Characteristics Of Organizational Structure

Published Date: 02 Nov 2017

Organizational Structure

ABSTRACT

This essay illustrates about the organizational structure and the types of organizational structure. This essay also examines about the need of organization structure which is essential for every organization.

INTRODUCTION

An organization is a social entity with a relatively identifiable boundary that aims to fulfill a common goal or a set of objectives consistently and collectively. In order to do so, every organization needs to have a defined structure which is formal and well designed to execute the workings of the business entity. In the book of (Robbins, n.d.) the author writes that an organizational structure defines how the tasks are to be assigned and allocated, who should be reporting to whom, the formal pattern of synchronized and coordinated mechanisms and the interaction patterns that needs to be pursued. The structure usually revolves around three areas of consideration, how complex, flexible and centralized will the structure be. The organization’s structure should be planned in such a way that it proves to be highly efficient and effective for the business making it profitable. No matter how large or small the operation is, the company must be structured in such a way that it best serves its needs and makes the business a success, whether it is a major department store or single unit sole proprietorship business.

ORGANIZATIONAL CHART

To support the organization structure, organization charts are designed to clarify the roles of all the employees working in the organization. This chart clearly entail the various divisions of the company, the roles each division play, the lines of responsibility and authority, decision-making positions and the flow of information. Such charts permit employees at any level of the organization to instantly learn and know about their position in the company and learn to whom they are responsible to and in turn their own paths of responsibility. The retail organizations have some well-defined traditional organizational structures. And organization structures differ from one entity to another depending on the type of structure each requires. For instance, some department stores’ structures are somewhat dissimilar from those of the chain organizations and some small retail operations differ from their giant counterparts. Each company adapts and modifies a chart that best suits its specific organizational needs. Frequently companies go through some changes in their structures that best fit their needs to address any new directions they may adopt. (Anon., Prenhall, 2004) writes that most department stores, for example, at one time exclusively the brick and mortar operations are now engaged in multichannel retailing that necessitates placing their catalog and E-tail divisions on the organizational chart.

NEED FOR ORGANIZATIONAL STRUCTURE

(Anon., Prenhall, 2004) further discusses about the need for organizational structuring so that the lines of authority along with each employees’ positions, duties and responsibilities can be understood by every member of the company. However, there are additional ways in which these structures operate and run the organization. Firm that deals with the complexities of organizational structuring and chart creation, include the formation of individuals into teams and getting everyone to work in the same direction as per the requirement of the company. The structure further helps to orient the new employees to the company by supplying them with career and succession plans. At the same time helping the in understanding the composite nature of the structures and assisting to simplify relationships. This enables people to understand the strategic vision of the company by defining reliance and associations. In the works of (Fouraker and Stopford, 1968) it has been researched that those organizations that have a single product or a few related product lines and a high degree of vertical integration tend to be organized in a centralized, functionally departmentalized structure. Whereas those organizations that have a diversified product line is likely to have a decentralized divisional structure. 

CHARACTERISTICS OF ORGANIZATIONAL STRUCTURE

The work of (James and Jones, 1976) highlights the characteristic of organizational structure and the theoretical relationships between organizational structure and individual attitudes of the employees and behavior. The evaluation is divided into the foundation that underlies the development of organizational structure, a combination of the scope of the organizational structure with stress placed on the recognition of major explanatory constructs of structure, then a review of the interrelationships of the planned dimensions of organizational structure, and lastly a discussion of the theoretical relationships between organizational structure and individual attitudes and performance. Some key conclusions based upon the review included the need to identify the economical constructs of the organizational structure and the need to use more sophisticated and integrated models in relating the organizational structure to the individual attitudes and behavior.

When a plan is concerned with only the performance of a single agent then the organizational activities such as delegating, informing and supervising lose their meaning since those activities are carried out within the single mind of one individual agent. Instead, groups have no single mind even though they can act as if they had one in particular by undertaking suitable organizational activities. (Grossi, Royakkers and Dignum, 2007) researched that given a raw plan, an organization is always required to elaborate an equivalent plan which can manage the flow of knowledge and the control issues within the group accordingly.

The work of (Grossi, Royakkers and Dignum, 2007) has presented an analysis of some basic concepts of responsibility in relation with the structure of an organization. The study of the connection between these two notions showed the structural requirements that form the foundation of specific notions of responsibilities and conversely, the kinds of responsibilities that can be evaluated on the basis of a given structure. Such outcomes can provide useful suggestions or clues on the possible course of actions that can be taken for the design of the organizations that exhibit desirable properties. The central point of the future work will be on a more meticulous semantic characterization of the organizational actions, the structures on which they are funded and on the study of more of such actions.

Very minute experimental verification exists on what part of the organizational structure matters and what is its foremost channel of influence. There are two alternative perceptions. Firstly, the notion that the vertical chain of control provides the main distinguishing effect. Alternatively, it is the degree of various specialties among the members that matters the most.

(Massa and Zhang, n.d.), writes that the level of bureaucracy is related to and is defined by the vertical chain in an organization. A vertical structure forms a chain of command that connects the higher order to the lowest level of the business units. The chain of command in the organizational structure connects through a series of intermediate layers that take care of executing to the higher order directives at a more disaggregated level. The allotment of authority and responsibilities to the managers of the intermediate layers in the organization has an effect on both the incentive of the managers as well as the ability of the higher order managers to monitor them. This should be reflected in higher delegation. The lower informational asymmetry may help the process of decision making and also help to produce greater information and offer more proficiency.

The focus is on the tradeoff between vertical structure and the degree of specialization. (Massa and Zhang, n.d.), argues that the greater the hierarchical structure the more the reduction in incentives to collect soft information. This reduces the incentive to concentrate the investment in few bonds and makes the manager more likely to herd. The net result is poorer performance. In comparison, a higher degree of specialization should produce a more unique thinking, reducing herding with other asset managers. And indeed, funds with more hierarchical structures tend to invest less in firms located close to the funds. This has a direct negative effect on fund performance. More vertical structures are characterized by worse performance. Funds with a more vertical structure tend to herd more with the other funds and to hold less concentrated portfolios. In comparison, funds that are characterized by a higher degree of specialties tend to herd less with each other. Thus these findings provide the first evidence of the tradeoff between vertical hierarchy and the degree of specialization in the organizations. While the effect of vertical structure seems to exist the degree of specialization still plays a very vital role in the provision of exclusive managerial solutions.

In the report of (The World Bank, 2007) it is mentioned about the basic organizational structure where there is little work specialization. The owner yields most power and few rules administer operations. The organizational structure is also flat meaning that there are not many levels of hierarchy and has a wide span of control which entails that there are many subordinates working directly under the top manager. Usually, small organizations such as restaurants have these types of organizational structures.

TYPES OF STRUCTURES

In another research report (Anon, n.d. Organization structure and effectiveness) has reported three types of organization structures that can be generated on the basis of arrangement of undertakings. The three broad types of structures are Functional Structure, Divisional Structure and Adaptive Structure.

ADAPTIVE

DIVISIONAL

FUNCTIONAL

TYPES OF STRUCTURES

The functional structure is when units and sub units of activities are created in the organization on the basis of functions. Thus, in any industrial organization, specialized functions like manufacturing, marketing, finance and personnel represent as separate units of the organization. All the activities which are connected with each such function are placed in the same unit. Sub units are created at lower levels in each unit and the numbers of people under each manager at various levels get added just as the volume of activity increases. This results in the interconnected positions taking the form or figure of a pyramid.

The division structure of an organization is more suitable to every large venture predominantly those which deal in several products to serve more than one distinct markets. The organization is then divided into smaller business units which are assigned with the business related to different products or various market territories. In other words, independent divisions, product divisions or market division are formed under the overall supervision of the head office. Each division’s manager is given independence to run all the functions pertaining to the product or market segment or regional market. Therefore, each division may have a number of supporting functions to carry out.

The adaptive structure has its own types, known as the Project organization and Matrix organization. The project organization, when an enterprise undertakes any specialized, time restricted work involving one time operations for a reasonably long period then the project organization is the most suitable option. In this situation the existing organization designs or forms a special unit in order to take on in a project work without disturbing its regular business. This becomes essential when it is not possible to deal with the special task or project. In the present system, the project may comprise of developing a new project, installing a plant, building an office or a complex. A project organization is led by a project manager who is in charge and holds a middle management rank reporting directly to the chief executive at the top level. Other managers and personnel in the project organization come from the functional departments of the existing organization and on completion of the project they return to their departments.

On the contrary, the matrix organization is another type of adaptive structure which intends to combine the aids of autonomous project organization and effectual specialization. There are functional departments with specialized personnel who are deputed to carry out the activities full time in various projects and sometimes in more than one project under the overall assistance and direction of project managers. At the time of completion of a project work, the individuals attached to it go back to their respective functional department to be assigned again to some other project. As in a large construction company or engineering firm this arrangement is found suitable where the organization is engaged in contractual project activities and there are many project managers.

PERSONAL EXPERIENCE

I have experienced a wide organization structure. My family owns a business of fishing and my role in our business was of marketing.

CONCLUSION

To conclude, (Robbins, n.d.) states that there are certain determinants that causes the organizational structure. These are strategy, organization size, technology, environment and power control. With all these determinants it is evident that if an organization changes its plan of action, the way it handles different projects and whether it plans for expansion or plans any technological change it will all lead to the change in the structure because any change in the workings of the organization, will create the need to change the formal coordination of the interaction patterns of the organization members.