2.2 Organizational Structure

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The following terminology to facilitate understanding different types of organizational structures:

• delegation

• span of control

• levels of hierarchy

• chain of command

• bureaucracy

• centralization

• decentralization

• de-layering

ORGANIZATIONAL CHARTS

Organizational structures are the internal layout the show how management is organized within a business.

An organizational chart:

• shows how authority is passed down within different levels of hierarchy 
• allows employees to visually see who they need to report to and who is responsible for them
• show the relationship between each department
• shows the channels of communication which exist in the business.
• shows the span of control and chain of command of managers and employees.

In the organizational chart above, the General Manager has a wide span of control while the Managing Director has a long chain of command.

Span of control - the span of subordinates a manager is responsible and accountable for, who must report back to them.

Levels of hierarchy - the different levels of status and authority.

Chain of command - the chain in which authority is passed down.
Delegation - the passing of authority to a subordinate down the hierarchy.
De-layering - the removal of one or more level(s) of the organizational structure to obtain a shorter chain of command.
Staff manager - person with managerial responsibilities of other people.

BUREAUCRACY
There are more workers as you go down the hierarchy. A complex hierarchy with many workers

Advantages:

• Greater specialization in labor
• More chance of promotion as there are more levels in the hierarchy.

Disadvantages:

• Larger teams are harder to manage.
• Communication is less efficient.

CENTRALIZATION AND DECENTRALIZATION

Centralization - all decision-making is done at the center or head office of the business.

Decentralization - decision-making is delegated to regional offices and managers.

The following types of organization charts:

• flat/horizontal

• tall/vertical

• hierarchical

• by product

• by function

• by region

There are many different types of organizational charts, such as:

• tall organizational structure (long chain of command)

A longer chain of command and a smaller span of control means that there are more workers in each section which could increase efficiency but communication could be distorted due to being passed down many levels of hierarchy.

• flat organizational structure (wide span of control)

A shorter chain of command and a wider span of control means that communication is more efficient and delegation is easier. However, employees could slack off as the manager has many workers that they are accountable for.

• structure by hierarchy

A pyramid-like structure, the hierarchy is fairly obvious. (eg., MD -> Senior manager -> Middle manager -> Assisstant -> Workers

• structure by function

Divided by functions into different departments. (eg., marketing, finance, operations, HR)

• structure by project

Structure is divided by project, with hierarchies within those projects.

• structure by region

Structure is divided by the various regions in which the business operates it.

Changes in organizational structures (such as project-based organization, Handy's "Shamrock Organization")

MATRIX
Project managers have a team of employees who work on individual projects. This is usually temporary and the teams will split up once the project is over to go and work on other projects.

• More flexible and responsive to market demands

SHAMROCK 
Reduces the cost and


Google's organizational structure:

• Short chain of command
• Small span of control
• Decentralized
• Few levels of hierarchy

Communication