Organizational structure is a formal system of working relationships that both separates and integrates functions and duties. While separation of duties identifies the work responsibilities for each employee, integration of duties guides people how to engage together in teamwork. This enables combining all resources together effectively to achieve the operational and strategic objectives of a company.
Those Strategic objectives, along with the mission and the vision of a company, shall determine the organizational structure that facilitates the correct implementation of the strategy and business plans.
Organizational structures are implemented to ensure that every aspect of the organization, employment, decision making, and management is integrated within the strategic objectives of the company and that it contributes to the successful achievement of those objectives.
Organizational structures help managers and employees work together effectively by forming a basis for the following:
Elements of the Organizational Structure
The four basic elements in designing a suitable organizational structure for a company.
Is the process of identifying tasks and assigning them to individuals or work groups who have been trained to do them? Managers could be differentiated into two types: Business Managers who usually supervise one subsidiary and Functional Managers who might oversee a function such as finance.
Standardization is defining the managerial levels in a clear manner, and unifying job titles and organizational entities within the same managerial level.
Coordination is the formal and informal procedures that integrate the activities performed by separate groups in an organization. Departmentalization divides the organizations’ work and allows for specialization and standardization of activities. However, in order to achieve organizational objectives, managers also need to coordinate people, and tasks. Coordination facilitates integration between different functions, since coordination can be defined as the process of integrating all the parts of the whole to achieve common objectives. Without coordination, people’s efforts are likely to end in delay, frustration, and waste.
For these reasons, you need to consider coordination as one of the basic elements of the organizational structure. Whereby, Coordination has three basic principles:
1. Unity of Command Principle
The unity of command principle states that an employee should have only one direct supervisor. Every employee needs to know who is giving the orders and to whom he or she reports.
Organizational structure must minimize any confusion over who makes decisions and who implements them, since uncertainty in this area can lead to serious productivity and morale issues.
2. Scalar Principle
The scalar principle states that a clear and unbroken chain of command should link every person in the organization with someone at a higher level, all the way to the top of the organizational structure. Tasks should be delegated clearly, with no overlapping or splitting of assignments.
3. Span of Management Principle
The span of management principle states that the number of people reporting directly to one manager must be limited since one manager cannot effectively supervise many subordinates.
There is no specific number of subordinates that a manager can supervise effectively. The four key factors that determine the best span of management for this given situation:
Authority is the fourth element of organizational structuring; it is the right to act or decide. Authority implies responsibility and accountability, i.e. managers accept the responsibility for acting and are willing to be held accountable for success or failure. Furthermore, when delegating tasks to others, managers should take into consideration to match the responsibility they confirm with authority and then insist on accountability for results.
Responsibility is an employee’s obligation to perform assigned tasks. The employee acquires this duty upon accepting the job or a specific assignment. A manager is responsible not only for carrying out certain tasks but also for the actions of subordinates.
Accountability is the expectation that each employee will accept credit or blame for results achieved in performing assigned tasks. Management also expects employees to report the results of their work. This feedback enables management to determine whether affective decisions are being made and whether tasks are being performed properly.
A manager cannot check every task an employee performs. The manager should establish guidelines within which work must be done, and then the employee is accountable to perform within these limits. Thus, unlike authority, accountability always flows from the bottom to the top. It should be emphasized that accountability is the point at which authority and responsibility meet.
3. Delegation of Authority
Delegation of authority is one of the important issues which was considered during establishing the organizational structure and could be defined as the process by which managers assign the right to act and make decisions in certain areas to subordinates. In other words, the manager assigns a task to a subordinate along with adequate authority to carry it out effectively.
Delegation starts when the structure of the organization is being established and tasks are divided. It continues as new tasks are added during day to day operations. The basic components of the delegation process are determining expected results, assigning tasks and the authority to accomplish them, and holding others accountable for results achieved.
4. Centralization and Decentralization of Authority
Centralization and decentralization of authority are basic overall management philosophies of delegation of where decisions are to be made. Centralization of authority is characterized by authority concentrated at the top of an organization or department.
Decentralization of authority is characterized by high degree of delegated authority throughout an organization or department. The centralization is an approach that requires managers to decide what and when to delegate, to carefully select and train personnel, and to formulate adequate controls.
Neither centralization nor decentralization is absolute. A single manager cannot make all the decisions, even in centralized settings, and total delegation would end the need for middle and first line managers. Thus, a combination of centralization and decentralization are taken into consideration in the design of the organizational structure.