Intro to Business and Management: Organizational Design and Structure

There are a number of definitions for the term Organizational Structure, According to Charles Handy, organizational structure refers to the allocation of formal responsibilities, the linking mechanisms between the roles and the co-coordinating structures of the organization. Usually, it is the organisational structure of a company that will determine it to be a failure or a success, as without a structure, a company will definitely crumble. However, that does not mean that there is a default structure that fits every organisation. Hence it is important to study structures so that we can better understand the goals, needs and resources of each organisation to plan and create a structure that is best suited for it.

Hence, there are many different types of structures; the basic structure however, is either a tall or flat structure. Tall strictures tend to have many management levels with a clear level of responsibilities and promotional structure. A good example of tall structures would be banks. Flat structures often have very few or just 1 layer of management and employees have far more responsibilities than their job description.

I will now further dwell into structures by talking about the chain of command, span of control, centralisation and decentralisation as well as the matrix structure.

The chain of command refers to the lines of authority that links people. This is where employees have a clear understanding of who to report to and who reports to them regarding their occupation. In the big picture of an organisation, it can be seen as a hierarchy where every entity in the organisation, except one, is subordinate to a single other entity. The hierarchy usually consists of a singular or group of power at the top with subsequent levels of power beneath them. For example, in Apple, Steve Jobs, during his tenure, was at the top of the hierarchy, hence the highest in the chain of command.

Span of control refers to the number of subordinates directly reporting to their supervisor. Should there be very close supervision by the supervisor, this would point towards a narrow span of control, predominant in a tall structure. If employees are given a lot more leeway and responsibilities, the span of control is wider and this is regularly seen in flatter organisational structures. Many governmental organisations have narrow spans of control where employees are given clear directions and instructions and are required to follow them closely.

Centralisation is when management at the top of the organisation takes a relatively large number of decisions. A famous example would be Apple, where the man at the top of the chain of command, currently Tim Cook, makes most final decisions. Decentralisation is when most decisions are made lower down the organisation in the operating units. An example would be travel agencies, where the agent in operations, and not their managers, makes a number of decisions on prices and route options.

A matrix structure is when those doing a task report both to a functional and a project boss. Hence, the employee could be doing multiple projects, reporting to a boss for each project and at the same time a functional head who is directly in charge of the employee. A matrix structure is very complex and can be very hard to set up and run as conflicts can easily occur in regards to an employees scheduling and ranking of importance of projects as well as conflicting instructions from different bosses. However, if run well, production can be both efficient and effective.

Having explained organisational structure and the different factors that contribute to it, I believe that a good organisational structure will have both a flat and tall structure, take our body for example. Since the structure is often referred to as the skeleton of the organization itself, our hip bone is very flat, meant for stabilization and center of gravity, hence a wider span of control, whilst our backbone is very long, like a tall structure where there are many layers, with a narrow span of control. (Biologically however, our backbone pretty much controls our entire body, hence a very very wide span of control for such a tall, narrow structure.)