Organizational Structure Meaning
An organizational structure is a term used to define how employees of a company work together to support their mission. The purpose of an organizational structure is to clearly define roles and responsibilities. Having a defined structure makes it easier to know who should be doing what and who to bring issues to for resolution when things do not go as planned.
Organizational structure is a pattern or arrangement of jobs and groups of jobs within an organization. An organisational chart shows how the chain of command works within the organisation. The type of structure that a business has reflects how it behaves. It defines its culture or way of working. A highly centralised, hierarchical structure means an organisation is run from the top. It may have a well-known person at its head who makes most of the decisions
“Organizational structure is a formal system of job relationship that coordinates employees to achieve company’s goals.”
What is organizational structure?
In other words, organizational structure can be defined as, “The typically hierarchical arrangement of lines of authority, communication, rights and duties of an organisation”.
Organisational structure determines how the organisational power, roles, and responsibilities are assigned, controlled, and coordinated within an organization. It serves as a blueprint for the seamless flow of information between the different levels of management.
The term structure is highly abstract and illusive. Its existence is real and affects everyone in the organisation In simple terms structure is the patterns in which various parts or components are interrelated or interconnected. Structure establishes relationships among various positions and activities in the organisation and because such positions are held by individuals; it prescribes relationships among people in the organisation.
Features of Good Organizational Structure
1) Clear Line of Authority
Whatever form of structure is adopted, there should be clear lines of authority running from top to bottom or in horizontal directions.
An organizational structure should be simple. The concept of simplicity implies that various organisational relations should be kept to the minimum possible.
3) Proper Delegation of Authority
The concept of ultimate responsibility can work only when there is proper delegation of authority at various levels of the organisation. Delegation of authority refers to authorising a manager to make certain decisions.
An organizational structure should be flexible enough so that changes can be incorporated whenever needs arise. The structure is designed not only for some time but for a distant future also. As such continuity must be maintained in the organizational structure over some time.
5) Principles of Unity of Direction and Command
Principles of unity of direction and command should be followed.
6) Application of Ultimate Responsibility
The concept of ultimate responsibility suggests that although a superior manager assigns some of the work to his subordinates, he is ultimately responsible for the performance of the total work.
7) Provision for Top Management
In the corporate form of organisation, it is imperative to provide some means by which shareholders and members of the Board of Directors participate in the management process. Normally shareholders are indifferent so far as the day-to-day management affairs of the company are concerned.
8) Minimum Possible Managerial Levels
As far as possible, there should be minimum managerial levels. The greater the number of managerial levels, the longer the line of communication in the chain of command and the communication has to travel along the line creating problems of delay and distortion.
9) Proper Emphasis on Staff
Line functions should be separated from staff functions and adequate emphasis should be placed on important staff activities.
Elements of Organizational Structure
Various elements of organisation structure are as follows:
- Chain of Command
- Work Specialisation
- Span of Control
- Centralisation and Decentralisation
It is the second element of organizational structure and follows Work Specialisation. Departmentalization is the way, work and responsibilities are distributed amongst different departments. Departmentalisation refers to the process of grouping activities into distinct departments. This strategic division of labour cultivates specialists who need coordination. This coordination is facilitated by grouping specialists in different departments.
2) Chain of Command
It is an unbroken line of authority that extends from the top-level executive and management to the lowest post, and echelon and clarifies who reports to whom. Organisation structure is a hierarchy that shows the Chain of Command and authority, creating a link between the managers and subordinates. It has two main elements:
- Unity of Command
i) Unity of Command: It preserves the unbroken line in the hierarchy. It states that, for the sake of better coordination, an individual or a group must only have a single superior, to whom reporting is done. It helps to remove work confusion and conflicts.
ii) Authority: It may be defined as the right of the managers and top-level executives to give orders to subordinates. To facilitate coordination, each manager has a certain role to play in the hierarchy and has a certain authority over his co-workers and subordinates to fulfil his responsibility.
3) Work Specialisation
It is the degree to which organisational tasks are subdivided into individual jobs. It is also known as the Division of labour. Organisation structure is the specialisation of labour in specific, circumscribed tasks and like roles. It is a vital element of Job Structure and plays a major role in success if it is rightfully utilised. Work Specialisation is more efficient and effective for managers, to fulfil organisational perspectives. Managers find it much easier to find talented personnel and train them to perform specific tasks.
Repetition improves the ability of an individual to perform a certain task with less time consumed. The jobs are assigned to specialised personnel or individuals. Thus, the individuals perform those tasks or fulfil those objectives in which they are specialised or are trained to compile. The essence of Work Specialisation is that an entire job is done by an individual, it is broken down into several steps, with each step being completed by a separate individual. Thus, individual perform their expertise in specialised tasks rather than the entire job.
“The degree to which jobs within the organisation are standardised.” Standardisation is the certainty of the job. If a job is standardised, the employees know what to do and there is no sort of confusion. If a job is highly standardised, there is a minimum amount of discretion over what is to be done, when it is to be done and how it is to be done. It results in consistent and improved performance. The degree of formalisation depends on the organisation, its policies and its structure. For example, a few jobs are not formalised, i.e., departmental store clerks, gas station workers, etc. On the other hand, companies like P&G and Unilever usually have a standardised way of doing the job. It is easy for employees to settle in, as they can understand their job properly.
5) Span of Control
It is also an important element of organizational structure. It manipulates the capability of a manager to control a certain number of employees. This number is determined offer analysing the size of the organisation. There are two types of spans:
- Wider spans, and
- Narrow spans
If a manager decides to maintain a narrow span, he can effectively exercise close control over the team. However, there are a few drawbacks associated with this approach. Firstly, they are expensive due to the additional level of management. Secondly, the communication process between the top and lower management becomes more complex. Finally, due to narrow but tight supervision, managers tend to make strong and tight policies, and regulations, which results in discouraging employee autonomy and satisfaction.
6) Centralisation and Decentralisation
Centralisation is defined as “the degree to which decision-making is concentrated at a single point in the organisation”. Decentralisation may be defined as “the process of dispersing decision making governance closer to the people and citizens”. Decentralisation and Centralisation have played major roles in the history of many societies.
Importance of Organizational Structure
An organisation is the framework through which managers get things done through people. The sound organisation is the backbone of effective management due to the following reasons:
The importance of organizational structure is as follows:
1) Optimum Use of Human Resources
All jobs are clearly defined and differentiated. This helps the selection of employees and ensures the appropriate alignment of individuals with their respective roles. Such matching of jobs and people enables better use of human talent, leading to enhanced job satisfaction among employees. Organising also helps to avoid overlapping of responsibilities and duplication of work among various employees and work units. This is due to the fact that particular jobs are assigned to individuals and work groups. The role, tasks, authority and responsibility of every job are spelt out.
2) Coordination and Cooperation
The organizational structure functions as a mechanism to unify and harmonise the efforts of individuals and work groups. Higher-level managers bring about cooperation and coordination by exercising authority over the interrelated activities of lower-level managers. A well-defined definition of authority and responsibility of each manager minimises confusion and conflicts that may arise regarding their respective powers and privileges. Lines of authority prescribed in the organisation structure serve as channels of communication. It makes clear to each manager to whom he is responsible and to whom he can issue orders.
3) Security and Support
A well-established organizational structure serves as a source of support. It provides security and satisfaction to both managers and workers performing their assigned tasks. It provides them with a definite status and position to each one of them.
4) Growth and Diversification
The organisation provides the framework within which an enterprise can expand and grow. Through the organisation, management can multiply its strength. Sound organisation helps keep various activities under control. It increases the capacity of the enterprise to undertake a greater number of activities seamlessly, without any disruptions or setbacks. It is through a sound organizational structure that many small firms have grown and become big.
A properly designed organizational structure is flexible. It facilitates adjustment to changes in workload resulting from shifts in the external environment. These changes may relate to products, technology, resources and markets. New and better methods of doing work can be introduced by adopting new technology. The job position and authority structure within an organization allows for seamless continuity of work, regardless of personnel changes.
6) Aid to Management
The organisation focuses managerial attention on the achievement of enterprise objectives. It provides a mechanism for effectively directing all the work activities and human efforts towards the achievement of organizational goals. It also enables the management to predict the work activities of different individuals and groups so that action may be taken in time to correct any deficiency.
In the process of organising, work is divided and further subdivided into compact and convenient jobs. Similar jobs are grouped into departments or divisions. Thus, organising promotes specialisation which in turn results in efficient and expedient task performance.
8) Training and Development
A well-defined organisation encourages initiative and creative thinking on the part of employees. It facilitates the development of managerial talent at lower levels through adequate delegation of authority. It also recognises merit for the distribution of rewards and promotions.
A well-structured organization is the fundamental requisite of effective management. It enables the top management to delegate responsibility to lower levels for routine functions. It can avoid confusion, delays, duplication of work, and overlapping efforts. If the organisation structure is ill-defined then it becomes challenging for management to operate efficiently and effectively.
The organizational structure is indispensable and a defective structure will seriously impair business performance and may even destroy it. Organisation is the mechanism by which management directs, controls and coordinates business.