An organizational structure is a diagram displaying the hierarchical arrangement of lines of authority, roles and duties within an organisation and how they relate to one another. A structure is dependent upon the objectives and strategy of which the organization is focussed on.
There are six basic elements of an organizational structure:
- Specialisation
- Departmentalisation
- Chain of Command
- Span of control
- Centralisation and Decentralisation
- Formalisation
Work specialization gives employees specific duties and roles they are expected to perform within the company, factoring in their qualifications and skills. Having descriptions of duties for staff members helps the organisation to fully meet the workforce needs and to ensure there are no unnecessary duplications within roles.
Departmentalization refers to how the organisation breaks down the functions and teams needed to run the company and carry out the essential tasks. Departments are usually made up of staff members who perform similar tasks in the same work area, but could also be grouped by project, location, or however the organisation sees fit to ensure increased productivity.
The main purpose of an organisational chart is to illustrate chain of command, and ensures that each employee has a clear directive of who they should be reporting to within the company. The manager responsible for a particular employee will assign them tasks, provide deadlines and motivation, and communicate important messages. If their staff member has an issue, the manager can take this higher up the chain of command for more support if necessary and to provide a resolution. A clear chain of command ensures messages are being communicated effectively between the relevant staff members.
The span of control is how many employees each manager is given to oversee, and limits to their capacity is set by the organisation. It ensures the efficiency of a company isn’t compromised, as a manager will become less effective at their job if they have too many staff members to supervise and the amount of time they spend focussing on each person will significantly reduce. Managers who are positioned higher up in the chain of command will typically oversee less staff members, as they will be directly responsible for middle managers and supervisors.
Centralization within a business means that middle management does not have a significant input to company decisions, and these are left to top level management only. This is typical of a larger organisation. Decentralization allows all level of management to share their input on the goals and visions of the wider company, which will then help to improve their individual teams.
Organizational structures implement a degree of formalization, and determines the procedures and rules of a company, as determined by management. A smaller organisation might have less formal standards because staff undertake multiples roles and duties, but a larger organization would need to set more defined elements to enable clarity for staff.
The type of organization structure, whether formal or informal, is based on the needs and usually the size of the company. A formal organisation has clearly defined roles and responsibilities for staff, and accountability is fixed within the structure. An informal structure has less set guidelines and restrictions, and is reliant upon the interactions that staff members have with each other. A formal structure has been deliberately created by top line management, but an informal structure would be spontaneous created by staff. This could lead to chaos and confusion if the team grows in numbers, as there may not be a clearly defined hierarchy or procedures to follow to ensure the company keeps working effectively. An informal structure does however allow for flexibility within the organisation, as there aren’t rules in place which could slow down operations.