An organizational structure is the method that an organization employs to delineate lines of communication, policies, authority and responsibilities. It determines the extent and nature of how leadership is disseminated throughout the organization as well as the method by which information flows. Organizations commonly adapt either a flat or hierarchical structure.
Flat Organizational Structure
A flat organization refers to an organization structure with few or no levels of management between management and staff level employees. The flat organization supervises employees less while promoting their increased involvement in the decision-making process.
Advantages of a Flat Structure
- It elevates the employees' level of responsibility in the organization.
- It removes excess layers of management and improves the coordination and speed of
communication between employees.
- Fewer levels of management encourage an easier decision-making process among employees.
- Eliminating the salaries of middle management reduces an organization's budget costs.
Disadvantages of a Flat Structure
- Employees often lack a specific boss to report to, which creates confusion and possible power struggles among management.
- Flat
organizations tend to produce a lot of generalists but no specialists. The specific job function of employees may not be clear.
- Flat structure may limit long-term growth of an organization; management may decide against new opportunities in an effort to maintain the structure.
- Larger organizations struggle to adapt the flat structure, unless the company divides into smaller, more manageable units.
Hierarchical Organizational Structure
A hierarchical organization follows the layout of a pyramid. Every employee in the organization, except one, usually the CEO, is subordinate to someone else within the organization. The layout consists of multiple entities that descend into the base of staff level employees, who sit at the bottom of the pyramid.
Advantages of a Hierarchical Structure
- Employees recognize defined levels of
leadership within the organization; authority and levels of responsibility are obvious.
- Opportunities for promotion motivate employees to perform well.
- Hierarchical structures promote developing employees as specialists. Employees may narrow their field of focus and become experts in specific functions.
- Employees become loyal to their departments and look out for the best interest of their area.
Disadvantages of a Hierarchical Structure
- Communication across different departments tends to be less effective than in flat organizations.
- Rivalry between departments may inflame as each department makes decisions that benefit its own interests rather than the organization's as a whole.
- Increased bureaucracy often hinders an organization's speed to change. Increased time may be required to respond to clients.
- Salaries for multiple
layers of management increase an organization's costs.
In an organizational structure, “chain of command” refers to a company's hierarchy of reporting relationships – from the bottom to the top of an organization, who must answer to whom. The chain of command not only establishes accountability, it lays out a company’s lines of authority and decision-making power. A proper chain of command ensures that every task, job position and department has one person assuming responsibility for performance.
Command Chain Formation
The command chain doesn't happen accidentally. Organizational designers lay it out as the last step in creating an organizational structure. Planners first consider a company’s goals since organizational structure must support strategy. Designers next determine the tasks needed to reach the goals.
Departmentalization follows as designers decide how to group the tasks. Grouping affects resource sharing and the ease with which people communicate and coordinate work. After departmentalizing, designers assign authority for tasks and areas. Once authority is assigned, planners can finally lay out the relationships between positions, thereby creating a chain of command.
Reporting Relationships and Organizational Chart
The reporting relationships established in the final step of organizational design are easy to see on an organizational chart, which depicts a company’s structure. Starting at the bottom, each position is connected to one above it by a line. Following the line vertically from position to position reveals the chain of command. Each person is one link in the chain.
Span of Control
A manager may be linked to many or few subordinates. The number of people reporting to a manager is called a manager’s span of control. Managers with wide spans of control have many subordinates, and it’s not possible for a manager to closely examine activity. Consequently, employees under such managers have more authority to perform their jobs and even make decisions than do employees reporting to managers with narrow spans of control.
Flat Organizational Structures
When a manager has a wide span of control, the organizational chart takes on a horizontal, flattened appearance. Fewer managers are needed in middle management, so the company has less of a power hierarchy. These are characteristics found in organic organizational structures. In organic structures, the chain of command’s importance is de-emphasized, since power is distributed among employees.
The chain may only consist of employees and the owner or employees to a manager to the CEO, making for a very short chain of command. Lacking bureaucracy, flat organizations can readily mobilize to meet market conditions.
Vertical Organizational Structures
Managers closely supervising subordinates can only manage a few. These managers have narrow spans of control. Narrow spans require more managers to make sure all employees are properly supervised. These managers must also be managed closely, given their involvement in details and decision-making.
This results in tall organizations with several layers of middle management. The chain of command is important and is used to exert control from the top. Many rules govern activities. Such structures are rigid and mechanistic, leaving little room for innovation and creativity.