Organizational Structure: Characteristics, Types and Elements

 An organizational structure or organizational model is one that defines a company through its referential framework, which includes lines of authority, communications, duties, and resource allocation. It determines how the activities (assignment of tasks, coordination and supervision) are directed towards the achievement of the objectives.

Organizations must be efficient, flexible and innovative to achieve sustainable competitive advantage. Organizational structure can also be thought of as the viewing window or perspective through which individuals view their organization and its environment.

An organization can be structured in many different ways, depending on its objectives. The structure of an organization will determine the ways in which it will operate and function. The organizational model allows the explicit assignment of responsibilities for the performance of different functions and processes to different entities.

These entities can be a branch, a department, a work team or an individual. Organizational structure affects organizational action, providing the platform on which operating procedures and standardized tasks rest.

Likewise, it determines which individuals can participate in the decision-making processes and, therefore, to what extent their points of view will shape the actions to be carried out by the organization. This model is driven by the goals of the organization and serves as the context in which processes operate and do business.

The ideal model depends on the nature of the business and the challenges it faces. In turn, the model determines the number of employees required and the skill set required. Business leaders regularly review the organization model to ensure that it supports their strategic objectives and mission.

They also take care that the processes respond to the standards of the industry. They control that it complies with labor, safety, health, and other requirements.

General characteristics

To operate efficiently, a business needs a formal decision-making, communication, and task-completion system that is consistent with the company's needs.

Defined and documented structure

Every company structure must have an established framework that defines the hierarchy. The structure should clearly define each job, explicitly stating the role of that job, the scope, and the senior management to which the role relates.

It should be well documented and easily accessible to all employees, to avoid people getting confused about their tasks and roles, or spending time on tasks that are out of their reach.

Communication

A good organizational structure will have a communication hierarchy established that determines how staff communicate with each other in different situations.

It will describe how tasks are delegated and communicated to employees, how employees keep management updated on tasks, and how they report or file complaints about problems.

An ideal communication structure will have a documented chain of command to guide employees in their daily interactions.

A clear communication structure allows leadership to improve interactions in the company.

Clear vision

Every company must have a vision. It serves as the foundation for establishing the goals and objectives of the company.

You must clearly define what you stand for, what you want to achieve, and your moral and ethical limits. The vision must be concise and provide direction for the business. The organizational structure must be created based on the vision of the company.

Departmentalization

Departmentalization specifies the way in which a company groups together different fragments of its organization. For example, a functional organizational model groups jobs by function, such as sales, marketing, manufacturing, and customer service.

A divisional organization is grouped according to geography, such as an eastern and western region. Other forms of departmentalization include departmentalization by customer, product, or market.

Job specialization

Labor specialization, also known as division of labor, is the level at which specific tasks within a company are divided into individual jobs.

When job specialization is extensive, a company may assign a person a task as part of a larger project. Often times, this type of environment creates smaller and more repetitive tasks.

Hierarchy of authority

Also called chain of command, it refers to an organization's line of authority, detailing who reports to whom.

In relation to the hierarchy of authority is the scope of control. Refers to the number of dependents over which managers have authority.

Centralization and decentralization

Decentralized organizational structures diffuse decision-making responsibilities to lower-level managers and some non-managerial employees.

On the other hand, a centralized organizational model keeps control and decision-making responsibilities near the top of the company.

However, whether an organization is centralized or decentralized can depend on various elements, such as the number of hierarchical levels the company has or the degree to which a company is geographically dispersed.

Types

Simple or business organization

A simple organization has a flexible organizational structure, generally driven by entrepreneurial minded leaders. Start-up companies, managed by their owners, exemplify this type of organization.

Ideals, energy, and forward-thinking enthusiasm are strengths. Possible drawbacks or risks are having a limited structure, poor discipline in the task, inefficiency in management control if there is no emphasis on defining work processes.

This type of organization has a simple and flat structure. It consists of a large unit with one or a few managers. The organization is relatively informal and unstructured.

When large companies face hostile conditions, they can revert to this structure to maintain tight control from the top.

However, as organizations grow, this structure may be inadequate, as decision makers can become so overwhelmed that they start to make poor decisions.

Organization of machinery (bureaucratic)

Henry Mintzberg called a highly bureaucratic organization a "machine." Government agencies and other types of large corporations embody this style.

The organization of machinery is defined by its standardization. The work is highly formalized, there are many procedures, decision-making is centralized, and tasks are grouped by functional departments.

Jobs are clearly defined; there is a formal planning process with budgets and audits, and procedures are reviewed regularly to verify their effectiveness.

All functional lines rise to the top, allowing top managers to maintain centralized control. These organizations can be very efficient.

Professional organization

The professional organization type has a similar level of bureaucracy to the machinery type. However, it is characterized by a high degree of professional knowledge.

These technically trained workers often have specialized skills and autonomy in their work. This allows a more decentralized decision-making than that prevailing in the type of machinery.

The key difference with machinery organizations is that professional organizations depend on highly trained professionals who demand control of their own work.

This structure is typical when the organization contains a large number of knowledge workers. This is why it is common in places like universities, accounting firms, and law firms.

The clear disadvantage of the professional structure is the lack of control that top executives can have, because authority and power are distributed through the hierarchy.

Divisional organization

A divisional structure is common in large corporations with multiple business units. Companies divide their businesses and products into divisions to promote specific management of each division.

Centralized control is common in this format, with divisional vice presidents overseeing all facets of work within their respective divisions.

This type of structure will be found in large, mature organizations that have a variety of brands, produce a wide range of products, or operate in different geographic regions.

The key benefit of a divisional structure is that it allows line managers to have more control and responsibility than in a machine structure.

With decentralized decision making, top central management can focus on "global" strategic plans.

A major weakness is the duplication of resources and activities that accompany a divisional structure. In addition, divisions can tend to conflict, because each needs to compete for the limited resources allocated by headquarters.

Innovative organization (“adhocracy”)

In new industries, companies need to innovate and function on an ad hoc basis to survive. The clear advantage of adhocracies is that they maintain a core pool of talents. People can be drawn from this group at any time to solve problems and work in a highly flexible way.

Workers often move from team to team as projects are completed and new projects are developed. Adhocracies can respond quickly to change, bringing together qualified experts capable of tackling new challenges.

There can be many conflicts when power and authority are ambiguous. Having to deal with such rapid changes is stressful for workers, making it difficult to find and retain talent.

Elements

Henry Mintzberg, in his book The Structure of Organizations , presented this diagram as a way to explain what an organization does:

The relative influence of these elements on each other has a significant impact on the nature of the organization. Mintzberg states that each element will have a preferred means of coordination.

For example, the strategic apex will attempt to coordinate through direct supervision, and it will be especially important in smaller organizations with simpler structures.

The middle line will seek to standardize the results, while the technostructure will try to standardize the work processes. The operating core will try to standardize skills.

Mintzberg's organizational model also illustrates an important principle of organizational structure: the separation of management and administration.

Due to this separation, the people who decide the mission and general direction of the organization (unless it is a very small organization) are different from those who manage the implementation of the plans and the subsequent control of the operations to ensure that the objectives are met. .

The Mintzberg organizational model, also called the Mintzberg organization's five-element model, divides the company into the following basic elements:

Strategic apex

At the top of the organization there is a strategic apex, whose objective is to ensure that the organization fulfills its mission and manages the relationship with its environment.

Top management (the strategic apex) will establish long-term organizational strategies and policies through which objectives will be achieved.

The people at the apex — for example, the CEO — are accountable to owners, government agencies, unions, communities, and so on.

Middle line

Below the apex is the middle line, which is a group of middle managers responsible for turning the overall strategic plans and objectives of the strategic apex into detailed operational action plans.

These operational action plans will be carried out by workers, specifying managerial responsibilities for particular tasks and how resources will be allocated.

These middle managers will also be responsible for overseeing activities and taking steps to ensure that resources are used efficiently and effectively to achieve the organization's goals.

Technostructure

As organizations grow and become more complex, they develop a separate group of people who care about the best way to do a job.

They specify exit criteria (eg quality standards) and ensure that staff have the appropriate skills (organizing training programs). This group of analysts is mentioned by Mintzberg as the technostructure.

The technostructure is made up of key individuals and teams working in functions such as human resources, training, finance, and planning.

Mintzberg states that there are several roles here. Analysts decide the best ways to get jobs done and seek to standardize skills. The planners decide the products and define the quality requirements.

Support staff

The organization also adds other administrative functions that provide services; for example, legal advice, public relations, cafeteria, etc. These are the support staff.

Support staff work in functions such as research and development, public relations, and legal services. Its products do not contribute directly to the core purposes of the organization, but its activities contribute to the efficiency and effectiveness of the strategic apex, the middle line, and the operating core.

Operating core

Finally, at the bottom of the organization is the operational core. These are the people who do the basic work of producing the products or providing the services.