Business Organizational Structure Definition
business organizational structure definition
Company structure
In business, organization structure means the relationships between positions & people who hold the positions. Organization structure is very important because it provides an efficient work system as well as a system of communication.
First of all we should distinguish between the organizing function & organizing structure. The organizing function is the process of breaking down the overall task into small jobs along with delegated authority to do those jobs & then putting them back together in units, or departments, of an optimal size according to some consistent bases. Thus we can describe the organizing function as dividing task into jobs, delegating authority, determining appropriate bases for departmentalizing jobs, & deciding the optimal number of jobs in a particular department. It helps to coordinate effort & create authority relationships.
Organizing structure is considered by many to be “the anatomy of the organization, providing a foundation within which the organization functions”. So the idea of a structure is a frame work – differentiation of position, prescriptions of authority. So structure helps to regulate the behavior of employees.
There are can be different kinds of organization structure, & firms can change their organization structure by becoming more or less centralized.
Most organization have a hierarchical or pyramidal structure, with one person or a group of people at the top, & increasing number of people below them at each successive level. There is a clear line or chain of command running down the pyramid. All the people in the organization know what decision they are able to make, who their superior (or boss) is (to whom they report), & who their immediate subordinates are (to whom they can give instructions). This structure is one of the simplest & it’s also called a line structure.
Some people in the organization have colleagues who help them: for example, there are might be an Assistant to the Marketing Manager. This is known as a staff position: its holder has no line authority, & is not integrated into the chain of command, unlike, for example, the Assistant Marketing Manager, who is number two in the marketing department. This structure is known as a staff structure.
Yet the activities of most companies are too complicated to be organized in a single hierarchy. Shortly before the First World War, the French industrialist Henry Fayol organized his coal-mining business according to the functions that it had to carry out. He is generally credited with inventing functional organization, including (among others) production, finance, marketing, sales, & personnel or staff departments. The functional type of organization structure reflects an arrangement based on the nature of the activities that must be performed. Related activities are grouped together in the functional areas with which they are most clearly identified. The chief executive of each area occupies a position on the second level of the organization & generally has the title Vice-President. This means, for example, that the production & marketing departments cannot take financial decisions without consulting the finance department. The functional structure allows for coordination of related activities, thereby reducing the risk of empire building by specialized areas & resulting in greater efficiency. The structure’s most distinguishing feature is that staff managers may have line (functional) authority for their particular activities. But in a functional structure the request could be an order. As I’ve already said the functional structure is efficient, but there are two standard criticisms. Firstly, people are usually more concerned with the success of their department than that of the company, so there are permanent battles between, for example, finance & marketing, or marketing & production, which have incompatible goals. Secondly, separating functions is unlikely to encourage innovation.
An inherit problem of hierarchies is that people at lower level are unable to make important decision, but have to pass on responsibility to their boss. One solution to this is matrix management, in which people report to more than one superior. For example, a product manager with an idea might be able to deal directly with managers responsible for a certain market segment & for a geographical region, as well as managers responsible for the traditional functions of finance, sales & production. This is one way of keeping authority at lower levels, but it’s not necessarily a very efficient one. Thomas Peters & Robert Waterman in their book “In search of Excellence” insist on the necessity of pushing authority & autonomy down the line, but they argue that one element – probably the product – must have priority; four-dimensional matrices are far too complex.
A further possibility is to have wholly autonomous, temporary groups or terms that are responsible for an entire project, & are split up as soon as it is successfully completed. Terms are often not good for decision-making, & they run the risk of relational problems, unless they are small & have a lot of self-discipline. In fact they still require a definite leader, on whom their success probably depends.
In matrix & geographical structure decentralization plays the key role. & it has its advantages & disadvantages.
Advantages of decentralization:
- It encourages managers to develop their decision-making ability, training for promotion into position of greater authority & responsibility.
- It creates competitive climate. Managers can be compared with each other that make them to be more productive.
- Managers have more freedom so they can be involved into solving different problems, so they become more creative.
Many organizations choose to follow decentralization of authority. But it also has disadvantages:
- It needs more intensive & expensive management training. Managers must be retrained for making decisions of high-level.
- It needs more sophisticated planning & reporting methods, especially for upper management, because the flow of information to upper managers increases.
- Top managers should delegate a portion of their decision-making job to middle & 1st level managers, but sometimes they can be unwilling & unable to do it.
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