Transcript for:
Organizational Structure Basics

hello and welcome to another of my introduction to business series videos in which we're going to take a look at the organization from a business perspective i will then examine the five dimensions of organizational structure that we recognize such as job specialization departmentalization centralization and span of management followed by chain of command i will also talk about various methods used for combining these individual elements within a single business structure i will also introduce four approaches to organizational culture and briefly look at items that can affect your corporate culture so first we should probably define what is an organization an organization is just a group of two or more people working together to achieve a common set of goals we can think of a neighborhood business perhaps a family-owned dog grooming and dog kennel and these could be operated by you know husband and wife or a whole family that exists there within the single household and this we consider a team of individuals and they have an organization because they are set to achieve a common set of goals by working together but then again obviously you can think of organizations as very large companies like walmart lowe's mcdonald's these are all organizations well so but the key definition of what defines them as an organization those elements are there and to better understand the personnel structure of an organization it's highly recommended to for individuals and organization to create an org chart or an organizational chart an org chart is a diagram such as you see here that's going to represent the positions and relationships within an organization as to who reports to who who's on what level we talked in a previous video about the different levels of management so we want to have that in a visual representation we should be able to look at our organizational charts and be able to easily recognize the chain of command now the chain of command is the line of authority that extends from the highest to the lowest levels within any organization the positions are going to be represented by broken lines are not part of that direct chain of command these are just like additional advisory type positions or staff positions now many smaller organizations find organizational charts useful some large organizations do not maintain complete detail charts because of various reasons such as it's difficult to accurately chart a few dozen or several dozen positions much less than thousands that characterize very large firms it's a very tedious task and larger organizations are almost always changing which quickly makes the organization chart outdated if there's not a person dedicated to making sure that they're keeping up with all the attrition within an organization movements within the organization so they're a great tool as long as they're maintained now there are some major considerations for organizing your business the factors that we need to think about to consider when deciding how to organize our organization are going to include such things as job design departmentalization delegation span of management and the chain of command now if we take a look at these individually with job design structuring the tasks and activities required to accomplish a firm's objectives into specific jobs so as to foster productivity and employee satisfaction that's what we do when we are designing our jobs we make sure that we take care of all the activities that are required within our organization to meet our specific objectives and we take those tasks and we want to make sure that we clearly identify those so that they're going to meet the goals of the company make sure that we're productive at what we're doing and then our employees are satisfied not and are able to perform those jobs now when we're looking at this factor called job design we need to look a little bit deeper into job specialization this is the separation of all of our organizational activities into very distinct tasks and the assignment of the different tasks to different people within our organization and specialization is necessary for lots of reasons such as the job of most organizations is going to simply too large for one individual to be able to handle when a worker has to learn one specific highly specialized task that individual can learn it very quickly and then be able to perform that task very efficiently the worker who's doing the same job over and over does not lose time changing operations therefore they're not going to be losing time that's essential to the organization now the more specialized the job the easier it may be to design specialized equipment for that job and then lastly the more specialized that a job or task is the easier it is for the job training of that specific job as with most things job specialization can have some negative consequences such as because employees are doing the same task over and over repetitively they can easily become bored and dissatisfied with the work they're doing now we as managers can minimize these issues by employing such tactics as job rotation and this is just the systematic shifting of our employees from one task or one specialized job to another job enlargement and job enrichment along with other different methods can be used to help motivate our employees so if you can identify that motivation is a factor then think about looking into doing such things as job enlargement and job enrichment if our employees are not motivated then they are not going to be as productive of employees as we need now let's look at another factor and that is of departmentalization with departmentalization this is the process of grouping several different types of jobs into manageable units within the organization and i'm sure you you have either worked an organization or you've talked with people in organizations that will talk about such things as departmentalization for like a function within the company departmentalization by function groups jobs that relate to the same organizational activity many smaller and newer organizations are going to utilize this based on function the disadvantages of this method are that it can lead to a slow decision making process and it tends to emphasize the department rather than the organization as a whole we can also base our departmentalization on product and this is where we're going to group all of our activities that are related to a particular good or product that we're doing or a service that we're providing a third way that we can departmentalize is by location and this just makes sense if we have several different locations based off of a geographical area in which they are performing they should be grouped by location sometimes we departmentalize by our customers if we departmentalize by our customers this is where groups of all activities that are according to the needs of various customers and their their populations then that's what we're going to departmentalize around our end customers and we can also have a combination of bases let's move on to our next factor and that is of delegation a delegation is going to be where we assign work and power to other workers uh it's key that we talk about delegation of authority uh here with the there are steps in the delegation process and three steps that are generally going to be involved in the delegation process include where the manager is going to assign responsibility they must assign that responsibility and when i say the word responsibility this is simply a duty to a job or performing a task another step is that the manager must grant authority which is to provide the individual power within the organization to accomplish a task and then lastly the manager must create some form of accountability accountability when we talk about that with an organization this is just the obligation of a worker to accomplish an assigned job or task that's been granted to them from their manager accountability is created but it cannot really be delegated now there can be a barrier to delegation there could be several reasons why the manager is not going to be willing to delegate work such as maybe they don't trust the employee to actually be able to complete the task or they may fear that an employee will do exceptional work and attract the attention of management that is that are above them and some managers are just simply so disorganized that they are not able to plan and assign work effectively now i want to mention the decentralization of authority this is the pattern of delegation throughout an organization is going to determine the extent to which that organization is either centralized or decentralized an organization in which the management is consciously attempts to spread authority widely across its organizational levels is said to be decentralized everything's not done in one so that leads us to centralized location and this is where an organization that systematically works to concentrate authority at only the upper levels of management this is where we are called a centralized organization and you might be able to identify in organizations that you've been in or that people you know have been in to be able to easily identify where the authority lies as if they are centralized or decentralized a variety of factors that can obviously influence the extent to which a firm is decentralized the external environment in which the firm operates the more complex or maybe unpredictable the environment of an organization the more likely it is that top management will let the lower level managers make more important decisions because lower level managers are going to be closer to those daily problems now another factor that can influence the extent of our organization to which we are decentralized or not is with the decision-making abilities of those lower level managers and yet another factor could be maybe a firm has practice centralization or decentralization and they're likely to maintain that same practice later on in the future in principle neither decentralization nor centralization is correct what works for this organization may not work for this other organization so we just have to look at the different factors that can lead us to centralization or decentralization now take a look at the fourth major step of organizing a business and this is establishing a span of management or you might hear the term span of control and this is just the number of workers who report directly to one manager we have wide and narrow spans of management a wide span of management exists when a manager has a large number of subordinates obviously a narrow span exists when that manager only has a few subordinates several factors determine the span that is best for any particular manager in within an organization another term that comes to light here when we discuss span of management is that of organizational height this is just that number of layers or or levels of management that exist within an organization now the span of management plays a direct role in determining an organization's height if the span of a manager is wide fewer levels are going to be needed and the organization is what we call a flat organization conversely if the span of management is very narrow then more levels are going to be needed and the result of the organization is called a tall organization now in a tall organization administrative costs are higher because we have more managers that are needed for these roles and because we have so many layers or levels then communication can become distorted through the communication change managers that exist in our flat type organizations may have to perform a lot more administrative duties because there are fewer resources fewer managers that are within this organization now let's move on to the last factor and that is with chain of command when we discuss chain of command there are four basic forms of organizational structure that exist and they are the line line and staff matrix and network structure first one we will talk about is that of the line structure with line structure this is when the chain of command goes directly from person to person throughout the organization here managers that exist in the line structure are called line managers and they make decisions and give orders to their subordinates to achieve the goals of the organization being in this line structure is going to allow line managers to make their decisions quickly with direct accountability because the decision maker only reports to one supervisor the downside of alliance structure is that the line managers are responsible for many activities and therefore they need to have a wide range of knowledge about all of these activities consequently line structures are more popular in very small organizations rather than medium to large organizations simply because that in these larger organizations the activities are going to be much more complex and there's going to be a lot more of these activities for these line managers to manage the next structure is that of the line and staff structure this utilizes the chain of command from the line structure but it also provides line managers with specialists that are called staff managers staff managers are going to provide support advice and expertise to these line managers but they're not part of the chain of command because they don't have the authority over their assistance now both line and staff managers are needed for effective management but the two positions differ in important ways line managers have line authority staff managers have advisory authority which means that they can provide advice to the line managers staff managers also have functional authority allowing them to make decisions and issue directives about their areas of expertise conflict between line managers and staff managers can occur if line managers perceive that those staff managers are a threat to their line authority or if the staff managers perceive that their recommendations are not being adopted by those line managers there are several ways that we can employ to minimize this conflict between the line managers and staff managers one thing we can do is integrate line and staff managers into a singular team we could also ensure that areas of responsibility of line and staff managers are clearly defined so they know they're not stepping on each other's toes or anything like that and then lastly we can hold the line and staff managers accountable for the results of their specific activities now let's look at the next structure this is going to be the matrix structure the matrix structure is going to combine vertical and horizontal lines of authority the matrix structure occurs when product departmentalization is superimposed on functionally departmentalized organization authority flows both down and across and employees report to more than one supervisor in a matrix structure people from different departments are assigned to a group and we usually call these cross-functional teams and these people are going to work on new projects frequently cross-functional teams are charged with developing new products the project manager is in charge of the overall team but employees on the team also are going to report to their functional department supervisors cross-functional teams may be temporary or they may be permanent these teams are often empowered to make major decisions the matrix organization has several advantages one advantage is obviously with its flexibility another is that the structure can increase productivity raise morale and nurture creativity and innovation within the organization because of being on these cross-functional teams employees sometimes experience personal development by doing a variety of jobs rather than being becoming stagnant with doing the same task over and over now where there's advantages there are also disadvantages with the matrix organization one such disadvantages with having employees report to more than one supervisor can cause some confusion about who is actually in charge another disadvantage is that teams may take longer to resolve problems and issues than individuals that are working alone another disadvantage is that other difficulties may include personality clashes poor communication undefined individual roles within the team unclear responsibilities and difficulties in finding ways to reward individuals and t team performances simultaneously this is where becoming a good leader and having especially good project management experience comes into play now the last advantage i want to bring up with the matrix organization is that because more managers and support staff may be needed a matrix structure can obviously become more expensive to maintain by having this in your organization so you have to always weigh out the advantages and disadvantages well now let's take a look at the next structure and that is of the network structure you might even hear this called by some individuals as a virtual organization but in a network structure administration is the primary function performed other functions are contracted out to other organizations this type of organization has only a few permanent employees consisting of top management and a few hourly or clerical workers they're also going to have leased equipment and facilities and so those are only going to be temporary and there's a limited formal structure flexibility is going to allow an organization to quickly adjust to the changes managers may face some of the following challenges in these network structures such as controlling the quality work performed by other organizations because it's not within the organization there could be low morale and high turnover among those hourly temporary workers and there can be a lack of clear hierarchy within the organization if you employ this network or virtual organization now that we have an idea about the different type of structures that exist let's look at the corporate culture because with the corporate culture it's very important that we define this as the inner rights rituals and values that exist within a firm corporate culture is generally thought to have a very strong influence on a firm's performance over a long span of time there are some studies that exist that say that there can be four types of corporate cultures the network culture the mercenary culture the fragmented culture and the communal culture and that when the company's environment changes cultural change is needed such as when your industry becomes more competitive the company's performance is mediocre or the company is growing rapidly then there could be need for cultural changes the organization's culture could have a powerful influence on how its employees think and act it can also determine public perception of your organization some of the common corporate culture indicators are things like the physical setting how the office is laid out as an example of this is it a open concept or are there enclosed cubicles or offices that can determine part of your corporate culture as well another indicator of the culprit culture is what the company says about its corporate culture in its advertising that's out there or its marketing as well as how the company greets guests do they have a formal area that people come into or is it very informal and people kind of come and go another indicator is how employees spend their time are they working alone and just doing their tasks by themselves or are they working with others so that is that culture there that they can work with others to accomplish these tasks with all the necessary resources willing to help and achieve the goals of the organization the corporate culture can affect the longevity of employees as well so how they feel the culture is in the organization can determine if they want to stay committed to the organization or looking for a culture that fits them better for them to transition onto now part of this culture we can see that there are several types of committees that exist as part of our organizational structure one of those would be the ad hoc committee this is created for a specific short-term purpose such as reviewing the employees benefits plan as an example so we form this committee and it's only going to meet for a specific amount time for a specific purpose and then it's probably going to break up now a standing committee is one in which is relatively permanent and charged with performing some tasks or tasks that we see that are reoccurring within our organization and then lastly another type of committee that we might see in our organization is that of a task force and this is a committee that's established to investigate a major problem or a pending decision so as a member of an organization you might be part of one of these three types of committees these committees offer some advantages over individual actions in our organization such as several members are able to bring more information and knowledge to the task at hand from different views another is that committees tend to make more accurate decisions and to transmit their results through the organization more effectively because they have buy-in and when they go back to the areas that they work in then those people are that they work with daily are more apt to buy in because of that relationship they have with that person who is on one of these committees disadvantages exist obviously because um we could have you know if we always have advantages we're always going to disadvantages but one of those is that committee deliberations can take much longer because there's so many more opinions and we if we were an individual we're going to make an action we're going to go with it whereas we our committee and there's several different opinions there could be several actions and it may just take longer to figure out get everybody on board for that one decision another disadvantage is that unnecessary compromise may take place within this committee just to appease one or more individuals so that is one disadvantage as well that exists with our committees but overall committees help get things done and having more than one view helps to make sure we're making the right decisions we've discussed formal organization well now it's important to talk about informal organizations informal organization describes the pattern of behavior and interaction that stems from personal rather than official relationships within an organization an informal group is created by members themselves to accomplish goals that may or may not be relevant to the organization workers may create an informal group to go have a softball or to form a union or get a particular manager fired or transferred or maybe it's something as simple as sharing a lunch informal groups can be powerful forces within your organizations and as a manager you should be aware of the different formal groups that exist now the grapevine is the informal communication network that exists within an organization it is a completely separate form than the organization's formal chain channels that we use for organ communication and sometimes we'll even find that the grapevine is a much faster channel of communication than what we have existing in our organizations managers would make a mistake if they try to eliminate the grapevine so don't try to do that instead a more rational approach is to recognize that exists in your organization um as kind of like an unofficial part of your organization just kind of accept it sometimes this grapevine can have a very powerful influence on the communication that exists within your organization so that's why sometimes it's just best to embrace it and just realize it's just another form of communication within your organization that is it for this tutorial on creating a flexible organization it is imperative to understand such things as the forms of organizational culture and the different aspects of your culture in your in your organization because we need to make sure that our organization not only is structured in a way that we meet our objectives for the organization but also keeping that core mindset that the employees are part of that and they are what makes our organization either be successful or not successful so there's a lot that goes into creating a flexible organization and while one method may not work for another it's important to just have all this information so that you are more informed manager thank you for following along and have a great day