The Structure of Organization Ch16

Organization
Businesses are often referred to as organizations. An organization is a body that is set
up to meet needs. Organizations are of all types and sizes, exist everywhere and most of
us belong too many of them during life. For example, hospitals, youth clubs, sports clubs,
schools, colleges, libraries, charities, trade unions, and all types of businesses.
*** Types of organizations in Public and private sector are already covered in Ch. 1.

Organizational Chart
A diagram showing the structure of an organization is called organizational structure.

Organization Structure
The organizational structure is internal, formal framework of organization that shows the
way in which management is linked together in terms of authority, responsibility and
chain of command.
 Authority
The right of a person to use powers to ensure that the duties given to subordinates
are carried out.
 Delegation
It means the passing down of authority to perform tasks and take decisions from
higher to lower levels in the organization.
 Responsibility
 The extent to which an individual is accountable to a superior for the
performance of a job is called responsibility.
 The duty to complete a task is called responsibility.
 Hierarchy
The hierarchy in an organization is the order or levels of management. Orders are
passed down and information is passes up in this hierarchy.
 Chain of Command
“This is a route through which authority and powers are passed down in a
hierarchy”. It defines who reports to whom. Organizations must consider the
number of levels in chain of command because any extra level of management in
the hierarchy will reduce the effectiveness of communication.
There is no rule about the most effective numbers of levels in the chain. All
depends on the need of organization. However, organizations generally try to
keep chains as short as possible.
 Span of Control
The number subordinates reporting directly to a manager. In other words if a
production manager has ten subordinates, his span of control is ten.
According to Henri Fayol, span of control should be between three and six. This
is called narrow span of control. More then this is called wide span of
control.
 A narrow span of control has the advantage of tight control, close supervision
and allows better coordination. A narrow span of control requires a long chain of
command.
 A wide span of control offers greater decision making authority for subordinates
which may lead to job satisfaction. This requires a short chain of command.
 (A) Production Department

Manager 

Assistant Managers  

Supervisors   
Skilled Workers    
Semi Skilled Workers     
 This is a long chain of command and a narrow span of control. A production
department may look like this. One manager is helped by a few assistant
managers, each responsible for supervisors. These supervisors are responsible
for skilled workers, who are in charge of a group of semi skilled workers.
Close supervision is needed to make sure that quality is maintained. This is
some times referred to as a tall organization structure.

(B) Education Department

Head of department 

Senior Staff  
       
 This is a short chain of command and wide span of control. A higher
education department may look like this, with a head of department, a few
senior staff and many lecturing staff. Staff will want a degree of
independence. This is some times referred to as a flat organization structure.

 Centralization and Decentralization

Centralization and decentralization refer to the extent to which authority is
delegated in an organization. If there is complete centralization then subordinates
would have no authority at all. Complete decentralization would mean
 subordinates would have all the authority to take decisions. Any organization
operates in either of these ways, managers has to retain the responsibility.

Types of Organizational Structure

 Hierarchical or Bureaucratic Structure

This is a traditional structure. Decision making is shared throughout the
organization. This contains different layers of management. See Figure 16.1 on
page 257 and Figure 16.2 on page 258.
 The Matrix structure
Project based organizations used this structure. This emphasizes getting people
with particular specialist skills together into a project teams. Individuals within
the team have their own responsibility. This is totally a team work. See Figure
16.3 on page 259.

Factors Influencing organizational Structures

 Size
 Leadership Style If owners wish ton retain control in the business, they will
want a narrow span of control. Owners who want to motivate employees may
delegate decision making.
 Business Objectives If business wants to expand rapidly, its span of control gets
wider.
 External Factors In the period of recession business may be forced to reduce
its chain of command to cut cost.
 Changes in Technology