One of the most challenging tasks of a business may be organizing the people who perform its work. A business may begin with one person doing all the necessary tasks. As the business becomes successful and grows, however, there is generally more work, and more people are needed to perform various tasks. Through this division of work, individuals can become specialists at a specific job. Because there are several peopleften in different locationsorking toward a common objective, "there must be a plan showing how the work will be organized. The plan for the systematic arrangement of work is the organization structure. Organization structure is comprised of functions, relationships, responsibilities, authorities, and communications of individuals within each department" (Sexton, 1970, p. 23). The typical depiction of structure is the organizational chart. The formalized organizational chart has been around since 1854, when Daniel McCallum became general superintendent of the New York and Erie Railroadne of the world's longest railroads. According to McCallum, since the railroad was one of the longest, the operating costs per mile should be less than those of shorter railroad lines. However, this was not the case. To remedy management inefficiencies, McCallum designed the first organizational chart in order to create a sense of structure. The organizational chart has been described as looking like a tree, with the roots representing the president and the board of directors, while the branches symbolize the various departments and the leaves depict the staff workers. The result of the organizational chart was a clear line of authority showing where subordinates were accountable to their immediate supervisors (Chandler, 1988, p. 156).
Traditional organizational structures focus on the functions, or departments, within an organization, closely following the organization's customs and bureaucratic procedures. These structures have clearly defined lines of authority for all levels of management. Two traditional structures are line and line-and-staff.
The line structure is defined by its clear chain of command, with final approval on decisions affecting the operations of the company still coming from the top down (Figure 1). Because the line structure is most often used in small organizationsuch as small accounting offices and law firms, hair salons, and "mom-and-pop" storeshe president or CEO can easily provide information and direction to subordinates, thus allowing decisions to be made quickly (Boone and Kurtz, 1993, p. 259).
Line structures by nature are fairly informal and involve few departments, making the organizations highly decentralized. Employees are generally on a first-name basis with the president, who is often available throughout the day to answer questions and/or to respond to situations as they arise. It is common to see the president or CEO working alongside the subordinates. Because the president is often responsible for wearing many "hats" and being responsible for many activities, she or he cannot be an expert in all areas (Figure 1).
While the line structure would not be appropriate for larger companies, the line-and-staff structure is applicable because it helps to identify a set of guidelines for the people directly involved in completing the organization's work. This type of structure combines the flow of information from the line structure with the staff departments that service, advise, and support them (Boone and Kurtz, 1993, p. 259).
Line departments are involved in making decisions regarding the operation of the organization, while staff areas provide specialized support. The line-and-staff organizational structure "is necessary to provide specialized, functional assistance to all managers, to ensure adequate checks and balances, and to maintain accountability for end results" (Allen, 1970, p. 63).
An example of a line department might be the production department because it is directly responsible for producing the product. A staff department, on the other hand, has employees who advise and assistaking sure the product gets advertised or that the customer service representative's computer is working (Boone and Kurtz, 1993, p. 259).
Based on the company's general organization, line-and-staff structures generally have a centralized chain of command. The line-and-staff managers have direct authority over their subordinates, but staff managers have no authority over line managers and their subordinates. Because there are more layers and presumably more guidelines to follow in this type of organization, the decision-making process is slower than in a line organization. The line-and-staff organizational structure is generally more formal in nature and has many departments (Figure 2).
A variation of the line-and-staff organizational structure is the matrix structure. In today's workplace, employees are hired into a functional department (a department that performs a specific type of work, such as marketing, finance, accounting, and human resources) but may find themselves working on projects managed by members of another department. Organizations arranged according to project are referred to as matrix organizations. Matrix organizations combine both vertical authority relationships (where employees report to their functional manager) and horizontal, or diagonal, work relationships (where employees report to their project supervisor for the length of the project). "Workers are accountable to two supervisorsne functional manger in the department where the employee
regularly works and one special project manager who uses the employee's services for a varying period of time" (Keeling and Kallaus, 1996,p. 43).
Since employees report to two separate managers, this type of organizational structure is difficult to managespecially because of conflicting roles and shared authority. Employees' time is often split between departments and they can become easily frustrated if each manager requires extra efforts to complete projects on similar time-lines.
Because the matrix structure is often used in organizations using the line-and-staff setup, its also fairly centralized. However, the chain of command is different in that an employee can report to one or more managers, but one manager typically has more authority over the employee than the other manager(s). Within the project or team unit, decision making can occur faster than in a line-and-staff structure, but probably not as quickly as in a line structure. Typically, the matrix structure is more informal than line-and-staff structures but not as informal as line structures (Figure 3).
Organizations with a centralized structure have several layers of management that control the company by maintaining a high level of authority, which is the power to make decisions concerning business activities. With a centralized structure, line-and-staff employees have limited authority to carry something out without prior approval. This organizational structure tends to focus on top-down management, whereby executives at the top communicate by telling middle managers, who then tell first-level managers, who then tell the staff what to do and how to do it. Since this organizational structure tends to be
fairly bureaucratic, employees have little freedom. Centralized organizations are known for decreased span of control limited number of employees report to a manager, who then reports to the next management level, and so on up the ladder to the CEO (Figure 4).
Because individual creativity can be stifled and management costs can be greater in a centralized organization, many organizations continue to downsize into a more decentralized structure. Decentralization seeks to eliminate the unnecessary levels of management and to place authority in the hands of first-line managers and staffthus increasing the span of control, with more employees reporting to one manager. Because more employees are reporting to a single manager than before, the managers are forced to delegate more work and to hold the employees more accountable. Downsizing has also helped to change the flow of communication, so that top management hears staff concerns and complaints in a more direct manner and management has a more hands-on approach. The hands-on approach involves less bureaucracy, which means there is a faster response to situations that demand immediate attention. This structure also takes advantage of bottom-up communication, with staff issues being addressed in a timely manner.
The restructuring generally takes place at the mid-management level. Because some middle managers have lost their jobs, been laid off, or simply taken advantage of early retirement and severance packages, their positions have been phased out, thus helping to reduce unnecessary costly salaries and increasing employee span of control. Many middle managers who stayed in their current "positions" found that their jobs have changed to being coaches, or team leaders, who allow their employees greater freedom in completing their work responsibilities (Csoka, 1995, p. 3).
The chain of command is the protocol used for communication within organizations. It provides a clear picture of who reports to whom. Quick decisions can be made in decentralized organizations because approval usually has to come only from the manager one level higher than the person making the decision. The chain of command involves line-and-staff employees, where the staff's job is completing the actual work and the line functions to oversee the staff (Figure 5).
Organizations can be divided into various departments, or units, with individuals who specialize in a given area, such as marketing, finance, sales, and so forth. Having each unit perform specialized jobs is known as departmentalization. Departmentalization is done according to five major categories (Figure 6): (1) product, which requires each department to be responsible for the product being manufactured; (2) geographic, which divides the organization based on the location of stores and offices; (3) customer, which
separates departments by customer typeor example, textbook companies that cater to both grade schools and community colleges; (4) functional, which breaks departments into specialty areas; and (5) process, which creates departments responsible for various steps in the production process (Boone and Kurtz, 1993).
Boone, Louis E., and Kurtz, David L. (1993). Contemporary Business, 7th ed. Fort Worth, TX: Dryden Press.
Chandler, Alfred D., Jr. (1988). "Origins of the Organization Chart," Harvard Business Review 88:2, (March/April):p. 156.
Csoka, Louis. (1995). "Redefining the Middle Manager," HR Executive Review, 2(2): 3-5.
Keeling, B. Lewis, and Kallaus, Norman F. (1996). Administrative Office Management, 11th ed., Cincinnati, OH: South-Western Educational Publishing.
Litterer, Joseph A. (1980). Organizations: Structure and Behavior. New York: Wiley.
Sexton, William P. (1970). "Organization Structure." In William P. Sexton, ed. Organization Theories. Columbus, OH: Charles E. Merrill.
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