A worker reports to a manager. A manager reports to a director, a director reports to a vice president, and a vice president reports to a C-level senior leader, like a chief executive officer or a chief administrative officer. If you’ve ever worked in a corporate setting, you’re likely to recognize this as the basic set of layers of an organization’s structure.
An organizational structure defines how job tasks are formally divided, grouped, and coordinated. The structure of an organization usually features six different elements:
Work Specialization: Frederick Winslow Taylor, who investigated time and motion to discover the most effective ways for workers to do their tasks, was previously covered. The idea of a “one right way” was introduced by Taylor. Henry Ford abandoned the idea of “one optimal way” when he created the assembly line and instead saw task specialization as a means of achieving continuous progress. The level of activity division and subsequent job separation within an organization is referred to as work specialization.
A month or two later, if you assigned one person to the task of creating an automobile, he might still be working on it. However, if two workers are assigned the responsibility of fitting the left front fenders and the right front tires, respectively, those responsibilities become standardized. With practice, employees can perform them rapidly.
The majority of manufacturers were engaging in work specialization, or “division of labor,” by the 1940s. From the perspective of the tasks, work specialization was ideal: simple activities could be completed by unskilled labor, and complex jobs could be divided up and handled by personnel who possessed those talents. These competent workers weren’t squandering their time on unnecessary activities.
Specialization in the workplace was perfect from the standpoint of production. When workers were allocated to one of those duties instead of both, tools didn’t need to be pulled out and put away because installing brake pads takes different tools than installing a tire. People could be cheaply trained to perform a single task, and many employees, each educated to perform their own duty, could construct extremely complicated machinery more quickly and efficiently than a single highly trained employee who had all the necessary abilities.
Up until the 1960s, manufacturers tweaked and fine-tuned worker specialization to boost output, but it soon became apparent that a good thing might be carried too far. Higher productivity is compensated by lower output, stress, increased absenteeism, and turnover. To increase engagement, manufacturers increased worker specialization by adding more tasks to a position.
Departmentalization: Jobs must be integrated once they have been divided up by work specialization in order to coordinate related tasks. It is through departmentalization that jobs are categorized. The following categories can be used to organize jobs.
- Function: This is one of the most widely used methods for group activities. A company might have a finance function, a human resources function, or a supply chain function. People with similar talents operate in groups called common units. All of the worker specialties for those fields are grouped together.
- Product: A major manufacturing firm might organize its frequent duties by product. One manufacturer of paper goods might have a division for office paper, another for toilet tissues, and a third for cartons. The main benefit of structuring routine tasks in this way is that it increases employee responsible for the quality of those outputs.
- Geography: An organization might decide to organize common tasks regionally if its clients are dispersed across a certain area. An organization is structured geographically if it has sales functions in the South, Midwest, and East.
- Process: A manufacturing facility may decide to structure routine tasks according to processes. Casting, pressing, finishing, packaging, and other processes may be used to arrange departments in a tube facility. Each division focuses on a certain stage of the production process. The Department of Motor Vehicles has a similar departmentalized structure, requiring you to move from one area to another to renew your license or your license plate.
- Customer: Depending on the customers a company serves, it may decide to consolidate tasks. A firm like Dropbox.com, for instance, offers free file sharing and cloud storage for its private customers but also has a division that caters to commercial clients.
Chain of Command: Who reports to whom is made clear by the chain of command, which is the continuous line of authority that runs from the top of the company (such as the CEO or President) down the lowest echelon. We began by discussing how managers reported to directors, who in turn reported to vice presidents, who in turn reported to C-level executives. The chain of command is as stated.
Along with the concept of chain of command, there are two more ideas. The first, authority, defines the rights managers have to issue commands and demand that those commands be followed. The idea that a subordinate should only have one superior to whom they are directly answerable is known as unity of command. Without unity of command, it is likely that a subordinate will be responding to orders from many people, which can lead to a conflict of priorities and is unproductive.
Henri Fayol’s management theories, in particular the chain of command and unity of command, were discussed. The chain of command part of organizational structure is not going away any time soon, but technological improvements and the movement toward employee empowerment have made these concepts less relevant today.
Span of Control: The amount of subordinates a manager can effectively supervise is known as the span of control. The greater the managers’ areas of authority, the more effective the company will be. Wider control arcs result in cost savings.
Think about the corporation whose scope of control is depicted in the figure above in blue. 5,461 people work for the blue corporation, which has six layers of management (all but the bottom layer of 4,096). Let’s imagine each of those managers earns $50,000. For 1,365 managers earning $50,000 each, the total payroll is $68,250,000.
If we look at the green company, there are still 4,096 people in the lowest layer, but there are fewer managers overall overseeing them. The entire payroll for the green company’s 585 managers, assuming they each earn $50,000, is $29,250,000. What a significant save!
Small control spans are not only expensive, but they also frequently make it more difficult to communicate inside the organization. The more levels there are, the more managers must pass the word. More stringent oversight, less employee inventiveness, and less employee empowerment are likewise encouraged by shorter control spans. Wider spheres of control have been more popular recently.
Centralization and Decentralization: The degree to which decision-making is concentrated at a single location within an organization is referred to as centralization.
Employee feedback is taken into consideration and actions can be made swiftly to solve problems in a decentralized company where employees have the capacity to make decisions. An organization is more decentralized when employees at lower levels have more decision-making authority.
Lower management is responsible for carrying out decisions made by upper management in centralized organizations.
Formalization: The level of job standardization inside an organization is referred to as formalization. An employee with a highly structured job has limited control over how, when, or even if the job should be done.
A person working in an assembly line is likely doing a highly regimented job where he has little control over how he performs his duties. While she certainly has less formal authority than an assembly line worker, an accounts payable associate has less control over how those numerous bills are handled. A sales associate who is out visiting customers might not have much formalization in his position.
