Organizational Structure
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Organizational structures have two dimensions: vertical and horizontal
Vertical refers to the number of hierarchical levels in the company: “tall structures” have
many more levels then “flat structures”
Another feature of the vertical dimension is the number of persons that a single manger has
reporting to them or “span of control”. Tall structures typically have a “narrow” (less people)
span of control and flat structures have “wider” span of control (more people).
Tall structure are characterized by centralized decision making at the top, flat structures
normally have more local decentralized decision making.
More autonomy (less supervision) and greater decision making opportunity is highly
correlation with increased motivation, creatively and innovation.
The horizontal dimension is the organization structure element which divides work into
specific jobs/tasks and assigns jobs into units such as departments.
The Vertical Dimension
Advantages of Tall Structures
Advantages of Flat Structures
Close supervisory control
Flexible and better able to adapt to changes
Clearly defined roles and responsibilities
Obvious chain of command
Decision making centralized at the top
Clear progression and promotion ladder
More mentoring
More direct and effective communication
Faster decision making
Greater autonomy and decision making for staff
Less hording of information at the top
More democratic
Disadvantages of Tall Structures
Disadvantages of Flat Structures
High management costs
Slow decision making
Ineffective and slow communication
Employees are less motivated, innovation suffers
Less rewards are given to staff, de-motivational
Subordinates have less freedom and responsibility
Less clear specific job functions
Less opportunity for promotion
High managerial work load
More difficult to coordinate between subordinates
Less close relationship between superior and staff
Produces more generalists than specialists
The Horizontal Dimension
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The horizontal dimension defines how work/jobs are grouped or
Departmentalization.
Popular approaches to departmentalization are:
o By function – Functional Departmental Structure
o By product or service – Divisional Departmental Structure
When customers or jobs are scattered over a large geographic area and have similar
needs based on their location, a Geographic organizational structure might be
appropriate.
Less common is the Matrix organizational structure, which combines two structures.
In a matrix structure; product, project or client/regional managers, borrow talent
from the specialized functional areas in achieve tasks.
Embedded these structures are two other considerations when designing
organizations; where to place decision making authority, centralized or
decentralized and the degree of formalization. Formalization refers to the
degree to which rules and regulations will direct employees and managers.
Functional Structure:
Advantages of the Functional
Departmental Structure
Disadvantages of the Functional
Departmental Structure
High degree of efficiency
Develops specialized employees
Allows economies of scale to be achieved
Fosters a professional identity within functions
Accountability and roles are clear
Clear career path
Cross functional communication poor
Diminished responsiveness to customers’ needs
Slow response to external environmental changes
Fosters restricted view of the organization
Creates allegiance to functions, not the organization
Develops specialists not generalists
Advantages of the Divisional
Organizational Structure
Disadvantages of the Divisional
Organizational Structure
Fast response to environment
Fast response to customer needs
Fosters high coordination across functions
Develops general managers and executive skills
Clear responsibility for all activities in the division
Duplication of resources
Reduced specialization
Competition among divisions
Makes standardization across divisions difficult
Poor coordination across divisions
Advantages of the Geographic
Organizational Structure
Disadvantages of the Geographic
Organizational Structure
Local hiring improves knowledge of local culture
Provides greater customer knowledge
Customer feels more comfortable
Faster more nuanced decisions
Fosters customized solutions
Duplication of personnel (home and regions)
Competition between different areas
Difficult to maintain core company beliefs
Potential feeling of division within the company
Different metrics and policies for each region
Advantages of the Matrix
Organizational Structure
Disadvantages of the Matrix
Organizational Structure
Efficient utilization of scare expensive specialists
Allows for rapid start of new projects/products
Develops cross-functional skills by employees
Increased employee involvement in decision making
Achieves coordination to meet customer needs
Dual chain of command repercussions
Requires good interpersonal skills
Conflict of between managers over priorities
Too much time spend coordinating
Places stress on individuals
Note:
During our phone discussions I have limited the conversation to the
vertical dimensions of organizational structure – tall/flat and span of
control (number of staff reporting to a single manager. This is because
that aspect is always in play, and the ramifications on motivation,
communications, etc. are clear…..
The horizontal dimension is also something that must be determined when
designing an organization. An organization can select one of many
commonly used structures or invent their own.
The assignments have focused on the vertical dimension only, for the
above reasons. However, it would be super to “drill” them to be sure they
understand the horizontal dimension too.