Organizational Structures and Principles

Posted on Aug 21, 2024 in Economy

Organization

Early Organizations

The earliest organizations were the military and the church, characterized by their vertical and authoritarian hierarchies. These structures are often represented as pyramids, with authority concentrated at the top and diminishing towards the base.

Organizing

Organizing is the process of creating formal work structures within a company. This involves:

  • Establishing a hierarchy of authority
  • Departmentalizing by function
  • Defining accountability for each work area

Departmentalization groups related activities, fostering specialization among those responsible. Core areas typically include:

  • Finance
  • Production or Operations
  • Marketing or Distribution
  • Human Resources (HR)

Structure

Structure is a means to an end, determined during the planning stage. It should support the organization’s objectives.

Linear Organizational Structure

This structure is authoritative, with communication flowing strictly downwards.

Organizational Process

Organizational processes and the resulting structure are defined by the planning process. If a structure isn’t grounded in planning, it’s unlikely to achieve the desired results, potentially leading to losses due to ever-present costs.

Redefining the Structure

If an organizational structure is poorly defined or yields undesirable outcomes, it needs to be redefined. This involves:

  • Analyzing the current structure’s shortcomings
  • Aligning the new structure with planning objectives
  • Considering legal and financial constraints

Since immediate overhauls are often impractical, it’s advisable to define three structures:

  • Short-term: Addresses the most pressing issues
  • Medium-term: Transitions towards the ideal state
  • Long-term: Represents the ultimate goal

Organization According to Taylor: “Linear Structure”

Frederick Taylor focused on the base of the organizational pyramid, where various positions and functions reside. He introduced specialists called “functional foremen,” leading to the “functional structure.” Key areas overseen by these foremen included:

  • Maintenance
  • Technical Office
  • Group (Discipline)
  • Planning
  • Quality Control
  • Methods, Timing, and Costs
  • Training
  • Staff

Advantage: Speed

Disadvantage: Rapid implementation can backfire if decisions are flawed.

Organization According to Fayol

A) “Advised Linear Structure”

Unlike Taylor, Henri Fayol concentrated on the upper levels of the pyramid. He aimed to achieve specialization without compromising unity of command, a challenge inherent in Taylor’s model. He accomplished this by incorporating staff advisors.

Staff advisors are specialists who provide guidance. While they advise subordinates, the ultimate decision-making authority and responsibility rest with the respective area or section head, who issues orders to maintain unity of command.

B) Linear Structure with Line and Staff Authority

Line Authority: Connects functions essential to the company’s core purpose.

Staff or Advisory Authority: Links staff functions to line functions, optimizing their performance.

Line functions are critical for daily operations, while staff functions contribute to short, medium, and long-term success without directly impacting immediate operations.

Staff

Authority: The ability to direct others, who are obligated to obey.

Types of Authority:

  1. Functional Authority (Formal/Legal): Derived from the organizational structure.
  2. Charismatic Authority: Stems from trust and respect; individuals are perceived as possessing authority.
  3. Technical Authority: Based on knowledge and expertise.
  4. Moral Authority: Conferred by ethics, morals, and decency.

Types of Staff:

  • Pure Staff (External): Advisors external to the company, possessing 100% technical authority.
  • Assistant Staff (Internal): Internal staff like secretaries, with 100% formal and moral authority.
  • Full Staff (Internal): Possess 100% technical, formal, and moral authority, with functional authority limited to specific tasks and timeframes.
  • Service Staff (Internal): Responsible for functions like maintenance, with technical, formal, moral, and functionally limited authority, but not time-bound.

Departments

Departments directly involved in the company’s core purpose are considered line departments; otherwise, they are staff departments.

C) Matrix or Cross-Matrix Structure

This structure is only applicable at the top levels of an organization, as implementing it at lower levels would violate the principle of unity of command.

D) Working Committee Structure

is a form that can support another of the old structures. The committee must decide by unanimous consensus, not majority. Features: Not more than 10 people. / Composed of persons fulfilling different roles within the company. / You should not enforce the hierarchy within the committee. / It takes longer to take decisions, but implementation is fast. / Is above the pyramid. Advantages: The free input of ideas, enriching as they are diverse. THE BEST IS THE ONE THAT Structure fit for purpose.