Understanding Organizational Structure: Authority, Delegation, and Design
LINE VERSUS STAFF AUTHORITY:
This section explores the concepts of line and staff authority within organizations.
Line Authority
Line authority grants the right to directly command immediate subordinates in the chain of command. For example, a CEO exercises line authority over division vice presidents.
Staff Authority
Staff authority involves advising individuals outside the direct chain of command, without the power to command. For instance, HR managers provide guidance to operational managers.
The document also differentiates between:
- Line functions: Directly contribute to product creation or sales.
- Staff functions: Support line activities without direct involvement in product creation or sales.
DELEGATION OF AUTHORITY:
Delegation entails assigning direct authority and responsibility for tasks to subordinates, typically handled by higher-level personnel. This process involves three key transfers:
- Transfer of Responsibility: The subordinate assumes full responsibility for the assigned task, as exemplified by Apple’s “directly responsible individual” concept.
- Transfer of Authority: The subordinate gains full authority over resources and personnel required for task completion.
- Transfer of Accountability: The subordinate becomes accountable for the successful execution of the task.
Effective delegation is crucial for organizational success, allowing leaders to focus on strategic growth. However, managers often face challenges in relinquishing control. Building a reliable team and recruiting the right individuals are essential for facilitating effective delegation.
DEGREE OF CENTRALIZATION:
This section examines the spectrum of decision-making authority within organizations.
Centralization
In centralized structures, most decisions are made at higher levels of the organization.
Decentralization
Decentralization distributes authority to lower levels, empowering employees and enabling faster decision-making. Trillium Health Centre in Ontario serves as a successful example of decentralization.
The document suggests that companies should centralize processes where standardization is critical and decentralize where flexibility is more important. Printing Canada’s standardized franchisee selection process illustrates this concept.
JOB SPECIALIZATION:
Job specialization involves breaking down tasks into small, simple steps, leading to high repetition and low variety. While this approach enhances productivity, it can also result in boredom, low job satisfaction, and high employee turnover. Companies like Taco Bell utilize specialized tasks to streamline processes and maintain lower wages.
RE-ENGINEERING:
Re-engineering is a radical redesign of business processes aimed at achieving significant performance improvements. It involves fundamental changes with a focus on processes to achieve dramatic results. McCarthy Tétrault LLP’s transformation in the legal sector exemplifies the application of re-engineering across various industries.
Re-engineering shifts organizational orientation from vertical to horizontal, emphasizing customer-centricity and cross-functional collaboration. It alters task interdependence by reducing sequential and pooled interdependence while increasing reciprocal interdependence.
However, re-engineering faces criticism for its association with cost-cutting measures and layoffs, which can negatively impact employee morale and performance.
INTER-ORGANIZATIONAL PROCESSES: MODULAR ORGANIZATIONS:
Modular organizations outsource non-core business activities to external companies or specialists, reducing costs and increasing flexibility. They focus on core competencies while leveraging external expertise. However, outsourcing can lead to a loss of control and potential competition from suppliers.
VIRTUAL ORGANIZATIONS:
A virtual organization comprises geographically dispersed participants who collaborate towards a shared goal using technology. Members may include full-time employees and external professionals, working on temporary projects or remotely.
Virtual organizations offer flexibility and cost-sharing advantages, as demonstrated by the partnership between Proctor & Gamble and Clorox. However, managing quality and relationships within virtual organizations can be challenging.
Brokers play a crucial role in facilitating collaborations, with cloud service brokerage emerging as a new opportunity in the digital age.