CHAPTER TEN:

FOUNDATIONS OF
ORGANIZATIONAL
STRUCTURE
ORGANIZATIONAL STRUCTURE
BENEFITS OF CREATING AN ORGANIZATIONAL STRUCTURE
• An organizational structure provides a clear understanding of roles, responsibilities, and reporting lines, ensuring that
everyone knows what is expected of them and who they report to.

• By defining roles and responsibilities, an organizational structure helps in streamlining workflow and minimizing
redundancy. This enhances efficiency and productivity within the organization.

• Organizational structures allow for specialization, enabling individuals to focus on specific tasks or functions where
they excel. This specialization leads to the development of expertise, which can contribute to higher-quality outputs.

• Clear lines of communication and reporting facilitate coordination among different departments or teams within the
organization. This encourages collaboration, knowledge sharing, and synergy among employees.
• An effective organizational structure provides a framework that can accommodate growth and expansion. It
allows the organization to scale operations efficiently by adding new departments, teams, or functions as
needed.

• While organizational structures provide a framework, they should also allow for adaptability and flexibility to
respond to changing market conditions, customer needs, or internal dynamics. A well-designed structure can
balance stability with agility.

• Organizational structures help in allocating resources effectively by aligning them with strategic priorities and
objectives. This ensures that resources such as finances, personnel, and equipment are allocated optimally to
support the organization's goals.
BASIC ELEMENTS OF
ORGANIZATIONAL
STRUCTURE
WHAT ARE THE ELEMENTS OF THE ORGANIZATIONAL STRUCTURE?
Organizational structure is a formal system of working relationships that both separates and
integrates functions and duties. While separation of duties identifies the work responsibilities for
each employee, integration of duties guides people how to engage together in teamwork.

ELEMENTS OF THE ORGANIZATIONAL STRUCTURE

• Work specialization.
• Departmentalization.
• Chain of command.
• Span of control.
• Centralization.
• Formalization.
A. WORK SPECIALIZATION
In any business, employees at all levels typically are given a description of their duties and the expectations that come with their
positions. In larger companies, job descriptions are generally formally adopted in writing. Work specialization or division of labor

B. DEPARTMENTALIZATION
Departmentalization refers to how the organizational structure groups the company’s functions, offices and teams. Those
individual groups are typically referred to as Departments.

Departmentalization refers to the process by which jobs are grouped together. This can be done by function, product,
geography, process, or customer.

C. CHAIN OF COMMAND
Most organizations, from businesses to nonprofits to the military, utilize a chain of command. This helps eliminate inefficiencies
by having each employee report to a single manager, instead of to several bosses.
The right of a boss to issue orders and expect them to be followed is referred to as authority
D. SPAN OF CONTROL
An organization’s span of control defines how many employees each manager is responsible for within
the company. There is no single type of span of control that’s ideal for all companies or even for all
businesses in a specific industry.
The span of control refers to the number of employees that can be managed by one manager.

F. FORMALIZATION
Formalization aids the creation of processes, relationships, and operational procedures which outlines
procedures, rules, and duties for individual employees, units, groups, teams, and the company as a
whole.

E. CENTRALIZATION AND DECENTRALIZATION

Centralization refers to decision-making concentrated in a single place in the organization.
A decentralized structure, on the other hand, allows lower-level employees to provide input or even
make choices
 Common
Organizational
Design
SIMPLE DESIGN STRUCTURE

A simple structure is a basic organizational system that a company uses to centralize its operations. Also referred to as the flat
structure, a simple management structure is usually characterized by low departmentalization, little work specialization, extensive
control, and little-to-no formalization or policies that govern operations.

In simple terms, there is no multilayered management system or formal departments in a flat structure. Instead, authority is
centralized with the Founder, who delegates work to staff directly. Due to the lack of management personnel, employees must report
to the business owner in case of any issues. Thus, communication is informal.

A startup is an excellent example of a flat organization because, apart from the owner, there might only be one or two employees who
multi-task and oversee the work completed by other employees to ensure the business achieves its goals. Such a structure
commands a high degree of collaboration.
FLAT STRUCTURE

A flat structure is dominated by employees with the leader at the top. It’s an organizational structure
that only small businesses have because managing the entire workforce as a single person is a task that
the leader can only handle to a certain extent. In a startup, for instance, an entrepreneur typically
implements a simple structure. Considering the size of the business, it takes no effort to set up a simple
structure as it arises and functions naturally.

During this pre-bureaucratic stage, staff members perform non-specialized tasks without following
written rules. The founder and employees collaborate and pitch in on an as-needed basis. Simply put,
everyone is a jack of all trades. Although the organization maintains a flat structure in the early startup
stage, employees may begin following a few rules and other agreed-upon working procedures as the
company advances up the growth cycle.
MATRIX STRUCTURE
A matrix organization is a work structure where team members report to
multiple leaders. In a matrix organization, team members (whether remote or in-house) report to a project
manager as well as their department head. This management structure can help your company create new
products and services without realigning teams.
Matrix organizations have two or more management reporting structures. While this may seem confusing at first, team members typically
have a primary manager for their department.
Reporting to a department manager functions similarly to a traditional work structure. For example, team members working in IT report to
the IT department head. The IT department head reports to the vice president of their division. Eventually, all reporting relationships lead
to the CEO.
The difference in a matrix structure is that team members also report to project managers. Projects often require work from members of
various departments like IT, marketing, and finance, which is why having a separate manager for individual projects makes sense.

Weak matrix

In a weak matrix, the project manager has the least amount of decision-making power compared to the other matrix management types.
When the project manager has limited authority over the project, the matrix becomes weak because the project budget and timeline is in
the hands of the department head. Creating a communication plan can keep communication from getting lost in a weak matrix.

Balanced matrix

In a balanced matrix, the department head and the project manager have equal authority and team members report to both of them. This
keeps communication open between everyone in leadership roles and allows the project to move forward smoothly.

Strong matrix

In a strong matrix, the project manager has most of the decision-making power over the project, while the department head has more
limited authority. This creates a strong organizational structure because the project manager has full ownership over the project. The
department head can oversee the project but doesn’t make key decisions.
Weak matrix
In a weak matrix, the project manager has the least amount of decision-making power compared
to the other matrix management types. When the project manager has limited authority over the
project, the matrix becomes weak because the project budget and timeline is in the hands of the
department head. Creating a communication plan can keep communication from getting lost in a
weak matrix.

Balanced matrix
In a balanced matrix, the department head and the project manager have equal authority and
team members report to both of them. This keeps communication open between everyone in
leadership roles and allows the project to move forward smoothly.

Strong matrix
In a strong matrix, the project manager has most of the decision-making power over the project,
while the department head has more limited authority. This creates a strong organizational
structure because the project manager has full ownership over the project. The department head
can oversee the project but doesn’t make key decisions.
Bureaucracy

Bureaucracy is a type of organizational structure characterized by a clear hierarchy,

division of labor, strict rules, impersonality, and merit-based advancement. While it can
promote efficiency and fairness, it may also be critiqued for rigidity and slow response
to change."
New Organization Design Options
Outsourcing is new practice which service or job
function are farmed out to a third party. In information
technology, in outsourcing initiative with the
technology provider can involves a range of operations,
from the entirety of the IT function to discrete, easily
defined components such disaster recovery, network
services, software development or QA testing.
Outsourcing Benefits and Cost
The business case for outsourcing varies by situation, but the benefits of outsourcing often include one or
more the following :

• Lower cost (due to the economics scale or lower labor rates)

• Include efficiency
• Variable capacity
• Access skills or resources
• Increased flexibility to meet changing business and commercial conditions
• Accelerated time to market
• Lower ongoing invest in internal infrastructure
• Access to innovation, Intellectual property, and thought leadership
• Increased focus on strategy/core competencies
• Outsourcing Benefits and Cost
• Slower turnaround time
• lack of business or domain knowledge
• language and cultural barriers
• Time zone differences
• lack of control
• Possible cash influx resulting from transfer of assets to the new provider some of the risk of
outsourcing include
Team-based organizational structure
Team-based organizational structure are made of team working towards a
common goal while working on their individual tasks. They are less
hierarchical and they have flexible structures that reinforce problem-solving.
Decisions-making and teamwork. Team organization structure have changed
the way many industries work. Globalization has allowed people in all
industries around the world to produce goods and services cooperatively.
Especially, manufacturing companies must work together with the suppliers
around the globe while keeping the cost to a minimum while producing high-
quality products.
REFERENCES
https://youtu.be/RcGCFX95ejE?si=M5fO8H6TtepVq8cB