What does the organizational structure look like? - Appendix 2 

This chapter provides an overview of organizational structure. Organizational structure refers to the rules, relationships, communication channels, and duties that allow members to work toward shared goals. Jobs are the building blocks of organizational structure. A job is defined as "a set of task elements grouped together under one job title and designed to be performed by a single individual." To obtain the most positive outcome, social and technical aspects of jobs in organizations must be optimized. This is socio-technical system design called. This way, jobs can be designed so that people are more motivated and satisfied, as well as perform better. 

What are the different types of organizational structures? 

Once jobs are specified, employees also need to understand reporting relationships and communication. Organizational charts provide important information about the power relationships and lines of communication built into an organization's structure. The most common organizational charts are:

• Functional organization: This structure organizes work into different functional areas or departments based upon specialized expertise. It organizes people into human resources, finance, accounting, marketing, and information systems. Large organizations have a chief executive officer (CEO) as well as a chief operating officer (COO). Vice presidents of the functional areas report to the CEO and COO. Because each area specializes in its work, this can cause silo mentality, where integration across functional areas is difficult. 
• Product organization (service or brand organization): This structure organizes work into units that are responsible for producing specific products or services. This type of structure is often seen in large organizations with very different products known as conglomerates. Within each product area, there are managers and employees in the functional areas (human resources, finance, accounting, marketing, and production). Also, decision-making is faster. A disadvantage is that there is a lot of duplication of effort, because each product line has its own functional areas. 
• Geographical organization: Such an organization organizes itself in different regions so that they are close to the customers. Disadvantages of this type of structure is that there is also a lot of duplication of effort and communication across units may be problematic. 
• Matrix organization: Here, functions and projects are combined. This structure is well-suited for organizations that are engaged in research and development (R&D), advertising, or management consulting. There is less duplication of effort and employees are exposed to both projects and functions, as a result of which skills and knowledge of the organization expands. However, there may be conflict between the horizontal and vertical departments, because employees have to report to two managers. A matrix organization is therefore difficult to manage, and can be costly. 
• Virtual organization: It is defined as "a temporary collection of enterprises that cooperate and share resources, knowledge, and competencies to better respond to business opportunities." This creates a quick response and flexibility with no long-term commitment to the project. However, communication is difficult, because they lack trust among partners and there is no commitment to an organizations and its mission. 

What are dimensions of organizational design? 

Organizational structures evolve over time. Organizational design is the process of constructing and adjusting an organization's structure to achieve its goals. It responds to an organization's business environment, which result in changes in strategy. Restructuring can encompass a broad range of changes, such as selling lines of business or making significant acquisitions, and changing the internal organization. Also, organizations can go through downsizing.

There are five dimensions of organizational design that can be used to describe most organization's structural elements: 

1. Specialization (division of labor): This occurs when jobs are narrowly defined and depend on unique expertise. 
2. Formalization: This refers to the amount of rules, regulations, and procedures an organization requires its employees to follow. 
3. Centralization: This occurs when most or all key decisions are made by an organization's top leadership. 
4. Standardization: This occurs when work is performed in a routine manner, following the same steps each time. 
5. Complexity: This describes the range of activities conducted within an organization. 

Additional considerations for designing organizational structures are:

• Chain-of-command: This refers to the flow of authority in the organization. As the organization grows and becomes more complex, the leader's authority must flow down the organization to maintain order, control and organizational performance. 
• Span of control: This is the number of direct reports each person has. It increases as one moves down the chain-of-command, but this is not always the case. Some organizations are flat and have large spans of control. A dotted-line relationship occurs when an employee provides useful information to a manager in a different part of an organization's structure.  

What are forms of organizational structure? 

Mintzberg modelled the organizational structure into different units. The top management is at the strategic apex and is supported by the technostructure and the support staff. The technostructure consists of analysts and the support staff provides advice and guidance. The strategic apex meets organizational goals by directing the operating core through the middle line management. The top management creates the missions, set goals, and delegates and controls the middle line managers. Middle managers translate the strategic plans into detailed action plans. Five general types of organizational structure may emerge: 

1. Simple structure: It is simple, flat and has few top managers. It is fast, flexible and lean. However, as organizations grow, decision-makers can become overwhelmed that they start making bad decisions. 
2. Machine bureaucracy: It is defined by its standardization. There are routine procedures and decision-making is centralized. Because procedures are analyzed by the technostructure, it is also known as a mechanistic structure. Advantages are that it organizes work efficiently and rely on economies of scale, therefore more units of a good or service is produced on a larger scale, with fewer input costs. But, work feels monotonous, conflicting goals can arise across departments, there is low intrinsic motivation and silo mentality. 
3. Professional bureaucracy: It consists of highly trained professionals and has decentralized decision-making. The professional organization is complex and has many rules and procedures. It is efficient and professionals have autonomy and power. However, professionals may resent being "micromanaged." 
4. Divisional form: If an organization has many different product lines and business units, there is typically a divisional structure. Advantages of this structure is that managers maintain control and accountability and top managers can focus on the "big picture." But, duplication of resources and conflict across divisions are obstacles that this structure has to deal with. 
5. Innovative adhocracy: It has loose rules, decision-making is decentralized and power is delegated to where needed. An innovative structure is flexible and it maintains a central pool of talent. Also, it can respond quickly to environmental change. Limitations are that there can be lots of conflict when authority and power are ambiguous and due to rapid changes, it is stressful for employees. 

What are legal structures of organizations?

There are several forms of small business entities:

• Sole proprietorship
• Partnership
• Corporation
• Limited liability company (LLC): This is an hybrid form of partnership. 

There are also varying levels of managers within organizational structures:

• Top management (C-Suite): This team includes the chief executive officer (CEO), chief operating officer (COO), chief financial officer (CFO), chief marketing officer (CMO), and chief diversity officer (CDO). 
• Middle management
• Operating-level management

The roles of managers are shifting, but all three levels must align the goals as their level with the overall goals of the organization so that it will succeed.