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Organizational Structure A ++ Introduction In our opening class, we described organizations as open systems which transform inputs from the environment into outputs. The people within organizations have specific roles which they carry out as part of this transformation process. These roles are coordinated in a certain way in an attempt to make the process function as efficiently as possible. Thus the structure of an organization reflects the division of work and the coordination of the organization's sub-units. In most organizations these roles and their coordination are formalized into an organizational chart which represents the various positions in an organization. They are in effect a map of the structure of the organization. Structure defines three key components of the organization: 1. the formal reporting relationships within an organization, including the number of levels in the hierarchy and the span of control of managers and supervisors 2. the grouping of individuals into departments and the fit of departments into the organization as a whole 3. the systems of communication, coordination, and integration Definition Organizational structure may be defined as the network of relationships that exists among various positions and position holders. Formal structure is a pattern of relationships that has been consciously planned and implemented. It includes formal hierarchy of authority as well as rules and procedures and other planned attempts to regulate behavior. Key Concepts Formalization: The extent to which jobs activities and behavior are standardized and the means by which the standardization is accomplished. Centralization: The degree to which decision-making power and control are concentrated. Vertical differentiation: Hierarchical structure consisting of a vertical dimension of differentiated levels of authority and responsibility. Differentiation by degrees of authority. Horizontal differentiation: Differentiation by specialization, often referred to as departmentalization. People with similar abilities working together on specialized tasks. Growth is a key impetus for horizontal differentiation, but is not the sole one. Environment and technology may also demand specialization. There are four major forms of departmentalization: 1. -Function: departments are set up in an organization according to the function being carried out. E.g. manufacturing, finance, marketing, etc. This is the most common form of departmentation. 2. -Process: people and jobs are grouped together which are needed to implement a certain process. E.g. departments organized around machines or data processing equipment 3. -Location: segregation by territories, regions, districts or countries. Where location makes a difference, a rationale exists for departmentalization on this basis. 4. -Product or service: the grouping of jobs and activities that are associated with a specific product. GM is a prime example with its different divisions. 5. -Client: activities and positions are grouped together in a way that is compatible with the unique needs of specific clients. These different types of departmentalization are usually applied in some combination. For example an organization which has a product or location d...

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