The organizational structure

The organizational structure is an intentional arrangement of roles, in which each person assumes a role that is expected to fulfill the highest possible performance. The purpose of an organizational structure is to establish a system of roles that the members of an entity have to develop in order to work together optimally and to achieve the goals set in planning.

Two definitions of Organizational Structure:

Mintzberg: (1984) Organizational structure is the set of all the ways in which work is divided into different tasks and the subsequent coordination of them. Strategor: (1988) Organizational structure is the set of functions and relationships that formally determine the functions that each unit must fulfill and the mode of communication between each unit.

What is organizing?

Identify and classify the activities that have to be carried out in the company We group these activities We assign each group of activities a director with authority to supervise and make decisions We coordinate the resulting structure vertically and horizontally.

Elements of the organization: (requirements)

The objectives must be verifiable, precise and achievable. To be accurate, they must be quantitative and to be verifiable, they must be qualitative. There must be a clear definition of the duties, rights and activity of each person. The area of authority of each person must be established, what each one must do. To achieve the goals Know how and where to obtain the necessary information for each activity. Each person must know where to get the information and it must be provided.

Principles of an organization

Effectiveness: an organizational structure is effective if it allows the contribution of each individual to the achievement of the objectives of the company. Efficiency: an organizational structure is efficient if it facilitates the achievement of the desired objectives at the lowest possible cost. The formal organization: it is the mode of social grouping that is established in an elaborate way and with the purpose of establishing a specific objective. It is characterized by the rules, procedures and hierarchical structure that order the relationships between its members. The informal organization: are the social relationships that arise spontaneously between the staff of a company. The informal organization is a complement to the formal one if managers know and can control it skillfully.

Formal organizational structure

characteristics

Specialization: the way in which work is divided into simpler tasks and how these are grouped into organizational units. Coordination and command areas: there are certain groups under the command of a supervisor. Formalization: degree of standardization of activities and the existence of norms, written procedures and bureaucratization.

Factors that determine what a formal organizational structure looks like:

Size: large company: + complexity + bureaucracy / more complex organizational structure + specialization Technology: technology conditions human behavior as well as the organizational structure itself. Sectorial and social environment: a company that is in the agricultural sector is not the same as in the industrial sector, if the company is in a simpler sector the structure is simpler.

Activities required to create an organization

Integrate objectives and plans Define the authority of each director. Establish a hierarchy Establish the premises of the hierarchy We define the information needs and its flow Staff it according to the objectives we want to meet.

Command areas

How many subordinates can the director have under his command, it has to be a limited number, he cannot have many subordinates because otherwise he cannot do his job well The organization helps us achieve the plans Excess levels are costly and can hinder to planning and control. Principle of breadth of management: a director should have only those subordinates who can manage efficiently. What are the basic variables and how do we determine the command area

Similarity of functions Geographical proximity Complexity of functions Type of direction and control Coordination that must have with other command areas Graicunas Theorem: calculates the number of relationships in a company depending on the number of subordinates.

Factors that determine that a command area is efficient

We must reduce the number of relationships and reduce the duration of relationships.

Training of subordinates, who are trained Clarity in the delegation of authority Complexity of tasks Clarity of plans, plans should be easy to understand and can be put into practice Speed of change or degree of change Use of objective standards Communication and control techniques Regarding communication, personal assistants are required. Do not rely on memory, if communication is done orally, the employee should not have any doubts. Differences depending on the organizational level considered. At higher levels, Specialization is less, which means that command areas tend to be wider. Amount of personal contact. For example, the amount of time spent holding meetings.

Advantages and disadvantages of reduced command areas.

Advantages:

Supervision is closer; more control can be exercised; speed of communication.

Disadvantages:

There may be more interference by the director Higher costs Increases bureaucracy as there are more levels Loss of information.

Advantages and disadvantages of large command areas

Advantages:

Superiors have to delegate Policies have to be clearly formulated Subordinates have to be more empowered

Disadvantages:

Communication bottlenecks form Loss of control High-quality managers are required.

Power and authority

Power: ability to influence the actions of other people. Authority: power that one has to occupy a certain position and through that position the power that a person has to make decisions that affect another. Authority is a type of power. You can have authority without having power.

Line authority

They are directly responsible for the achievement of the objectives, while the Staff functions are those that help the line to achieve the objectives efficiently.

It is called line authority because a superior is granted a line of authority among his subordinates. This is where the Scalar Principle arises: the clearer the line of authority from the managerial position, the higher the line of authority will be to all subordinate positions and the clearer the responsibility for decision-making.

Differences between line and staff

They are given by the nature of the relationships that are maintained in the organization.

Line: the nature of your relationships is one of authority. Staff: the nature of their relationships is one of power.

Sources of power

Legitimate power: derived from the position and is accepted. Knowledge Power: Power derived from skill and expertise. Reference power: its source is the reference. He believes in people and their ideas. Power of reward Power of coercion: linked to the legitimate and to the reward.

The power of skill, expertise and knowledge have great influence and could paralyze the process within an organization.

Authority: legitimate, rewarding and coercive power. Power: power of ability, expertise and knowledge.

Functional authority

It is the right that is delegated to an individual or a department to control certain processes, practices, policies or other matters related to the activities comprised by the people of other departments. This authority can be exercised by the linear authority or by the staff. Functional authority applies to how and when, and rarely applies to what, who, and where. The use of functional authority should be sporadic and should be concentrated at the highest point in the organization.

Advantages and disadvantages of the staff

Benefits:

Advises on complex issues, allows you to think instead of going from day to day.

Disadvantages:

It can undermine the authority of the line. Lack of responsibility: the staff only recommends, has no responsibility. It can fall into "empty thinking" since the staff does not know the personality of the company and all the information. It creates administrative problems, loses unity of command. It can cause problems for whoever exercises leadership.

Factors for the staff to be efficient:

Attend to the line authority first. The line must listen to the staff. Understand that the staff does not criticize, but suggests help and solves problems. The staff must keep informed of the day to day. The staff must be anonymous and altruistic.

Delegation of authority

It is the assignment and transfer of authority by the person who possesses it to other people in order to make decisions and issue instructions. Work and authority are delegated, but ultimate responsibility for results is never delegated. The distribution of authority between the different levels within the organization is what is called management systems. If there is no delegation of authority, we speak of a centralized management system. There cannot be a fully decentralized or centralized management system.

The best steering system is in the range SD1, SD2.

Types of centralization

Centralization of performance: we mean that there is geographic concentration. Departmental centralization: we concentrate specialized activities generally in a department.

We define centralization as an aspect of administration, as the tendency to restrict delegation in decision-making, in which a high degree of authority is maintained at higher levels.

Delegation process

Determination of the expected results for a position. A series of tasks and activities are assigned to that position. The authority is delegated so that these tasks can be carried out. That person is held responsible for the fulfillment of that task.

Dismembered, divided or fragmented authority

It occurs when decisions cannot be made without gathering delegations of authority of two or more people.

Art of delegating

Personal attitudes

There must be receptivity, the ideas of others must be given a chance. The decisions that the subordinate has made must be accepted with pleasure. Willingness to let go. The law of comparative administrative advantage arises (we have to let our subordinates make decisions). There are times when it is not fulfilled because the person who occupied the position continues to meddle. You have to admit the mistakes of others, the supervisor observes the errors and if it is small, he does not say anything so that the other learns.. A supervisor when delegating authority to someone has to do so by trusting that subordinate. Feedback: The person delegating authority must ensure that the subordinate is using that authority to achieve goals and objectives.

Guides to avoid bad delegation

The tasks must be defined and authority delegated according to the expected results. The right people must be chosen for each task and they must be integrated with the rest of the company staff. The information lines must be kept open, since Not all authority is delegated and not all information is delegated Appropriate controls should be established, it is best to establish extensive controls and rather than interfere, it is better to point out which are the deviations Reward people who delegate well, both to the who delegate authority as much as those who accept authority.

Principles of delegation of authority

Principle of authority and responsibility: the delegated authority must be proportional to the authority that is assigned Functional definition principle: the more clearly the expected results, activities, limits, information channels are defined… the greater the possibility of that the director's Mission is fulfilled Scaling principle: the clearer the line of authority, the more effective decision-making will be the authority level principle: the decisions that fall within the competence of a director should be made by him and not referred to to a superior. Principle of unity of command: the more complete the dependence of an employee on a single superior, the better. Principle of total responsibility:The responsibility of a person before his superior is total and no superior can avoid his responsibility for the actions of his employees.Principle of delegation for the expected results: the delegated authority must be adequate to ensure the ability to obtain the expected results.

Factors that determine the degree of centralization of a company

The cost of decisions Due to the size of the company: the larger the size, the more decentralized Due to the history and culture of the company: if the company has been stable, the company will be centralized Availability of good directors: the better the Directors., the greater the centralization. Control techniques used: if appropriate, it is easier to delegate authority. Business dynamics: the change that may occur in the environment. The greater the dynamism, the more centralization (as in point 3) Environmental influences:

taxes: more taxes, more centralization. monopoly. The more monopoly, the more centralization. Price regulation: more regularization, more centralization. Union power: the greater the power, the greater the business centralization.

Business philosophy regarding decision making: if the director is a despot, the company is centralized. Otherwise, the company is more decentralized. Policies uniformity: greater uniformity, greater decentralization. Desires for independence: greater desires, greater decentralization.

Performance decentralization

A company is decentralized to carry out its actions.

Reorganize

It serves to solve the dismembered authority. It consists of recovering part of the delegated authority to re-delegate it correctly. All authority cannot be recovered because then we would be in a totally centralized system, nor can all authority be delegated by delegating again because we would be in a totally decentralized system.

Departmentalization

Department

It is a differentiated branch within the company, with a supervisor who has authority over the performance of certain specific activities carried out by a group of people.

Managing Director => company Vice President => division Director => department / different positions within a company Manager => branch Chief => section

Departmentalization is the specialization within the company and is governed by the principle of homogeneity. Departmentalization can be vertical or horizontal.

Vertical departmentalization (scalar process): the quality of the management increases, for this more hierarchical levels are created Horizontal departmentalization: the normal thing in a company is that the two departmentalizations occur at the same time, increasing the quality of work and management and we continue to specialize the cost shoots up. You have to find the logical balance.

Basic departmentalization:

Numbers

The people who have to carry out the same task are grouped under the same director, the important thing being the number of people who work (it is falling into disuse).

Time

Group activities in relation to time. Shifts are used, for example, police, bus drivers, etc.

Advantages:

Services may go beyond normal working hours. Production process may be uninterrupted. Expensive capital equipment may be used longer. Allow adaptation to some people's schedules.

Disadvantages:

Lack of supervision on the night shift. Fatigue factor: behavior is altered. Coordination and communication problems between different shifts. High cost of using multiple shifts.

Departmentalization by functions

It consists of making departments according to the basic functions of a company. It depends on the sector in which the company is located to see how many departments to create.

Advantages:

It is the logical reflection of the functions that are developed in the company. The power of the main functions is maintained. It follows the principle of occupational specialization. It facilitates the efficiency of the occupation of the personnel. It facilitates the formation and training since the basic functions are those that are near the upper levels, these have the responsibility for the final results. It allows a strict control from the top.

Companies that have few product lines and are in stable products are advised.

Disadvantages:

Overall results are downplayed. Specialization is exaggerated. Coordination between functions is reduced. All final responsibility lies with senior management. Slow adaptation to changes. Training of CEOs is made difficult.

The departmentalization by functions is used in companies that work in stable conditions and that have few products or services and that their tasks are routine.

Departmentalization by geographical areas

We group depending on the area where the activity carried out by the company is located.

Advantages:

Responsibility is placed at higher levels Take advantage of local markets Improve regional coordination Provide an opportunity for training of CEOs

Disadvantages:

requires higher-level personnel makes it difficult to centralize functions difficult to control the company

This departmentalization depends on the market, production and operation area but not on Finance. Control problems increase and it is used to effectively cover a consumer market. What you do is decentralize production.

Departmentalization by products

It occurs in companies that were departmentalized by functions and due to the amount of products or services that the company offers, the departmentalization remains small. It is also used to be able to give the same importance to different products.

Advantages:

Focuses action on the product Facilitates specialization by product Improves coordination of functions Lowers financial responsibility Provides training for future directors Lowers financial responsibility Increases diversification of the company

Disadvantages:

requires more senior management employees makes it difficult to centralize economic functions control problems for top management

Conclusions: recommended in unstable environmental circumstances, it increases coordination between technicians for the same product.

Departmentalization by clients

Groups the activities that reflect a special interest in customers.

Advantages:

stimulates specialization the client has the impression of being the only one facilitates the knowledge of each type of client

Disadvantages:

Difficult coordination of opposing demands from the same client. Requires a highly specialized staff. It is difficult to guide grouping by clients within a company.

Conclusion: it is oriented to the outside of the company unlike the other specializations. It is used when you have several products or services but the customer is the most important thing.

Market-oriented departmentalization

Advantages and disadvantages: the same as in the departmentalization by products and by clients.

Departmentalization by projects

A project is underway to be able to produce a new product. It is used to facilitate budget control.

Multidivisional departmentalization

It consists of mixing the criteria seen above.

Matrix departmentalization

It is a combination of functional departmentalization and departmentalization by products. It is widely used in engineering and R&D but it is rarely used in marketing. It is used to try to guarantee that the results are met, it is not only used the departmentalization by projects because it may be that the project needs very few personnel or because the duration of the project is very short, although it can be reorganized often, it gives more safety not doing it. Workers prefer to be organized by function than by project.

In practice, it happens that project managers in some cases tend to be over functional department managers and friction arises between functional managers and project managers.

Advantages:

It is oriented towards the final results. It maintains the professional identification.

Disadvantages:

conflicts of authority between the two departments the principle of unity of command is not met a good manager is required in terms of human relations due to potential conflicts, each person in the organization will want everything to be put in writing

Strategic business units (UEN)

They are small businesses established as units within the company to ensure that a certain product is promoted and managed. It is a product line as if it were an independent product.

Each UEN has an administrator to guide or promote the product from what is research, production….

The UEN have their own plans, objectives, staff…

What the company ensures with the UEN is that the product is not lost among the others.

To consider a UEN, the following requirements must be met:

Have their own mission and it must be different from that of other SBUs They have to face a defined competition, different from other SBUs They must prepare their own plans, different from other SBUs Manage their own resources They must be of an appropriate size

Groups, committees, teams

Committee

It is a group of people who are assigned as a group a certain matter.

Types:

With authority: line committees, their decisions are carried out Without authority: staff committees, share information Formal: when the company is created it is established that a committee must be created for certain matters Informal: arise spontaneously, not They are established by society. Fixed: they have a certain assiduity (formal). Temporary: they exist at a certain time (informal).

Phases of creating a committee:

Members get to know each other. The purpose of the meeting is determined. Standards are established. Performance: The task begins to be solved.

To be on a committee:

People must develop a series of roles, each person can assume a different role from the one they have in the organization. You have to pay close attention to non-verbal behaviors. Using a round table (all people are the same) is not the same as using a square or rectangular table, where those at the head are more important.

Names of committees: steering committee, sales commission…

Reasons for using committees:

Group deliberation and judgment Fear of giving too much power to one person Bringing together people who are interested in the same issue the company has an interest in Coordinating a complicated issue Information sharing Resolving dismembered authority Motivating the group delay or avoid an action.

Reasons why a committee should not be used

They are expensive, the lowest common denominator (how little two people can agree on). Indecision tends to self-destruct of the committee, a leader emerges spontaneously. Division of responsibility. Minority tyranny.

Conditions for the proper use of the committees.

Clearly define its mission and authority. It should have an optimal minimum of members. Right selection of the components. Right selection of the subject to deal with. Prepare and present the results well. Do not spend more than what is expected to be obtained.

Differences between a group and a team

In a group there is usually a strong or authoritarian leader, in the team leadership is usually shared, in the group everyone is responsible for what they do, in the team the responsibility is joint, in the group the objectives are those of the organization In the team the results are specific. In the group the work is individual, in the team the work is joint. In the group, efficiency is measured indirectly, in the team the results are measured directly.

To complement the concepts presented so far, on organizational structure and design, we suggest the following video-lesson (3 videos, 40 minutes), from the Miguel Hernández University of Elche (Based on "The structure of organizations" by Mintzberg), through which you will be able to delve into the topics of the organizational structure, the parts of the organization, the parameters of the organizational design and the contingency factors to consider. We know you will find it useful.

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