You are taking a long-overdue and much-needed vacation, and you have chosen a destination. Good for you! Now, you must decide on the mode of transportation. If you have a limited number of vacation days and the destination is far away, air travel might be the best method. If you have a lot of vacation time and you want the option of sightseeing while traveling to your ultimate destination, ground transportation might be the best method.
This vacation planning example can be used to explain the connection between an organization’s strategy and its organizational structure Once an organization determines its strategy and sets its goals, organization leaders must design the optimal organizational structure. The importance of this is further emphasized by Richard L. Daft and Dorothy Marcic (2020), authors of the popular college management textbook titled Understanding Management:
“Structure is a powerful tool for reaching strategic goals, and a strategy’s success often is determined by its fit with organizational structure.”(p. 229).
Due to the pandemic, organizations had to adjust their strategies, goals, business models and business practices just to stay afloat. Now might be a good time to assess if any changes to the organizational structure need to be made to improve alignment and fit. For this month’s article, my goal is to provide you with the basic concepts of organizational structure in a simplistic and easy-to-understand manner.
Over the years of teaching management students, I’ve learned that by providing my management students with six guiding questions for organizational structure, it enables them to understand the basics while also providing them with a framework to comprehend more advanced management concepts and terminology related to organizational structures. I think managers will benefit from this as it will give them a starting point for assessing the structure of their respective organizations and to think about any possible changes that need to be made. The questions are presented in the sections below along with tips and recommendations.
How do we divide up the work?
This question focuses on all the tasks that are completed in the organization. With the help of current employees, re-evaluate if tasks and responsibilities are a) still necessary and essential and b) are assigned to the appropriate positions. Then, revise and update position and job description documents as needed.
Who reports to whom?
This question focuses on the chain of command in the organization considering factors such as authority, responsibility, accountability and delegation relationships among all employees. With very few exceptions, traditional management practices suggest that each employee should report to only one direct supervisor.
How many direct reports should a supervisor have?
This question focuses on determining the maximum number of employees a manager is responsible for supervising. Non-managerial employees can focus their time solely on completing their individual work responsibilities. Supervisors must divide their time between a) completing their individual work responsibilities and b) managing and overseeing the work completed by their direct reports. Even more so with the latter, the more direct reports a supervisor has, the less amount of time that can be devoted to each direct report. Take this into consideration when determining the number of direct reports assigned to a supervisor. Traditional practice in the field of management recommends a maximum ratio of 7-10 direct reports for each supervisor
At what level of the organization should decisions be made?
This question focuses on determining the level at which most decisions should be made in the organization. The keyword in the previous sentence is the word “should.” In centralized organizations, decisions are typically made by individuals at the top levels of the organization; in decentralized organizations, decisions are made by individuals that are closer to the lower levels of the organization. Depending upon your organization and industry, consider balancing the need for consistency across the organization (centralization) with the ability to adapt and to be flexible in response to changing market demands (decentralization).
Which organizational structure works best to accomplish the strategy of the organization?
This question focuses on the structural design of the organization to indicate how individual job positions are grouped together in departments. Departments can be grouped by a) functions (e.g., marketing, finance), b) divisions (e.g., geographical locations), or c) a matrix structure (e.g., includes both function and division design elements). Determine which of these three structures would work best to enable the organization to achieve its goals, and update/revise the organizational chart accordingly.
How do we enable communication among people in different departments and at different levels?
This question focuses on communication, collaboration, and information sharing practices throughout the organization. Consider the inner workings of an automobile. The individual parts of an automobile belonging to one of several independent systems (i.e., fuel system, electrical system, braking system, etc.). Yet, the individual parts and the collective independent systems must work interdependently with other parts and systems for the car to function properly. This is akin to what needs to occur in an organization. Employees and the collective departments need to communicate and collaborate with each other on a regular basis. This can occur in various formal ways (e.g., cross-functional committees, task forces, etc.). The preference is to create an organizational culture in which communication, collaboration and information sharing across units (horizontally) and at different levels (vertically) is encouraged and occurs naturally through daily employee interactions.
For additional information and details about organizational structure concepts, I recommend reviewing Daft & Marcic’s (2020) Understanding Management textbook.
Dr. Aikens can be reached at: [email protected]