To effectively run a business you must implement an organizational structure, especially in the workplace. Meanwhile, the operation of some companies differs from others. So also some organizational structures might be more beneficial than others. For instance, knowing how your company operates can help you perform in line with what’s expected of you and help you become a better employee overall.
In this article, we define organizational structures, principles, decentralization, and its examples.
What Is The Meaning of Organizational Structure?
An organizational structure can be defined as a system that outlines how certain activities are directed to achieve the goals of a company. These activities can include rules, roles, and responsibilities.
The organizational structure also determines how information flows between levels within the company. For example, in a centralized structure, decisions flow from the top down, while in a decentralized structure, decision-making power is distributed among various levels of the organization. Having an organizational structure in place allows companies to remain efficient and focused
What Are The Principles of Organizational Structure?
Businesses of all shapes and sizes use organizational structures heavily. They define a specific hierarchy within an organization. A successful organizational structure defines each employee’s job and how it fits within the overall system. However, the organizational structure lays out who does what the company can meet its objectives.
For instance, one of the principles of an organizational structure is how certain activities are delegated toward achieving an organization’s goal. The principles outlines an employee’s role and various responsibilities within a company. The more authority employees have, the higher up they’ll be on the organizational structure. In addition, the more organized a structure is, the more efficiently a company operates.
This structuring provides a company with a visual representation of how it shaped and how it can best move forward in achieving its goals. Organizational structures are normally illustrated in some sort of chart or diagram like a pyramid. Also, it show where the most powerful members of the organization sit at the top, while those with the least amount of power are at the bottom.
What do you understand by centralized and decentralized organizational structures?
An organizational structure is either centralized or decentralized. Traditionally, organizations have been structured with centralized leadership and a defined chain of command. The military is an organization famous for its highly centralized structure. And sometimes with a long and specific hierarchy of superiors and subordinates. In a centralized organizational system, there are very clear responsibilities for each role. Also with subordinate roles defaulting to the guidance of their superiors.
There has been a rise in decentralized organizations, as is the case with many technology sent up. This allows companies to remain fast, agile, and adaptable, with almost every employee receiving a high level of personal agency. For example, Johnson & Johnson is a company that’s known for its decentralized structure.
As a large company with over 200 business units and brands that function in sometimes very different industries, each operates autonomously. Even in decentralized companies, there are still usually built-in hierarchies (such as the chief operating officer operating at a higher level than an entry-level associate). However, teams are empowered to make their own decisions and come to the best conclusion without necessarily getting “approval” from up top.
What are the examples of organizational Structure?
An example of an organizational structure is a decentralized structure. They gives an individuals and teams high degrees of autonomy without needing a core team to regularly approve business decisions. Hence, a good example of this decentralized structure is Johnson & Johnson. With thousands of products and lines of business. However, the company structures itself so each business unit operates as its own company with its president. For instance, the example of a decentralized company includes:
1. Amazon’s Organizational Structure
Amazon’s organizational structure enables control of global operations. The organizational structure or corporate structure establishes the design and system of interactions among personnel. And sometimes among business processes, and other resources of the e-commerce company.
For example, the corporate structure determines how managers direct operational activities in various business areas. This business areas such as information technology development and marketing. The company maintains an organizational structure that supports its expanding market reach and the management of subsidiaries. For example, such as Whole Foods Market. Also, Amazon’s corporate structure adapts as the enterprise gradually diversifies.
The company’s organizational design involves such a business structure that complements the technological foundation of online services operations. This complementary condition makes the company’s corporate structure a determining factor of the business’s ability. Also, to withstand the effects of competitors, like Walmart, eBay, Home Depot, and Costco, as well as IBM and Intel.
The competitive landscape examined in the Five Forces analysis of Amazon also shows the significance of competing consumer electronics. Also it show the competition in online services, software, and on-demand digital content distribution businesses, like Apple, Google (Alphabet), Microsoft, Samsung, Sony, and Netflix. The characteristics of Amazon’s organizational structure strengthen the business against these competitors.
2. Apple’s Organizational Structure
Apple’s organizational structure can be described as hierarchical and functional. Such a structure has been developed by its founder and former CEO late Steve Jobs to ensure the focused realization of his innovative ideas and clear vision for the business. When Steve Jobs returned to turnaround failing Apple in 1997 the company had a typical organizational structure with many business units with their own profit and loss (P&L) responsibilities. In order to increase the coherence and fuel innovation, Jobs fired general managers of all business units (within one day) and put in place one P&L for the entire business.
Apple organizational structure has been subjected to certain modifications since the leadership role was assumed by Tim Cook in August 2011. Specifically, Mr. Cook embraced the decentralization of decision-making to a certain extent to encourage innovation and creativity at various levels. Also, Cook divided hardware function into hardware engineering and hardware technologies. As the most recent change to the corporate structure, Cook added artificial intelligence (AI) . Also Mr. cook added machine learning as separate function areas due to the increasing importance of AI and machine learning.
Currently, Apple’s organizational structure has the format illustrated in the figure below:
What are The Types of Organizational Structure?
Functional Structure
Four types of common organizational structures are implemented in the real world. The first and most common is a functional structure. This is also referred to as a bureaucratic organizational structure and breaks up a company based on the specialization of its workforce. Most small-to-medium-sized businesses implement a functional structure. Dividing the firm into departments consisting of marketing, sales, and operations is the act of using a bureaucratic organizational structure.
Divisional or Multidivisional Structure
The second type is common among large companies with many business units. Called the divisional or multidivisional (M-Form) structure, a company that uses this method structures its leadership team based on the products, projects, or subsidiaries it operates. A good example of this structure is Johnson & Johnson. With thousands of products and lines of business, the company structures itself so each business unit operates as its own company with its president.
Divisions may also be designated geographically in addition to specialization. For instance, a global corporation may have a North American Division and a European Division.
Team-Based
Similar to divisional or functional structures, team-based organizations segregate into close-knit teams of employees that serve particular goals and functions, but where each team is a unit that contains both leaders and workers.
Flat (Flatarchy) Structure
Flatarchy, also known as a horizontal structure, is relatively newer and is used among many startups. As the name alludes, it flattens the hierarchy and chain of command and gives its employees a lot of autonomy. Companies that use this type of structure have a high speed of implementation.
Matrix Structure
Firms can also have a matrix structure. It is also the most confusing and the least used. This structure matrixes employees across different superiors, divisions, or departments. An employee working for a matrixes company, for example, may have duties in both sales and customer service.
Circular Structure
Circular structures are hierarchical, but they are said to be circular as they place higher-level employees and managers at the center of the organization with concentric rings expanding outward, which contain lower-level employees and staff. This way of organizing is intended to encourage open communication and collaboration among the different ranks.
Network Structure
The network structure organizes contractors and third-party vendors to carry out certain key functions. It features a relatively small headquarters with geographically dispersed satellite offices, along with key functions outsourced to other firms and consultants.
What are the benefits of organizational Structures?
Putting an organizational structure in place can be very beneficial to a company. The structure not only defines a company’s hierarchy but also allows the firm to lay out the pay structure for its employees. By putting the organizational structure in place, the firm can decide salary grades and ranges for each position.
The structure also makes operations more efficient and much more effective. By separating employees and functions into different departments, the company can perform different operations at once seamlessly.
In addition, a very clear organizational structure informs employees on how best to get their jobs done. For example, in a hierarchical organization, employees will have to work harder at buying favors or courting those with decision-making power. In a decentralized organization, employees must take on more initiative and bring creative problem-solving to the table. This can also help set expectations for how employees can track their growth within a company and emphasize a certain set of skills as well as for potential employees to gauge if such a company would be a good fit with their interests and work styles.
What Is an Organizational Structure Chart?
The best organizational structures are normally illustrated in some sort of chart or diagram like a pyramid, where the most powerful members of the organization sit at the top, while those with the least amount of power are at the bottom.
What Is the Best Organizational Structure?
There is no one best organizational structure, as it depends on the nature of the company and the industry it operates in.
Conclusion
There are entire fields of study based on how to optimize and best structure organizations to be the most effective and productive. Senior leaders should consider a variety of factors before deciding which type of organization is best for their business, including the business goals, industry, and culture of the company.