Every organisation has certain basic parts that are made up of people who perform, supervise, and plan besides those who render support services and technical advice. As such, studying the structure or design of an organisation means analysing how these parts are put together, who reports to whom, the degree of centralisation or decision making power concentrated at the top, the extent of rules, policies, regulations, and procedures in the organisation. The building of the initial structure of an organisation may be based on the conditions prevailing in the society and the industry characteristics prevailing at the time and the personality of the founder (entrepreneur). As the organisations grow in their size from small to large over a period of time, their priorities do change and it becomes necessary for the organisations to make changes in the organisation design in order to ensure that the organisations function efficiently. In any discussion of Organizational Structure, it’s helpful to become acquainted with a few key terms that describe specific aspects of business organization practices. Very simply, Organizational Structure is the manner in which an organization arranges itself. Once an organization investigates its options and decides upon how it’s going to structure itself, it’s common to draw up an Organizational Chart. An Organizational Chart
Some organizations consider their Organizational Charts as confidential, while other organizations most of them, in fact, do not. Some companies go so far as to post their Organizational Charts on their publicly accessible websites. Other key terms include Centralized and Decentralized Decision Making. Centralized decision making refers to a business model in which decisions are directed to the top of the organization. Decentralized decision making is a model in which the organization tends to push the decisions down to the lowest levels, which can be a good thing. With decentralized decision making, the benefit is that the individuals who best know the company’s processes are those lower in the organization, those who roll up their sleeves and work with the processes every day. Theoretically, such individuals are in a better position to respond to external and internal drivers and make rapid decisions to control those drivers before they get out of hand and negatively affect the organization. Decentralized decision making tends to be a trap, as it may dangerously undermine upper management in the organization. Nonetheless, decentralized decision making is increasingly accepted as a viable business model today. Yet another key term is one known as Formalization, the degree to which an organization tends to document its processes, rules, and regulations. Centralized and Decentralized Decision Making and Formalization will vary from one organizational structure to another, depending upon the options for change that are open to a company. Another key term that is familiar in the designing an organization is what we call a Hierarchy of Authority. The concept of Hierarchy of Authority says that an organization must know who is in charge of which elements and who reports to whom. Of course, this has implications for the division of labour because, under the Hierarchy of Authority, many tasks are divided and distributed across the organization. This process necessarily entails varying degrees of specialization of jobs and tasks, which we see a lot these days as the business environment grows more sophisticated. Regarding Types of Organizational Structures, I will first critically note that an appropriate organizational structure for any given company is a very elusive animal, indeed. Every company tends to organize itself differently, so there is no absolute right and no absolute wrong way to design an organization. Appropriate organizational structure depends upon the unique strategy of the business, its unique customer base, its unique sense of products and...
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