The study of the structuring of work organizations is a developing field. It was a major interest to classical theorists such as Fayol, Urwick and Brech. It was a source of inspiration for Weber’s theory of bureaucracy and it is a major theory of complex organization – the contingency school. In this article I will discuss the practical issues of structure facing modern organizations, and identifies the most important options that are currently available.

As Lawrence and Lorsch have pointed out most organizations are in a state of tension as a result of the need to be both differentiated and integrated. Once an organization has grown beyond the point when the owners can exercise direct control, then some degree of differentiation, or specialization, is inevitable. Thus, most organizations have to face up to a number of crucial issues, about the kind of structures that will best sustain the success of the enterprises. The most frequent issues are:

To what extent one should encourage the specialization of roles?

What degree of standardization should be imposed on the behavior and methods, or to put another way what degree of discretion should be given to individual job holders?

How much formality should be encouraged?

How many levels of authority should be established?

To what extent should decision-making be centralized or decentralized?

There is no perfect answer to any of these questions, but there are number of possible options, which, taken together can produce an optimum design for an organization. These factors will be considered shortly. First of all I shall look more closely at the key issues, commencing with the question of specialization.

Specialization

Specialization is concerned with the division of labor within an organization. It serves to break down the total mission of an organization into a number of subordinate objectives. which in turn give rise to tasks of various kinds. It is essentially a disintegrating process. This process acts initially by grouping key activities in the organization, and subsequently allocating roles and tasks to individuals.

Specialization by grouping activities can be achieved in several different ways. The most frequent method is that of functional specialization. In this case, tasks are linked together

on the basis of common function. So, all production activities or all financial activities are grouped into a single function which undertakes all the tasks required of that organization. A typical functional organization would have the follows:

The Top position in this organization is the Managing director. Then it is functionally organized into Production Manager, Marketing manager, Accounting and Administration Manager and Personnel Manager. Production is then grouped into production control, Purchasing, and Quality control. Marketing is grouped into Sales, Marketing Research and Advertising. Accounting and administration is grouped further into Financial Accounting, Cost Accounting, Management Accounting and Information and Technology Function. Under personnel manager the activities are grouped in to Employee services, Industrial Relations, Training and Development, payroll and manpower planning.

The main advantages of functional organization, is that by grouping people together on the basis of their technical and special expertise, the organization can facilitate both their utilization and their coordination in the services of the whole enterprise. Functional groupings also provide better opportunities for promotion and career development. The disadvantages are primarily the growth of sectional interests which may conflict with the needs of the organization as a whole, and the difficulties of adapting this form of organization meet issues such as product diversification or geographical dispersion.

Another frequent form of grouping is by product. This is popular with large organizations having wide range of products or services. Say a Heath Service, for example, the key groups of employees – medical, nursing, paramedical and hotel services -are dispersed according to the service provided like the maternity, orthopedic, surgical, psychiatric, and many others. By comparison a large pharmaceutical company could be organized as follows:

Managing director

Director R& D, Finance Director, General Manager Vaccines, General Manager

Antibiotics, General Manager Cosmetics, General Manager Sterile Supplies, Corporate Marketing Director and Personnel Director

Then in each product departments such as Vaccines, Antibiotics, Cosmetics and Sterile supplies the product department is grouped functionally in to Production, Sales and Marketing, Accounting and administration and Personnel.

The advantages of a product organization as shown above are that it enables diversification to take place, it can cope better with problems of technological change by grouping people with expertise and their specialized equipment in one major unit. The main disadvantage is that each general Manager may promote his own product group in a way that creates problems with other parts of the company. This implies that top

Management must exercise careful controls, without at the same time robbing the product managers of their motivation to produce results.

Another popular form of organization is grouped on a geographical basis. This is usually adopted where the realities of a national or international network of activities make some kind of regional structure essential for decision-making and control, in particular. An example of this form of organization is as follows:

Managing Director

Southern Region, Midlands Region, Northern Region and European Region

Each region the sub divided and grouped in to operations, Sales and marketing accounting and personnel

However, the Company Accounting, Personnel Manager, Marketing and Management Services come under direct control for the company under the managing director.

As in product organization, the decentralized structure produced, causes additional problems of top management control. Hence it is usual to find a group of senior functional manager located at headquarters in order to provide direction and guidance for the regional managers in the performance of their line role.

With increasing complexity and size, many companies are opting for a mixed structure, which may combine the benefits of two or more of functional, product and geographical forms of organization. Two such mixed structures will be looked at briefly: divisional structures and matrix structures.

Divisional structures: In these cases, the organization is divided up into divisions on the basis of products and/or geography, and each division is operated in a functional form, but certain key functions retained at company head quarters (e.g. Planning, finance and personnel policy). This is becoming a common organization structure for highly diversified firms operating in more than one country.

The following is an example of a divisional structure in a British company, operating worldwide:

Chairman/Managing Director

Under the control of Managing Director, Director Region I, Region II and Region Americas discharge their line duties. These are Geographical divisions.

In functional divisions Director Production, Group marketing Director, Director R&D, Director Corporate plans works under direct control of Managing Director. These are functional divisions.

In Head office function retained at head office Finance Director and Personnel Director works under direct control of Managing Director.

In this example, the Regions act very much like self standing companies in producing and marketing the products developed by parent company. Standards are controlled worldwide via the functional divisions, and headquarters provide group policy in key areas such as finance and personnel. A balance can therefore, be maintained between necessary corporate control from the centre and desired divisional independence at the regional and functional levels.

Matrix structures: these are relatively new types of structure, which have come about as a result of coordination problems in highly complex industries such as aerospace, where the functional and product types of structure have not been able to meet the demands of the variety of activities and relationships created by the work. A matrix structure usually combines a functional form structure with a project based structure. Thus, for the purpose of a two year project, for example one project manager coordinates, and is accountable for the work to be undertaken by the project team, and he is the person who deals with the client. However, although reporting to his own line manager, he is functionally involved with one or more functional managers depending on the complexity of the project. The functional managers provide technical expertise and organizational stability. The project manager provides the leadership required to steer the project through during its relatively temporary lifetime.

The main feature of a matrix structure is that it combines lateral with vertical lines of communication and authority. This has important advantage of combining the relative stability and efficiency of a hierarchical structure with the flexibility and informality of an organic form of structure. A matrix form focuses on the requirements of the project group, which is in direct with the client. It helps to clarify who is responsible for the success of the project. It encourages functional managers to understand their contributive role in the organization’s productive efforts, and thus offsets one of the principal disadvantages of the purely functional form i.e. individual empire-building by the functional heads. However, like all organizational forms, matrix structures do have their disadvantages. The most important is: potential conflict that can arise concerning the allocation of resources and the division of authority as between project groups and functional specialists.

Another disadvantage of matrix organization is that it has the relative dilution of functional management responsibility throughout the organization.

The matrix structure also has the disadvantage of having the possibility of divided loyalties on the part of members of project teams in relation to their own manager and their functional superiors.

Despite these disadvantages, the matrix form probably offers us the best answer to date to the issue of handling the tension between the need to differentiate and the need to integrate the complex activities of modern organizations.

Centralization and Decentralization

The inevitable push towards in all but the smallest of organizations leads to the diffusion of authority and accountability. The need to structure activities develops logically into to the need to allocate appropriate amounts of authority to those responsible for undertaking those activities. As we have seen in the organization forms, the issues are much about power and authority as they are of grouping activities and deploying key roles. Thus, every organization of any size has to consider how much authority to delegate from the centre, or the top. Only the small entrepreneurial organization can sustain what Handy calls the “power culture” where effective authority is firmly retained at the centre. Most organizations have to decide how, and how much to delegate to managers and others throughout their total operation.

The concept of centralization, as it is being considered here, is not referring to the physical dispersal of an organization, but to the dispersal of authority to commit the organization’s resources. The physical deployment of an organization may or may not reflect genuine power-sharing. In my definition, therefore highly decentralized organization is one in which the authority to commit men, money and materials is widely diffused throughout every level of the structure. Conversely, a highly centralized organization is one where little authority is exercised outside a key group of senior managers. In practice, some functions are more easily decentralized than others. Production and marketing/ sales functions are more amenable to extensive delegation than planning and R & D, for example. So even highly decentralized organizations usually reserve some functions to the centre. As well as planning and research, it is usually the finance and personnel functions that are best decentralized.

The advantages of decentralizations are chiefly:

It prevents top management overload by freeing them from many operational decisions and enabling them to concentrate on their strategic responsibilities.

It speeds up operational decisions by enabling line units to take local actions without reference back all the time.

It enables local management to be flexible in their approach to decisions in the light of local conditions, and thus be more adaptable in situations of rapid change.

It focuses attention on to important cost and profit centers within the total organization, which sharpens management awareness of cost-effectiveness as well as revenue targets.

It can contribute to staff motivation by enabling middle and junior management to get a taste of responsibility, and by generally encouraging initiative by all employees.

The main disadvantages of decentralization are:

It required adequate control and communication system if major errors of judgment are to be avoided on the part of operational management.

It requires greater coordination by senior management to ensure that individual units in the organization are not working against the interest of the whole.

It can lead to inconsistency of treatment of customers, clients or public especially in service industries.

It may encourage parochial attitudes in subsidiary units, who may be inclined to look more to their own needs than to those of colleagues in the organization.

It dose required a plentiful supply of capable and well motivated managers, able to respond to the increased responsibility which decentralization brings about.

Organization Levels

The emphasis so far in this chapter has been on vertical aspects of organization structures. Let me now turn to some of the horizontal aspects, and in particular to the question of how many levels are appropriate between the top and bottom layers of an organization. Organizations can be flat or tall in relation to their total size. These main features of flat and tall organizations are as follows:

Flat Organizations

Centralized

Few Authority levels

Wide span of control

For example flat organizations levels are as flows:

Chief Executive

Department Heads

Supervisors

Workers

A structure as flat as the one shown would apply, generally, only to a small organization, say of up to 500 employees. The one major exception to this norm, as pointed out by Peter Drucker many years ago) Practice of Management) is the Catholic Church which, in line management terms, has only three levels: Pope, Bishops and Priests. Most organizations, whether business enterprises or public services, find that a flat structure produces a span of control that is unmanageable for most managers and supervisors. The span of control – wide span of control create more opportunities for man mismanagement than narrow span of control. On the other hand, a flat organization has fewer problems of communication and coordination, and does encourage delegation by the managers involved.

Tall organizations

Decentralized

Many authority levels

Narrow span of control

For example a tall organization may have the following levels of authority as follows:

Chief executive

Divisional Heads

Department heads

Section Heads

Senior Supervisors

Supervisors

Operatives

The above structure shows a typical number of levels for an organization of about 5000 employees. Research evidence tends to suggest that as organizations increase in size, so they appear to hold down the number of levels. An organization of 10000 employees might still have seven levels, as in the above example, and certainly will not exceed eight. The advantages of tall structures arise mainly from the ability to sustain a very high degree of specialization of functions and roles. The principal disadvantages are connected with long lines of communication and decision making. Thus tall structures seem to go hand in hand with formality and standardization, which may discourage initiative and risk-taking at operational levels.

The major factors in determining the number of levels for any one organization are likely to be:

Size of operations

Nature of operations, especially in relation to complexity of production, and

Management style

As we have seen in the above discussion, size is one of the most important factors influencing organizations towards relatively flat or relatively tall structures. As a general rule, the smaller the organization, the more likely it is to have no more than three or four levels, and the larger it is, the more likely it is to have seven or eight levels. However, factors such as the technology employed can offset the influence of size alone. Woodward’s studies, suggested strongly the type of production process had a direct impact on the span of control of managers at different levels . Mass production operation, for example, appeared to derive more benefit from a flatter structure, with wider span of control, than from a taller or narrower structure. Management style has significant effect on structure. Organization with a definite policy of increasing managerial responsibility for results will tend to adopt innovation at lower levels i.e. they will tend to adopt the flatter structure to minimize the length of the chain of command,. Conversely, organizations that do not or cannot decentralize decision-making, perhaps for safety reasons, will tend to settle for a taller structure with narrow span of control.

Line & Staff functions & Relationships

There is hardly a textbook on Management that does not refer to the confusion that exists between the terms “line’, “staff” and “functional” when these expressions are used to describe structural aspects of organizations. One of the main reasons for this confusion undoubtedly stems from the attempt to promote classical “principles’ in complex organizational structures which are far from classical themselves. For example, the classical concept of Unity of Command – one man, one boss – is just not practicable in organizations where the legal, financial, personnel and technological implications of the line processes can only be dealt with by diffusing authority across the management hierarchy as well as down it. This is not to reject the classical view out of hand but to say that it has to be considerably qualified in the light of modern organizational complexity.

The terms “line” and “staff” are usually understood in two senses: as functions contributing to organization’s objectives and as relationship to authority. Taking this in order, the following points summarize the most notable views that have been expressed about “line” and “staff”:

Functional perspective of Line and staff characteristics

Line functions are functions that contribute directly to the provision of goods and services.

Typical line functions are production and sales.

Line functions are seen as the primary function of the organization

Line functions act

Staff functions are functions that indirectly contribute to the provision of goods and services.

Typical staff function include purchasing, accounts, legal and personnel and finance

Staff functions are seen as the secondary functions of the organization

Staff functions think

Relationship perspectives of line and staff characteristics

In terms of relationships of authority, “line’ and “staff” can be more effectively distinguished if “staff” is sub-divided into service and functional as depicted below:

Line functions have direct authority over others. Direct authority is part of the role of every manager and supervisor. Line authority is the essence of the chain of command.

Line relationships tell

Line authority is invariable qualified by functional authority

Staff in a service role acts only as advisory

Staff in a service role is seen as authority without responsibility

Staff in a service role sell but not tell.

Staff in a functional role has direct authority over others in respect of specialist functions only.

Staff in a functional role also tells but only as prescribed

It makes more sense to consider line and staff in terms of authority relationships where there is real differences, rather than in terms of functions, where it is highly arguable to state that some functions are primary and others secondary. The key point about functions is that every organization is a complex blend of functions that are dependent each on the other. Almost every comment made in the functional definition of line and staff can be challenged. No wonder there is confusion in defining line and staff functions. It is much more productive to concentrate attention on line and staff as an issue of differences of authority as between one manager and another.

Line authority is the simplest to understand as well to agree about. It is the authority that every manager exercises in respect of his own subordinates. Thus specialist managers, such as chief accountants and personnel managers, exercise line authority over their own staff. In this role they are not different from so-called line managers, such as production manager and sales managers. Line authority, then is not dependent on the functions. It is the central feature of the total chain of command thought the entire organization structure.

Staff authority is a misleading concept altogether. It begins to make more sense when divided into two further concepts, those of service and functional authority, as suggested above. Unlike the situation for line authority, the concept of staff authority is derived from the staff function, and this does relate it to the advisory and service functions of the internal structure of an organization. However, because of the very interdependence of all the key functions in a modern organization, one must distinguish between those aspects of the staff function that merely provide service e.g. costing, recruitment, market research etc.), and those that provide key standards of performance for all other sections of the organization (e.g. setting and monitoring company accounting procedures, installing and controlling industrial relations procedures etc.). When looked at in this way, it is probably best to forget the term “ staff authority” altogether in favor “functional authority”, which is the former stripped of its servicing aspects, but made much more powerful of standards in the particular function.

Functional authority, unlike line authority, is not exercised by every manager. It can only be exercised by managers of specialist functions, and it consists of the right to order others, including other managers, as to what to do, and how to do it, in relation to agreed aspects of their own particular specialist discipline. So, for example the Finance director of a company is not only responsible (i.e. accountable) for the conduct of financial matters, but also has the authority to insist that line managers and others shall adhere to the company’s established financial procedures and policies. With the complexity of modern business, it would not be possible for senior line managers to be busy with their operational duties and to have the time to attend to the design and use of financial, personnel and other procedures. Thus the use of functional authority is a very real part of organizations today. Naturally, the existence of such authority detracts from the power of line managers to exercise their own discretion as widely as they would like, but, given the pressures imposed on organizations by their external environment, it is only by having strong specialist guidance that line managers can fulfill their responsibilities in the ways demanded by customers, employees, politicians and other groups. What has to be avoided is turning line managers into puppets, operated by functional masters a centre.

It is useful to consider for a moment the differences between authority and responsibility as these are different concepts and it relates to line and staff functions in any organizations.

Authority is the legitimate power to act in certain ways; it can be delegated to subordinates.

Responsibility is the obligation to perform certain functions on behalf of the organization: responsibility may range from the very specific to the very broad; it is commonly called accountability; unlike authority it cannot be delegated. Both the authority and responsibility can be distinguished from power, which is the ability to implement actions, regardless of considerations of authority and responsibility. For example an unofficial

Strike leader may have no authority whatsoever to call a strike, and certainly will have nothing about such activities in his job description. but nevertheless has the power to lead his group into a strike situation. Managers in such a situation have the authority to prevent a strike, but not necessarily have the power to do so.

Summary

In essence this article examined key aspects of organizational structure. It has in fact, been looking at the consequences of many of the ideas generated by the theorists of management and organization. It also has discussed the practical implications of organizations, especially in terms of the grouping of activities. Five common forms of structure were identified. These were:

Functional organization based on groupings of all the major functions e.g. production, marketing, finance personnel etc.

Production organization based on individual products or product ranges, where each grouping carries its own functional specialization.

Geographical organization centered around appropriate geographical features e.g. regions, nation and sub-continents.

Divisional structure, usually based on products or geography or both, and certain key functions such as planning and finance reserved for headquarters.

Matrix structure based on a combination of functional organization with project-based structures, and thereby combining vertical and lateral lines of communication and authority.

In this article the issue of centralization versus decentralization was considered next. This was defined as the extent to which authority to commit organizational resources was dispersed throughout the organization. It was noted that certain functions such as production and sales were more readily decentralized than others such as planning R&D. Several advantages of decentralization were mentioned. including the freeing of top management from operational type decisions, the speeding up of decision making process and the improvement of management morale. The disadvantage was primarily the additional load on mechanisms for coordination and control, the greater possibility of inconsistencies arising and the development of parochial and sectional interests at the expense of organization-wide interests.

It was noted that flat structures resulted in centralized authority with few levels of authority but encouragement to delegate in circumstances where spans of control tend to be large. Tall structures, by contrast, represented the decentralization of authority, although this was affected by means of numerous levels management operating with narrow span of control. The major factors affecting the number of levels were seen as the

size of operations, their nature, especially in respect of technology, and, finally, the management style of the organization.

In this article I have discussed line and staff functions and relationships. The term line function was variously described, but was identified mainly as function contributing directly to the provision of goods and services. A staff function was seen mainly as a contributor to the line in the provision of goods and services. It was argued that it was not particularly helpful to discuss line and staff in terms of functions, but it made more sense to discuss the issue in terms of relationships in terms of authority. Whether it is line or staff line authority has to be exercised by all managers over their subordinates. It is more useful to think functional authority as the main type of authority. Functional authority is the right to order other people what to do only in respect of agreed aspects of specialist tasks and functions .This arises because of the increasing complexity of the modern organizations, in which there is high degree of interdependence between the line and the specialist functions.

In addition, I have looked briefly the distinction between authority, responsibility and power. Authority is defined as legitimate power to act in certain ways. Responsibility is defined as the obligation to perform certain things for the organization. Power is defined as the ability to achieve things regardless of authority or responsibility. Authority was contrasted with responsibility in one key respect: authority could be delegated, but responsibility could not be.

As discussed above the issue of organizational structural issues and concerns is a major factor to be considered by any management of modern organization because these issues if not resolved will affect the organizations effectiveness and its survival.