Organizational Structural Issues

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.