Organizational Structure Basics

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Jiminez has a dashed line to the Product and Services Marketing Department, which means that she sometimes will work for that department or will report to that department's manager. When lines represent a tree structure—when two or more rectangles are linked to another with multiple lines—this indicates that several individuals or departments report to one supervisor.

For instance, the tree structure represents the relationship between the CEO and the three top managers who report to the CEO. Finally, a rectangle that is attached horizontally outside of the vertical hierarchy typically indicates an assistant or staff person.


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In the example, this is represented by the executive secretary to the CEO. While organizational charts can be created by hand, most are created using computer software. Although it may be labor intensive, organizational charts can be created using drawing tools in a word processing program. Microsoft's PowerPoint presentation software allows for the creation of organizational charts, although there is little space available to create large charts.

Specific software exists for creating Figure 1 Sample Organizational Chart larger, more complex charts, and there are many different packages available for purchase.


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These software programs allow for quick and easy chart creation with point-and-click menus and automatic resizing and alignment. Many of these software programs also allow one to easily download charts into a word processing document, a presentation, or a Web site. Other features available in these programs include the ability to insert employee photographs, as well as information from other human resources computer programs, directly into charts. The organizational chart provides a great deal of information about the organization as a whole and the interaction of its parts.

From a chart, one can see the organization's structure, its hierarchy, the degree to which it is centralized or decentralized, and its chain of command. Each of these is summarized below. First, organizational charts detail an organization's structure. It may be functional, in which work units are divided based on what they do and named after those functions e. The structure may be divisional, based on product, customers served, or geographic location. Finally, an organizational chart may represent a matrix structure, in which work units are organized by both function and division.

In addition to outlining the type of organizational structure, the organizational chart also indicates the number of management levels, whether the organizational structure is tall or flat, and the span of control at each level. Tall organizations have many levels of middle management and small spans of control.

Each manager supervises and directs few employees, and the chain of command has many managers. Conversely, a flat organization has fewer management levels and larger spans of control.

The 5 Types Of Organizational Structures: Part 1, The Hierarchy

Because managers supervise more employees, employees tend to have more autonomy and discretion in their jobs. Organizational hierarchy and the number of management levels often indicates the degree of centralization within an organization. Centralized organizations are those in which most of the decision making occurs by a few people at the top of the hierarchy. This typically creates a top-down management structure, in which top-level managers strongly control the direction of the workplace through their decisions and supervision.

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Conversely, an organization with a decentralized structure allows greater decision-making and authority at lower organizational levels. Highly decentralized companies may have units that operate nearly independently of one another. The degree of hierarchy on an organization's chart normally will help one to determine the degree of centralization or decentralization within its structure.

Typically, the taller the organization, the more centralized it is; flatter organizations generally require more decentralization, because managers each have broader spans of control and cannot direct and closely supervise so many people. Additionally, as previously described, the organization's structure may indicate the degree of centralization. Functional structures tend to be more centralized than do divisional structures. The vertical and horizontal lines connecting the rectangles on an organizational chart indicate reporting relationships and chain of command.

That is, they indicate which employees are directly responsible for the supervision of others and who has ultimate accountability for a group of employees. Many companies make their organizational chart available to their employees and to the public. The members of the public who may have an interest in a company's organizational chart include company shareholders, investors, distributors and suppliers, customers, potential job applicants, and even community members. Employees typically have access to the organizational chart through materials provided by the organization e.

Providing the organizational chart to employees allows them to see the structure of the organization and to better understand the entirety of the organization and how their position or work unit fits into it. Additionally, the observable chain of command can help an employee to understand to whom they are accountable.

This may aid the company in diagnosing organizational problems by being able to pinpoint accountability.

What is an Organizational Chart?

Many organizations now make their organizational charts available for viewing by the general public, either online or in corporate literature for shareholders and prospective employees. By providing this information, these external stakeholders and other interested parties may gain a better understanding of the organization. The chart may give them a sense of the organization's operations, workforce, or even its strategy. There are a number of reasons that an organizational chart might change since the chart must reflect any alterations to the organizational structure.

The structure may change due to a company's growth, decline, or restructuring. All organizations progress through a life cycle of growth, maturity, and decline, and in each stage the organizational structure is likely to be different. In the growth stage, the company is expanding rapidly, gaining customers and market share.

Types of Organizational Structures

Growth will occur when a company is just beginning and products and services are gaining a foothold. It may also occur when an organization develops a new product or expands into new markets, perhaps in other countries. With growth, the organizational chart will change.

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Levels of management may be added, along with new departments. In maturity, an organization is no longer growing at a rapid rate and is stable in its production and sales. The organization may introduce minor changes to a product or service, but there are unlikely to be major changes to its structure. In the decline stage, the organization is losing ground in the marketplace.

It may be that its products or services are becoming obsolete or that its competitors are taking over the market. In decline, the organization may shed levels of management or positions in all divisions. Additionally, it may outsource work in some areas and thus remove those departments from its structure. It groups people into functional departments of specialization, then further separates them into divisional projects and products.

In a matrix structure the team members are given more autonomy and expected to take on more responsibility for their work. This increases the productivity of the team, fosters greater innovation and creativity, and allows managers to cooperatively solve decision-making problems through group interaction. This type of organizational structure takes lots of planning and effort, making it appropriate for large companies that have the resources to devote to managing a complex business framework.

A flat organizational structure attempts to disrupt the traditional top-down management system of most companies. The employee simply communicates directly with the target on a peer-based level.

Organizational Structure

A company adopting this type of structure for everyday purposes typically establishes a special top-down management system for temporary projects or events. Skip to main content. Divisional vs. Matrix vs. Sullivan, Janie. Four Basic Elements of Organizational Structure.