Org Structure

• Simple organization structure


  Typically used in small and start-up organizations where the tasks and functions are not varied and complicated
• Simple organization structure

  • Low in complexity
  • Low in formalization
  • Low span of control
  • Low specialization
• Complexity


  The amount of differentiation in tasks, functions, and authorities that exist within the organization
• Formalization


  The degree to which organizations standardize behavior through organizational practices and processes
• Span of control


  The number of people directly reporting to the next level
• Specialization


  How employees and their activities are grouped together
• Bureaucratic structure


  Characterized by high degrees of complexity, formalization, span of control, and specialization
• Bureaucratic structure is typically used in medium and large organizations
• Bureaucratic structure


  Governed by impersonal rules and regulations and maintained through written communication
• Tall organization


  More management layers, more hierarchical controls
• Tall organization


  • Communicating within the organization can be challenging
  • Several layers of communication which make it difficult to relay and implement decisions
• Flat organization


  Fewer management layers, less hierarchical controls, more efficient flow of information
• Flat organization


  • Decision-making and implementation can be faster
  • Can increase workload and stress due to the wide spans of control
• Organizations can choose to have different layers as they grow
• Some companies have moved towards flatter structures, also called delayering
• Centralization


  Formal decision making authority is held by a few
• Decentralization


  Authority and decision-making is typically dispersed throughout the organization
• Flat organizations

  Usually have a decentralized structure
• Decentralized structure


  Makes the flow of work and information more efficient
• Decentralization


  • Teams may lose sight of organizational goals and may focus only on their area
• Functional organization structure


  The most common structure where the organization is divided into smaller groups based on specialized roles
• Functional organization structure

  • Enables greater operational efficiency since employees are clustered together based on their competencies
  • Potential threat is that the groups or clusters may not communicate well with one another and function in silos or in isolation with other groups preventing the entire organization from achieving smooth coordination and functioning
• Divisional organization structure


  A form wherein groups are organized into different divisions which operate semi-autonomously from one another
• Divisional organization structure


  • Geographically dispersed company with divisions by region
• Divisional organization structure


  • High degree of formality where positions and job descriptions are clearly defined and delineated
  • Rules of engagement between and among roles are clearly laid out for the smooth functioning of the organization
• Matrix organization structure


  A hybrid of both functional and divisional structures which works best in project-based work arrangements
• Matrix organization structure

  • Allows efficient flow and effective exchange of information between and among functions and the various projects required
  • Prevents departments from working in silos since managers and employees interact more closely and respond more quickly to the project requirements
  • Breaks barriers that are often present in divisional or functional structures by allowing them to interact more and discuss issues related to the project
• Contextual factors to consider when adopting an organization structure

  • Organization strategy
  • Leadership
  • Size
  • Technology
  • Business environment
• Organization strategy


  The foremost contextual factor to consider when adopting an organization structure
• An organization's structure must follow its strategy (Chandler, 1962)
• Leadership


  Determines organization structure, especially in family-owned businesses where structure is more likely to be in accordance with owners' vision, values and preferred strategies
• Size


  As an organization grows, there is more division of labor, more hierarchy, and more formalization, making the structure more complex
• Technology


  Influences an organization's structure, with organizations using more technology tending to be flatter and more fluid
• Business environment

  Organization structure has to adapt to the demands and needs of the business environment, such as competitors serving as benchmarks, changes required by regulatory organizations, and markets determining units or departments that need to be created
• The ever-changing business landscape has prompted many organizations to adopt non-traditional organization structures
• Family businesses comprise approximately 65 to 90 percent of all businesses internationally
• In the Philippines, it is estimated that at least 80 percent of businesses are family-owned
• Prominent family-owned companies in the Philippines

  • Ayala Corporation
  • ABS-CBN Corporation
  • J.G. Summit Holdings, Inc.
  • Metropolitan Bank and Trust Company
  • SM Prime Holdings, Inc.
• Transition of family businesses from one kind of organization structure to another

  1. Threshold or limit at which transformation has to take place

  2. Structural change is primarily and ultimately the concern and decision of the family

  3. Family-owned business begins as a small-sized business with the entrepreneur responsible for key areas

  4. As the family-owned business grows, its business becomes too large and too complex to be served by the traditional centralized structure

  5. Family may find it increasingly necessary to delegate management tasks to trusted non-family members or professionals

  6. As the family-owned business becomes even larger and more complex, its organization structure becomes formal and impersonal
• Many family businesses never reach the stage where the family business in its pure form ceases to exist