Organizational Structure
Organizational Structure is about division of labor (i.e., who does what, where individuals belong within hierarchical structures, and who reports to whom) and ensuring that information and work flow efficiently throughout the organization.
Differentiation
Differentiation distinguishes and separates jobs and jobholders from one another via division of labor and specialization.
Integration
Integration and its related concept, coordination, refer to the procedures that link the parts of the organization to achieve the organization’s overall mission.
This refers to the processes and methods used to ensure that different units of an organization work together effectively. It involves aligning goals and activities across various departments to achieve the organization’s overall mission. Integration ensures that despite specialization or departmentalization within the organization, there is a unifying approach towards common objectives. Coordination is the specific set of tactics and communication used to link the diverse parts of the organization. It ensures that departments and units are not working in silos and that their efforts contribute cohesively towards the organization’s goals. This involves regular communication, collaborative efforts, and sometimes the establishment of teams or roles specifically dedicated to overseeing coordination across different segments of the organization.
Vertical Structure
In corporate structures, the relationship between stockholders, the board of directors, and management is fundamental to governance and strategic decision-making. Here's an overview of this structure:
Role of Stockholders
Stockholders (or shareholders) are the owners of a corporation. They hold shares representing a portion of the company. Due to their numbers and diverse interests, most stockholders are not directly involved in the day-to-day management of the company. Instead, they exercise their influence through voting rights, primarily used to elect the board of directors. Board of Directors
The Board of Directors, elected by the stockholders, oversees the management of the company. The board is typically led by a chairperson and is responsible for making key decisions that affect the organization. These decisions must align with the corporate charter and bylaws. Board responsibilities include: CEO Oversight: Selecting, evaluating, rewarding, and, if necessary, replacing the Chief Executive Officer (CEO). Strategic Direction: Determining the company's strategic direction and reviewing its financial performance. Ethical and Legal Conduct: Ensuring the company operates ethically, responsibly, and legally. Composition of the Board
Boards usually consist of inside directors (company executives) and outside directors (executives from other companies). Recent trends favor a higher proportion of outside directors. This is because independent outsiders are believed to provide diverse perspectives and prevent conflicts of interest, leading to better governance and decision-making. CEO (Chief Executive Officer)
In corporate governance, the authority structure typically positions the Chief Executive Officer (CEO) at the apex of the organizational hierarchy. Here's how this plays out:
The CEO is the highest-ranking executive in a company and holds a pivotal role in decision-making and strategic planning. They are responsible for the overall management and operational success of the organization. The CEO is directly accountable to the board of directors and, by extension, to the owners or shareholders of the company. This accountability covers all aspects of the organization’s performance, from financial results to strategic direction and adherence to corporate policies. The CEO, appointed by the board, is responsible for implementing the board's policies and decisions. While the board of directors has ultimate authority within the company, this power is typically delegated to the CEO for practicality and efficiency. The CEO, in turn, may delegate certain responsibilities to other senior executives but remains the primary link between the board and the management of the company. Top Management Team
CEOs (Chief Executive Officers) often adopt a collaborative approach to decision-making and leadership, working closely with their top management team or C-suite. Here's an elaboration on this concept with bullet points:
Collaborative Leadership Style: CEOs don't necessarily have to adopt a dictatorial or autocratic leadership style. They can share authority and decision-making responsibilities with other key members of the top management team. The term "C-suite" refers to the group of the highest-ranking senior executives in a company, where "C" stands for "chief". This team typically includes, but is not limited to, the CEO, the President, Chief Operating Officer (COO), Chief Financial Officer (CFO), Chief Information Officer (CIO), Chief Human Resources Officer (CHRO), and other key executives. Rather than making critical decisions independently, many CEOs regularly convene with their top management teams to make decisions collectively. This approach ensures a diversity of perspectives and expertise are considered in the decision-making process. Examples from Major Companies: At prominent companies like Netflix, Facebook, and Salesforce, CEOs often engage in regular meetings with their top management teams to deliberate and decide on important company matters. This collaborative approach helps in balancing different viewpoints and leads to more informed and effective decision-making. High-Involvement Organization
Participative Management is a powerful tool for businesses aiming to foster a collaborative, inclusive, and innovative culture.
By involving employees at various levels in decision-making, organizations can harness a wide range of insights and expertise, enhancing their competitiveness and overall performance.
Horizontal Structure
Horizontal Structures are differentiated horizontally as well, and the two structural elements relate to one another in important ways.
In complex organizations, the subdivision of work into smaller units or departments is essential for efficient operation.
This leads to the distinction between line and staff departments:
Line Departments
These departments are directly responsible for the core activities of the firm. Functions typically include production, sales, and customer service. Example: At General Motors, line departments include product design, fabrication, assembly, and distribution. Line managers in these departments hold considerable authority and power and are responsible for major operational decisions. They are accountable for the bottom-line results of their units, impacting the company's overall success directly. Staff Departments
Staff departments provide specialized or professional expertise to support line departments. They include areas like research, legal, accounting, public relations, and human resources. These departments usually have their own leadership, such as vice presidents, overseeing specialized functions. In some cases, staff departments hold significant authority, such as accounting or finance groups involved in approving and monitoring budgetary activities. This organizational structure allows for a clear division of roles and responsibilities, ensuring both the effective execution of core business functions and the provision of essential support and expertise.
Organizing for Innovation
Technical Innovator
Technical Innovator - A person who develops a new technology or has the key skills to install and operate the technology.
Product Champion
Product Champion is a person who promotes a new technology throughout the organization in an effort to obtain acceptance of and support for it.
Executive Champion
Executive Champion is an executive who supports a new technology and protects the product champion.
Design Thinking
Design Thinking is a human-centered approach to problem solving and solution finding that is based on nonlinear iterations of inspiration, ideation, and implementation.
Inspiration
Acts as the catalyst for the problem-solving process. Involves identifying a motivating problem or envisioning a potential solution that triggers the creative process. Ideation
Represents the creative heart of the process. Entails the generation, development, and testing of ideas. Focuses on exploring a wide variety of solutions without constraint. Includes refining concepts into practical applications through critique and iteration. Implementation
Marks the transition from concept to reality. Concerns the strategic pathway that brings the project from the planning stage into the end-users' real-world context. Involves finalizing the solution, production, market launch, and post-launch monitoring. Problem-Solving Process
Is inherently iterative, not strictly sequential. Involves moving back and forth between the spaces of inspiration, ideation, and implementation. Requires revisiting and revising elements in light of new insights and feedback. Development Project
Development Project is a focused organizational effort to create a new product or process via technological advances.
sociotechnical systems
Sociotechnical Systems is an approach to job design that attempts to redesign tasks to optimize operation of a new technology while preserving employees’ interpersonal relationships and other human aspects of the work.
Bureaucratic Control Systems
Bureaucratic Control Systems revolve around quantified goals and measures of progress and performance, plus applying corrective measures as needed.
The Control Cycle
Setting performance standards. Comparing performance against the standards and determining deviations. Principle Of Exception -often applied in management and accounting, is a practice that streamlines decision-making processes by setting a threshold or standard, and focusing managerial attention only on significant deviations from these standards Taking action to correct problems and reinforce successes. After-Action Review
An after-action review (AAR) is a structured evaluation process typically conducted following the completion of a project or after specific events or actions have taken place, particularly if those actions were in response to an unexpected problem or challenge.
Preventive in Nature: This form of control is applied before a process begins to prevent future problems. Establishing Standards: It involves setting up policies, procedures, and rules that aim to ensure activities are correctly executed. Inspecting raw materials to verify quality before use. Selecting and training employees properly to prepare them for their roles. Real-Time Adjustment: This control takes place during the execution of plans and aims to correct any issues as they happen. Active Management Techniques: Involves direct supervision, monitoring activities, and making adjustments on the fly. Adjusting work assignments as tasks are being performed to ensure efficiency. Monitoring ongoing operations and making immediate corrections if needed. Post-Action Review: This type of control uses the results of actions to inform and correct any deviations that occurred. Results-Oriented: Focuses on the outcomes of operations and processes. Reviewing the performance data of a completed project to identify any variances from the plan. Using customer feedback to make improvements to a product after it has been launched. Management audit
Management Audit is an evaluation of the effectiveness and efficiency of various systems within an organization.
A well-done audit is intended to improve a company’s risk management, control, and governance processes. External Audits
An External Audit is an evaluation conducted by one organization, such as a CPA firm, on another.
Internal Audit
An Internal Audit is a periodic assessment of a company’s own planning, organizing, leading, and controlling processes.
Triple Bottom Line (TBL)
The Triple Bottom Line (TBL) is a framework that expands the traditional reporting framework to include ecological and social performance in addition to financial performance.
Budgetary Controls
Budgetary Controls are the process of investigating what is being done and comparing the results with the corresponding budget data to verify accomplishments or remedy differences.
Section 7: Organizational Structure
