Question

Organizational Design is described as being “the foundation” of business organization. Where do Organizational Structure and Organizational Charts fit into this foundation? Explain how Specialization, Departmentalization and Decision-Making Hierarchy help to determine a company’s organizational structure.

Answer 1

Organisational structure and charts : An organisational structure is needed to define a hierarchy within a firm, one that identifies jobs, functions and reporting structures that will enable the organisation to set and meet its goals. Creating an organisational chart can also help to see if all relevant areas have representation or are under/over represented in the firm.

There are several types of structures available so firms can pick and choose exactly what they want/need for their corporate strategy. Not having an organisational structure can lead to miscommunication (who to inform/complain to), lack of coordination (who to check with in case of conflicts in resources), bad decision-making (relevant stakeholders not included), conflict and ultimately failure. A bad structure or the lack of one is a serious impediment to success for any business.

A functional structure can help to group employees by skills in organisations that have varying and numerous highly differentiated skill-sets operating towards a combined goal, employees can focus on their tasks and their skills to deliver projects which can be highly effective in firms working with niche skills (technology, science).

A divisional structure can help firms that have large and diverse departments working independently to meet their individual goals, each department managing its own budget and schedules effectively as a smaller entity within the organisation (google mail and messenger, google glasses).

A matrix or hybrid structure can bring order to a firm where employees work in different roles at the same time (start-ups that share resources, consulting firms).  

The same type of structure might not work for all firms and so the planned organisational design should be reviewed to build a good organisational structure complete with an organisational chart of the main people involved (and keep it current) to position the firm to successfully accomplish its strategic goals/objectives.

(Point park university, 2020).

Specialisation, departmentalisation and decision-making hierarchy :

Specialisation is a way to define a skill-set/authority/chain-of-command to a role within an organisation. This allows specific roles to command or control activities that fall under their purview. e.g. An SAP project manager can be in-charge of reviewing, accepting or rejecting all work that is received for that specific technology. A Cloud developer can be set as the final approver for all Cloud related technical work. Both can report to the same manager however, they will specialise in only doing activities that pertain to their technology expertise. This allows highly techincal work to be managed by qualified personnel within a firm.

Departmentalisation is important when different roles within departments have their own hierarchies, chain-of-command and workflows. All SAP related queries can go to the SAP department and all Cloud queries to the Cloud department. This ensures that control of differently grouped activities is kept within the group that they relate to, ensuring that work is not interrupted or impacted by the actions of other departments.

Decision-making hierarchy needs to be defined in any firm to ensure the final decision is ratified with all relevant stakeholders. In the case of a specialised structure, the firm might choose to have the technical experts make decisions with internal meetings, discussions with external experts etc. Decisions in a departmental structure will be taken by the department heads, after incorporating any relevant inputs from interested parties. Decision-making is usually progressively increased with the role level so that the higher levels focus more on the bigger picture of return on investment, revenue generation, resource allocation across the firm etc. without getting caught up in the details.

(French, 2011)

A company's organisational structure should be decided based on the type of work being done within, roles and skills, decision making structure that is needed to reach the organisation's goal.

References :

French, Ray (2011) Organizational Behaviour.

Point Park University (2020) 4 Types of Organizational Structures.