Factors in the Design of an Organization Structure
A basic design challenge involves deciding how much authority to centralize at the top of organizations and how much to decentralize to middle and lower levels. An organization’s hierarchy begins to emerge when the organization experiences problems in coordinating and motivating employees.
These problems lead to organizations:
– Increasing the number of managers
– Increasing the number of levels in the management hierarchy
Principle of Minimum Chain of Command
An organization should choose the minimum number of management levels consistent with its goals and the environment in which it exists. In other words, keep the organization as flat as possible while maintaining control over activities.
One way is by increasing manager’s span of control—the number of subordinates a manager directly manages. In general, a manager’s span of control is limited by two factors: the complexity and interrelatedness of tasks.
Factors affecting the shape of the hierarchy:
Horizontal Differentiation — an organization that is divided into subunits has many different hierarchies, not just one.
Centralization — with decentralization, less direct managerial supervision is needed Standardization — reduces the need for levels of management because rules substitute for direct supervision