An organization structure is a system made up of tasks to be accomplished, work movements from one work level to other work levels in the system, reporting relationships, and communication passageways that unite the work of different individual persons and groups. The types of organizational structures include: (a) vertical structure (b) horizontal structure (c) network structure
A vertical structure clears out issues related to authority rights, responsibilities, and reporting relationships. Authority rights refer to the legitimate rights of individuals, appointed in positions like president, vice president, manager, and the like, to give orders to their subordinates, who in turn, report to them what they have done.
Owners of private business companies are said to have absolute authority, even if other persons are appointed as managers in their companies. In corporations, the owners are the stockholders and they elect a board of directors to manage the organization’s activities. The board has a chairman who acts as the leader, while the members act as the corporation’s authority figures, responsible for making major decisions affecting their organizations, subject to the corporation’s constitution and by-law provisions. Besides the chairman of the board, a chief executive officer (CEO) is appointed to occupy the top post in the organization pyramid and is personally accountable to the members of the board and other owners for the organizational performance.
Below the top-level managers are the middle-level managers in charge of departments who, as earlier mentioned, report to them. Below the middle-level managers are the lower-level managers which include office managers, sales managers, and supervisors who directly report to the former. Employees under the lower-level managers also have reporting relationships with their respective department managers.
A horizontal structure refers to the departmentalization of an organization into smaller work units as tasks become increasingly varied and numerous.
Departments formed are of two types:
- Line departments – deal directly with the firm’s primary goods and services; responsible for manufacturing, selling, and providing services to clients.
- Staff departments – support the activities of the line departments by doing research, attending to legal matters, performing public relations duties, etc.
Meanwhile, departmentalization may be done using three approaches:
- Functional approach – where the subdivisions are formed based on specialized activities such as marketing, production, financial management, and human resources management
- Divisional approach – where departments are formed based on management of their products, customers, or geographic areas covered
- Matrix approach – is a hybrid form of departmentalization where managers and staff personnel report to the superiors, the functional manager, and the divisional manager
Finally, a network structure is a collection of independent, usually single-function organizations/companies that work together in order to produce a product or service. Such network organizations are each capable of doing their own specialized work activities independently, like producing, distributing, designing, etc., but are capable of working effectively at the same time with other network members. Often their communication is by electronic means where sharing of information is speedy. This results in their ability to respond at once to their customers’ demands.