An organization structure is a framework that allots a particular space for a particular department or an individual and shows its relationship to the other. An organization structure shows the authority and responsibility relationships between the various positions in the organization by showing who reports to whom. It is an established pattern of relationship among the components of the organization.
March and Simon have stated that-"Organization structure consists simply of those aspects of pattern of behavior in the organization that are relatively stable and change only slowly." The structure of an organization is generally shown on an organization chart. It shows the authority and responsibility relationships between various positions in the organization while designing the organization structure, due attention should be given to the principles of sound organization.
Significance of Organization Structure
Properly designed organization can help improve teamwork and productivity by providing a framework within which the people can work together most effectively.
Organization structure determines the location of decision-making in the organization.
Sound organization structure stimulates creative thinking and initiative among organizational members by providing well defined patterns of authority.
A sound organization structure facilitates growth of enterprise by increasing its capacity to handle increased level of authority.
Organization structure provides the pattern of communication and coordination.
The organization structure helps a member to know what his role is and how it relates to other roles.
PRINCIPLES OF ORGANIZATION STRUCTURE
Modern organizational structures have evolved from several organizational theories, which have identified certain principles as basic to any organization structure.
a) Line and Staff Relationships:
Line authority refers to the scalar chain, or to the superior-subordinate linkages, that extend throughout the hierarchy (Koontz, O'Donnell and Weihrich). Line employees are responsible for achieving the basic or strategic objectives of the organization, while staff plays a supporting role to line employees and provides services. The relationship between line and staff is crucial in organizational structure, design and efficiency. It is also an important aid to information processing and coordination.
Departmentalization is a process of horizontal clustering of different types of functions and activities on any one level of the hierarchy. Departmentalization is conventionally based on purpose, product, process, function, personal things and place.
c) Span of Control:
This refers to the number of specialized activities or individuals supervised by one person. Deciding the span of control is important for coordinating different types of activities effectively.
d) De-centralization and Centralization:
De-centralization refers to decision making at lower levels in the hierarchy of authority. In contrast, decision making in a centralized type of organizational structure is at higher levels. The degree of centralization and de-centralization depends on the number of levels of hierarchy, degree of coordination, specialization and span of control.
Every organizational structure contains both centralization and de-centralization, but to varying degrees. The extent of this can be determined by identifying how much of the decision making is concentrated at the top and how much is delegated to lower levels. Modern organizational structures show a strong tendency towards de-centralization.