Organizational Structure

Understanding Organizational Structure

Organizational structure may be defined as the framework of tasks, reporting and authority relationships within which an organization functions. According to Stephen P Robbins, “An organizational structure defines how job tasks are formally divided, grouped and coordinated.” Fred Luthans, however, defines organization structure in terms of the behavior of individuals in an organization. He argues that organization structure represents the holistic framework for Organizational Behavior. The building blocks for designing an organization’s structure consist of six elements.

Management experts use the six basic elements of organizational structure to devise the right plan for a specific company. These elements are: departmentalization, chain of  command,  span of control, centralization or decentralization, work specialization and the degree of formalization. Each of these elements affects how workers engage with each other,  management and their jobs in order to achieve the employer’s goals.


Departmentalization refers to how the organizational structure groups the company’s functions, offices and teams. Those individual groups are typically referred to as  departments. Departments are usually sorted on the basis of the kinds of tasks the workers in  each  department perform, but this is not the only way to create a company’s departmental  breakdown. You could also divide the business into groups based on product or brand lines, geographic locations or even customer needs.

Chain of Command

Most organizations, from businesses to nonprofits to the military, utilize a chain of command. This helps eliminate inefficiencies by having each employee report to  a  single  manager,  instead of to several bosses. In the corporate context, this type of chain of  command  is  reflected in the organizational structure and affects job descriptions as well as  office  hierarchies. Managers assign tasks, communicate expectations and deadlines to employees, and provide motivation on a one-to-many basis.

When employees encounter obstacles or problems, they report back to  the  appropriate  manager. When necessary, the manager is then responsible for taking the concern or issue up  the chain of command to the next level, and so forth. This chain of authority or command streamlines corporate operations and communications for a more efficient and productive business.

Span of Control

An organization’s span of control defines how many employees each manager is responsible    for within the company. There is no single type of span of control that’s ideal for all companies or even for all businesses in a specific industry. The optimal span will depend on a number of factors, including the size of the workforce, how the company is divided into departments and even the company’s specific business goals and strategies.

Other factors to consider are the type of manager assigned to each specific department and the job descriptions of the employees reporting to that manager. Based on the manager’s individual style or approach, the span of control could range from three or four to 15 or more. Of course, managers who are placed higher up the chain of command typically have a tighter span of control, as they are directly responsible for middle-manager or team leaders.

Centralization and Decentralization

Organizational structures also rest somewhere on a spectrum of centralization. Generally, more conservative corporate entities adopt a centralized structure. In this design, C-level managers make all the decisions, management designs a plan for execution and  front-line employees  carry out that plan. C-level officers are generally those at the uppermost level of the organizational chart, such as the chief executive officer, chief operating officer and chief marketing officer.

Centralizing authority in a business means that middle management typically is left  with little  to no input about the goals the company sets. This system is typical in larger corporate organizations, as well as at companies in more conservative industries. On the other hand, a company could adopt a more decentralized approach. A decentralized system allows all levels   of management the opportunity to give input on big-vision goals and objectives. Larger, company-wide decisions are still generally reserved to C-level officers, but departmental managers enjoy a greater degree of latitude in how their teams operate.

Work Specialization

In any business, employees at all levels typically are given a description of their duties and the expectations that come with their positions. In larger companies, job descriptions are generally formally adopted in writing. This approach helps ensure that the company’s specific workforce needs are met, without any unnecessary duplication of effort. Work specialization ensures that  all employees have specific duties that they are expected to perform based on each employee’s work experience, education and skills. This prevents an expectation that employees  will  perform tasks for which they have no previous experience or training and to keep them from performing beneath their capacities.


Finally, organizational structures implement some degree of formalization. This  element outlines inter-organizational relationships. Formalization is the element that determines the company’s procedures, rules and guidelines as adopted by management. Formalization also determines company culture aspects, such as whether employees have to sign in and out upon arriving and exiting the office, how many breaks workers can take and how long those breaks can be, how and when employees can use company computers and how workers  at  all levels  are expected to dress for work.


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Organizational Behavior by Icfai Business School is licensed under a Creative Commons Attribution-NonCommercial-ShareAlike 4.0 International License, except where otherwise noted.