What do a small retail store, an electronics firm run by a hard-driving entrepreneur, and an airline’s “war room” in the midst of a pilot’s strike have in common? They probably all use the simple structure.

The simple structure has a low degree of departmentalization, wide spans of control, authority centralized in a single person, and little formalization. It is a flat organization; it usually has only two or three vertical levels, a loose body of employees, and one individual with decision-making authority. Most companies start as a simple structure, and many innovative technology-based firms with short life spans, like cell phone app development firms, remain compact by design.17

Consider a retail men’s store owned and managed by Jack Gold. Jack employs five full-time salespeople, a cashier, and extra workers for weekends and holidays, but he runs the show. Though this is typical for a small business, in times of crisis large companies often simplify their structures (though not to this degree) as a means of focusing their resources.

The strength of the simple structure lies in its simplicity. It’s fast, flexible, inexpensive to operate, and accountability is clear. One major weakness is that it becomes increasingly inadequate as an organization grows because its low formalization and high centralization tend to create information overload at the top. Decision making typically becomes slower as the single executive tries to continue doing it all. This proves the undoing of many small businesses. If the structure isn’t changed and made more elaborate, the firm often loses momentum and can eventually fail. The simple structure’s other weakness is that it’s risky—everything depends on one person. An illness at the top can literally halt the organization’s information and decision-making capabilities.

Standardization! That’s the key concept that underlies all bureaucracies. Consider the bank where you keep your checking account, the store where you buy clothes, or the government offices that collect your taxes, enforce health regulations, or provide local fire protection. They all rely on standardized work processes for coordination and control.

The bureaucracy is characterized by highly routine operating tasks achieved through specialization, strictly formalized rules and regulations, tasks grouped into units, centralized authority, narrow spans of control, and decision making that follows the chain of command. Bureaucracy incorporates all the strongest degrees of departmentalization described earlier.

Bureaucracy is a dirty word in many people’s minds. However, it does have advantages, primarily the ability to perform standardized activities in a highly efficient manner. Putting like specialties together in units results in economies of scale, minimum duplication of people and equipment, and a common language employees all share. Bureaucracies can get by with less talented—and hence less costly—middle- and lower-level managers because rules and regulations substitute for managerial discretion. There is little need for innovative and experienced decision makers below the level of senior executives.

Listen in on a dialogue among four executives in one company: “You know, nothing happens in this place until we produce something,” said the production executive. “Wrong,” commented the R&D manager, “Nothing happens until we design something!” “What are you talking about?” asked the marketing executive, “Nothing happens until we sell something!” The exasperated accounting manager responded, “It doesn’t matter what you produce, design, or sell. No one knows what happens until we tally up the results!” This conversation highlights that bureaucratic specialization can create conflicts in which the unit perspectives override the overall goals of the organization.

The other major weakness of a bureaucracy is something we’ve all witnessed: obsessive concern with following the rules. When cases don’t precisely fit the rules, there is no room for modification. The bureaucracy is efficient only as long as employees confront familiar problems with programmed decision rules. There are two aspects of bureaucracies we should explore: functional and divisional structures.

The matrix structure combines the functional and product structures, and we find it in advertising agencies, aerospace firms, R&D laboratories, construction companies, hospitals, government agencies, universities, management consulting firms, and entertainment companies.21 Companies that use matrix-like structures include ABB, Boeing, BMW, IBM, and P&G.

The most obvious structural characteristic of the matrix is that it breaks the unity-of-command concept. Employees in the matrix have two bosses: their functional department managers and their product managers. Exhibit 15-4 shows the matrix for a college of business administration. The academic departments of accounting, decision and information systems, marketing, and so forth are functional units. Overlaid on them are specific programs (that is, products). Thus, members in a matrix structure have a dual chain of command: to their functional department and to their product groups. A professor of accounting teaching an undergraduate course may report to the director of undergraduate programs as well as to the chairperson of the accounting department.

The strength of the matrix is its ability to facilitate coordination when the organization has a number of complex and interdependent activities. The matrix reduces “bureaupathologies”—its dual lines of authority limit people’s tendency to protect their territories at the expense of the organization’s goals.22 The major disadvantages of the matrix lie in the confusion it creates, its tendency to foster power struggles, and the stress it places on individuals.23 Without the unity-of-command concept, ambiguity about who reports to whom is significantly increased and often leads to conflict and power struggles between functional and product managers.