Structure
In any organizing effort, managers must choose an appropriate structure. Structure refers to the designated relationships among resources of the management system. Its purpose is to facilitate the use of each resource, individually and collectively, as the management system attempts to attain its objectives.25 The two basic types of structure within management systems are formal and informal structures. Formal structure is defined as the relationships among organizational resources as outlined by management; formal structure is represented primarily by the organization chart. In contrast, informal structure is defined as the patterns of relationships that develop because of the informal activities of organization members. It evolves naturally and tends to be shaped by individual norms and values and social relationships. Essentially, an organization’s informal structure is the system or network of interpersonal relationships that exists within, but is not usually identical to, the organization’s formal structure.26
Informal Organizational Structures
A mechanistic structure is a formal organizational structure such as those discussed in this chapter. In contrast, an organic structure is less formal and represents loosely coupled networks of workers. Some researchers suggest that mechanistic structures are better suited for some organizations and organic structures are better suited for other organizations. In particular, research indicates that a mechanistic structure is better for large companies and those operating in stable industries. In contrast, organic structures are better for smaller companies and those operating in more volatile industries.27
Organization structure is represented primarily by means of a graphic illustration called an organization chart. Traditionally, an organization chart is constructed in pyramid form, with individuals toward the top of the pyramid having more authority and responsibility than do those toward the bottom.28 The relative positioning of individuals within boxes on the chart indicates broad working relationships, and lines between boxes designate formal lines of communication between individuals. In addition to specifying formal relationships within the firm, an organization chart can also communicate to outsiders the complexity of the organization. Structure involves two primary dimensions: the vertical dimension and the horizontal dimension. The following sections discuss each dimension in detail.29
Vertical Dimensioning
Vertical dimensioning refers to the extent to which an organization uses vertical levels to separate job responsibilities. Vertical dimensioning is directly related to the concept of the scalar relationship—that is, the chain of command. Every organization is built on the premise that the individual at the top possesses the most authority and that other individuals’ authority is scaled downward according to their relative position on the organization chart. The lower a person’s position on the organization chart, then, the less authority that person possesses.30
The scalar relationship, or chain of command, is related to the unity of command. Unity of command is the management principle that recommends that an individual have only one boss. If too many bosses give orders, the result will probably be confusion, contradiction, and frustration—a sure recipe for ineffectiveness and inefficiency in an organization. Although the unity-of-command principle made its first appearance in management literature well over 75 years ago, it is still discussed today as a critical ingredient of successful organizations.31
Span of Management
When examining the vertical dimensioning of an organization chart, it is important for managers to consider the influence of span of management—the number of individuals a manager supervises. The more individuals a manager supervises, the greater the span of management. Conversely, the fewer individuals a manager supervises, the smaller the span of management. The span of management has a significant effect on how well managers carry out their responsibilities. Span of management is also called span of control, span of authority, span of supervision, and span of responsibility.32
The central concern of span of management is to determine how many individuals a manager can supervise effectively.33 To use the organization’s human resources effectively, managers should supervise as many individuals as they can best guide toward production quotas. If they are supervising too few people, however, they are wasting a portion of their productive capacity. If they are supervising too many, they are losing part of their effectiveness.
Designing Span of Management: A Contingency Viewpoint
As repo-rted by Harold Koontz, several important situational factors influence the appropriateness of the size of an individual’s span of management:34
Employees at call centers like this one perform similar activities, are physically close, and need little coordination, so supervisors tend to have a greater span of management.
david pearson/Alamy
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Similarity of functions—the degree to which activities performed by supervised individuals are similar or dissimilar. As the similarity of subordinates’ activities increases, the span of management appropriate for the situation widens. The converse is also generally true.
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Geographic contiguity—the degree to which subordinates are physically separated. In general, the closer subordinates are to each other physically, the more of them managers can supervise effectively.
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Complexity of functions—the degree to which workers’ activities are difficult and involved. The more difficult and involved the activities are, the more difficult it is to manage a large number of individuals effectively. This is particularly true for research and development departments, which typically include a number of engineers and scientists.35
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Coordination—the amount of time managers must spend synchronizing the activities of their subordinates with the activities of other workers. The greater the amount of time that must be spent on such coordination, the smaller the span of management.
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Planning—the amount of time managers must spend developing management system objectives and plans and integrating them with the activities of their subordinates. The more time managers must spend on planning activities—whether those activities are repetitive and routine or infrequent but complex—the fewer individuals they can manage effectively.36
Table 8.1 summarizes the factors that tend to increase and decrease the span of management.
Table 8.1 Major Factors That Influence the Span of Management
| Factor | Factor Has Tendency to Increase Span of Management When— | Factor Has Tendency to Decrease Span of Management When— |
|---|---|---|
| 1. Similarity of functions | 1. Subordinates have similar functions | 1. Subordinates have different functions |
| 2. Geographic contiguity | 2. Subordinates are physically close | 2. Subordinates are physically distant |
| 3. Complexity of functions | 3. Subordinates have simple tasks | 3. Subordinates have complex tasks |
| 4. Coordination | 4. Work of subordinates needs little coordination | 4. Work of subordinates needs much coordination |
| 5. Planning | 5. Manager spends little time planning | 5. Manager spends much time planning |
Graicunas and Span of Management
Perhaps the best-known contribution to span-of-management literature was made by the management consultant V. A. Graicunas.37 He developed a formula for determining the number of possible relationships between a manager and subordinates when the number of subordinates is known. Graicunas’s formula is as follows:
C is the total number of possible relationships between manager and subordinates, and n is the known number of subordinates. As the number of subordinates increases arithmetically, the number of possible relationships between the manager and those subordinates increases geometrically.
A number of criticisms have been leveled at Graicunas’s work. Some have argued that he failed to take into account a manager’s relationships outside the organization and that he considered only potential relationships rather than actual relationships. These criticisms have some validity, but the real significance of Graicunas’s work lies outside them. His main contribution involved pointing out that span of management is an important consideration that can have a far-reaching impact on the organization.38
Height of Organization Chart
Span of management directly influences the height of an organization chart. Normally, the greater the height of the organization chart, the smaller the span of management, and the lower the height of the chart, the greater the span of management.39 Organization charts with little height are usually referred to as flat, whereas those with much height are usually referred to as tall.40
Figure 8.3 is a simple example of the relationship between organization chart height and span of management. Organization chart A has a span of management of six, and organization chart B has a span of management of two. As a result, chart A is flatter than chart B. Note that both charts have the same number of individuals at the lowest level. The larger span of management in A is reduced in B merely by adding a level to B’s organization chart.
An organization’s structure should be built from top to bottom to ensure that appropriate spans of management are achieved at all levels. Increasing spans of management merely to eliminate certain management positions and thereby reduce salary expenses may prove to be a shortsighted move. Increasing spans of management to achieve such objectives as speeding up organizational decision making and building a more flexible organization is more likely to help the organization achieve success in the long run.41 A survey of organization charts of the 1990s reveals that top managers were creating flatter organizational structures than top managers used in the 1980s. Overall, managers seem to be using flatter organizational structures now than in the past.
One company that has derived benefits from a flatter organizational structure is steel manufacturer Nucor Corporation. In recent years, Nucor had increased its layers of management, which resulted in increased employee costs. In an effort to decrease these costs and improve efficiencies, the company drastically reduced its layers of management. Although some of its competitors had as many as 30 layers of management, Nucor reduced its structure to only four. This reduction in layers of management reduced costs and has also increased satisfaction among employees at lower levels now that they are less removed from the top layer of the organization.42
Horizontal Dimensioning
The horizontal dimensioning of an organization refers to the extent to which firms use lateral subdivisions or specialties within the organization. Overall, to build organizations horizontally, organizations establish departments. A department is a unique group of resources established by management to perform some organizational task. Departmentalizing is the process of establishing departments within the management system. Typically, these departments are based, or contingent, on such situational factors as the work functions being performed, the product or service being offered, the territory being covered, or the customer being targeted.
