Organizational Structure Models and Department Types

Formal Organization and Departments

Formal organization: A defined structure established by the company that places each element in the most appropriate location. It clarifies the relationships between all business elements through hierarchy and authority. It is reflected through organizational rules and regulations. It is based on the division of labor and the organization of the company into departments.

Department Types

Departments are formed by all the people doing the same job or task. Common types include:

• By function (Functional departments): Based on different functional areas of the company and facilitating specialization. Disadvantages: lack of coordination and competition among departments.
• By geographic area: Used by multinationals to approach local markets. Problem: duplication of functions because each division may contain all departments.
• By project, product, or customer: Departments organized around specific projects, products, or customer groups.

Elements of Organizational Structure

Elements of organizational structure:

• Directive units (Senior management): Set overall objectives and make strategic decisions.
• Middle management: Executives with direct authority over operators; they link senior management with departments.
• Management units: Groups of experts and professionals in different business functions, typically in large companies.
• Support units: Specialists who advise the company and support management in decision making.
• Operating units: Technicians and workers who perform the work directly.

Organization Charts and Relations

Organization charts are graphical representations of the organizational structure, showing relationships between departments, authority flows, information flows, and decision-making lines.

Communication and Formal Relations

Relations depend on communication and authority patterns between elements of the company:

• Linear (Chain of command): A direct chain of command from manager to subordinate (direct: ascending or descending).
• Line-and-staff: Staff groups provide specialized advice without direct authority; line managers have directive authority.
• Cross-functional support: Teams that provide contrasting ideas and collaborate across departments.
• Informal relations: Unofficial communications and relationships between people or groups at the same level.

Types of Charts and Their Purpose

Charts can be classified by shape, purpose, and extent:

• By shape:
  • Vertical: Top command with subordinates below.
  • Horizontal: Authority flows from left to right.
  • Radial: Central node with branches radiating outward.
• By purpose:
  • Informative: Provide global information, often used for large units.
  • Analytical: Detail the entire organizational structure for analysis.
• By extension:
  • General: Covers the entire company.
  • Partial: Covers only part of the company.
• By content: Structural charts show relationships; functional charts show departments and personal roles and help identify people.