Organizational Structure

Types of Organizational Structure

Scholars have conceptualized organizational structure in different ways. The most important is the “hierarchy,” which is generally characterized by a top-down authority structure, centralized coordination, and vertical communication. There are different views about how relationships are organized within a hierarchy. Max Weber described hierarchies in terms of their command and control functions—one person at the top directs and coordinates everyone below. Herbert Simon, on the other hand, conceptualized the hierarchy as a system of interrelated subsystems organized from top to bottom. In this model, each person at any given level is connected to many people within that level, but relatively fewer people between levels. Aside from the hierarchical model, scholars have also conceptualized organizational structure as: mechanistic (characterized by high task specialization, vertical coordination and control, and management by plan and command), organic (characterized by multitasking, lateral coordination, and facilitative leadership), matrix (characterized by project-oriented teams comprising individuals detailed from other divisions), and M-form (characterized by multiple divisions organized according to the type of output they produce).

Elements of Organizational Structure

Regardless of the form it takes, organizational structure consists of both formal organization (the rules, procedures, and routines that guide and constrain behavior) and informal organization (the patterns of social relationships that exist “outside” the formal structure of the organization). The most important types of social structures within any organization are the authority and communications structures. The former concerns the relationships of authority, both formal and informal, by which organizational leaders [Page 645]exercise control over other participants. Authority structures are commonly conceived as hierarchies, but they can also take other forms. In some organizations, authority is vested in individuals who that possess highly specialized knowledge; in others, authority may be delegated informally to individuals who occupy no formal position of authority.

Communication structures are principally concerned with the flow of information through an organization. When an organization is functioning optimally, decisionmakers have access to as much of the information as they need to make well-informed decisions. As scholars have observed, however, organizational participants do not always have the motivation or incentives necessary to ensure that information is disseminated in an efficient manner.

Organizational Structure and Rational Decision Making

When an organization's authority and communication structures are working optimally, with the right balance between formal and informal organization, the organization's structure can be said to help individuals approximate rational decision making. Organizational participants are, at best, boundedly rational, with little choice but to make the best decisions possible under conditions of limited cognition and incomplete information. Although complete rationality may not be possible at the individual level, it can be approximated by building rationality into the structure of the organization, using such devices as standard operating procedures, roles, formal rules, and training. Within such a framework, organizational participants are able to make decisions using a variety of means that help them to overcome their human limitations.

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