Organizing the Vertical Structure

The organizing process leads to the creation of organization structure, which defines how tasks are divided and resources deployed. Organization structure is defined as 1) the set of formal tasks assigned to individuals and departments 2) formal reporting relationships, including lines of authority, decision responsibility number in hierarchical levels and span of managers’ control 3) the design of systems to ensure effective coordination of employees across department.

The set of formal tasks and formal reporting relationships provides a framework for vertical control of the organization. The characteristics of vertical structure are portrayed in the organization chart, which is the visual representation of an organization’s structure.

Work Specialization

Organizations perform a wide variety of tasks. A fundamental principle is that work can be performed more efficiently if employees are allowed to specialize. Work specialization sometimes, called division of labour, is the degree to which organizational tasks are subdivided into separate jobs. Work specialization is illustrated by the separation of production tasks into bottling, quality control, and maintenance. Employees within each department perform only the task relevant to their specialized function. When work specialization is extensive, employees specialize in a single task. Jobs tend to be small, but they can be performed efficiently. Work specialization is readily visible on an automobile assembly line where each employee performs the same task over and over again. It would not be efficient to have a single employee build the entire automobile or even perform a large number of unrelated jobs.

Despite the apparent advantages of specialization many organizations are moving away from this principle. With too much of specialization employees are isolated and do only a single boring job. Many companies are enlarging jobs to provide greater challenges or assigning teams so that employees can rotate among the several jobs performed by the team.

The chain of command is an unbroken line of authority that links all persons in an organization and shows who reports to whom. It is associated with two underlying principles. Unity of command means that each employee is held accountable to only one supervisor. The scalar principle refers to a clearly defined line of authority in the organization that includes all employees.  Authority and responsibility for different tasks should be distinct. All persons in the organization should know to  whom they report as well as the successive management levels all the way to the top. The payroll clerk reports to the chief accountant, who in turn reports to the Vice president who in turn reports to the company president.

Authority is the formal and legitimate right of a manager to make decisions, issue orders and allocate resources to achieve organizationally desired outcomes. Authority is distinguished by three characteristics:

  • Authority lies in organizational positions, not people. Managers have authority because of the position they hold and other people in the same positions would have the same authority.
  • Authority is accepted by subordinates. Although authority flows top down through the organization’s hierarchy, subordinates comply because they believe that managers have a legitimate right to issue orders. The acceptance theory of authority argues that a manager has authority only if subordinates choose to accept his or her commands. If subordinates refuse to obey because the order is outside their zone of acceptance, a manager’s authority then disappears.
  • Authority flows down the vertical hierarchy. Positions at the top of the hierarchy are vested with more formal authority than are positions at the bottom.

Typically managers are assigned authority commensurate with responsibility. When managers have responsibility for task outcomes but little authority, the job is possible but difficult. They rely on persuasion and luck. When managers have authority exceeding responsibility they may become tyrants, using authority towards frivolous outcomes.

Accountability is the mechanism through which authority and responsibility are brought into alignment. Accountability means that the people with authority and responsibility are subject to reporting and justifying task outcomes to those above them in the chain of command. For organizations to function well, everyone needs to know what they  are accountable for and accept the responsibility and authority for performing it. Accountability can be built into the organization structure. For example, at incentive programs tailored to different hierarchical levels provide strict accountability.

Performance of all managers- monitored and bonus payments are tied to successful outcomes.

An important distinction in many organizations is between line authority and staff authority, reflecting whether managers work is in line or staff departments in the organization’s structure. Line departments perform tasks that reflect the organization’s primary goals and mission. In a software company, line departments make and sell the product. In an Internet based company lien departments would be those that develop and manage online offerings and sales. Staff departments include all those that provide specialized skills in support of line departments include all those that provide specialized skills in support of line departments. Staff’s departments have an advisory relationships with line departments and typically include marketing, labour relations, research, accounting and human resources.

Line authority means that people in management positions have formal authority to direct and control immediate subordinates. Staff authority is narrower and includes the right to advise, recommend and counsel in the staff specialists’ area of expertise. Staff authority is a communication relationship; staff specialists advise managers in technical areas. For example, the finance department of manufacturing firms would have staff authority to coordinate with line departments regarding which accounting forms to use, to facilitate equipment purchases and standardize payroll services.

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