The simple structure and bureaucracy

What do a small retail store, an electronics firms run by a hard driving entrepreneur and an airline in the midst of a company wide pilot’s troika have in common? They probably all use the simple structure.

The simple structure is said to be characterized most by what it is no rather than by what it is. The simple structure is not elaborate. It has a low degree of departmentalization wide spans of control authority centralized in a single person and little formalization. The simple structure is a ‘flat’ organization it usually has only two or three vertical a loose body of employees, and one individual in whom the decision authority is centralized.

The simple structure is most widely practiced in small business in which the manager and the owner are one and the same. This, for example is illustrated, an organizations chart for a retail men’s store. Jack Gold owns and manages this store. Although he employees five full time salesperson a cashier and extra personnel for weekend and holidays, he runs the show. But large companies, in times of crises can become simple structures for short periods. IBM for instance became structure for more than a year back to the early 1990s. When Louis Gerstner was hired as CEO in 1993 he immediately put the company into what he called survival mode. He had cut $9 billion a year in expenses and had to bring the company back literally from the brink of death. So Gerstner implemented a highly centralized, personalized leadership and organizational style. Gerstner said it was benevolent dictatorship with me as the dictator helped the company.

The strength of the simple structure lies in its simplicity. It’s fast, flexible, and inexpensive to maintain and accountability is clear. One major weakness is that it is difficult to maintain in anything other than small organizations. It becomes increasingly inadequate as an organization grows because its low formalization and high centralization tend to create information overload at the top. As size increases, decision making typically becomes slower and can eventually. As size increases decisions making typically becomes slower and can eventually come to a standstill as the executive tries to continue making all the decisions. This often proves to be the undoing of many small businesses. When an organization begins to employ 50 or 100 people, it’s very difficult for the owner-manager to make all the choices. If the structure isn’t changed and made more elaborate, the firm often loses momentum and can eventually fail. The simple structure’s other weaknesses is that it is risky – everything depends on one person. One heart attack can literally destroy the organization’s information and decision making centers.

The Bureaucracy:

Standardization! That’s the key concept that underlines all bureaucracies. Take a look at the bank where you keep checking your account, the department store where you buy your clothes or the government offices that collect your taxes, enforce health regulations or provide locals for protection. They all rely on standardization work processes for coordination and control.

The bureaucracy is characterized by highly routine operating tasks achieved through specialization very formalized rules and regulations, tasks that are grouped into functional departments, centralized authority narrow spans of control and decision making that follows the chain of command. Bureaucracy is a dirty word in many people’s minds. However it does have its advantages. The primary strength of the bureaucracy lies in its ability to perform standardized activities in a highly efficient manner. Putting specialties together in functional departments results in economies of scale, minimum duplication of personnel and equipment and employees who have the opportunity to talk the same language among their peers. Furthermore, bureaucracies can get by nicely with less talented and hence less costly – middle and lower level managers. The pervasiveness of rules and regulations substitute for managerial discretion, Standardization operations, coupled with high formalization allow decision making to be centralized. There is little need, therefore for innovative and experienced decisions makers below the level of senior executives.

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