Page 355 - Business Principles and Management

Unit 4

13.4 Developing Effective Organizations

Goals Terms
• Describe the strengths and weak- • line organization • centralized
nesses of four types of organiza- • line-and-staff organization
tional structures. organization • decentralized
• Make recommendations for im- • matrix organization organization
proving business organization. • team organization • flattened
• self-directed work organization
teams

Types of Organizational Structures

A business’s organizational structure identifies the relationships among departments
and personnel and indicates the lines of communication and decision making.
Two principal types of organizational structures are (1) line and (2) line-and-staff
organizations. Two newer structures in companies today are matrix and team
organizations.

LINE ORGANIZATION
In a line organization, all authority and responsibility can be traced in a direct
line from the top executive down to the lowest employee level in the organiza-
tion. A line organization is shown in Figure 13-9 (sales is the only area for
which the complete organization is shown). The lines joining the individual
boxes indicate the lines of authority. The lines show, for example, that the presi-
dent has authority over the sales manager, the sales manager has authority over
the assistant sales manager, the assistant sales manager has authority over the
branch managers, and the branch managers have authority over the sales repre-
sentatives. In addition, the lines describe how formal communications are ex-
pected to flow up and down the organization.
In a line organization, the president has direct control over all units of the
business, but responsibility, authority, and accountability are passed along from
one person to another, down to the lowest level. Under this form of organiza-
tion, each person is responsible to only one manager, who, in turn, is responsible
to someone else. This type of organization can be very efficient, because new plans
and ideas can be put into effect immediately in one area of the business without
involvement from other areas. However, it often leads to many layers of man-
agement and isolation or lack of communication between departments and divi-
sions. There is no direct way that managers of different departments not in the
same line of authority can communicate and work together.

LINE-AND-STAFF ORGANIZATION
Large and complex businesses need a great deal of expertise to operate well.
Managers have greater difficulty mastering the knowledge and skills they need

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