Business organizational
structures came about to simplify decision-making. The typical organization
chart depicts a hierarchy of authority starting with the chairman, CEO and
other executive officers at the top because the executive officers set the goals
and direction of the company. Supporting layers of managers under the executive
level are tasked with applying these goals to their areas of responsibility or
departments, which are arranged in order of appropriate information flow from
management.
History
The concept of studying and using organizational
structure to improve on enterprise performance dates back to the late 19th
century and the writings of sociologist and engineer Max Weber, who examined
the dependence of capitalism upon bureaucracy. During the early 20th century,
companies used organizational structure to enhance performance by creating
specialization within the company and departmental authorities who managed
those specialized areas. Henry Ford developed his assembly line production
methods as a result of the then-groundbreaking theories of organizational
structure.
Function
Each specialized unit is managed by its own
decision maker, who theoretically is best able to understand the needs and
problems of that particular unit. This allows a consolidation of performance
information in the managerial level where the executive level may access only
the most pertinent information for goal and directional purposes. This filters
out the details of company operations and feeds only the results of operations
up the ladder to the executives and board of directors.
Significance
An organizational structure that divides the
operations of a company into specialized departments empowers the managers of
those departments to deal with problems and create efficiencies of process and
production that are customized to their particular departments. It also creates
a corporate management level where enterprise knowledge is developed, tested
and preserved for the future efficient operation of the department, as well as
easy accessibility by those in higher management charged with enterprise
planning.
Benefits
A filtered flow of information from the
production level of an enterprise allows executive management to focus on the
goals of the company and compare the production and administration performance
with their intended corporate direction. This assists their decision making by
focusing on intended results rather than the detailed process of individual
management of departmental operations.
Considerations
No organizational structure works unless the
flow of information works. The purpose of organizational structure is to
distribute the decisions of executive management down through administrative
levels where the managers interpret those decisions and put them into practice.
It also creates a way for managers to send feedback and p
Source: http://smallbusiness.chron.com/organizational-structure-decision-making-3825.html
