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The Nature and structure of organizations Part-2

Updated on February 23, 2013


1- Levels of organization

Organizations often have the following three levels shown in the diagram

Strategic Level: The top level is the strategic level includes most top managers ,president, vice president, directors etc, this level of organization is responsible for the overall strategy of the organization for example they will look after if a five year strategic plan is made for organization , they will look after where organization will stand in five year which products to be manufactured and where to market these products whether operation of the organization will be set up locally or globally etc all these are the strategic level decisions.

Operational Level : At the bottom of organization there is operational level and at this level people perform day to day activities time horizon is very short decision often are day to day basis , planning is very short based sometime on weekly basis. Duties performed mostly includes , recording day to day transactions, dealing with customers complaints and queries, processing invoices and sending out orders.

Tactical Level : In between tactical and operational level there comes tactical level, this level we can say is the level of managers of departments and they have time horizon of almost a year like a budget to be prepared at this level for one year. At this level day to day activities are also performed but main concern is how to meet yearly budget of a department.

1- Tall/narrow, wide/flat

Organizations are often said to be “tall narrow” or “wide flat” in tall narrow organization each supervisor or manager have to control only few peoples. In the following diagram there is a direct span of control of two people by the supervisor of manager.

In tall narrow organizations there are many layers as you see in diagram and there control of only few people by the manager so there is very close supervision which indeed you can say is not supervision but re-performance or interference,

Tall narrow organization sometimes said to be very bureaucratic, formal and with strict job description. Each one is graded as per his performance and benefits are given on the bases of these grades.

In wide flat organization span of control is very wide than tall narrow structure for example look at the diagram showing the span of control of seven people by each head.

In this type of organization communication between top and bottom level is very fast and quicker, there is emphasis is on how to done a work instead of job description. The work is done as a team and not as a part of organizational hierarchy.

At the time of cost pressure from the far eastern manufacturers companies deliberately inclined towards the wide flat structure to delayer the organization and to compete the low cost producing manufacturers from the Far East. It is thought the mangers only supervise and add no value to the organization hence increasing to cost of production so they flatten the organizations to reduce costs.

Secondly at the time of technological advance thing begin to move quickly and tall narrow structure adopt the advances very slow while wide flat organizations adopt these technological changes very quickly.

1- Centralization / Decentralization

The location of the power within the organization does not define the shape of the organization. Two organizations with the same shape and structure may have authorized its purchaser to have cash for purchases dollar 50 in one organization and dollar 3000 in other organization of the same shape and structure.

Centralization/Decentralization concept describes how far down the powers goes in an organizations structure.


· In centralization all decision has to be made top of the management and managing director or board of directors have to take all ordinary decision along with important decisions , top management will be overloaded which slow up the process of decision making. Top management’s skills should be reserved for only important decisions hence decentralization is necessary.

· In centralized decision making question has to be passed up from the down for answers to be passed down it takes too much time hence slower the process. Decentralization speeds up the decision making process.

· Decentralization gives power to the expertise areas like the power of advertisements should be with the person who is expert in this area and should be from sales and marketing department rather than managing director who may be from engineering back ground or accounting back ground. Similarly the power to look after the matters of organization in South America should be a local from this area not a person from United Kingdom. Decentralization accomplishes this object only.

· In decentralization good people are motivated to run their own department by giving them powers otherwise good people with expertise will leave the organization.

· In decentralization through training and assessment junior staff are given powers and motivated to take part in decision making. If never allow junior people to make decision there will be no guide line for promotions in future.


Poor coordination is the biggest disadvantage of decentralization sometime called dysfunctional decision making. Sometimes a division of the organization takes decision which is beneficial for that division but harmful for overall organization. For example a specific division may stop manufacturing of a vital component which is not beneficial for that division but beneficial for another division of the organization, at this stage the top management should interfere by breaking the rules of decentralization to impose a decision.


· Downsizing has become necessary evil for cutting costs.

· De-layering of organization by stepping toward flat organizational structure cuts cost and makes organization flexible.

· Out sourcing that departments of the organization which are supporting only and getting in some outsider firm to perform tasks of that department like an IT Department of payable ledger do not earn income so it is outsourced by the management to an outsider firm.

2- Formal / Informal organizations

An informal organization exits along with the formal organization side by side and consists of social relationship, network of informal communication, power influence structure and behavioral norms all of which may bypass formal organization’s arrangements. The benefits depends how it is managed.

Formal organization is an organization which management has deliberately designed it is an organization about which management knows and somewhat is in written from. Procedures are written and management knows about the organization chart and knows who is responsible for specific duty who is head of the department who is subordinate and who is worker and management also know and the job descriptions of all the persons in organization chart.

Following diagram will show the formal informal organizations behavior

Following are the benefits of informal organization

· Employee commitment.

· Knowledge sharing.

· Speed

· Responsiveness.

· Co-operation


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