Organizations become more complex as they grow, and this can require more formal division of labor and a strong emphasis on hierarchy and vertical links. Thus when relying on a simple structure, the owner of a firm must be sure to communicate often and openly with employees.Īs a small organization grows, the person in charge of it often finds that a simple structure is no longer adequate to meet the organization’s needs. A lack of clear guidance from the top of the organization can create confusion for employees, undermine their motivation, and make them dissatisfied with their jobs. Important tasks may be ignored if no one person is specifically assigned accountability for them. Informality has potential negative aspects, too. On the plus side, the flexibility offered by simple structures encourages employees’ creativity and individualism. The informality of simple structures creates both advantages and disadvantages. The process of evaluating and rewarding employees’ performance also tends to be informal. Because there is little emphasis on hierarchy within a simple structure, organizations that use this type of structure tend to have very few rules and regulations. Indeed, often the owner of the firm makes all the important decisions. Meanwhile, strategic decision making in a simple structure tends to be highly centralized. In a family-run restaurant or bed and breakfast, for example, each person must contribute as needed to tasks, such as cleaning restrooms, food preparation, and serving guests (hopefully not in that order). If the firm consists of more than one person, tasks tend to be distributed among them in an informal manner rather than each person developing a narrow area of specialization. There is a good reason most sole proprietors do not bother creating formal organizational charts. If a firm’s structure is designed to maximize efficiency, for example, the firm may lack the flexibility needed to react quickly to exploit new opportunities. Once a structure is created, it constrains future strategic moves. As they do this, executives must realize that the choice of structure will influences their firm’s strategy in the future. When creating a structure for their firm, executives will take one of these types and adapt it to fit the firm’s unique circumstances. Like snowflakes, however, no two organizational structures are exactly alike. Four types of structures are available to executives: (1) simple, (2) functional, (3) multidivisional, and (4) matrix ( Figure 9.3 "Common Organizational Structures"). Within most firms, executives rely on vertical and horizontal linkages to create a structure that they hope will match the needs of their firm’s strategy.
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