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The Importance of Structure in an Organization 
 
by Robbi Erickson July 21, 2005

What is Organizational Structure?

Organizational structure can be considered as the arrangement of organizational parts that exist to provide organizational effectiveness. Its complexity, formalization, and centralization characterize an organization's structure.

Organizational Complexity

Its vertical, horizontal, or geographical organization determines complexity. Vertical hierarchies are defined by how many levels deep an organization is. A complex organization has many levels of successive power and expertise, where as a simple organization will only have a few. Horizontal complexity is defined by the way in which tasks are subdivided. Highly trained individuals can be given a wide range of tasks to perform, or the tasks can be subdivided down to many short duration tasks that can be performed by non-skilled workers. Activities and personnel can be arranged geographically by vertical or horizontal hierarchies. The breadth of geographical disbursement dictates the complexity of the organization in this regard.

Formalization

Formalization is the extent to which rules and procedures are written out and enforced. Those organizations with high formalization, like bureaucracies, have strict enforcement of many set written rules and regulations. Organizations with low formalization, like organized anarchies, have very few, if any, written rules, and have a looser organization that is less stable.

Centralization

Finally centralization is defined by how power is distributed throughout the organization. This is based on several issues: size, technology, and environments. The relationship between size and centralization is complex. Some research suggests that the larger the organization the more stress is put upon upper management and thus leads to the delegation of power to subordinates. However this delegation is based on rules and structured procedures, so in general larger size is linked to high levels of centralization of power. Centralization of power in an organization that uses specialized technologies delegates power to experts, but still maintain the bulk of authority for high level management. The environment an organization functions in is very important to its structure. Issues like competition, physical environment, distribution of services or products, staff availability, and material acquisition all impact the functioning and structure of an organization. (Hall 45-81, and Ott & Shafritz pp. 197-297)

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