6 Organizing the organization

6.1Structure follows strategy

Decision-makers in the organization have to ask themselves a number of questions:

•What kind of structure should be put in place?

•How do they want to get the work done?

•What about the idea of centralization vs. decentralization?

•How do we handle authority and responsibility?

Most organizations today in North America are structured using a “bureaucracy”. This is an ancient structure, dating as far back as Julius Caesar. It has a military background. The organization does not have to be structured using bureaucratic principles. There are a number of inherent drawbacks to bureaucracies that good organizations have learned how to minimize in order to function effectively.

There are other options. However, the next section will talk about bureaucracies, how they work and what they mean. Many companies are structured along bureaucratic lines, so it is important to know what they are all about.

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6.2Bureaucracy

It is the bureaucratic organization that looks like a pyramid – one person at the top, a lot at the bottom and layers of middle management. This sounds as though it exists only in large organizations. However, a bureaucracy can exist in an organization that has, for example, 10 people. When we use the word bureaucracy, we are referring to the structure used.

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Figure 6.1 Basic bureaucratic structure

6.3Authority – staff and line

There are two concepts related to “authority” within a bureaucracy. There is both line authority and staff authority in a bureaucracy.

It is easier to talk about some departments as line departments and some as staff departments. The people in a line department are called line employees and the people in the staff departments are staff employees. They have different roles and authority.

6.3.1Line departments/line authority

To take a manufacturing company as an example, there are 3 absolutely essential functions that must exist in this company. These three are manufacturing, sales and finance. The company cannot exist without these functions. These departments are the ones that directly make money for the organization. These are the line departments.

In using the example in the preceding paragraph, we need to define some terms. “Manufacturing” refers to the area that makes the product. This area could also be labeled operations or production.

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“Sales” refers to the area that directly sells the product to the end customer. In this way, this is the area that brings money into the company. If sales and marketing are separate areas, then sales is a line function and marketing is not. Marketing is the area that comes up with ideas (like new packaging or advertising) that help the sales area to sell the product. They are auxiliary to the sales function.

“Finance” is also distinct from accounting. Finance is the function that manages the money in the organization. They would be involved in activities such as raising money through going onto the stock market or acquiring debt or examining and approving capital expenditures (buying a new plant or expanding into another country). Accounting is the function that keeps track of the revenue and expenditures.

6.3.2Staff departments/staff authority

The other departments in this company are nice to have, and they presumably support the activities of these line functions. However, they are not absolutely essential. These are staff departments. The role of these staff departments is to advise, counsel and assist the line departments to do their jobs. If there is a budget cutback, it is likely that these staff departments would get cut first.

Staff departments work by influencing the people in the line departments – as such then, the staff employees should have no power, except for activities in their own departments. Who are these staff departments? These would be anything other than the 3 line departments listed above. So, for instance, Human Resources, Accounting, Marketing, Public Relations, Engineering, Event Planning, would all be examples of staff departments. There are lots of others.

Let’s take an example of the Human Resource (HR) department. Their role is to help the managers and employees in the line departments in Human Resource activities. So let’s say that the manager of Manufacturing has a vacant position that needs to be filled. The Human Resource department will help to create the job description, advertise the position, receive all of the resumes and phone calls and do the preliminary interviews to screen the applicants. They will then refer perhaps the 3 “best” applicants to the Manager of Manufacturing, who then interviews these three. The final hiring decision should be made by the Manager of Manufacturing, since the Manager of Manufacturing has to, in essence, “live” with this person. The HR department helps the Manager of Manufacturing to fill the vacancy. However, the HR department should not make the final hiring decision. If they do, then the HR department has assumed line authority, which they should not have. If the HR department makes the final hiring decision and assumes line authority, then the organization will have a whole pile of problems.

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So the HR department has staff authority. They do not have the same type of power that a line department has. The line departments do not have to accept the advice offered by a staff department. The staff employees must use influence, created by their expertise and personal credibility, to help the line employees. If there was a budget cut, the company could fire the entire HR department. To use the above example, the Manager of Manufacturing would simply do all of the activities connected with filling their vacancy. It simply would not make sense for the company to keep the HR employees (because they are doing an important job) and fire manufacturing employees in a budget cut decision.

The basic message is that the line departments are the essential departments, without which the company could not survive.

The example above has only described a manufacturing company. The same principles apply to all organizations. In order to determine the equivalent of the manufacturing department in any organization, we must ask ourselves what the core or basis of the organization is. For instance, the core of a call centre is the area that answers the calls (not surprisingly). The core of a university is the academic group that teaches and researches.

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