Organizational structure can be established using various models but all codify the lines of authority and decision making. A company may be organized with the authority concentrated at the top or it may be more organically decentralized with respective departments having autonomous jurisdiction within their respective departments. The easiest way to visualize an organization's structure is through the use of organizational charts (like the one pictured above).
"There is no one best way to design an organization," writes Phyllis and Leonard Schlesinger in "The Portable MBA in Management." With small businesses (those with 250 or fewer employees) considered the major engine that makes the economy run, it is important that they have an organizational structure. An exception to this would be, for example, a small family business like a corner deli, which could be run by a family--they don't need an organizational chart. But with businesses of 100+ employees, there are several factors to consider to most efficiently make use of their employees. According to the Schlesingers, there is no one iron-clad system that can be imposed universally. But among the critical factors are legal considerations, the ratio of managers to staff, which type of organization would produce the greatest operational efficiency, the amount of latitude each person has down the chain of command and where you envision the company going.
This is the level at which organization charts become essential or chaos can ensue. Let's use a generic XYZ corporation as an example. If it is a publicly held company, the board of directors have the final say on behalf of the shareholders. At the top would be the president or chief executive officer who has overall responsibility for virtually every aspect of operations. He's the captain that steers the ship. Below the president are usually vice presidents with more direct, hands-on decision-making authority, overseeing several different but often related departments. For example, the VP of distribution has to interact with the VP of production so the schedules mesh to meet sales goals. And above them but below the president or CEO could be a VP of operations that coordinates all the departments. Below each of the VPs are managers who oversee the daily production operations and, perhaps, assistants below them overseeing specialized areas within production, sales and marketing. The structure of all this can vary according to product, timeline for delivery, quantity, competition, price sensitivity and a myriad of other considerations. In the end, efficiency is the goal.
A Word on Managers
Managers oversee the daily operations of each of the departments, including advertising, sales and distribution and other departments, depending on the product and methods of production and distribution. Human resource managers are something of an anomaly because they have responsibility for personnel issues that arise in every department, crossing the spectrum of all departments at every level. For example, the distribution manager wouldn't oversee a personnel problem in the sales department.
Military Hierarchy of Command
While not embraced as having the same fluidity as the business world, the military, too, is another form of organizational structure. It is especially important in times of war or national emergency. All five branches of the military--the Army, Air Force, Navy, Marines and Coast Guard--operate in a linear organizational structure from the top down. To simplify, consider the Army chain of command. The names change for various ranks of the five branches but the principle is the same. The highest ranking military commander is the U.S. president, known as the Commander in Chief, who is advised by the Secretary of Defense and the Joint Chiefs of Staff, a committee of high-ranking officials from each branch of the armed forces. Below them are ten unified command units, divided by their areas of specialty or geographically. For example, there is a Joint Forces Command, which includes the various military branches; a Special Operations Command, which oversees special operations, obviously; and a European Command, which responds to military situations in Europe. In descending order of size and authority, each command unit is comprised of battalions, then companies, then platoons, sections or squads, and lastly fire teams.
In case of a nuclear meltdown, earthquakes, tornadoes, terrorist situations or any other large-scale emergencies, it is essential to have a clearly defined and simple chain of command. Generally, there are five key areas, starting at the top with the Incident Commander. Immediately under the commander are typically four management areas: Planning and Intelligence, Operations, Logistics and Finance and Administration. The chain of command flows down from the command team but it is essential, depending on the seriousness and duration of the incident, that each person in the command unit be capable of performing any of these roles, as necessity dictates.