Creating an effective organizational structure

Hi, my name is Dave Ketchen and I serve as a Harbert Eminent Scholar and Professor of Management at Auburn University in Auburn, Alabama in the United States of America. In this video, we're going to talk about creating an effective organizational structure.

To think about organizational structure, we need to consider the basic building blocks. One building block is the concept of division of labor. Any company that's putting out products or services is going to have a series of smaller tasks that go into creating that offering. When we think about division of labor, not everybody needs to do every job. Let's say we are making shoes, one person cuts out the shoes, another sews them together, another boxes them up. When we think about an organizational structure, it's often depicted in a diagram called an organizational chart that basically shows the reporting relationships between supervisors and subordinates. When we look at an organizational chart, it's made up of both vertical linkages, those supervisor subordinate relationships I just talked about and also horizontal linkages. These are relationships between equals in an organization, and they often take the form of committees or task forces that draw from different areas of the company. We'd be remiss if we didn't also acknowledge that in any company there are informal linkages that don't necessarily show up in an organizational chart. These would be social relationships between people in a company that don't show up in the organizational chart, but they affect how work gets done. Let's say a low level employee just happens to be friends with the chief executive officer, that low-level employee is probably going to have more influence over how the organization does its work than a typical lower-level employee.