What is clear and distinct lines of authority within an organization?

1. What tools do companies use to establish relationships within their organizations?

Once companies choose a method of departmentalization, they must then establish the relationships within that structure. In other words, the company must decide how many layers of management it needs and who will report to whom. The company must also decide how much control to invest in each of its managers and where in the organization decisions will be made and implemented.

Managerial hierarchy (also called the management pyramid) is defined by the levels of management within an organization. Generally, the management structure has three levels: top, middle, and supervisory management. In a managerial hierarchy, each organizational unit is controlled and supervised by a manager in a higher unit. The person with the most formal authority is at the top of the hierarchy. The higher a manager, the more power he or she has. Thus, the amount of power decreases as you move down the management pyramid. At the same time, the number of employees increases as you move down the hierarchy.

Not all companies today are using this traditional configuration. One company that has eliminated hierarchy altogether is The Morning Star Company, the largest tomato processor in the world. Based in Woodland, California, the company employs 600 permanent “colleagues” and an additional 4,000 workers during harvest season. Founder and sole owner Chris Rufer started the company and based its vision on the philosophy of self-management, in which professionals initiate communication and coordination of their activities with colleagues, customers, suppliers, and others, and take personal responsibility for helping the company achieve its corporate goals.

An organization with a well-defined hierarchy has a clear chain of command, which is the line of authority that extends from one level of the organization to the next, from top to bottom, and makes clear who reports to whom. The chain of command is shown in the organization chart and can be traced from the CEO all the way down to the employees producing goods and services. Under the unity of command principle, everyone reports to and gets instructions from only one boss. Unity of command guarantees that everyone will have a direct supervisor and will not be taking orders from a number of different supervisors. Unity of command and chain of command give everyone in the organization clear directions and help coordinate people doing different jobs.

Matrix organizations automatically violate the unity of command principle because employees report to more than one boss, if only for the duration of a project. For example, Unilever, the consumer-products company that makes Dove soap, Ben & Jerry’s ice cream, and Hellmann’s mayonnaise, used to have a matrix structure with one CEO for North America and another for Europe. But employees in divisions that operated in both locations were unsure about which CEO’s decisions took precedence. Today, the company uses a product departmentalization structure. Companies like Unilever tend to abandon matrix structures because of problems associated with unclear or duplicate reporting relationships, in other words, with a lack of unity of command.

Individuals who are part of the chain of command have authority over other persons in the organization. Authority is legitimate power, granted by the organization and acknowledged by employees, that allows an individual to request action and expect compliance. Exercising authority means making decisions and seeing that they are carried out. Most managers delegate, or assign, some degree of authority and responsibility to others below them in the chain of command. The delegation of authority makes the employees accountable to their supervisor. Accountability means responsibility for outcomes. Typically, authority and responsibility move downward through the organization as managers assign activities to, and share decision-making with, their subordinates. Accountability moves upward in the organization as managers in each successively higher level are held accountable for the actions of their subordinates.

Each firm must decide how many managers are needed at each level of the management hierarchy to effectively supervise the work performed within organizational units. A manager’s span of control (sometimes called span of management) is the number of employees the manager directly supervises. It can be as narrow as two or three employees or as wide as 50 or more. In general, the larger the span of control, the more efficient the organization. As (Figure) shows, however, both narrow and wide spans of control have benefits and drawbacks.

If hundreds of employees perform the same job, one supervisor may be able to manage a very large number of employees. Such might be the case at a clothing plant, where hundreds of sewing machine operators work from identical patterns. But if employees perform complex and dissimilar tasks, a manager can effectively supervise only a much smaller number. For instance, a supervisor in the research and development area of a pharmaceutical company might oversee just a few research chemists due to the highly complex nature of their jobs.

1. How does the chain of command clarify reporting relationships?
2. What is the role of a staff position in a line-and-staff organization?
3. What factors determine the optimal span of control?

authority Legitimate power, granted by the organization and acknowledged by employees, that allows an individual to request action and expect compliance. chain of command The line of authority that extends from one level of an organization’s hierarchy to the next, from top to bottom, and makes clear who reports to whom. delegation of authority The assignment of some degree of authority and responsibility to persons lower in the chain of command. managerial hierarchy The levels of management within an organization; typically includes top, middle, and supervisory management. span of control The number of employees a manager directly supervises; also called span of management.

In an organizational structure, “chain of command” refers to a company's hierarchy of reporting relationships – from the bottom to the top of an organization, who must answer to whom. The chain of command not only establishes accountability, it lays out a company’s lines of authority and decision-making power. A proper chain of command ensures that every task, job position and department has one person assuming responsibility for performance.

The command chain doesn't happen accidentally. Organizational designers lay it out as the last step in creating an organizational structure. Planners first consider a company’s goals since organizational structure must support strategy. Designers next determine the tasks needed to reach the goals.

Departmentalization follows as designers decide how to group the tasks. Grouping affects resource sharing and the ease with which people communicate and coordinate work. After departmentalizing, designers assign authority for tasks and areas. Once authority is assigned, planners can finally lay out the relationships between positions, thereby creating a chain of command.

The reporting relationships established in the final step of organizational design are easy to see on an organizational chart, which depicts a company’s structure. Starting at the bottom, each position is connected to one above it by a line. Following the line vertically from position to position reveals the chain of command. Each person is one link in the chain.

A manager may be linked to many or few subordinates. The number of people reporting to a manager is called a manager’s span of control. Managers with wide spans of control have many subordinates, and it’s not possible for a manager to closely examine activity. Consequently, employees under such managers have more authority to perform their jobs and even make decisions than do employees reporting to managers with narrow spans of control.

When a manager has a wide span of control, the organizational chart takes on a horizontal, flattened appearance. Fewer managers are needed in middle management, so the company has less of a power hierarchy. These are characteristics found in organic organizational structures. In organic structures, the chain of command’s importance is de-emphasized, since power is distributed among employees.

The chain may only consist of employees and the owner or employees to a manager to the CEO, making for a very short chain of command. Lacking bureaucracy, flat organizations can readily mobilize to meet market conditions.

Managers closely supervising subordinates can only manage a few. These managers have narrow spans of control. Narrow spans require more managers to make sure all employees are properly supervised. These managers must also be managed closely, given their involvement in details and decision-making.

This results in tall organizations with several layers of middle management. The chain of command is important and is used to exert control from the top. Many rules govern activities. Such structures are rigid and mechanistic, leaving little room for innovation and creativity.