Strategic Management: Formulation and Implementation

Levels Of Hierarchy

Span of managements for various managerial positions directly impact the number of hierarchical levels in an organization. A tall organization is one that has many hierarchical levels and narrow spans of control. The other structure is a flat organization, which has few hierarchical levels in its hierarchy and wide span of control from top to bottom.

Both organizational types have certain advantages. The relatively tall, centralized organization allows for better communication of the business's mission, goals, and objectives to all employees. In these organizations, planning and its execution are relatively easy to accomplish since all employees are centrally directed. Tall organizational structures are well suited for environments that are relatively stable and predictable.

However, very tall organizations raise administrative overhead, slow communications and decision making (because of many levels), make it more difficult to pinpoint responsibility for various tasks, and encourage the formation of dull, routine jobs. Thus, many companies recently flattened theirs structure.

The purpose is to increase organizational efficiency and effectiveness.

Flat structure reduces administrative costs, allows managers at various levels to have more authority, which may increase their motivation to assume responsibility for their area's performance. Finally, because of the greater freedom in decision making, innovations encouraged. Therefore, flat structures are appropriate for more dynamic environment.

Because of such problems with tall structures, many organization recently have been downsizing. Downsizingis the process of significantly reducing the layers of middle management, expanding than spans of control, and shrinking the size of the work force.

A closely relatedterm is "restructuring." Restructuring is the process of making a major change in organization structure that often involves reducing management levels and also possible changing some major components of the organization through divestiture and / or acquisition.