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Complexity as the most known characteristic of organizations

management, business, organizational structure, organigram, corporate structures, administration, directing, controlling, delegating

Like size, complexity is among the first characteristics of organizations to strike a newcomer. Complexity refers to the division of labor, or horizontal differentiation; the levels of hierarchy, or vertical differentiation; and the physical location of the organization, or spatial dispersion.

The way tasks are assigned is by horizontal differentiation. Managers need to understand this notion whenever they restructure existing work or design new projects. Basically, tasks can be structured in either of two ways. In one, a typical worker completes many aspects of a job, either sequentially (e.g., a worker in an ice-cream shop who takes the order, makes the ice-cream cone, serves the customer, and rings up the sale) or functionally (e.g., being responsible for planning, manufacturing, and marketing a product). In the other approach, the work is divided rather minutely among different workers who do each individual task (either sequentially or functionally), often very rapidly. An example of the first approach is the manager's job, in which many different tasks are done daily; assembly line jobs illustrate the second approach. Because they handle a multiplicity of tasks, workers with jobs in the first group often need extensive training. This is less often the case with jobs in the second group, but may nevertheless be true. A word processor, for instance, while specializing in one narrow task, may nonetheless receive a significant amount of training to exploit fully the features of a word processing program.

Another aspect of horizontal differentiation is the breakdown of the organization into units and subunits (departments, divisions, sections, branches, groups, and so on). Complex organizations have more jobs and more subunits than other organizations.

The number of levels in an organization, or its hierarchy, is referred to as vertical differentiation and reflects the lines of authority and responsibility. Authority is essentially a matter of power. The question is: Who has the right to make a given kind of decision? Responsibility goes hand in hand with authority; the worker or manager authorized to make a decision is also responsible for the consequences. Similarly, that worker's supervisor or that manager's manager has responsibility for the quality of the decision as well.
An organization's hierarchy is revealed in an organizational chart, which provides a picture of the formal relationships of authority and control. Boxes represent positions, and the lines that connect them demonstrate who directs—and who reports to—whom. The convention in preparing such charts is for the higher positions to appear at the top; as one moves down the chart, one is also moving down the organizational ladder. Positions that appear on the same level are assumed to be of equal stature, although this is not necessarily the case.

Charts can be prepared for any level of organization. To provide more manageable and intelligible charts, chart designers often divide the entire organization into a number of views, the first showing the organization's top management structure, and subsequent charts revealing the structure of individual units, be they departments, divisions, or product lines.

An organization can have either a flat structure, with little hierarchical differentiation among workers, or a tall structure, with many levels and increasing authority as the top is approached. A club with no officers, in which all decisions are made by majority vote, is a flat structure. Charts must be used with caution. While they are useful, it is important to remember that they are snapshots of an organization at one moment. As such, their accuracy is usually momentary; organizations constantly change, usually faster than chart makers can keep pace with. Furthermore, charts are limited by their two-dimensional nature and by the scope of relationships they can portray. Charts convey only lines of authority and reporting relationships, showing few, if any, of the diagonal and lateral ties and inter workings of organizations. A sharp distinction should be made between the formal structure of an organization and its day-to-day work activities.

Charts may also be deceptive if used as depictions of the focuses of power in organizations. Many organizations distribute power so that very little is held at the top. Consulting firms, brokerage houses, or research institutes, for instance, may place little power in the top position. In some organizations the real power to accomplish objectives (or to frustrate their accomplishment) lies not at the top but with middle managers, who decide what work is done today and what gets put off until tomorrow. Senior management may find itself frustrated over having less power to control its middle management than it thinks it has.

The third dimension of complexity—spatial dispersion—may be either horizontal or vertical. The activities of an organization can be dispersed by separating power centers or by separating according to tasks. If an organization with a fully developed hierarchical form decides to clone itself in another location, its spatial dispersion is horizontal. On the other hand, if an organization has its company headquarters in Chicago, manufactures its products in Taiwan, and sells them in Western Europe, spatial dispersion is vertical. Assessing the nature of spatial dispersion may help a manager make decisions about the amount of autonomy given to field personnel, the functions of central staff, entry into new markets, and other such strategic issues. Growing evidence shows that structural characteristics are related to organizational strategy.

Greater organizational complexity produces problems of communication, coordination, and control. Spatial dispersion of either sort (horizontal or vertical) increases the relative size of the administrative component of organizations. Spatial dispersion is negatively related to the standardization of work activities. Workers in dispersed organizations have more freedom in determining their work activities.

Organizations tend to become more complex as their activities and their environments become more complex. This was true for Westinghouse, as they restructured their portfolio of holdings in the late 1980s in spite of trends by other U.S. firms to return to core business to meet greater competition from the Japanese.

Managers should be attuned to these results of complexity, particularly if their organizations are growing rapidly, because, as noted earlier, size affects complexity. In fact, expansion increases organizational complexity at geometric rates. A simple example illustrates this phenomenon. In an organization of three people, three interpersonal relationships are possible. If size doubles to six people, the number of interpersonal relationships goes up five times, to fifteen. Interactions create complexity.
Published: 2007-04-15
Author: Martin Hahn

About the author or the publisher
Martin Hahn PhD has received his education and degrees in Europe in organizational/industrial sociology. He grew up in South-East Asia and moved to Europe to get his tertiary education and gain experience in the fields of scientific research, radio journalism, and management consulting.

After living in Europe for 12 years, he moved to South-East again and has worked for the last 12 years as a management consultant, university lecturer, corporate trainer, and international school administrator

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