Organization structure is an expression of the managerial, administrative and operational relationships within an establishment. It shows the management structure and main departments within an organization (Daft 90). It also shows the relationships between the departments and the span of control of each employee. Organization structure embodies authority, responsibility and accountability. It groups activities for the purpose of control and administration and combines duties and responsibilities into jobs. It serves as a tool for implementing operational, financial, human resource, and strategic plans. It influences the organization's ability to communicate, coordinate its functions and respond to environmental changes (Daft 91). To the customers and visitors to the firm, it gives them an immediate impression of the overall size of an organization.
An organizational chart's communication is limited to the extent that it does not communicate fully what goes on in the organization (Griffin & Gregory 409). To begin with the information it communicates will be out of date if employees leave the firm or new ones join. Organizations are also influenced by informal structures that are not reflected on the formal organizational chart. These informal networks include all communications that are not transmitted through the formal organizational chart. According to Daft (118), informal communication takes root where the factors directing the flow of information are made personal such that the employees communicate with one another without regard to positions in the organizational structure. In such cases information flows upward, downward, horizontally and cross-channel with little regard for designated positional relationship. In some organizations, informal networks are very influential. They literally run the company and this is not reflected on the organizational chart.
Organizational charts can be useful for strategic planning in that it offers information on how the firm is organized and who are the key employees in the organization (Bryson 327). This can be useful in identifying the strengths and weaknesses in a firm. It can be used to hold individual employees responsible and to show which department or specific position is weak and in need of change. The information is also useful in guiding future recruitment so that people are recruited to meet specific needs identified in the organization. The structure can also be compared to the competitors' to gauge the competitiveness of a firm and to respond to competition.