In a n organizational structure the majority of entities are subordinate to another entity

See Also:
Organizational Structure: Advantages of Centralization
Organizational Structure: Advantages of Decentralization
Capital Structure Management

Organizational Structure Definition

Organizational structure is the way responsibility, authority, and lines of communication are arranged. It is also how all processes occur in a company. Additionally, this term is commonly referred to as organizational culture.
The most common organizational structure include hierarchy with employees comprising vertical layers of rank where each layer is superior to the layers below and subordinate to the layers above. In addition, most large organizations divide their employees up into subunits called divisions, departments, segments, business units, work units, or groups. The objective is to get employees at all levels and across all subunits working towards the goals of the organization.

Models exist on many levels. To simplify the matter, however, they generally fall into two categories: centralized or decentralized. This main theory is studied across the world.

Centralization vs. Decentralization

Organizational structure in business is either centralized or decentralized. Thus, centralization and decentralization are two ends of a spectrum. You can find organizations somewhere along that spectrum. Companies with centralized structure concentrate their authority in upper levels of management. For example, the military has a centralized organization structure. This is because the higher ups order those below them and everybody must follow those orders.

Unlike centralized companies, decentralized companies have less concentrated authority. In a decentralized organization, lower levels in the organizational hierarchy can make decisions. An example of a decentralized organization is a fast-food franchise chain. Each franchised restaurant in the chain is responsible for its own operation. Broadly speaking, companies start out as centralized organizations and then progress towards decentralization as they mature. This structure, horizontal when decentralized, places power in the decision maker on the ground floor.
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This article discusses the structures through which people coordinate work and distribute power in Teal organizations.

All organizations prior to Teal were structured as pyramids for a simple reason: it is a natural consequence of the boss-subordinate relationship. In self-managed organizations, peer commitments replace the boss-subordinate relationship, and the pyramid disappears. Authority is distributed, and work is conducted by decentralized, self-managing teams or networks. The static hierarchy of the pyramid gives way to fluid natural hierarchies, where influence flows to people who have the most expertise, passion or interest. Freed from the rigidity and sluggishness of a command and control structure, Teal organizations can be more responsive and more energized. They are “emergent”: the behavior of the organization ‘emerges’ from the actions of teams and individuals.[1]

The following describes organizational structure in earlier stages:

Red organizations

In the Red paradigm, organizations are structured around a strong leader who, largely through fear, exercises power over others. There is little formal hierarchy, and Red organizations rely largely on the chief’s ability to keep all its members in line, rather like wolves in a pack around the alpha male.

Amber organizations

In the Amber paradigm,the organization chart with reporting lines appears, resulting in a hierarchical pyramid and a clear chain of command. People identify with job titles and their place in the hierarchy. Decisions are made at upper levels of the hierarchy while lower levels follow orders.

Orange organizations

In Orange organizations, the pyramid remains the fundamental structure, although some additional freedom is given. Project groups, virtual teams, cross-functional initiatives, expert staff functions, and internal consultants are created to drill holes into rigid functional and hierarchical boundaries in order to speed up communication and foster innovation.

Green organizations

Green organizations typically still operate with the pyramid structure, but there is more empowerment of front-line employees. Higher managers are asked to share control: to move from being doers, problem solvers and fixers to being “servant leaders”. This is often symbolized by an "inverted pyramid", where the CEO at the bottom supports senior and middle managers who in turn support front-line employees.

Although the pyramid disappears in Teal, it would be a mistake to think that self-managing organizations are simply flat and structureless. Teal organizations to date seem to fall into three broad types of structure to fit the context in which they operate. These are described further below. However all share the common attributes of distributed authority and natural hierarchies.

Distributed authority

In traditional organizations, when power is concentrated at the top, bosses can approve or invalidate a decision made by a subordinate. In Teal organizations, power is distributed There are no bosses, only coaches. Anyone who senses a problem or an opportunity can initiate a decision making process, using methods that leverage the collective intelligence of the organization.

In traditional hierarchies, power is concentrated at the top, and can be exercised in a top-down fashion: bosses can approve or invalidate a decision made by a subordinate. In Teal organizations, power is distributed: everyone who senses a problem or an opportunity can step up and initiate a decision making process, using methods that leverage the collective intelligence of the organization about the topic at hand. These methods —sometimes called "advice process"— don't involve, as a common misconception about self-managing structures, consensus decision making.

Natural hierarchies

A common misconception about self-management is that everyone is "equal" and should have equal say in decisions. In reality, when traditional hierarchies are gone, lots of natural and fluid hierarchies blossom―hierarchies of development, skill, talent, expertise, and recognition. On every issue, some colleagues will have more expertise than others, more passion, or more willingness to help. Decision rights and influence flow to those who have the expertise or willingness to contribute. Fluid, natural hierarchies replace the fixed power layers of the pyramid. A person’s influence depends on her talent, interest, skills, and the confidence of her colleagues. It is no longer determined by her position in the organization chart.

Archetypes of structure

Self-managing organizations adopt different forms to fit the context in which they operate. There seem to be three broad types of self-managing structures that have emerged so far:

1. Parallel teams
2. Web of individual contracting
3. Nested circles

These structures are not mutually exclusive, and some organizations exhibit a mixture of these types.

This is the most common structure found to date in Teal organizations.[2]Examples would include Buurtzorg (geographic teams) and FAVI (client teams) (see “Concrete examples for inspiration” below). This model is highly suitable when work can be broken down in ways that teams have a high degree of autonomy, without too much need for coordination across teams. They can then work side by side. In this model, it is within the team that colleagues define their roles and the mutual commitments they make to each other. Teams also typically handle their own recruitment, planning, establish their investment needs, devise a budget (if a budget is needed), track their financial and non-financial results, and so on.

In an ideal situation, each team is fully autonomous and performing all tasks from start to finish. When that is the case, every single person in the organization has the satisfaction of seeing the entire organization’s purpose come to life, and not just a small slice of it as is often the case in large specialized organizations. In practice, there will often be a need for some people or teams who take on coordinating or supporting roles with a more narrow focus:

• Team coaches: In Teal Organizations, there are no middle managers. But teams often feel a need to be supported by someone external that can help them work through problems. At Buurtzorg, they are called regional coaches; at RHD, hub leaders.
• Supporting teams: For some tasks, duplication in every team doesn’t make sense. At FAVI, for example, the great majority of teams are client facing―the Audi team, the Volkswagen team, etc. However, a few teams support other teams, such as the foundry team. It would not be practical for the teams to operate the foundry in turns, nor would it make sense to duplicate the equipment and have a foundry within each team. RHD has units responsible for areas such as training (its “miniversity”), real estate, and payroll, that support all the units in the field.
• Supporting roles: The self-management model pushes expertise down to the teams, rather than up into staff functions. But for certain specific expertise or for coordination purposes, creating a supporting role can make sense. At FAVI, for instance, there is an engineer who helps teams exchange innovations and best practices.

Web of individual contracting

Individual contracting, as has been pioneered by Morning Star, a California-based tomato processing company, is a natural fit for continuous and relatively stable processes, such as can be found in the chemical industry, in food processing, or in long assembly chains. Each major step in the process often involves only a few people, and so a nested structure is not needed. Through individual one-on-one contracting, colleagues can make clear agreements with their upstream and downstream counterparts and anyone else they work closely with. These commitments are often formalized in a written document.

Investment budgets and financial results, on the other hand, are set up and discussed in teams, just as in the model of parallel teams. (Morning Star calls them “Business Units,” and each Business Unit is linked to a particular step in the process―say, tomato preparation, dicing, canning, or packaging―or to a support service―for instance, steam generation or IT.)

Nested teams (Circles)

Some industries have not only long, but also deep value chains, when certain steps in the value chain involve both a large number of people and complex tasks (for instance, research in a pharmaceutical company or marketing in a large retail bank). Consumer electronics firms, large media companies, banks, insurance companies, car manufacturers, aerospace companies, and airline companies are likely to have long and deep value chains. For these types of companies, nested teams (often called circles) might be particularly appropriate, as they allow an overall purpose to be broken down into successively less complex and more manageable pieces.

This structure was formalized by Kees Boeke in the mid 20th century in a system called Sociocracy (first applied in a school in the Netherlands). Holacracy, an organizational system pioneered by Brian Robertson in his software company Ternary Software, is also structured in concentric circles (see “Concrete examples for inspiration” below).

Through nesting, circles gradually integrate related activities, so there is a hierarchy of purpose, complexity, and scope, but not of people or power. Each circle has full authority to make decisions within the scope of its specific purpose. Decisions are not sent upwards, and cannot be overturned by members of overarching circles.

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