Most small businesses create an organization chart to clarify structure and to show employees where they fit into a firm’s operations. Figure 6.1 is an organization chart for Contemporary Landscape and Lawn Services, a small but growing business in a small Texas community. Each box in the chart represents a specific job. The solid lines define the chain of command. The chain of command, in turn, refers to reporting relationships within the company. In theory, such reporting relationships follow a “chain” from the highest level in the organization to the lowest. For example, the retail shop, nursery, and landscape operations managers all report to the owner and president. Within the landscape operation is one manager for residential accounts and another for commercial accounts. Similarly, there are other managers in the retail shop and the nursery.

Figure 6.1

The Organization Chart

The organization charts of large firms are far more complex and include individuals at many more levels than those shown in Figure 6.1. Size prevents many large firms from even having charts that include all their managers. Typically, they create one organization chart showing overall corporate structure, separate charts for each division, and even more charts for individual departments or units.

Recall our definition of organizational structure: the specification of the jobs to be done within an organization and the ways in which those jobs relate to one another. The boxes in the organization chart represent the jobs, and the lines connecting the boxes show how the jobs are related. As we will see, however, even though organizational structure can be broken down into a series of boxes and lines, virtually no two organizations will have the same structure. What works for Microsoft will not work for Google, Jet Blue, Exxon Mobil, Amazon, or the U.S. Department of Commerce. Likewise, the structure of the American Red Cross will probably not work for Urban Outfitters, Target, Starbucks, or the University of Nebraska.

How is an organization’s structure determined? Ideally, managers carefully assess a variety of important factors as they plan for and then create an organizational structure that will allow their organization to function most efficiently effectively.

Many factors play a part in determining an organization’s optimal structure. Chief among them are the organization’s mission and strategy. A dynamic and rapidly growing business, for example, needs an organizational structure that allows it to be flexible, to respond quickly to changes in its environment and strategy, and to grow. A stable organization with only modest growth goals and a more conservative strategy will most likely function best with a different organizational structure.

Size of the company and elements of the organization’s environment also affect organizational structure. As we saw in Chapter 5 , organizing is a key part of the management process. As such, it must be conducted with an equal awareness of both a firm’s external and internal environments. A large services provider or manufacturer operating in a strongly competitive environment, such as American Airlines or Hewlett-Packard, requires a different organizational structure than a local hair salon or clothing boutique. Even after an organizational structure has been created, it is rarely free from tinkering—or even outright re-creation. Most organizations change their structures on an almost continuing basis.

Since it was first incorporated in 1903, Ford Motor Company has undergone literally dozens of major structural changes, hundreds of moderate changes, and thousands of minor changes. In the last 25 years alone, Ford has initiated several major structural changes. In 1995, for instance, the firm announced a major restructuring plan called Ford 2000, which was intended to integrate all of Ford’s vast international operations into a single, unified structure by the year 2000.

By 1998, however, midway through implementation of the grand plan, top Ford executives announced major modifications, indicating that (1) additional changes would be made, (2) some previously planned changes would not be made, and (3) some recently realigned operations would be changed again. In early 1999, managers announced another set of changes intended to eliminate corporate bureaucracy, speed decision making, and improve communication and working relationships among people at different levels of the organization. Early in 2001, Ford announced yet more sweeping changes intended to boost the firm’s flagging bottom line and stem a decline in product quality. More significant changes followed in both 2003 and 2004, and in 2006, the firm announced several plant closings, resulting in even more changes. Not surprisingly, yet another major reorganization was announced in 2010 as the firm sought to deal with a global recession and a major slump in automobile sales. In 2011 the firm announced even more restructuring to gain more international market share, and other changes were announced in 2015 as global auto sales began to increase and Ford needed additional manufacturing capacity.