The so-called pyramid structure of an organization refers to the tendency of an organization to have a greater number of base level employees (engineers, workers, technicians, etc.) than top strategic decision makers (CEO, Vice Presidents, managers).
Levels of Hierarchy
Levels of hierarchy are what make up the "height" of the organizational pyramid. The greater the number of levels of hierarchy, the more levels between the lowest worker and the highest executives in the company, and the greater the distance that information and decisions have to travel from top to bottom. Levels of hierarchy can be reduced by increasing the span of control, or the number of people the average manager has reporting to him. This is also a way to increase the "width" of the pyramid.
Departmentalization is the other major determinant of the "width" of the organizational pyramid. Departments are usually split up by function or by product. Functional departments do the same thing for a large number of products, and product-based departments do everything required to work on one specific product.
Centralization and Formalization
Centralization is the degree to which the tip of the organizational pyramid is top-weighted. In highly centralized organizations, decision making tends to be highly concentrated at the top of the structure, leaving less autonomy for individual workers to make decisions. This often works hand-in-hand with formalization, which is the degree to which the rules about communication and decision making must be followed, and how complicated they are. Highly centralized and formalized organizations tend to have very rigid structures.
Boundaryless organizations tend to have smaller organizational pyramids because they have removed as many barriers as possible, both horizontal (departmental) and vertical (hierarchical). Some do this by simply being as free-form as possible, but others outsource all non-value generating portions of the business, leaving only the core. This core is usually a much smaller and more easily managed and changed organization.
The primary type of organization that breaks the pyramid-style structure is a matrix-managed organization. In this type of organization, groups will report both to their functional leader and their product leader, leading to a somewhat looping, circular shape.
- "Organizational Behavior"; Tayla Bauer and Berrin Erdogan; 2009
- pyramid image by christine dedman from Fotolia.com