Organizational structure and organizational culture have a dependent relationship with one another. In the business world, management structure determines the behaviors, attitudes, dispositions and ethics that create the work culture. If a company's organizational structure is strictly hierarchical, with decision-making power centralized at the top, the company's culture will likely reflect a lack of freedom and autonomy at the lower levels. If a company's management structure is decentralized, with shared power and authority at all levels, the culture is likely to be more independent, personalized and accountable.
The way a company allocates power and authority determines how employees behave. These choices manifest in a company's organizational structure and organizational culture. Organizational structure is the the way a company arranges its management and lines of authority. It determines roles, responsibilities and the flow of information within the company. Work culture results from those decisions.
Most companies use a hierarchical structure that looks like a pyramid on paper. The chief executive or president sits at the very top of the pyramid. His direct reports, usually the vice-presidents, are on a line under him. Their direct reports are on a line under them. The pyramid stretches outward and downward based on the number of levels of management the company needs to operate according to its objectives.
Upper management uses organizational structure to control who has power and authority in the company. For example, if a company president only wants to deal with the most important decisions and wants to leave the day-to-day decision-making to someone else, the organizational structure would have the president on the top line with the vice-president of operations sitting alone on the second line. This effectively means that the vice-president of operations is the only executive with a direct line to the president, and everyone else reports to him. In this scenario, the vice-president of operations has a great deal of power.
Conversely, the president could allow many of his executives with direct access to him. This is a decentralized approach to organizational structure, allowing more people to have input into the decision-making process. Decentralized power gives more autonomy to individual departments and managers. In this way, organizational structure and organizational culture are interrelated.
A decentralized power structure means there is more room for employee input into decisions. Employees are more accountable, because they have more responsibility. They work more independently, because they do not always need approvals from upper management to proceed. The organizational culture reflects these freedoms.
Likewise, organizational structure and organizational culture can have a negative impact on one another if power and authority are highly centralized at the top of the pyramid. In this instance, employees have little control over decisions and must merely do their jobs. The type of culture this structure can breed is one of no accountability at the lower levels, hostility and an environment where employees do not feel vested in the company or their jobs.