The structure can be looked at through many dimensions. In this video we'll talk about three dimensions and any structure that can create specific organization, embodies some levels across these dimensions. Centralization. This is the degree to which a decision making authority in the organization is centralized. Formalization is about rules and processes that prescribe people's behaviour. It also specifies who and how performs different tasks. This is about horizontal and vertical differentiation or creating units in different geographies. Let's now zoom in on each of these dimensions. There are advantages of centralizing your organization. It ensures tight coordination of decisions. There are just a few decision makers in the organisation and they should act on problems. On the other hand, there are advantages to decentralization. In a centralized organisation, decision makers need to handle a lot of decisions and this puts high demands on their cognitive capabilities. When there are more people with authority, each individual doesn't have to handle many decisions. Also, since more employees have the authority to make decisions. More of this employees may recognize or act upon strategic problems or opportunity. They would care because their job involves making such calls. And remember that more people are involved in implementing a strategy than in formulating it. So if more people tasked with implementation have decision making authority, more eyeballs would be able to spot flaws and strategy implementation. That should make it easier to detect and react to problems and facilitate implementation. So is there any good in high centralization? It turns out that works well with strategies that need to be carried out fast or when your decision making managers are Gurus who indeed know the best, but these are rare. A famous example is Steve Jobs, who made decisions about how Apple products should be designed all by himself. It also works well in small companies or units. There, the managers can stay in touch with the environment and see strategic problems and opportunities first hand. The advantage of high formalization is that it eliminates ambiguity about roles. Everyone knows what they are supposed to be doing. On the other hand there are advantages to low formalization as well. Greater employee flexibility in decision-making. If employees face a situation that is not covered by the rules, they know that they don't have to rely on the rules to react to it. So generally employees who work with complex situations should rely more on their professional judgement instead of being covered by a formalized rules. And don't forget that many employees, for example, knowledge workers, actually enjoy the autonomy that comes with their professions. And low formalization supports this professional autonomy. It may increase their motivation to act in support of your strategy. Putting formalization into the organizational structure is good for strategies that emphasize efficiency. Rules can be put in place and continuously optimized to achieve optimal performance. The advantage of complexity is that it supports implementation when the company is immersed in different environments. For example, different countries or market segments. The disadvantages are that its difficult to coordinate activities between these different units and the decision-making authority is ambiguous. Complex organizational structure is good for strategies that will be implemented in different environments and the company needs to be responsive to each of them.