Organization Structure

Organization Design & Structure

PROCESS OF ORGANISING Identification of Activities

Division of Work

Grouping of Activities

Departmentation

Assigning Activities

Delegation of Authority

Hierarchy

Decentralization

Factors Affecting Organizational Design Environment

Strategy

Determine design or organizational structure

Human Resources (Size)

Technology

Determinants of Structure ■

The environment: The quicker the environment changes, the more problems face managers. 

■

Structure must be more flexible when environmental change is rapid.

Strategy: Different strategies require the use of different structures. 



A differentiation strategy needs a flexible structure, low cost may need a more formal structure. Increased vertical integration or diversification also requires a more flexible structure.

Determinants of Structure  Technology: The combination of skills, knowledge, tools,

equipment, computers and machines used in the organization.  More complex technology makes it harder for managers to regulate the organization.

■

Human Resources: the final factor affecting organizational structure.  Higher skilled workers who need to work in teams usually need a more flexible structure.  Higher skilled workers often have professional norms (CPA’s, physicians). Managers must take into account all four factors (environment, strategy, technology and human resources) when designing the structure of the organization.

Organization Structure  Defines

the primary reporting relationships that exist within an organization. 

The chain of command and hierarchy of responsibility, authority, and accountability are established through organizational structure.

 Common    

Forms of Organizational Structure

Functional structure Divisional structure Matrix structure Network structure

Line Organization Scalar chain of command

In a Line Organization all managers have direct authority over their respective subordinates, through Scalar chain of command. Managing Director

Production Manager

A direct relationship between superior and subordinate works as: As a chain of command As a channel of communication

Production Superintendent

Foreman

As a carrier of responsibility

i. Simplicity ii. Clear-cut division of authority and responsibility. iii. Strong discipline iv. Unified control v. Prompt decisions vi. Flexibility i. Heavy burden of work ii. Concentration of authority iii. Lack of specialization iv. Lack of communication v. Scope for favoritism

Line and Staff The line and staff organization refers to an organization in which two Organization types of authority relationships co-exists. They are Direct or Line authority and Advisory Authority.

Staff managers advice ,support and serve line managers. Following are the characteristics of the line and staff organization:

 Managers are of two types-Line Managers and Staff managers.  The line managers perform the functions of decision-making, issuing orders and controlling while the Staff managers perform the functions of advising, assisting and providing expert and specialized services.  There is a unity of command.  There is a scalar chain.

Line & Staff Organization StructureChief Executive Asst. to Chief Executive

Personnel Manager

R&D Manager

Qty. Ctrl. Manager

Mfg. Manager

Plant Manager

Mktg. Manager

Plant Manager

Industrial Relations Manager

Industrial. Product manager

Training manager

Consumer Product manager

Employ service manager

Marketing Research manager

1. Specialization 2. Encouragement to research and development programmes 3. Balanced decisions 4. Less burden on line managers

1. Confusion 2. Ineffectiveness of the staff 3. Conflict between the line and staff.

Functional Organisation 

Members of the organization are grouped according to the particular function that they perform within the organization. 

   

Appropriate when an organization’s greatest source of complexity comes from the diverse tasks that must be performed rather than from its products, geographic markets, or consumer groups.

People with similar skills and performing similar tasks are grouped together into formal work units. Members work in their functional areas of expertise. Are not limited to businesses. Work well for small organizations producing few products or services.

Potential Advantages of functional structures:   



Economies of scale. Task assignments consistent with expertise and training. High-quality technical problem solving, In-depth training and skill development. Clear career paths within functions.

Potential Disadvantages of functional structures:    

Difficulties in pinpointing responsibilities. Sense of cooperation and common purpose break down. Narrow view of performance objectives. Excessive upward referral of decisions.

Difference Sr. No.

Feature

Line Organization

Line and Staff Organization

Functional Organization

1.

Simplicity

High

Not So High

Low

2.

Suitability

For small enterprises

For medium and large enterprises

For large enterprises

3.

Specialization

Low

Moderate

High

4.

Work load of managers

High

Moderate

Uneven

5.

Unity of Command

Strictly observed

Observed to great extent

Not observed in general

6.

Economy

High

Moderate

Low

Divisional Structures 

A division is a collection of functions working together to produce a product. 





Product structure: divisions created according to the type of product or service. Geographic structure: divisions based on the area of a country or world served. Market structure: divisions based on the types of customers served.

Product Structure CEO C o r p o r a tio n C o rp o ra te M a n a g e rs W a s h in g M a c h in e D iv is io n

L ig h tin g D iv is io n

T e le v is io n D iv is io n

Geographic Structure CEO C o r p o r a tio n C o rp o ra te M a n a g e rs N o rth e rn R e g io n

W e s te rn R e g io n

S o u th e rn R e g io n

E a s te rn R e g io n

Market Structure CEO C o r p o r a tio n C o rp o ra te M a n a g e rs L a r g e B u s in e s s C u s to m e rs

S m a ll B u s in e s s C u s to m e rs

E d u c a tio n a l In s titu tio n s

In d iv id u a l C u s to m e rs

Matrix Organisation A

structure in which the tasks of the organization are grouped along two organizational dimensions simultaneously.

 Examples

include:



Product/function



Product/geographic region