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EXECUTIVE SUMMARY

The influence of certain factors on organizational structure has been in


researchers focus for years, together with their impact on the overall
organizational efficiency. Many of these factors are from the environment
where traditional view commonly divided into internal and external factors.
This paper presents the findings of a study to evaluate the influencing factors
and impact on organizational structure of a sample of firms located in Hanoi,
Vietnam. Structured questionnaires were administered with respect to these
factors. The variables studied were identified from among the factors
considered in contingency theory and by incorporating elements of the
strategic choice approach. After grouping the variables into two factors
(related to external and internal respectively), the results revealed three groups
of firms according to how they regarded the impact of these factors on
organizational structures. In those groups that consider the variables of internal
factors to be modifiers of structure the organizational structures are of the
complex classical type, whereas simple forms predominate in the group that
believes these variables do not modify their structure.
An organizational structure defines how activities such as task allocation,
coordination and supervision are directed towards the achievement of
organizational aims. It can also be considered as the viewing glass or
perspective through which individuals see their organization and its
environment.
Organizations are a variant of clustered entities.
An organization can be structured in many different ways, depending on their
objectives. The structure of an organization will determine the modes in which
it operates and performs.
Organizational structure allows the expressed allocation of responsibilities for
different

functions

and

processes

to

different

the branch, department, workgroup and individual.

entities

such

as

INTRODUCTION
Organizations are formed by groups of people with the purpose of achieving
effects that one person cannot achieve individually. Better results are created
as a consequence of organizational effect which directs organization to
achieving some organizational goal. Regarding the purpose of the
organizations founding, they can be described as successful (profitable) or
failure (no profitable) ones. To achieve these goals organizations create inner
order and relations among organizational parts that can be described as
organizational structure. All organizational parts together with relations and
mechanisms of their coordination are important for proper functioning of any
organization. Organizations are influenced by many factors which come from
their dynamic surrounding or from the organization it. Due to the static nature
of organizational structure, it sometimes cannot meet requirements of
efficiency and adoptability. Classics in the field of organization theory
represented many different schools of influencing factors on organizational
structure. Some believed that certain factors, such as size, environment, or
technology, determined place (the market/industry); socio-economic factors
that define the socio-economic context in which the organization operates; and
political-administrative factors which define the legal boundaries and
organizational options. Internal factors are those organizational characteristics
which create a basis for measuring and comparing organizations. These
include mission statement of the organization and organizational instruments.
Organizational structures developed from the ancient times of hunters and
collectors in tribal organizations through highly royal and clerical power
structures to industrial structures and today's post-industrial structures.
Organizations can be regarded as people management systems. They range
from simple hierarchies along traditional lines to complex networks dependent
on computer systems and telecommunications. Human resource managers can
encourage organizations to adopt strategies (for their structures) which foster
both cost-effectiveness and employee commitment. Organizational structures

can be classified into a number of types, including functional, divisional,


matrix, federations and networks.

RESEARCH METHODOLOGY
Objectives
1. To understand the organization structure of various companies
2. To bring out differences in the organizational structure of the company.
3. To bring out the distinct advantages and disadvantages in company due
to organizational structure

Primary data:
The primary data is through the paper articles and through the personal
interview and the website

Secondary data:
The secondary data is through the internet and other references of the authors
on organizational structure.

LITERATURE REVIEW

There are many different opinions and definitions on organizational structure.


Structure in one sense is the arrangement of duties use for the work to be done.
This is best represented by the organization chart. In another sense, structure
is the architecture of business competence, leadership, talent, functional
relationships and arrangement. Walton identified structure as the basis for
organizing, to include hierarchical levels and spans of responsibility, roles and
positions, and mechanisms for integration and problem solving. Thompson
said that structure is the internal differentiation and patterning of
relationships. He referred to structure as the means by which the organization
sets limits and boundaries for efficient performance by its members, by
delimiting responsibilities, control over resources, and other matters. Kartz and
Kahn said that structure is found in an interrelated set of events which return
to complete and renew a cycle of activities. Jackson and Morgan used a
modified definition originally formulated. They defined structure as the
relatively enduring allocation of work roles and administrative mechanisms
that creates a pattern of interrelated work activities and allows the organization
to conduct, coordinate, and control its activities. Lawrence and Lorsch
describe structure as the technique in which the organization is differentiated
and integrated. Differentiation is related to the scope in which executives act
quasi entrepreneurs, whereas integration is described in such a way that every
member of the organization including managers will do their best to achieve
organizational goals. Similarly, an organization is a set of elements in
interaction, organized level and decision making units. Identification of these
elements has always been one of the most important issues facing
organizational

researchers.

According

to

Dictionary-Organizational

behavioural, organizational structure is defined as the established pattern of


relationships among the components of parts of company (The way a company
is set-up). They formally defined framework of an organizations task and
authority relationships. Sablynski succinctly defined organizational structure
as how job tasks are formally divided, grouped, and coordinated.
Organization structure indicates an enduring configuration of tasks and
activities. In other words, organizational structure is a set of methods through

which, the organization divided into distinct tasks and then create a harmony
between different duties. Underdown said organizational structure is the
formal system of task and reporting relationships that controls, coordinates,
and motivates employees so that they cooperate to achieve an organizations
goals. Andrews stated that organizational structure consists of job positions,
their relationships to each other and accountabilities for the process and subprocess deliverables. Organizational structure directs the competence of
work, the enthusiasm of employees and coordination among the top
management and subordinates for flow of plans and goals in the organization
to sketch the future plans. Organizational structure is a way responsibility and
power are allocated, and work procedures are carried out, among
organizational members. Zheng, et al.
Mentioned that the most important components of organizational structure
include formalization, centralization, and control. Formalization measures the
extent to which an organization uses rules and procedures to prescribe
behaviour. The nature of formalization is the degree to which the workers are
provided with rules and procedures that deprive versus encourage creative,
autonomous work and learning. In organization with high formalization, there
are explicit rules which are likely to impede the spontaneity and flexibility
needed for internal innovation.
Centralization refers to the hierarchical level that has authority to make
decision. If decisions are delegated to lower levels the organization is
decentralized and if decision making power authority is kept at the top level it
is centralized. Centralization also creates a non-participatory environment that
reduces communication, commitment, and involvement with tasks among
participants. A company may start out small; however, as time goes by when
more employees may be hired, it is necessary for the departmental managers to
create a managerial structure. Additionally, an executive team may be required
to run the various aspects of the business, and there may be the need for
middle managers who would report to the managers. Penguin stated that,
organizational effectiveness and its relation to structure is determined by a fit
between information processing requirements so people have neither too little
nor too much irrelevant information. However, the flow of information is
essential to an organizations success. The organizations structure should be

designed to ensure that individuals and departments that need to coordinate


their efforts have lines of communication that are built into the structure.
Companies may use various organizational structures for communication
purposes. Large companies have many levels of management. Therefore, the
most effective way to communicate is from top of the organization down.
Executives create certain operational procedures which they communicate to
directors and managers. Managers, in turn, explain these operational
procedures to subordinates or hourly employees. Wolf said structure has a
direct effect on the success of an organization operational strategy. Good
organization structure influences the execution behaviours of a company.
Structure not only shapes the competence of the organization, but also the
processes that shape performance. Therefore, Clemmer supported the idea
that organizational structure shapes performance: Good performers, in a poorly
designed structure, will take on the shape of the structure. Many organizations
induced learned helplessness. People in them become victims of the system.
This often comes from a sense of having little or no control over their work
processes, policies and procedures, technology, support systems and the like.
These feelings are often amplifies by a performance management system that
arbitrarily punishes people for behaving like the system, structure or processes
they have been forced into. Walton tied structure to effectiveness, asserting
that management restructuring is designed to increase not only the efficiency
but also the effectiveness of the management organization. Walton associated
quicker responses to problems, increased unity of functions, coherent and
consistent priorities, enhanced abilities, and career satisfaction with the
performance benefits of structural alignment. A given structural alignment can
only emphasize a few of the interdependencies among activities. Therefore,
appropriate structures must ensure that the most important types of
coordination occur. Organizational structure includes decision-making;
customers needs, and harnessing experience. Decision-making authority is
influenced by organizational structure. In decentralized structure front-line
employees are often empowered to make on the-spot decisions to meet
customer needs.

CHAPTER 1
THE ORGANIZATION STRUCTURE OF COMPANIES
1. Organizational Structure of Infosys:
Infosys was founded on 2 July 1981with the capital of Rs. 10,000/ only by
seven entrepreneurs:
1) N. R. Narayan Murthy
2) Nandan Nilekani
3) Kris Gopalakrishnan
4) S. D. Shibulal
5) K. Dinesh
6) Ashok Arora
7) N. S. Raghavan officially being the first employee of the company
Infosys Limited, formerly known as Infosys Technologies Limited. Infosys is a
global technology Services Company headquartered in Bangalore. It is the
second largest IT exporter in India with 1, 41,822 employees as of September
2011
The chances of success were very low for this company that was started by a
small group of entrepreneurs with no connections to government officials and
very little money in socialist India. Yet these entrepreneurs were confident that
they could survive in the hostile environment and were determined to create a
company that would compete with the best US and European companies. In
order to compete with the best, the founders of Infosys realized that they
would need to differentiate their company from other Indian companies.
Infosys voluntarily adopted stringent accounting principles such as the US
GAAP while most Indian companies used opaque accounting practices.3
(Starting in 2003, Infosys reported financial performance in compliance with
accounting principles in 8 countries: Australia, Canada, France, Germany,
Japan, UK, US, and India.4) It distributed ownership of the company among
its employees while most Indian companies were controlled by a few powerful

families. In addition, it gave employees benefit such as stock option plans, a


health club
VISION of INFOSYS
Be globally respected corporation
Mission of Infosys is to:
"To achieve the objectives in an environment of fairness, honesty, and courtesy
towards our clients, employees, vendors and society at large."
ORGANIZATIONAL STRUCTURE
Organizational structure is the formal arrangements of jobs within an
organization.
A structure depends entirely on the organization's objectives and the strategy
chosen to achieve them. In a centralized structure, the decision making power
is concentrated in the top layer of the management and tight control is
exercised over departments and divisions. In a decentralized structure, the
decision making power is distributed and the departments and divisions have
varying degrees of autonomy. An organizational chart illustrates the
organizational structure.

INFOSYS IN BEGINNING

Infosys was a start-up founded by 7 individuals.


Early days were a constant struggle
Dynamic Environment.
Companies focus was on delivering a single product based on single

technology in a single marketplace.


Low degree of Formalization, low complexity and high centralization

Period from 1989 2002

In 1989, company lost some key accounts.


Drastic change in the overall strategy.

The period after liberalization led to massive growth.


catering to different market segments and different clients.
Company had to adhere to a new set of guidelines and streamline

process due to the IPO in 1992.


The company structure was split up into functional units.
Project Matrix Structure was employed within the production unit.
Characterized by increasing complexity, moderate formalization
and

moderate degree of centralization.

FROM 2003 ONWARD..

Company had become too big to carry on without modifying the existing
structure.

Concept of decentralization was brought in.

Company divided into IBUs. Each IBU concentrated on a particular sector.

Made the company more customers focused. A Gamma B


transformation.

Managers of each IBU were empowered to take decisions to further


the IBUs prospects.

Role Enlargement and Role Specialization.

Decentralized system with an ability to take quick.

Crucial as a result of the dynamic world order after the Sept 11 attacks
and Asian financial crisis.

Within each IBU the project matrix structure was carried forward.

In 2007, the IBU concept was further refined to take into account
geographic growth opportunities.

The 2007 reorganization was also for role enlargement of the second
line of business leaders.

CHAIRMAN AND DIRECTORS

N. R. Narayan Murthy appointed Chairman Emeritus.

Mr. K. V. Kamath named as the Chairman of the Board.

Mr. S. Gopalakrishnan named as the Co-Chairman of the Board.

Mr. S. D. Shibulal named as the Chief Executive Officer and


Managing Director.

2. ORGANIZATION STRUCTURE OF ACC CEMENT COMPANY

ACCs organization structure was revised in 2006. Added thrust was given to
sustainable development with the creation of separate cells at the
corporate office and plants to coordinate activities relating to waste
management,

alternate

fuels

and

raw

materials,

corporate

social

responsibility and occupational health and safety. All these were placed
under the supervision of the Managing Director
To enable better coordination of the organisations triple bottom line
performance, it is proposed to constitute a high level team with
representatives from functions relating to the main pillars of sustainable
development to coordinate reporting and align operations in line with the
overall corporate objectives. The committee will include the heads of
Environment & Energy Conservation, Alternate Fuels and Raw Materials
Business

Development,

Occupational

Health

&

Safety,

Corporate

Communications & Social Responsibility, Corporate Human Resources,


Commercial Services, Central Procurement and Secretarial & Compliance.

3. ORGANIZATION STRUCTURE OF HDFC


The organization structure of the company HDFC is such that it comprises of
the departments and the employees in the hierarchical order so that they are
able to perform their functions and duties smoothly and effectively doing their
job in a manner in which it should be done. The organization is headed by the
administrative department which coordinates and controls the executive
department. The executive department is a link from the top and the bottom
comprising of the lower level employees such that they work together to fulfil
the common objective of getting business from the persons who get in touch
with them and see to it that they are provided with the best of the bank which
constitute giving financial advice to providing Account to the customers. The
lower level employees and the corporate financial consultants work together to
see to it that the database for providing financial bank to sufficient number of

people is made .They work together to see to it that this database is followed
and worked upon such that more and more number of people get themselves
avail the financial bank `of the organization. Team leaders who form the part
of the administrative department of the organization make sure that the clients
that turn up for the financial bank are dealt with most effectively and
efficiently. Each team lead has a team comprising only of both
senior as well as junior market research analyst who aid the team
lead in the entire market research process as it has been
discussed previously. This is the basic organizational structure
followed by HDFC bank.

CHAPTER 2
TYPRE OF ORGANIZATION- ADVANTAGES AND DISADVANTAGES
All managers must bear that there are two organisations they must deal withone formal and the other informal. The formal organisation in usually
delineated by an organisational chart and job descriptions. The official
reporting relationships are clearly known to every manager. Alongside the
formal organisation exists are informal organisation which is a set of evolving
relationships and patterns of human interaction within an organisation that are
not officially prescribed.
Formal organisational structures are categorised as:
4. Line organisational structure.
(ii) Staff or functional authority organisational structure.
(iii) Line and staff organisational structure.
(iv) Committee organisational structure.
(v) Divisional organisational structure.
(vi) Project organisational structure.
(vii) Matrix organisational structure and
(viii) Hybrid organisational structure.
These organisational structures are briefly described in the following
paragraphs:
5. Line Organisational Structure:
A line organisation has only direct, vertical relationships between different
levels in the firm. There are only line departments-departments directly
involved in accomplishing the primary goal of the organisation. For example,

in a typical firm, line departments include production and marketing. In a line


organisation authority follows the chain of command.

Features:
Has only direct vertical relationships between different levels in the firm.
Advantages:
1. Tends to simplify and clarify authority, responsibility and accountability
relationships
2. Promotes fast decision making
3. Simple to understand.
Disadvantages:
1. Neglects specialists in planning
2. Overloads key persons.
Some of the advantages of a pure line organisation are:
6. A line structure tends to simplify and clarify responsibility, authority and
accountability relationships. The levels of responsibility and authority are
likely to be precise and understandable.
(ii) A line structure promotes fast decision making and flexibility.
(iii) Because line organisations are usually small, managements and employees
have greater closeness.
However, there are some disadvantages also. They are:
7. As the firm grows larger, line organisation becomes more ineffective.

(ii) Improved speed and flexibility may not offset the lack of specialized
knowledge.
(iii) Managers may have to become experts in too many fields.
(iv) There is a tendency to become overly dependent on the few key people
who can perform numerous jobs.
2. Staff or Functional Authority Organisational Structure
The jobs or positions in an organisation can be categorized as:
8. Line position:
a position in the direct chain of command that is responsible for the
achievement of an organisations goals and
(ii) Staff position:
A position intended to provide expertise, advice and support for the line
positions.
The line officers or managers have the direct authority (known as line
authority) to be exercised by them to achieve the organisational goals. The
staff officers or managers have staff authority (i.e., authority to advice the line)
over the line. This is also known as functional authority.
An organisation where staff departments have authority over line personnel in
narrow areas of specialization is known as functional authority organisation.

In the line organisation, the line managers cannot be experts in all the
functions they are required to perform. But in the functional authority
organisation, staff personnel who are specialists in some fields are given
functional authority (The right of staff specialists to issue orders in their own
names in designated areas).
9. Line and Staff Organisational Structure:
Most large organisations belong to this type of organisational structure. These
organisations have direct, vertical relationships between different levels and
also specialists responsible for advising and assisting line managers. Such
organisations have both line and staff departments. Staff departments provide
line people with advice and assistance in specialized areas (for example,
quality control advising production department).

The line functions are production and marketing whereas the staff functions
include personnel, quality control, research and development, finance,
accounting etc. The staff authority of functional authority organisational
structure is replaced by staff responsibility so that the principle of unity of
command is not violated.

Some staffs perform only one of these functions but some may perform two or
all the three functions. The primary advantage is the use of expertise of staff
specialists by the line personnel. The span of control of line managers can be
increased because they are relieved of many functions which the staff people
perform to assist the line.
Advantages:
10. Even through a line and staff structure allows higher flexibility and
specialization it may create conflict between line and staff personnel.
(ii) Line managers may not like staff personnel telling them what to do and
how to do it even though they recognize the specialists knowledge and
expertise.
(iii) Some staff people have difficulty adjusting to the role, especially when
line managers are reluctant to accept advice.
(iv) Staff people may resent their lack of authority and this may cause line and
staff conflict.
Disadvantages:
11. Conflict between line and staff may still arise.
(ii) Staff officers may resent their lack of authority.
(iii) Co-ordination between line and staff may become difficult.
Advantages:
1. Committee decisions are better than individual decisions
2. Better interaction between committee members leads to better co-ordination
of activities
3. Committee members can be motivated to participate in group decision
making.
4. Group discussion may lead to creative thinking.
Disadvantages:
1. Committees may delay decisions, consume more time and hence more
expensive.
2. Group action may lead to compromise and indecision.
3. Buck passing may result.
4. Divisional Organisational Structure:
In this type of structure, the organisation can have different basis on which
departments are formed. They are:

12. Function,
(ii) Product,
(iii) Geographic territory,
(iv) Project and
(iv) Combination approach.

13. Project Organisational Structure:


The line, line and staff and functional authority organisational structures
facilitate establishment and distribution of authority for vertical coordination
and control rather than horizontal relationships. In some projects work process
may flow horizontally, diagonally, upwards and downwards.

Feature:
Temporary organisation designed to achieve specific results by using teams of
specialists from different functional areas in the organisation.
Importance of Project Organisational Structure:
Project organisational structure is most valuable when:
14. Work is defined by a specific goal and target date for completion.
(ii) Work is unique and unfamiliar to the organisation.
(iii) Work is complex having independent activities and specialized skills are
necessary for accomplishment.
(iv) Work is critical in terms of possible gains or losses.
(v) Work is not repetitive in nature.
Characteristics of project organisation:
1. Personnel are assigned to a project from the existing permanent organisation
and are under the direction and control of the project manager.
2. The project manager specifies what effort is needed and when work will be
performed whereas the concerned department manager executes the work
using his resources.
3. The project manager gets the needed support from production, quality
control, engineering etc. for completion of the project.
4. The authority over the project team members is shared by project manager
and the respective functional managers in the permanent organisation.

5. The services of the specialists (project team members) are temporarily


loaned to the project manager till the completion of the project.
6. There may be conflict between the project manager and the departmental
manager on the issue of exercising authority over team members.
7. Since authority relationships are overlapping with possibilities of conflicts,
informal relationships between project manager and departmental managers
(functional managers) become more important than formal prescription of
authority.
8. Full and free communication is essential among those working on the
project.
6. Matrix Organisational Structure:
It is a permanent organisation designed to achieve specific results by using
teams of specialists from different functional areas in the organisation. The
matrix organisation is illustrated in Exhibit 10.8.
Advantages:
1. Decentralised decision making.
2. Strong product/project co-ordination.
3. Improved environmental monitoring.
4. Fast response to change.
5. Flexible use of resources.
6. Efficient use of support systems.

Disadvantages:
1. High administration cost.
2. Potential confusion over authority and responsibility.
3. High prospects of conflict.
4. Overemphasis on group decision making.
5. Excessive focus on internal relations.
This type of organisation is often used when the firm has to be highly
responsive to a rapidly changing external environment.
In matrix structures, there are functional managers and product (or project or
business group) managers. Functional manager are in charge of specialized
resources such as production, quality control, inventories, scheduling and
marketing. Product or business group managers are in charge of one or more
products and are authorized to prepare product strategies or business group
strategies and call on the various functional managers for the necessary
resources.
7. Hybrid Organisational Structure

Advantages:
1. Alignment of corporate and divisional goals.
2. Functional expertise and efficiency.
3. Adaptability and flexibility in divisions.
Disadvantages:
1. Conflicts between corporate departments and units.
2. Excessive administration overhead.
3. Slow response to exceptional situations.

CHAPTER 3
IMPACT OF ORGANIZATION STRUCTURE
1. Managerial Influence
The efficiency of your managerial staff has a broad-reaching effect in your
organization because of the organizational structure. Weak or incompetent
management at any level of an organization will spread throughout the
company as bad managerial decisions in those departments also affect the
departments that come into contact with each them and reduce productivity.
Good management can have the opposite effect, as efficient and intelligent
decision-making can help improve productivity and raise overall efficiency.
2. Structural Flaws
If your organizational structure is not set up properly, information is not able to
travel where it is needed. If the middle management team does not have
effective channels of communication with the executive team, important
company information could take days before it reaches the entire staff. Flaws
in your organizational structure that cause breakdowns in communication or
lapses in responsibility need to be repaired to facilitate efficiency.
3. Creativity
Ideas from employees are critical to the success of the organization. The influx
of employee input adds to current company ideas and offers a variety of
opinions that company management may not have considered. The
bureaucracy that can sometimes develop in an organizational structure can
stifle that creativity and hurt productivity. For example, if a manufacturing
employee submits an idea to make better use of manufacturing equipment that
would lower costs, but that idea gets lost in the shuffle of corporate
bureaucracy, the company could be losing money when it could be seeing an
improvement in productivity.

4. Growth
As a company grows with a weak internal structure, communication and
administrative channels are strained to the point of inefficiency. A strong
corporate structure that is designed to grow with the organization can maintain
corporate productivity during times of growth and allow for structural
improvements that will be necessary as the organization expands.

A. Challenges of Flat Organizational Structure


Organizations with relatively few layers of management in their hierarchy are
said to have flat organizational structures. The term "flat" is in reference to the
way an organizational structure chart looks when it has fewer managers,
featuring fewer and wider rows delineating the hierarchy of jobs. Flat
structures impart distinct benefits to companies, but there are a number of
challenges for flat organizational structures to overcome.
1. Motivational Leadership
An advantage of a flat organizational structure is that it places more
responsibility on individual employees to motivate themselves and maximize
their performance. This creates challenges at the same time, however, because
employees have fewer leaders to motivate them and give them individual
attention. Not every personality type thrives in a self-starting environment;
some employees need managers for guidance, instruction and motivation. The
challenge in flat organizations is to create a company culture that encourages
self-motivation and breaking personal performance records.
2. Consistency
Another advantage of flat structures is front-line employees' ability to make
decisions on their own to solve operational and customer-service issues. Again,
this strength introduces a new set of challenges. Organizations with less of an
emphasis on supervision can be lacking in strict operational policies, creating a
situation in which different employees handle different situations in different

ways. The same customer complaint may be handled differently on different


days, for example, sending conflicting messages to the marketplace. Or some
employees may find a way to sell products that are inferior in some way, while
others throw away damaged goods, creating discrepancies in product quality
and company costs.
3. Decision-Making
Taller organizational structures center decision-making responsibility at the
upper layers of a company, increasing decision-making efficiency in addition
to consistency. Strategic decision-making in flat organizations can become
complicated and inefficient if a company relies on voting or building
consensus among its employees. Companies with flat structures who find they
facing a decision with far-reaching consequences may find it challenging to
address the issue quickly and decisively.
4. Advancement
Employee development programs take on new challenges in flat organizational
structures. With a higher ratio of front-line employees to managers, there are
fewer managers to take note of the individual performance levels of
employees. This can make it easier for high-performers to fall through the
cracks in performance reviews, possibly causing them to leave the company to
find a position with more personal recognition. In addition to this, there are
fewer managerial positions in which to promote front-line employees,
reducing the advancement opportunities presented to each employee.

CHAPTER 4
Flat Vs. Hierarchical Organizational Structure
An organizational structure indicates the method that an organization employs
to delineate lines of communication, policies, authority and responsibilities. It
determines the extent and nature of how leadership is disseminated throughout
the organization as well as the method by which information flows.
Organizations commonly adapt either a flat or hierarchical structure.
A. Flat Structure
A flat organization refers to an organization structure with few or no levels of
management between management and staff level employees. The flat
organization supervises employees less while promoting their increased
involvement in the decision-making process.
Advantages of Flat Structure:
It elevates the employees level of responsibility in the organization.
It removes excess layers of managements improves the coordination and
speed of communication between employees.
Fewer levels of management encourage an easier decision-making process
among employees.
Eliminating the salaries of middle management reduces an organizations
budget costs.
Disadvantages of Flat Structure:
Employees often lack a specific boss to report to, which creates confusion
and possible power struggles among management.
Flat organizations tend to produce a lot of generalists but no specialists. The
specific job function of employees may not be clear.
Flat structure may limit long-term growth of an organization; management
may decide against new opportunities in an effort to maintain the structure.

Larger organizations struggle to adapt the flat structure, unless the company
divides into smaller, more manageable units.
B. Hierarchical Structure
A hierarchical organization follows the layout of a pyramid. Every employee
in the organization, except one, usually the CEO, is subordinate to someone
else within the organization. The layout consists of multiple entities that
descend into the base of staff level employees, who sit at the bottom of the
pyramid.
Advantages of Hierarchical Structure:
Employees recognize defined levels of leadership within the organization;
authority and levels of responsibility are obvious.
Opportunities for promotion motivate employees to perform well.
Hierarchical structures promote developing employees as specialists.
Employees may narrow their field of focus and become experts in specific
functions.
Employees become loyal to their departments and look out for the best
interest of their area.
Disadvantages of Hierarchical Structure:
Communication across different departments tends to be less effective than in
flat organizations.
Rivalry between departments may inflame as each department makes
decisions that benefit its own interests rather than the organization's as a
whole.
Increased bureaucracy often hinders an organizations speed to change.
Increased time may be required to respond to clients.
Salaries for multiple layers of management increase an organizations costs.

A.The Differences between Flat & Hierarchical


Organizations
Flat and hierarchical organizational structures refer to how managers report to
superiors and supervise the staff under their watch. Both types of structures
have benefits as well as drawbacks.
Hierarchical Organizations:
Hierarchical organizations are also known as "tall systems." They are
characterized by a large number of layers between top management and the
lower ranks of the firm. In such a firm, a suggestion coming from the factory
floor may have to go to the supervisor, then the factory floor superintendent,
and then the chief engineer before it can reach the factory manager. Between
the factory manager and the CEO, too, there will likely be multiple layers.
Such tall organizations promote expertise and specialization as each layer of
management deals with a relatively narrow and highly specific task or region.
Flat Organizations:
A flat organization, on the other hand, will have few layers of managers,
executives and supervisors. There may only be one layer between a factory
worker and factory manager, for example. Keep in mind that flat and tall are
relative terms, and the size of the organization in question must also be
considered when assessing its inherent structure. Therefore, firms should be
compared to other organizations of similar size and specialization to determine
how flat or tall their structure is. What may be considered a tall organization
for a supermarket chain with 20 stores, could constitute a very flat operation if
the same chain grows to manage 100 stores without adding more layers of
management and supervision.

Benefits:
The benefits of a hierarchical organization are better control of work flow and
expert supervision. Where errors can be highly costly, hierarchical
organizations tend to be more common. The military is a very tall organization
for example; every layer of soldiers supervises a relatively small workforce
and is therefore able to do so with extreme attention to detail. A flat
organization helps build team spirit and is more nimble. Information travels
faster from the bottom up and orders from upper management can be
implemented far more quickly down on the "floor," whether that refers to the
factory, dealership or retail outlet.
Disadvantages:
Hierarchical organizations are notorious for demotivating workers. When there
are eight levels one must get promoted through between shop supervisor and
factory manager, it is easy to give up. In addition, upper management may not
be able to keep up with critical developments, which take a long time to filter
up to the CEO or VP level. Flat structures, on the other hand, may force
managers to be a "jack of all trades and master of none." If a supervisor has to
oversee the production of sneakers, kids' shoes, sandals as well as dress shoes
in a factory, he may never develop the expertise that is required for the job.

CHAPTER 5
CASE STUDY
1. Case study Toyota

Toyota Motor Corporation (TYO: 7203) has often been referred to as the gold
standard of the automotive industry. In the first quarter of 2007, Toyota
(NYSE: TM) overtook General Motors Corporation in sales for the first time
as the top automotive manufacturer in the world. Toyota reached success in
part because of its exceptional reputation for quality and customer care.
Despite the global recession and the tough economic times that American auto
companies such as General Motors and Chrysler faced in 2009, Toyota
enjoyed profits of $16.7 billion and sales growth of 6% that year. However,
late 2009 and early 2010 witnessed Toyotas recall of 8 million vehicles due to
unintended acceleration. How this could happen to a company known for
quality and structured to solve problems as soon as they arise? To examine this
further, one has to understand about the Toyota Production System (TPS).
TPS is built on the principles of just-in-time production. In other words, raw
materials and supplies are delivered to the assembly line exactly at the time
they are to be used. This system has little room for slack resources, emphasizes
the importance of efficiency on the part of employees, and minimizes wasted
resources. TPS gives power to the employees on the front lines. Assembly line
workers are empowered to pull a cord and stop the manufacturing line when
they see a problem.
However, during the 1990s, Toyota began to experience rapid growth and
expansion. With this success, the organization became more defensive and
protective of information. Expansion strained resources across the organization
and slowed response time. Toyotas CEO, Akio Toyoda, the grandson of its
founder, has conceded, Quite frankly, I fear the pace at which we have grown
may have been too quick.

Vehicle recalls are not new to Toyota; after defects were found in the
companys Lexus model in 1989, Toyota created teams to solve the issues
quickly, and in some cases the company went to customers homes to collect
the cars. The question on many peoples minds is, how could a company
whose success was built on its reputation for quality have had such failures?
What is all the more puzzling is that brake problems in vehicles became
apparent in 2009, but only after being confronted by United States
transportation secretary Ray LaHood did Toyota begin issuing recalls in the
United States. And during the early months of the crisis, Toyotas top leaders
were all but missing from public sight.
The organizational structure of Toyota may give us some insight into the
handling of this crisis and ideas for the most effective way for Toyota to move
forward. A conflict such as this has the ability to paralyze productivity but if
dealt with constructively and effectively, can present opportunities for learning
and improvement. Companies such as Toyota that have a rigid corporate
culture and a hierarchy of seniority are at risk of reacting to external threats
slowly. It is not uncommon that individuals feel reluctant to pass bad news up
the chain within a family company such as Toyota. Toyotas board of directors
is composed of 29 Japanese men, all of whom are Toyota insiders. As a result
of its centralized power structure, authority is not generally delegated within
the company; all U.S. executives are assigned a Japanese boss to mentor them,
and no Toyota executive in the United States is authorized to issue a recall.
Most information flow is one-way, back to Japan where decisions are made.
Will Toyota turn its recall into an opportunity for increased participation for its
international manufacturers? Will decentralization and increased transparency
occur? Only time will tell.

2. NOKIA case study

Nokia: A Phone for Every Segment.


"While practically everybody today is a potential mobile phone customer,
everybody is simultaneously different in terms of usage, needs, lifestyles, and
individual preferences," explains Nokia's Media Relations Manager, Keith
Nowak. Understanding those differences requires that Nokia conduct ongoing
research among different consumer groups throughout the world. The
approach is reflected in the company's business strategy.
We intend to exploit our leadership role by continuing to target and enter
segments of the communications market that we believe will experience rapid
growth or grow faster than the industry as a whole. In fact, Nowak believes
that "to be successful in the mobile phone business of today and tomorrow,
Nokia has to fully understand the fundamental nature and rationale of
segmentation."

THE COMPANY
Nokia started in 1865, when a mining engineer built a wood-pulp mill in
southern Finland to manufacture paper. Over the next century, the company
diversified into industries ranging from paper to chemicals and rubber. In the
1960s, Nokia ventured into telecommunications by developing a digital
telephone exchange switch. In the 1980s, Nokia developed the first
"transportable" car mobile phone and the first "handportable" one. During the
early 1990s, Nokia divested all of its non-telecommunications operations to
focus

on

its

telecommunications

and

mobile

handset

businesses.

Today, Nokia is the world leader in mobile communications. The company


generates sales of more than $27 billion in a total of 130 countries and
employs more than 60,000 people. Its simple mission: to "connect people."
The mission is accomplished by understanding consumer needs and providing
offerings that meet or exceed those needs. Nokia believes that excellence in

three areas-product design; services such as mobile Internet, messaging, and


network security; and state-of-the-art technology-is the most important aspect
of its offerings.

THE CELLULAR PHONE MARKET

In the 1980s, first generation (1G) cell phones consisted of voice-only


analogue devices with limited range and features that were sold mainly in
North America. In the 1990s, second generation (2G) devices consisted of
voice/data digital cell phones with higher data transfer rates, expanded range,
and more features. Sales of these devices expanded to Europe and Asia. In the
twenty-first century, Nokia and other companies are combining several digital
technologies into third generation (3G) communication devices that reach
globally and feature the convergence of the cell phone, personal digital
assistant

(PDA),

Internet

services,

and

multimedia

applications.

The global demand for cell phones has increased significantly over the yearsfrom 284 million in 1999 to 410 million units in 2000 to 510 million units in
2001. Producers of first and second generation cell phones used a geographic
segmentation strategy as wireless communication networks were developed.
Most started with the U.S. and then proceeded to Western Europe and Asia.
However, each market grew at different rates. By 2001, Asia had the largest
number of handsets-170 million units. Western Europe was a close second at
167 million units, followed by North America at 90 million units. Latin
America had sales of 42 million units while the rest of the world had sales of
38 million units. In terms of market share, Nokia led all producers with 32
percent in 2000 and 35 percent in 2001. Motorola and Ericsson, the second and
third share leaders respectively, each had less than 20 percent of the market in
2001.

The total number of worldwide wireless subscribers reached 1 billion in 2001


and is expected to increase to 2.3 billion by 2005. Demand should increase due
to the growing demand by teens for high-speed handsets that will provide
Internet

and

multimedia

applications.

According

to

the

Cellular

Telecommunications& Internet Association (CTIA), U.S. wireless subscribers


spend an average of $45 per month on calls.

HOW NOKIA SEGMENTS ITS MARKETS


According to Debra Kennedy, Director of America's Brand Marketing at
Nokia, "Different people have different usage needs. Some people want and
need all of the latest and most advanced data-related features and functions,
while others are happy with basic voice connectivity. Even people with similar
usage needs often have differing lifestyles representing various value sets. For
example, some people have an active lifestyle in which sports and fitness play
an important role, while for others arts, fashion and trends may be very
important."
Based on its information about consumer usage, lifestyles, and individual
preferences, Nokia currently defines six segments: "Basic" consumers who
need voice connectivity and a durable style; "Expression" consumers who
want to customize and personalize features; "Classic" consumers who prefer a
traditional appearance and web browser function; "Fashion" consumers who
want a very small phone as a fashion item; "Premium" consumers who are
interested in all technological and service features; and "Communicator"
consumers who want to combine all of their communication devices (e.g.,
telephone, pager, PDA).

NOKIA'S PRODUCT LINE


To meet the needs of these segments, Nokia has recently introduced several
innovative products. For example, for the Communicator segment, Nokia's

7650 features a built-in digital camera, an enhanced user interface, large color
display, and multimedia messaging (MMS) functionality that allows users to
combine audio, graphic, text, and imaging content in one message. Once the
user has selected a picture, written text, and included an audio clip, a
multimedia message can be sent directly to another multimedia messagingcapable

terminal

as

well

as

to

the

recipient's

email

address.

Nokia's 6340 phone allows Classic consumers to roam between various global
networks; has a new wallet feature that stores the user's credit and debit card
information for quick wireless Internet e-commerce transactions; supports
voice-activated dialling, control of the user interface, and three minutes of
voice memo recording; and includes a personal information manager (phone
book and calendar).
To target the Basic segment, Nokia provides very easy-to-use, low-priced
phones that are likely to be used primarily for voice communication. They are
designed for consumers who are buying their first cell phone. "We want it to
be a very easy choice for the consumer," explains Kennedy. Products designed
for the Expression segment are still in the low price range but allow young
adults to have fun while communicating with friends. Nokia recently
introduced the 5210, a cell phone that offers a youthful and vibrant style with
improved durability, for this group. Features include a removable shell, a builtin stopwatch, a thermometer, downloadable game packs, a personalized logo,
and a personal information manager.
Nokia also designs phones for the Fashion segment-people who want a phone
to "show off." The Nokia 8260 and 8390 products are in this category. They
provide basic communication and other features but are not designed for heavy
use. One of Nokia's television commercials for fashion phones showed two
people sitting on a couch trying to talk to each other at a loud party-so they
call each other on their phones! In addition, Nokia offers phones for the
Premium segment-people who also want a distinctive and elegant design, but
as a fine item to appreciate rather than to show off. The Nokia 8890, a phone
with a chrome case and blue back light, was designed for this group. In

addition, Nokia recently introduced the all-in-one 5510, which features an


MP3 player that can store up to 2 hours of music, an FM radio, a messaging
machine with full keyboard, a game platform with game controls for two
hands and keys located on either side of the screen, and of course, the cell
phone.
THE FUTURE FOR NOKIA
A fast-growing segment for wireless mobile cell phones is the automobile.
According to the ARC Group, the number of cars with "telematics" systems
will increase from 1 million units to 56 million units by 2005. Ford, Nissan,
and other automobile manufacturers have recently introduced systems in
selected models. One reason for the expected popularity of these devices is
their "hands-free, voice-activated" operation, which is designed to reduce cell
phone-related automobile accidents. The CTIA has recently developed a public
service announcement (PSA) to curb this dangerous behaviour and forestall
legislation designed to eliminate cell phone use in the car entirely.

3. CASE STUDY- SYNDICATE BANK


Banking industry has now fully changed since post-independence. The success
of every business depends upon its customers. A Customer is the most
important visitor on our premises said by Mahatma Gandhi have much
importance in our work. Customers in urban India no longer have much time to
spend in queues. They want quick service. The Banks have also changed & are
providing best services to their customers by ATM Phone & Net banking
services right at your doorstep. Syndicate bank started its business with a capital
of 8000 rupees. TMA Pai Upender Rai & Vanan Kudva strove together to start
up the bank. This bank was nationalized along with the 13 major commercial
banks. On 19th July 1969 in Udupi, Karnatka State it had started its first branch
in 1928.Its headquarter is in Manipal, Karnatka, India.This bank has expanded
its business in foreign also & has a branch in London, Doha, Muscat. Currently

it has over 2708 branches. All these branches are giving Core banking, ebanking service all over the India at any time. It has sponsored the first RRB in
India. This financial institution has performed all the functions of retail banking
& investment banking. This bank performs all the functions of commercial bank
such as accepting the deposits of persons, provides the loan & advances of
various forms &credit creation. Along with these primary functions the bank
also performs agency functions such as to purchase & sale securities, accept tax
proceeds & tax returns & to deal in foreign exchange etc.

RECOMMENDATION
Choosing an organizational structure is a crucial decision facing a business
owner or partners preparing to form a company. Deciding which structure will
work depends on the size of the company being formed, tax implications and
the level of legal complexity with which owners are willing to deal. In many
cases, a simple structure will suffice, but the simplicity of a sole proprietorship
or partnership has its risks.
Sole Proprietorship:
The sole proprietorship is the simplest organizational structure and the most
common start up choice for small businesses, according to the Small Business
Administration. One person owns the business and likely runs the day-to-day
operations. Sole proprietors have complete control of the company, within
limits of the law, and receive all income to spend as they wish or reinvest in
the business. Taxation is simple. Income is reported on a personal return, and
business deductions are itemized on IRS form Schedule C: Profit or Loss from
Business. Yet, besides income tax, any profits are subject to self-employment
tax. Sole proprietors also face unlimited liability and responsibility for all
debts against the business, with all business and personal assets at risk.
Partnership:
Partnerships are similar to sole proprietorships in that the IRS does not
differentiate between business and personal income. They are also easy to set
up, but because ownership is shared, negotiating an operating agreement
between the partners is highly advisable. Partnerships can have a better chance
of raising startup funds, both by the money each partner brings to the business

and the ability to attract other funds. Each partner can also bring
complementary talents and expertise to help run the business. Disadvantages
include sharing of profits and the potential for critical disagreements in shared
decisions.
Corporation:
A corporation is recognized by the state and by the IRS as an entity separate
from its shareholders, so shareholders have only a liability for company debts
limited by the size of their investments, though company officers can be held
personally liable for their actions by the courts. A corporation can sell stock to
raise funds. But a corporation takes more time, money and paperwork to meet
state and federal laws. Dividends paid to shareholders cannot be deducted
from business income, so profits are taxed twice, once for the companys
income and again for each shareholders dividends.
S Corporation:
A variation of the regular, or C, corporation, the S corporation provides the
pass through taxation of profits by treating them as distributions to
shareholders reported directly on personal tax returns, avoiding the double tax
of C corporations. But shareholders active in the running of the corporation
must also be paid a reasonable compensation that is subject to standard
payroll taxes. Shareholders with a passive role do not pay self-employment
tax, and any dividends an active shareholder receives beyond a wage also
avoids the self-employment tax.
Limited Liability Company
The Limited Liability Company is a hybrid business structure that brings a
liability protection to single-owner or multiowner companies without the
complex structure and paperwork required of corporations. While there is
some formal structure and state registration requirements of an LLC, there is
also a great deal of flexibility. The IRS does not recognize an LLC for tax
purposes and generally will, by default, treat single-owner LLCs as sole
proprietorships and multiowner LLCs as partnerships. But an LLC can elect to
change its tax status to a C or S corporation without changing the actual legal

structure of the company. Such an election has a tax advantage as a company


matures and profits increase.

CONCLUSION
The structure of an organisation varies depending on a number of
influencing factors. Structure is influenced by the external
environment in which the business operates as well as its culture
and the nature of the work and activities it undertakes. The
structure can have both a positive and negative impact on a
business. Having the right structure allows a business to respond
and adapt to changes in the market quickly. Innovation and
creativity are usually found in flatter organisational structures and
in organisations with an entrepreneurial and employee focused
culture, such a culture means its employees feel empowered and
motivated. This in turn encourages them to positively contribute to
generating relevant ideas and effective team working in this
innovative working environment.

REFERENCES
Case written by Berrin Erdogan, Carlene Reynolds, and Talya Bauer to accompany Bauer, T.,
& Erdogan, B. (2009). Organizational behavior (1st ed.).New York: Flat World Knowledge.
Based on information from Accelerating into trouble. (2010, February 11). Economist.
Retrieved March 8, 2010,
fromhttp://www.economist.com/opinion/displaystory.cfm?story_id=15498249; Dickson, D.
(2010, February 10). Toyotas bumps began with race for growth.Washington Times, p. 1;
Maynard, M., Tabuchi, H., Bradsher, K., & Parris, M. (2010, February 7). Toyota has a
pattern of slow response on safety issue

http://www.time.com/time/nation/article/0,8599,1967654,00.htm

http://catalog.flatworldknowledge.com/bookhub/4?e=fwk-122425-ch14a_s01
http://www.123helpme.com/nokia-case-study-view.asp?id=159231
http://www.abhinavjournal.com/images/Management_&_Technology/Oct13/1.pdf

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