Session:

Organiza.on structures
“The studies of organiza1onal structure
deal with the disposi1on of units,
departments, posi1ons, groups and staff
within a firm, and the exis1ng rela1ons
among them.” (Oliveira, 2012)
 Organiza.on chart

•  Line rela1onships occur when authority flows

ver<cally downward through the structure
from superior to subordinate (e.g. managers–
sec<on leader–staff )
(Source: Worthington, I. & BriIon, C. , 2006)
•  Staff rela1onships are created when senior
personnel appoint assistants who normally
have no authority over other staff but act as
an extension of their superior.

(Source: Worthington, I. & BriIon, C. , 2006)

 Organiza.on chart
•  Lateral rela1onships exist across the
organiza<on, par<cularly between individuals
occupying equivalent posi<ons within different
departments or sec<ons (e.g. commiIees,
heads of departments, sec<on leaders).

(Source: Worthington, I. & BriIon, C. , 2006)

 Centralized organiza.ons

•  “Centralized organiza<ons are characterized

by power and decision- making concentrated
in a single powerful ‘center’. The center may
be a single individual or a head office. No
major decision-making power is devolved to
any other part of the organiza<on”
(Oliveira, 2012)

 Advantages of centraliza.on
•  It enables managers in the center to maintain a
.ght level of control. The risks of problems
occurring in the parts of the organiza<on are thus
poten<ally reduced.
•  It avoids the poten<al problems of introducing
complex organiza.onal structures.
•  Communica.ons are quicker and cheaper when
the en<re organiza<on is located close together.
•  The risks associated with delega.on are avoided.

 Disadvantages of centraliza.on
•  A centralized structure is best suited to a
stable environment and is generally
incompa<ble with effec<ve management in a
dynamic, highly compe..ve environment.
•  It restricts the ability of local managers to use
their knowledge of local circumstances to
adapt their area of ac<vity the op.mum
benefit of the organiza<on.
 Disadvantages of centraliza.on
•  Customer responsiveness is at risk with local
managers limited in their authority to make
decisions at the customer interface.
•  Senior managers can be overburdened with
rela<vely minor opera<onal issues at the expense
of their strategic roles.
•  It can lead to a surfeit of func<onal specialists at
the ‘center’, adding to the overhead costs of the
business.
 Decentralized organiza.ons
•  “Decentralized organiza<ons are characterized
by, to varying degrees, devolu.on of power
from the center to its peripheral parts. The
‘parts’ of an organiza<on to which power is
devolved may be dis<nct divisions,
departments, subsidiary companies (for
holding companies), strategic business units
(SBUs), or profit and cost centers.”
(Oliveira, 2012)

 Advantages of decentraliza.on
•  It means the organiza<on can engage in a
wider range of ac.vi.es and can operate in
many loca.ons at once.
•  It enables increased specializa.on in the
decentralized parts (e.g. those who ‘know
best’ about a certain market, a specific
product line or a specific range of ac<vi<es).

 Advantages of decentraliza.on
•  It can reduce the .me taken to make key
decisions. If power is devolved, decisions can
be made by managers in the decentralized
parts without the need to refer to the centers
every <me a decision needs to be made.
•  The devolu.on of power serves to develop
and improve the skills of managers: a feature
which may also serve to mo<vate them.
 Organiza<on structures
•  With regard to the division of work and the grouping
of organiza<onal ac<vi<es, this can occur in a variety
of ways. These include:
q  By func1on or major purpose, associated par<cularly with
●

departmental structures.
q  By product or service, where individuals responsible for a
●

par<cular product or service are grouped together.

q  By loca1on, based on geographical criteria.
●

q  By client group (e.g. children, the disabled, the elderly).

●

(Source: Worthington, I. & BriIon, C. , 2006)

The main methods of grouping ac<vi<es in
business organiza<ons.

•  Func<onal organiza<on
•  The divisional structure ( based on
geography, customer, product, and process)
Ø  geographical structure
Ø  customer-based structure
Ø  product-based structure
Ø  process structure
•  Matrix structures
•  Project teams
(Source: Worthington, I. & BriIon, C. , 2006)
Func<onal organiza<on

(Source: Worthington, I. & BriIon, C. , 2006)

 Func<onal organiza<on
•  The func<onal organiza<on structure allows individuals to
be grouped together on the basis of their specialisms and
technical exper.se, and this can facilitate the development
of the func<on they offer .

•  It could also be argued that this form of structure is most
suited to single-product firms and that it becomes less
appropriate as organiza<ons diversify their products and/
or markets.
The divisional structure

(Source: Worthington, I. & BriIon, C. , 2006)

 The divisional structure
•  This structure is likely to be the divisional (or ‘mul<-
divisional’) company.
•  A divisional structure is formed when an organiza<on is
split up into a number of self-contained business units,
each of which operates as a profit center.
•  Such a division may occur on the basis of product or
market or a combina.on of the two, with each unit
tending to operate along func.onal or product lines, but
with certain key func<ons (e.g. finance, personnel,
corporate planning) provided centrally, usually at company
(Source: Worthington, I. & BriIon, C. , 2006)
headquarters.
Organiza<on by product or service

(Source: Worthington, I. & BriIon, C. , 2006)

 Organiza<on by product or service
•  One advantage of this type of structure is that
it allows an organiza<on to offer a diversified
range of products.
•  Its main disadvantage is the danger that the
separate units or divisions within the
enterprise may aIempt to become too
autonomous.

(Source: Worthington, I. & BriIon, C. , 2006)

 The divisional structure
•  The main benefit of the mul<-divisional company is
that it allows each part of what can be a very
diverse organiza<on to operate semi-
independently in producing and marke<ng its
products, thus permiang each division to design
its offering to suit local market condi.ons – a
factor of prime importance where the firm
operates on a mul<na<onal basis.
(Source: Worthington, I. & BriIon, C. , 2006)
Matrix structure

(Source: Oliveira, 2012)

Matrix structures

(Source: Worthington, I. & BriIon, C. , 2006)

 Matrix structures

•  A matrix is an arrangement for combining

func<onal specializa<on (e.g. through
departments) with structures built around
products, projects or programs.

(Source: Worthington, I. & BriIon, C. , 2006)

 Matrix structures
•  Matrix structures offer various advantages, most
notably flexibility, opportuni.es for staff
development, an enhanced sense of ownership of
a project or program, customer orienta<on and
the co-ordina<on of informa<on and exper<se.
•  On the nega<ve side, difficul<es can include
problems of co-ordina<on and control, conflic<ng
loyal<es for staff.
(Source: Worthington, I. & BriIon, C. , 2006)
 Project team
•  The project team is essen<ally a temporary
structure established as a means of carrying
out a par<cular task, oben in a highly
unstable environment.
•  Once the task is complete, the team is
disbanded and individuals return to their
usual departments or are assigned to a new
project.
(Source: Worthington, I. & BriIon, C. , 2006)
 Project team
•  Project teams are increasingly common in high
technology firms, construc.on companies and
in some types of service industry, especially
management consultancies and adver.sing.
•  Rather than being a replacement for the exis<ng
structure, they operate alongside it and u<lize
in-house staff (and in some cases, outside
specialists) on a project-by-project basis.
(Source: Worthington, I. & BriIon, C. , 2006)
 Structural change
•  Internal change is an important feature of the modern
business organiza<on.
•  In order to remain compe<<ve and meet stakeholder
needs, a firm may have to find ways to restructure its
organiza<on as the environment in which it operates
changes. Solu<ons can range from a par<al or
wholesale shib in the organiza<on’s structural form to
strategies for reducing the overall size and shape of the
company (e.g. ‘downsizing’) or a radical redesign of
business processes (e.g. ‘re-engineering’).

 Organization structure should be able to:
•  Achieve efficiency in the u.liza.on of resources
•  Provide opportuni<es for monitoring organiza.onal
performance;
•  Ensure the responsibility of individuals;
•  Guarantee co-ordina.on between the different parts
of the enterprise;
•  Provide an effec<ve means of organiza.onal
communica.on;
•  Create job sa.sfac.on, including opportuni.es for
progression; and adapt to changing circumstances

brought about by internal or external developments.

<TITLE> 45
 The role of marke.ng department,
human resource management, finance
department
 The marke<ng department
•  Iden<fying the needs of consumers (e.g.
through marke<ng research).
•  Designing different ‘offerings’ to meet the
needs of different types of customers (e.g.
through market segmenta.on).
•  Choosing products, prices, promo.onal
techniques and distribu.on channels that are
appropriate to a par<cular market (i.e.
designing a ‘marke.ng mix’ strategy).
(Source: Worthington, I. & BriIon, C. , 2006)
 The marke<ng department
•  Undertaking market and product planning.
•  Deciding on brand names, types of packages,
and methods of communica<ng with the
customer.
•  Crea<ng a marke<ng informa<on system.
•  …
(Source: Worthington, I. & BriIon, C. , 2006)
 Human resource management (HRM)
•  Recruitment and selec<on;
•  Working condi<ons;
•  Training and career development;
•  Job evalua<on;
•  Employee rela<ons;
•  Manpower planning;
•  Legal aspects of employment.
(Source: Worthington, I. & BriIon, C. , 2006)
 Finance department
•  The role of finance department within an
organiza<on.
Ø  Bookkeeping
Ø  Management of company’s cash flow
Ø  Budget and forecas<ng
Ø  Advising and sourcing longer term financing
Ø  Management of taxes
Ø  Management of investment
Ø  Financial reports and analysis
Ø  Making strategic decisions rela<ng to finance
Ø …
 References
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Campbell, D. & Craig, T. (2005), organiza1on and business environment,
Elsevier, UK: Oxford.
Graicunas, V.A. 2004. In: Cole, G.A. (ed.). Management Theory and Prac1ce,
6th edn. London: Thomson.
Handy, C. (1989). The Age of Unreason. London: Business Books.
Lawrence, P.R. and Lorsch, J.W. (1969). Organisa1on and Environment.
USA: RD Irwin.
Minzberg, H. (1979). The Structuring of Organisa1ons – a Synthesis of the
Research. London: Pren<ce-Hall.
Taylor, F.W. (1998). The Principles of Scien1fic Management. Toronto: Dover.
Urwick, L.F. (1955). The Elements of Administra1on. London: Pitman.
Weber. (1964). The Theory of Social and Economic Organisa1on. USA: Macmilla
Worthington, I. & BriIon, C. (2006), the business environment, Pearson,
UK.
Thank you