Organizational

Structure

Definition of Organizing

Organizing is the process by which managers

establish working relationships among
employees to achieve goals.

Organizational Structure

Organizational Structure is a formal system of

task & reporting relationships showing how
workers use resources.

concepts
1.
2.
3.
4.
5.
6.
7.
8.

Tall Structure
Flat Structure
Organic structure
Mechanistic Structure
Span Of control
Unity of command
Line Managers
Staff

Burns and Stalker

Tall And Flat Organizations, And The

Span Of Control
Span of Control
The number of subordinates reporting directly to a
supervisor.
Wide spans: larger number of direct reports.
Narrow spans: fewer number of direct reports.

Tall vs. Flat Organizations

Tall organizations: more management layers and
more hierarchical controls.
Flat organizations: fewer management layer and
decision making closer to the customer

Types of Organizational Authority

Line authority
The position authority (given and defined by the
organization) that entitles a manager to direct
the work of operative employees

Staff authority
Positions that have some authority (e.g.,
organization policy enforcement) but that are
created to support, assist, and advise the
holders of line authority

What is organizing as a management

function?
Formal structures
The structure of the organization in its official state.
An organization chart is a diagram describing reporting
relationships and the formal arrangement of work
positions within an organization.
An organization chart identifies the following aspects of
formal structure:
The division of work.
Supervisory relationships.
Communication channels.
Major subunits.
Levels of management.
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Spans of control in flat versus tall

structures.

Departmentalization

Functional Structure
C la r k J o h n s o n
C EO

E x e c . V .P .
F in a n c e & A d m in .

S e n io r V . P .
S to re s

V .P . T a x

V . P . C o n t r o lle r

V .P . M IS

D ir e c t o r
C o r p . P la n n in g

S e n io r V . P .
L o g is t ic s
V .P .
D is t r ib u t io n

D ir e c t o r
T r a n s p o r t a t io n

Function: people working together with similar skills, tools

or techniques to perform their jobs.
Functional structure consists of departments such as
marketing, production, and finance.
Most suited in dealing with one product or services.
Advantages:
Workers can learn from others doing similar tasks.
Easy for managers to monitor and evaluate workers.
Disadvantages:
Hard for one department to communicate with others
Managers can become preoccupied with their
department and forget the firm

Divisional structures based on product,

geography, customer, and process.

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What are the major types of organization

structures?
Potential advantages of divisional

structures:

More flexibility in responding to environmental

changes.
Improved coordination.
Clear points of responsibility.
Expertise focused on specific customers,
products, and regions.
Greater ease in restructuring.
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Study Question 2: What are the major types

of organization structures?
Potential disadvantages of divisional

structures:
Duplication of resources and efforts across
divisions.
Competition and poor coordination across
divisions.
Emphasis on divisional goals at expense of
organizational goals.

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Product organization: e.g: HUL, Johnson &

Johnson, Richardson Hindustan.
CEO
C o r p o ra 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

Geographical Organization: e.g: FCI, Indian Railways

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

Customer 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

What are the major types of organization

structures?
Matrix structure
Combines functional and divisional structures to gain
advantages and minimize disadvantages of each.
Used in:
Manufacturing
Service industries
Non-profit sector
Multi-national corporations

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Matrix Structure
CEO
Func.
Managers

Team Managers

Sales

Design

Production

Product
team A
Product
team B

Product Team

Product
team C

= two boss employee

What are the major types of organization

structures?
Potential advantages of matrix structures:

Better cooperation across functions.

Improved decision making.
Increased flexibility in restructuring.
Better customer service.
Better performance accountability.
Improved strategic management.
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What are the major types of organization

structures?
Potential disadvantages of matrix structures:
Two-boss system is susceptible to power struggles.
Two-boss system can create task confusion and
conflict in work priorities.
Team meetings are time consuming.
Increased costs due to adding team leers to structure.

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What are the new developments in

organization structures?
Team structures
Extensively use permanent and temporary

teams to solve problems, complete special

projects, and accomplish day-to-day tasks.
Often use cross-functional teams.

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How a team structure uses cross-functional teams for

improved lateral relations.

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 Potential advantages of team structures:

Eliminates difficulties with communication and
decision making.
Eliminates barriers between operating
departments.
Improved morale.
Greater sense of involvement and identification.
Increased enthusiasm for work.
Improved quality and speed of decision making.

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 Potential disadvantages of team structures:

Conflicting loyalties among members.
Excessive time spent in meetings.
Effective use of time depends on quality of
interpersonal relations, group dynamics, and
team management.

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What are the new developments in

organization structures?
Network structures
A central core that is linked through networks of
relationships with outside contractors and
suppliers of essential services.
Own only core components and use strategic
alliances or outsourcing to provide other
components.

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A network structure for a Web-based retail

business.

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 Potential advantages of network structures:

Firms can operate with fewer full-time employees
and less complex internal systems.
Reduced overhead costs and increased operating
efficiency.
Permits operations across great distances.

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 Potential disadvantages of network

structures:

Control and coordination problems may arise from

network complexity.
Potential loss of control over outsourced activities.
Potential lack of loyalty among infrequently used
contractors.
Excessively aggressive outsourcing can be
dangerous.

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What are the new developments in

organization structures?
Boundary less organizations
Eliminate internal boundaries among subsystems and
external boundaries with the external environment.
A combination of team and network structures, with
the addition of temporariness.
Key requirements:
Absence of hierarchy.
Empowerment of team members.
Technology utilization.
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The boundary less organization eliminates internal and

external barriers.

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What are the new developments in

organization structures?
Boundaryless organizations (cont.)
Encourage creativity, quality, timeliness, flexibility, and
efficiency.
Knowledge sharing is both a goal and essential
component.
Virtual organization.
A special form of boundaryless organization.
Operates in a shifting network of external alliances that are
engaged as needed, using IT and the Internet.
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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.
Usually need to decentralize authority.
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. Technology can be measured by:
Task Variety: new problems a manager encounters.
Task Analyzability: programmed solutions available to a
manager to solve problems.
High task variety and low analyzability present many unique
problems to managers.
Flexible structure works best in these conditions.
Low task variety and high analyzability allow managers to
rely on established procedures.

Technology & People

Small Batch Technology: produces small

quantities of one-of-a-kind products.
Based on the skills of the workers who need a flexible
structure.

Mass Production Technology: automated

machines make high volumes of standard
products.
Workers perform repetitive tasks so a formal structure
works well.

Continuous Process Technology:

Workers must watch for unexpected problems and react
quickly. A flexible structure is needed here.

Determinants of Structure

Human Resources: the final factor affecting

organizational structure.
Higher skilled workers who need to work in teams
usually need a more flexible structure.

Managers must take into account all four factors

(environment, strategy, technology and human
resources) when designing the structure of the
organization.