ORGANIZATIONAL STRUCTURE

Organizing: Arranging and structuring work to accomplish an organizational’s goals.

Organization chart: The visual representation of an organatization’s structure.

Organizational Structure: The formal arrangement of jobs within an organization.

Organizational Design: Creating or changing an organization’s structure.

Work specialization: Dividing work activities into separate job tasks.

Departmentalization: The basis on which jobs are grouped together.

Formalization: How standardized an organization’s jobs are and the extent to which employee behavior is guided by rules and procedures.

CoordinatingEstablishing such relationships among various parts of the organization that they all together pull in the direction of the organizational objectives.InvolvesClear definition of authority-responsibility relationshipUnity of directionUnity of command

Organizational Structure: is the formal arrangement of jobs within organization. This structure, which can be shown visually in an organization chart.

Organizational Design: When managers create or change the structure, they are engaged in organizational design, a process that involves decisions about six key elements: work specialization, departmentalization, chain of command, span of control, centralization and decentralization, and formalization.

Chain of command: The line of authority extending from upper organizational levels to the lowest level, which clarifies who reports to whom.

Span of Control: The number of employees a manager can efficiently and effectively manage.

Span of Management/Span of Control Number of employees who report to a

supervisor› Traditional view = seven subordinates per

manager› Lean organizations today = 30+ subordinates

Supervisor Involvement› must be closely involved with subordinates,

the span should be small› need little involvement with subordinates, it

can be large

Chain of Command

Unbroken line of authority that links all persons in an organization

Shows who reports to whom

Associated with two underlying principlesUnity of CommandScalar Principle

Unbroken line of authority that links all persons in an organization

Shows who reports to whom

Associated with two underlying principlesUnity of CommandScalar Principle

Structuring Organization

Following are the different approaches to organization structure:

1. Functional Organizational Structure2. Product Organizational Structure3. Geographical Organizational Structure4. Matrix Organizational Structure5. Team Organizational Structure6. Virtual Organizational Structure7. Line & Staff Organizational Structure

Functional Organizational Structure Functional

structure: This structure is based on functions of business firms

Advantages of Functional Org. Structure

A functional structure would be effective in single business firms where key activities revolved around well- defined skills and areas of specialization.

The functional structure is most appropriate when firms compete on the basis of technical specialization or efficiency in a relatively stable environment.

Disadvantages of Functional Org. Structure

The departmental members may see the activities from the narrow view point of the department rather than the total organization. This aspect results in poor coordination and cooperation.

Delay in decision making or ineffective decision making.

Product Organizational Structure

This structure is based on the products produced by the firm.

Advantages of Product Org. Structure

Appropriate for organizations with multiple products.

Suited for more dynamic environment. Moves decisions close to the problem Clarifies profit/ loss accountability.

Disadvantages of Product Org. Structure

Involves difficulty in allocating overheads

Results in duplication of equipment and personnel.

Geographical Organizational Structure

This structure is based on the geographical areas of operations of the firm.

Advantages of Geographical Organizational Structure

Improves functional coordination within the target market.

Takes advantage of economies of local operations.

Disadvantages of Geographical Organizational Structure

Adds another layer of management to run the geographic units.

Can result in duplication of staff services at head-quarters and regional levels, creating a relative cost disadvantage.

Matrix Organizational Structure

Matrix is a hybrid grid structure wherein pure project organization is superimposed on a functional structure. It combines vertical and horizontal lines of authority.

The Matrix Organization

Function

ProjectWorkerProgram

CEOProject workers have two bosses

Dual Authority Structure in a Matrix Organization

Advantages of Matrix Organizational Structure

The matrix structure is commonly used in the firms whose technological change is rapid.

This structure has considerable flexibility. The personnel can be transferred from one project to the other depending upon the need of the project.

Disadvantages of Matrix Organizational Structure

Greater administrative cost associated with its operation.

Personnel spend much time in exchanging information to coordinate functional areas with projects.

Team Organization Structure

This structure is based on the business teams.

Team Advantages Same advantages as

functional structure Reduced barriers among

departments Quicker response time Better morale Reduced administrative

overhead

Team Disadvantages

Dual loyalties and conflict

Time and resources spent on meetings

Unplanned decentralization

Virtual/ Network

These structures are not visible but their presence is felt wherever necessary.

An organizational structure that disaggregates major functions to separate companies that are brokered by a small headquarters organization.

Virtual Network Approach Advantages

Can draw on expertise worldwide

Work force flexibility Reduced administrative

overhead

Network Approach Disadvantages

Lack of control, weak boundaries Greater demands on managers Employee loyalty weakened

Five Approaches to Structural Design

Five Approaches to Structural DesignSlide 2

daft ch10 insert1.CLP

Line and Staff Organization

Line Authority = individuals in management positions have the formal power to direct and control immediate subordinates

Staff Authority = granted to staff specialists in their area of expertise

Line and staff Organization

Line and staff organization is a combination of line and functional structures. Under it, line authority flows in a vertical line in the same manner as in the line organization. In addition, staff specialists are attached to line positions to advise them on important matters. These specialists do not have power of command over subordinates in other departments. They are purely of advisory nature.

Advantages: 1) Expert advice2) Reduced Workload3) Quality decisions4) Flexibility

Disadvantages:1) Line and staff conflicts2) Confusion3) Ineffective staff4) Expensive