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Submitted To:

Sir Jehanzaib
Akram
Submitted By:
M Usama Ramzan

Section Name:
BBA 2nd (A)

Subject Name:
Introduction to Business

Department of Management Sciences

NUML
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Discuss the basic forms of Organizational

Structure from chapter 6. Also draw chart
of each structure.

Organizational Structure:
An organizational structure defines how activities such as task allocation, coordination, and
supervision are directed toward the achievement of organizational aims. Organizational structure
affects organizational action and provides the foundation on which standard operating
procedures and routines rest. Every company needs an organizational structure; it basically
defines the hierarchy of the company. In simple words, it defines who works for whom and who
reports to whom.

Chart:

Organizational structure affects organizational action and provides the foundation on which
standard operating procedures and routines rest. It determines which individuals get to
participate in which decision-making processes, and thus to what extent their views shape the
organization's actions. Here we discuss basic forms of organizational structure.
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Functional Organization:
A functional organizational structure is a structure that consists of activities such as coordination,
supervision and task allocation. The organizational structure determines how the organization
performs or operates. The term organizational structure refers to how the people in an
organization are grouped and to whom they report. One traditional way of organizing people is
by function. Some common functions within an organization include production, marketing,
human resources, and accounting.

Chart:

Employees are classified according to their function in this structure. The organizational chart for
a functional structure shows the role hierarchy: for example, president, vice president, finance
department, sales department, customer service, administration, etc.

Advantages of Functional Organization:

 The hierarchy is clear. This reduces the number of communication channels.

 Communication is frictionless within the department.
 Work is not duplicated as all departments have defined responsibilities.
 Employees feel secure; they perform well without fear.
 Because of job security, employees tend to be loyal to the organization.
 Cooperation is excellent within the department.
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Disadvantages of Organizational Structure:

 Communication is weak among the departments. This causes poor inter-department

coordination, affecting flexibility and innovation. 

 There is a lack of teamwork among different departments.

 Employees may have little concern about events outside their group.

 The functional structure is rigid and adapting to changes difficult and slow.

 Decision making is slow due to the bureaucratic hierarchy.

 Employees do not learn any new skills and their roles don’t change often.

Divisional Organization:
The divisional structure or product structure consists of self-contained divisions. A division is a
collection of functions which produce a product. It also utilizes a plan to compete and operate as
a separate business or profit center. It is a structure used to organize workers. They are grouped
based on their specific skills and knowledge. It vertically structures each department with roles
from president to finance and sales departments, to customer service, to employees assigned to
one product or service.

Chart:
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Employees who are responsible for certain market services or types of products are placed in
divisional structure in order to increase their flexibility.

Advantages of Divisional Organization:

 The divisional organizational structure allows each division of a firm to be accounted for
in isolation.
 The divisional organizational structure allows people in a single division to interact with
each other.
  In a divisional organizational structure, a division focuses just on its own product,
service or region. 
 Organizational culture is the values and the practices that persist in an organization. The
divisional structure allows this type of culture to persist in a division.
 In the divisional structure, each division has its own leader. The leader sets goals along
with his/her employees and works alongside them to achieve those goals.

Disadvantage of Divisional Organization:

 Divisional structure is not a possibility in small organizations.

 Organizations producing products that are relation with each other might find it difficult
to integrate divisions producing those complementary (related) products.
  Divisions would not communicate amongst each other; they would not know each
other’s objectives and goals.
  Divisional structure prevents organizations from getting the most out of economies of
scale. 

Matric Organization:
The matrix structure groups employees by both function and product simultaneously. A matrix
organization frequently uses teams of employees to accomplish work, in order to take advantage
of the strengths, as well as make up for the weaknesses, of functional and decentralized forms.
An example would be a company that produces two products, "product a" and "product b". Using
the matrix structure, this company would organize functions within the company as follows:
"product a" sales department, "product a" customer service department, "product an" accounting,
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"product b" sales department, "product b" customer service department, "product b" accounting
department.

Chart:

Advantages of Matrix Organization:

 It increased communication efficiency.

 It can improved employee motivation.
 It allows maximizes resource usage. This type of structure allows resources to be
maximized because of how equipment and employees are shared across projects.

Disadvantages of Matrix Organization:

 Sometimes there is potential conflict between managers and projects.

 In this structure there is authority confusion always remains between employs.
 It increased management overhead costs.
 It reduced employee effectiveness and increased ambiguity as employees try to decide
which tasks are most important.
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Formal Organization:

The formal organizational structure (also used the term organizational structure) is an officially
codified hierarchical arrangement of relationships between different jobs within the
organizational units and relationships between departments within the organization. It defines
hierarchical relationships and assigns competencies (competences), mutual ties and liability.

Chart:

Advantages of Formal Organization:

 Formal organization structure results in systematic and smooth functioning of an

organization.
 Formal organizational structure is established to achieve organizational objectives.
 Formal organizational structure results in coordinating the activities of various
departments
 Formal organizational structure lays more emphasis on work than interpersonal relations.

Disadvantages of Formal Organization:

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 While following scalar chain and chain of command actions get delayed in formal
structure.
 Formal organizational structure does not give importance to psychological and social
need of employees which may lead to demotivation of employees.
 Formal organizational structure gives importance to work only; it ignores human
relations, creativity, talents, etc.

Informal Organization:
The informal organization is the interlocking social structure that governs how people work
together in practice. It is the aggregate of norms, personal and professional connections through
which work gets done and relationships are built among people who share a
common organizational affiliation or cluster of affiliations. It consists of a dynamic set of
personal relationships, social networks, communities of common interest, and emotional sources
of motivation. The informal organization evolves, and the complex social dynamics of its
members also.

Chart:

Advantages of Informal Organization:

 It meets social needs of the members and hence results in a sense of belongingness
among them.
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 It has a powerful positive influence on the productivity and job satisfaction.

 It serves as a faster channel of communication.
 It helps in achieving organizational objectives by compensating the limitations of the
formal structure.

Disadvantages of Informal Organization:

 It is very difficult for management to bring changes in the organization if the informal
organization opposes them. Such resistance may restrict growth of the organization.
 Sometimes informal organization becomes a disturbing force, which can go against
organizational interests, e.g., spreading rumors in the organization.
 It is based on the mutual relationships rather than on division of work as anybody can talk
to any person in any department with regard to any topic. Hence, specialization is not
possible.

International Organization:

An international organization (intergovernmental organization) is an organization established by

a treaty or other instrument governed by international law and possessing its own international
legal personality.

Chart:
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The End