ORGANIZING AS A MANAGEMENT FUNCTION

I. DEFINITION

The word ‘organize’ means placement of ideas, objects or people in a correct

order so that they are easily available whenever required.

In management, it represents all those activities that result in the formal

assignment of tasks, authority &responsibility to groups and individuals.

According to Chester Barnard, “Organizing is a function by which the concern is

able to define the role positions, the jobs related and the co-ordination between
authority and responsibility”. Hence, a manager always has to organize in order to get
results.

Reasons for organizing

Organizing is undertaken to facilitate the implementation of plans. In effective

organizing, steps are undertaken to break up to the total job into more manageable
man-size jobs. Doing these will make it possible to assign particular tasks to particular
persons. In turn, these will help facilitate the assignment of authority, responsibility, and
accountability for certain functions and tasks. Efforts expended in organizing may also
result to easier coordination among the various activities.

Process of Organizing

The following steps are to be undertaken in the organising process:

1.Identification and Division of Work

The first step in the process of organising involves identifying and dividing the
work that has to be done in accordance with previously determined plans. Work is
divided into manageable tasks, so that duplication can be avoided and workload can be
shared among employees.

2.Departmentalization

Once, work has been divided into small and manageable activities, then those
activities which are similar in nature, are grouped together. This process is called
departmentalization. Departments can be created on the basis of products, functions
and territory. This brings specialization in operations.

3.Assignment of Duties

Once the departments are created, each department is placed under the charge
of an individual, called departmental head. Then, each job is allocated to an individual,
according to his knowledge and skill. There should be a proper match between the
nature of jobs and the ability of an individual.

4.Establishing Reporting Relationships

In the organisation, each employee has some authority as well as responsibility.

It is necessary that every individual must know whom he has to take orders from and to
whom he is answerable. This creates superior subordinate hierarchy and helps in
coordinating various activities in the organisation.

II. IMPORTANCE OF ORGANIZING FUNCTION

1. Specialization

It is the process of organizing groups and sub-divide the various activities and
jobs based on the concept of division of labor. This helps in the completion of maximum
work in minimum time ensuring the benefit of specialization.

2. Well defined jobs

Organizing ensures effective role-job-fit for every employee in the organization. It

helps in avoiding confusion and delays, as well as duplication of work and overlapping
of effort.

3. Clarifies authority

Organizational structure helps in clarifying the role positions to every manager

(status quo). This can be done by clarifying the powers to every manager and the way
he has to exercise those powers should be clarified so that misuse of powers do not
take place. Well defined jobs and responsibilities attached helps in bringing efficiency
into managers working. This helps in increasing productivity.

4. Coordination

Organization is a means of creating coordination among different departments of

the enterprise. It creates clear cut relationships among positions and ensure mutual
cooperation among individuals. Harmony of work is brought by higher level managers
exercising their authority over interconnected activities of lower level manager.

Authority responsibility relationships can be fruitful only when there is a formal

relationship between the two. For smooth running of an organization, the co-ordination
between authority- responsibility is very important. There should be co-ordination
between different relationships. Clarity should be made for having an ultimate
responsibility attached to every authority. There is a saying, “Authority without
responsibility leads to ineffective behaviour and responsibility without authority makes
person ineffective.” Therefore, co-ordination of authority- responsibility is very important.

5. Effective administration

The organization structure is helpful in defining the jobs positions. The roles to be
performed by different managers are clarified. Specialization is achieved through
division of work. This all leads to efficient and effective administration.

6. Growth and diversification

A company’s growth is totally dependant on how efficiently and smoothly a

concern works. Efficiency can be brought about by clarifying the role positions to the
managers, co-ordination between authority and responsibility and concentrating on
specialization. In addition to this, a company can diversify if its potential grow. This is
possible only when the organization structure is well- defined. This is possible through a
set of formal structure.

7. Sense of security

Organizational structure clarifies the job positions. The roles assigned to every
manager is clear. Co-ordination is possible. Therefore, clarity of powers helps
automatically in increasing mental satisfaction and thereby a sense of security in a
concern. This is very important for job- satisfaction.

8. Scope for new changes

Where the roles and activities to be performed are clear and every person gets
independence in his working, this provides enough space to a manager to develop his
talents and flourish his knowledge. A manager gets ready for taking independent
decisions which can be a road or path to adoption of new techniques of production. This
scope for bringing new changes into the running of an enterprise is possible only
through a set of organizational structure.

III. FORMAL & INFORMAL ORGANIZATION

After the business plan is adapted, management will proceed to form an
organization to carry out the activities indicated in the plan.

The formal organization, as described by Nelson and Quick “ Is the part of the
system that has legitimacy and official recognition.” What is depicted in the organization
chart is the formal organization. It is the planned structure representing the intended
configuration of positions, job duties, and lines of authority among the component parts
of the organization.

The formal structure is described by management through:

1. Organizational Chart- is a diagram of the organizations official positions and formal
lines of authority.
2. Organization Manual- provides written descriptions of authority relationships, details
the functions of major organizational units, and describes job procedures.
3. Policy Manual- describes personnel activities and company policies.
INFORMAL GROUPS
Formal organizations require the formation of formal groups, which will be
assigned to perform specific tasks aimed at achieving organizational objectives. The
formal group is a part of the organizational structure.
There are instances, however, when members of an organization spontaneously
form a group with friendship as a principal reason for belonging. This group is referred
to as an informal group. It is not a apart of the formal organization and it does not have
a formal performance purpose.

The advantages of the informal organization are as follows-

 Fulfils social needs – An informal organization can meet the social needs of the
employees in a firm because it encourages a feeling of belonging. It takes into
account the values and sentiments to integrate every member in its fold
 Faster communication – An informal organization has a fast and quick
communication channel that can spread any news within a short period
 Efficient work system – informal organizations blend beautifully with formal ones to
make the system more efficient. An informal relation is flexible and spontaneous,
and this is why it can meet the problems head-on that formal organizations are
unable to. This creates a dynamic situation where the work system is better and
effective
 Enhanced productivity – An informal organization has a positive influence that
leads to a boost in productivity
 Improved management practice – One of the benefits of informal organizations is
that it pushes the managers to organize, control and plan professionally. This
results in improved management practice
 Fulfils organizational objectives – The informal organization can compensate for
the limitations that occur because of formal structure and is thus able to fulfil
organizational objectives successfully
  Job satisfaction – An informal organization provides emotional security to the
workers. The sense of being there and belonging in a warm space helps in job
satisfaction. This reduces employee turnover and boosts employee retention.
 Lightens the workload of management – When the management has confidence
in the informal organization, they become flexible and are ready to delegate. They
also do not have to micromanage every activity, and this ultimately lightens the
workload of the management
 Fills the gap in management abilities – If the informal organization has any doubts
about the manager’s skill, then it becomes ready to fill in the gaps. In case he is
weak in management, then the members of the informal group will offer viable
suggestions in correcting his defective plans.
 Safety valves – Informal organization is considered a safety valve for emotional
outbursts and frustrations as the members get the opportunity to share and
discuss their dilemma and issues in a friendly setting
 Careful planning – Managers are aware that members of the informal organization
will keep a check on its activities, and this is why it makes careful plans after going
through its pros and cons. They do not try to misuse their powers and create
absurd actions and policies that will prove harmful for the organization

The disadvantages of the informal organization are as follows-

 Resistance to change – It becomes impossible to bring changes in a firm if the

informal organization is not in its favour. It ultimately restricts the growth of that
firm and slows down the progress
 Lack of specialization – Another disadvantage of the informal organization is that
the work is based on mutual relationship and not on division of labour and this is
why there is a lack of specialization in such organizations
 Creates rumours – It is seen that informal organization often participates in
spreading rumours that can be against the interest of the company. These
rumours are often inaccurate, distorted and destructive that spreads incorrect
information amongst the members and leads to hostility, anxiety and confusion.
 Causes insubordination – An informal organization often encourages employees
to act against organizational procedures and policies. This restricts output,
promotes unauthorized action and causes insubordination.
 Roadblock for competent people – An informal organization makes employees
reluctant, and they do not wish to act independently or creatively. This is because
they fear to lose the approval of the group. This is a roadblock for the people who
are competent as others will not let them find their way in the maze
 High operating costs – Informal organization encourages idle conversation and
joke-telling amongst the members that means wastage of time and high operating
costs.
 Poor motivation – Informal organization has a weak satisfaction level, and this is
why it has a poor motivation point. Competent people cannot find actual job
satisfaction in this environment
 Source of conflict – An informal organization is often considered by many as a
source of conflict within the company
 Leads to conflicts – An informal organization leads to inter-group and
interpersonal conflicts and hinders the organizational work
 Managers are unable to exercise control – As formal rules do not bind the
employees, they are not obliged to abide by the order of a manager. Thus it
proves a disadvantage for the manager as he is unable to exercise proper control
 Role conflict – Informal organization develops and encourages role conflict and
negative attitude within the organizational structure.
 Emphasis on individual interest – Informal organization is all about individual
satisfaction and interest and not about the interest and welfare of the company.
IV. LEVELS OF MANAGEMENT AND SUPERVISION
The management and supervision of an organization may be done through levels of
hierarchy, which may be flat or tall.
1. Flat Structure
The flat organization has few levels or management. This characteristics provides it with
the following advantages.
a. communication is generally faster and less distorted;
b. decisions can be made quickly; and
c. supervisors’ salaries are eliminated

Disadvantages
a. they require managers with experience in the various tasks;
b. a manager may have little time for all subordinates;
c. when the manager is out, the group is without a leader; and
d. managers may have little time to anticipate problems

2. Tall Structures
The tall structure has many levels of management. It has the following advantages:
a. sine the average span of control is narrower, the supervisory load is less for each
manager;
b. there are more opportunities for promotion because there are more levels of
positions;
c. managers are provided with opportunities to specialize;
d. there is less demand for managers with multiple skills; and
e. managers are afforded with more time to attend to other important problems

Tall structures are also saddled with disadvantages such as the followings.
a. communication tends to be slower and distorted because of the number of levels it
has to pass through;
b. the number of management levels also hinders effective decision making rendering
such activity slower and less accurate; and
c. it is more expensive to maintain as there are more managers to compensate
BASIC ELEMENTS OF ORGANIZATIONAL STRUCTURE
In designing the organizational structure, certain basic elements are considered. These
are as follows.
1. Work specialization
2. departmentation
3. Pattern of authority
4. Span of control; and
5. Coordination of activities

1. Work specialization
Work Specialization. This is also known as division of labor. It refers to the
degree by which a job is subdivided into separate defined tasks. Its concept involves
breaking down a job into several steps, where each step would then be assigned for
execution of an employee. Work specialization increases efficiency since employees
can focus on a single particular task rather than the entire activity. Since there would be
a variety of tasks available in the organization, the employees could be assigned to
positions where they are skilled and that they enjoy (Medina, 2011; Neck et al., 2017).

Specialization is extensive, for example running a particular machine in a factory

assembly line. The groups are structured based on similar skills. Activities or jobs tend
to be small, but workers can perform them efficiently as they are specialized in it.
In spite of the obvious benefits of specialization, many organizations are moving away
from this principle as too much specialization isolates employees and narrows down
their skills to perform routine tasks.

Also it makes the organization people dependent. Hence organizations are

creating and expanding job processes to reduce dependency on particular skills in
employees and are facilitating job rotation among them.
 Identification of activities - All the activities which have to be performed in a
concern have to be identified first. For example, preparation of accounts, making sales,
record keeping, quality control, inventory control, etc. All these activities have to be
grouped and classified into units.

2. Departmentation
Departmentally organizing the activities - In this step, the manager tries to
combine and group similar and related activities into units or departments. This
organization of dividing the whole concern into independent units and departments is
called departmentation.

Once jobs are divided up through work specialization, those jobs need to be
combined together to coordinate common tasks. Departmentalization is the basis by
which jobs are grouped together. Jobs can be grouped in the following ways.

Departmentation refers to the grouping of jobs based on criteria that managers

believe help in the coordination and control of activities.

Departmentalization. This involves grouping jobs and employees based on duties,

skills, and experiences under the leadership of one (1) manager for each group. Often,
medium- to large-sized companies implement departmentalization (Neck et al., 2017).
Jobs may also be departmentalized in variety of ways (Robbins & Judge, 2018):

 Functional departmentalization – This involves grouping the employees based

on their functions or job roles. For instance, a retail company may have
marketing, accounting, human resources, and operations departments.

 Product/Service departmentalization – This involves dividing the employees

based on the product or service that they produce. For example, a
manufacturing company may be departmentalized into a group that produces
 refrigerators and a different group that produces washing machines.

 Geographical departmentalization – This involves grouping the employees

based on their respective location or territory. This is common in sales
wherein an agent is given a specific region to cover as his/her assignment on
selling the company’s products.

 Process departmentalization – This involves dividing the employees according

to the identified steps of processing a service or product. For example, in a
government agency, a client would go through different steps; each step is
handled by a different department.

 Customer departmentalization – This involves grouping the employees based

on the type of clients or customers they seek to cater to. This standardizes the
intended processes or resources to cater to the specific needs of a particular
group of clients. For example, a company may opt to divide their sales agents
and assigned a team to cater to clients working in a bank, and another team
to serve clients employed by malls or retail stores.
Departmentalization can be advantageous as supervision is easier since each
department is focused on accomplishing a set of related tasks. The use of shared
resources, such as people, materials, and equipment, can be maximized. It is also
easier for management to establish a standard performance gauge.

3. Chain of Command. This pertains to the unbroken flow of authority from the top level
of the organization down to the lowest-rank employees. Authority refers to the power to
implement orders that go along with the position in the organization. The principle of
unity of command is directly related to the chain of command, where an employee
should have only one (1) superior to report to and responsible for. But as time passes
by, business trends have developed and the concept of the chain of command has been
considered of less importance. Nowadays, organizations empower their employees to
make decisions and have designed job roles and cross-functional groups that would
involve multiple bosses. In these cases, the concept of chain of command is seen to be
less relevant (Robbins & Judge, 2018).
Co-ordination between authority and responsibility - Relationships are established
among various groups to enable smooth interaction toward the achievment of the
organizational goal. Each individual is made aware of his authority and he/she knows
whom they have to take orders from and to whom they are accountable and to whom
they have to report. A clear organizational structure is drawn and all the employees are
made aware of it.

4. Pattern of Authority
Classifying the authority - Once the departments are made, the manager likes to
classify the powers and its extent to the managers. This activity of giving a rank in order
to the managerial positions is called hierarchy. The top management is into formulation
of policies, the middle level management into departmental supervision and lower level
management into supervision of foremen. The clarification of authority help in bringing
efficiency in the running of a concern. This helps in achieving efficiency in the running of
a concern. This helps in avoiding wastage of time, money, effort, in avoidance of
duplication or overlapping of efforts and this helps in bringing smoothness in a
concern’s working.

This refers to the extent by which employees are authorized to decide on

organizational matters without the need to ask permission from members of higher
authority. The suitability of pattern of authority depends on the nature of companies
(Medina, 2011).

There are two (2) patterns to consider:

Centralized authority – In this pattern, the majority of decisions are made by the top-
level managers.
Decentralized authority – In this pattern, low-level employees are allowed to make
decisions concerning the organization.

Most companies are gearing toward decentralization because they become more
effective, productive, and successful as their employees become empowered.
5. Span of Control
This pertains to the number of employees for which a superior is responsible.
The span of control can either be narrow or wide.

 Narrow span of control – This happens when a superior only has a few
subordinates to deal with. This span of control allows the superior to develop
closer mentoring relationships with his/her subordinates. As the superior
becomes more hands-on, there is less delegation of authority. There is a
tendency to be strict with implementations as subordinates can be closely
monitored. Nonetheless, it allows the superior to have more time for
rewarding the behavior of subordinates (Medina, 2011).
Narrow Span of control
This indicates that there are more levels in the organization. Further results in the
relatively taller structure. As shown in Figure 2.
Advantages
Clarity
When a manager has fewer people to handle, he is in personal contact with each one of
them. He is clear about the roles & responsibilities of each.
Organized Structure
Things are pretty organized with regard to who has to do what, who reports to whom,
etc., when there are few people to handle.
Departmentisation
A business that requires different departments for different tasks can adopt this
structure. The benefit of specialization can be availed.
Disadvantages
Expensive
The salaries of managers are high. More managers lead to more remuneration
expenses.
Communication
Communication between managers becomes difficult. As they are at the same level,
ego clash & other issues persist.
Bureaucracy
As the levels increase, there is more bureaucracy as each decision passes through
every level of the organization. More people have access to key information.

According to Colquitt et al. (2017), researchers in their early writing assumed that
employees become more productive as they get involved in a narrow span of control.
On the other hand, the implication of this is that the organization would be required to
recruit more managers who would handle small groups, which would incur an increase
in labor costs.

 Wide span of control – This happens when a superior has many subordinates
to handle. In this span of control, employees are required to work with
minimum supervision. This also means that there is a high degree of
delegation of authority. The control over the employees is less strict. There
would be less time to reward the behavior of the subordinates (Medina,
2011). With this span of control, less number of managers would be hired.
This would mean a reduction in costs and overhead expenses.

Wide Span of Control

This indicates that there are fewer levels in the organization. Further results in a
relatively flatter structure. As shown in Figure 1.
Advantages
 Decision Making
It leads to quick decision-making. Due to fewer levels, fewer approvals are required.
Thus, management can respond to the issues faster.
 Bureaucracy
Due to lesser levels, bureaucracy is reduced. Hence a positive atmosphere prevails in
the organization.
 Development
The lower levels are prepared to become future managers as they report directly to
competent higher authorities.
  Coordination
Coordination becomes easy. As a number of people take orders from the same person, there is
less misunderstanding regarding who does what.
 Reduced Costs
Fewer management layers reduce the costs of compensation.
 Flexibility
The employees are not bifurcated into specific teams or sub-teams. They have to do all the
tasks together. This makes them flexible in the long run.
 Motivation
The manager feels motivated as he is in charge of many people. The employees feel motivated
when they work in larger groups; their social needs get satisfied well.

Disadvantages
 Training Managers
A manager has to be dynamic and flexible. He has to work under pressure of being
responsible for the work of many people. Sometimes this requires training. As a result,
time, energy, and money are invested in it.
 Technological Support
To handle larger teams, technology is a factor required for smooth coordination. This will be
discussed in detail in the factors of the Span of control below.
 Chaos
There are chances that there may be mismanagement or miscommunication in larger teams.
This may lead to chaos.
 Disputes
The more the people involved, the more will be the viewpoints. The perceptions do not match all
the time. The chances of disputes increase.
 OversighT
While handling such a large team, there is a fair chance of overseeing some issues or errors.

Decision-making would also be faster as authority is delegated among subordinates.

This is the reason why most companies apply a wide span of control in their
organizations (Robbins & Judge, 2018).
Formalization – This pertains to the degree by which standard rules and procedures are
established in the organization in order to manage behaviors and decisions (Neck et al.,
2017; Colquitt et al., 2017). It is an essential component in the control and coordination
within the organization. As strict rules and procedures are implemented, there would be
a better understanding of the purpose and ways things are done in the organization.
This would set the expectations for the employees to produce standard quality of
products and services (Neck et al., 2017).

Basic Organizational Designs

There are four basic organizational designs. These are the following:

1. Functional Design
2. Divisional Design
3. Hybrid Design
4. Matrix Design

1. Functional Design
An organization may be designed basically according to function. In organization with
functional design, employees are grouped together in separate departments on the
basis of common tasks, skills, or activities.
 Strengths Weakness
1. Efficient use of resources Slow decision making
2. In-depth skill development Less innovation
3. Clear career paths Unclear performance responsibility
4. Unity of direction; Limited management training
5. Enhanced coordination within function Poor coordination across functions

1. Efficient use of resources

Because individuals with common abilities and expertise are grouped by

duties performed, functional departments may increase operational efficiency. As a
result, each group of specialists may work autonomously, with management serving as
the point of contact between functional areas. This configuration allows for more
specialization.

2. In-depth skill development

 A functional organizational structure facilitates the training of employees
as it focuses on a limited set of skills. For example, personnel in the marketing
department are given training in marketing issues only.

3. Clear career paths

Segregating the workforce based on function clarifies organizational

accountability and job distribution. This reduces assignment duplication, which wastes
time and effort, and makes it simpler for management to send work to appropriate staff.

4. Unity of direction;

Employees within a functional organization structure have a unique skill

set that allows them to perform to a high standard within their individual departments.
This expertise leads to increased levels of productivity companywide as employees can
carry out their tasks effectively, with little supervision from their superiors

5. Enhanced coordination within function

Functional structures facilitate coordination and specialization as all the

employees working within a department are specialists in that area, making coordination
more straightforward.

1. Slow decision making

When a dilemma requires the involvement of more than one specialist,

there can be major delays in the decision-making process due to a lack of
communication and coordination between separate departments. Implementing a matrix
organizational structure can help mitigate these delays by improving inter-departmental
communication and fostering collaboration across departments.

2. Less innovation

Without experienced guidance and extra information from managers,

employees from individual departments may possess little knowledge of how their roles
relate to the business’s overall goals and objectives.
3. Unclear performance responsibility

In the long run, employees tend to feel bored and lose morale when their
work becomes monotonous. Furthermore, morale can be affected when management
changes procedures and modifies the work environment without taking input from
employees on the ground.

4. Limited management training

5. Poor coordination across functions

2. Divisional Design

A divisional structure is a common organizational framework that groups

business activities based on products, services, geographical locations, or markets.
Each division within this structure operates as a semi-autonomous entity equipped with
its own set of resources and functions.

 The Walt Disney Company: The famous entertainment conglomerate uses a

divisional organizational structure centered around its different business
segments, such as Walt Disney Parks, Experiences and Consumer Products and
Walt Disney Studios. This structure allows Disney to effectively manage its
diverse operations across various industries like entertainment, media, and
theme parks.

 McDonald’s Corporation: The fast food giant employs a divisional structure

primarily based on geographical regions, including the U.S. and international
markets. This approach allows McDonald’s to adapt its operations and marketing
to the unique needs of different local markets while maintaining a consistent
global brand.
 Strengths Weakness
1. Adaptation to unstable environment Inefficient use of resources
2. High customer satisfactory Low in-depth training for personnel
3. High task coordination Focus in on division objectives
4. Clear performance responsibility Loss of control
5. General management training Poor coordination across functions

1. Adaptation to unstable environment

Divisions can respond more quickly to market changes. Since they enjoy a high
degree of autonomy, they can make swift decisions without bureaucratic processes
slowing them down.

2. High customer satisfactory

3. High task coordination

4. Clear performance responsibility

5. General management training

1. Inefficient use of resources

Typically, each division has its own administrative functions – such as sales,
finance, and marketing – which can lead to inefficient use of resources and increased
costs.

2. Low in depth training for personnel

Although targeted talent attraction and retention have benefits within divisional
structures, they can limit talent mobility across the organization. Employees may find it
challenging to expand their careers outside their specific divisions, limiting their career
advancement opportunities.

3. Focus in on division objectives

It may be harder to create a unified company culture when there are different
divisions, especially those spread across multiple regions. As a result, it can negatively
impact the sense of a shared culture and values across the organization.

4. Loss of control

5. Poor coordination across functions

There is a risk of working in isolation, as well as limited communication across

divisions. This siloed approach can affect knowledge sharing, innovation, and
implementing best practices across the organization.

3. Hybrid Design

The hybrid design, also called the matrix structure, is a combination of divisional
units and functional departments.

Employees report to two bosses: one for their functional area (like marketing or
finance) and one for their product or project.
 Simultaneous coordination Slow response to
exceptional situations
Integration of goals with Conflict between
objectives headquartes and divisions
Efficient and highly Administrative Overhead
adaptable

 Benefits: Drives cross-disciplinary collaboration, shared expertise across the

organization, and innovation.

 Limitations: Often internally focused and requires clear governance to work.

Internal tensions in terms of conflicting priorities and accountability may arise.

4. Matrix Design

The matrix organizational structure integrates multiple types of organizational

frameworks, such as project management and functional management. It features both
a traditional hierarchy, where functional managers oversee employees, and project
managers who supervise employees from various departments. These managerial
systems intersect within a grid or matrix format.

This matrix environment is ideal for project-based organizations that execute

multiple projects simultaneously. To achieve this, they must assign each project to a
project manager who will be responsible for overseeing its execution and working
collaboratively with department managers and employees.
 To better illustrate how a matrix organization works, let’s compare a matrix
organizational structure example against a functional organizational chart, the most
commonly used structure.

The organizational chart below divides employees by their business department

such as product development, marketing, operations management and finance. It also
shows their corresponding manager, which in this case is a vice president (VP) position.

The matrix structure diagram below shows what this organization would look like
in a matrix environment. Now each of these business department employees will not
only report to its corresponding VP but also to a project manager who will be in charge
of specific projects.

This matrix environment is ideal for project-based organizations that execute

multiple projects simultaneously. To achieve this, they must assign each project to a
project manager who will be responsible for overseeing its execution and working
collaboratively with department managers and employees.

In a matrix organizational structure example like this, the project manager will
strive to get projects delivered on time, under budget and meeting quality standards,
while the main focus of department managers is to manage their teams’ workload,
achieve department-level goals, monitor employee performance and allocate resources
across projects.
 The matrix organizational structure is more complex than the hierarchical structure,
but it has many advantages. Some advantages of the matrix design include clear
project objectives, an efficient use of resources, free-flowing information, and training for
project managers.
1. Clear project objectives
The matrix organization design can ensure greater clarity on project objectives.
When your team reports their progress to both the project manager and the department
head, solidifying project goals is critical. When the project manager feels supported by
other members of senior management, project organization becomes a priority.
Scenario: Let’s say your team is working on an app development project. Because
you’re using a matrix structure, the IT developers report to you as the project manager
and the IT department head. The project objective is to create a keyword search app for
marketers to use on-the-go. When the IT department head and the project manager
communicate a clear project objective to the IT developers, the app gets developed
quicker.
2. Efficient use of resources
The matrix structure allows for an efficient use of resources because teams include
specialists from various departments. This reduces overhead costs and the amount of
time needed to complete a project. In a hierarchical structure where every team reports
to only one manager, there are fewer managers per team. These teams may require
more time to create one project deliverable because they don’t have members with
different specialities.
Scenario: The team creating the keyword research app may involve specialists from the
IT department, the finance department, and the marketing department. When these
team members successfully report to their department heads and their project manager,
they increase team productivity, save time, and get the project done more efficiently.
The matrix team reduces costs because without a combined group of specialists,
companies would have to restructure teams and potentially hire new team members
every time a new product or service is developed.
3. Free-flowing information
 Working in a matrix structure creates a free-flow of information between teams
because the team reports to multiple leaders. While team members must remember to
relay information in a hierarchical system, the matrix makes information flow a
requirement. Reporting information to multiple leaders may seem tedious, but with the
right project management system in place, it requires little or no extra work from team
members.
Scenario: If the development team on the keyword research app only reported to the
project manager, information about a bug fix could get lost. However, relaying
information to the IT department head is easy to remember when it’s part of the matrix
process.
4. Training for project managers
The unique structure of the matrix organization gives project managers a large
amount of responsibility. Project managers must lead their team through the project
lifecycle. This structure challenges project managers and trains those who want to be
cross-functional managers in other departments.
Scenario: During this project, your team encounters some bug fixes and a delay in the
project timeline. As the project manager, it’s your responsibility to work with the IT
department head to successfully handle all issues. In doing so, you discover a personal
interest in IT—and a potential career opportunity in the future.
5. Team retention
The matrix organization has a great track record from team member retention
because when specialists are placed together, the product team stays strong. These
team members work under functional department heads and are then assigned to
project managers. Specialists often enjoy working together, and it can improve project
performance.
Scenario: During the keyword research app project, the project team consists of various
IT, marketing, and finance specialists because these team members understand the ins
and outs of creating an application for phone users. This team of specialists will likely
stick together to work on many projects in the future.
Disadvantages of the matrix organization structure
Like the hierarchical reporting structure, the matrix organization also has
disadvantages. Most of the disadvantages stem from this structure being complex.
While complex designs can have benefits when they work, they also have the potential
to cause conflict and make things messy.
1. Complex reporting style
The complexity of the matrix organization can be a disadvantage because teams
may have trouble knowing who to report to and when. While the intention of the matrix
is to benefit teams, it may complicate projects and muddy the overall process.
Solution: The best way to prevent a reporting failure is to ensure every member of the
matrix understands who to report to and how to do so. Using an intuitive project
management platform that facilitates cross-team work can make the matrix structure
less complex.
2. Slow response time
The complexity of the matrix can lead to slow response times, which can delay
projects. Slow response times come from the need to report information to multiple
people. Having more people involved is a good thing, but the downside is that relaying
information to more people takes time.
Solution: Using a project management system will solve the issue of slow response
times with the matrix structure. As a central source of truth, Asana can prevent duplicate
work and increase visibility among teams and leadership.
3. Conflicting guidance
Conflicting guidance occurs if the project manager and department head aren’t on
the same page. While the matrix structure is meant to encourage teamwork, it may do
the opposite depending on the personalities involved.
Solution: To prevent conflicting guidance, establish a system that allows managers to
interact directly with one another. Team members can avoid feeling like they’re caught
in the middle if managers are aligned on project goals and stay on the same page.
4. Potential friction
The main difference between the matrix and hierarchical structure is that team
members report to two managers in a matrix structure. This makes the matrix
organization more complex and puts more responsibility on team members. Having two
managers can give team members more feedback and guidance, but it can also result
in friction.
Solution: To prevent potential friction, it’s essential for the department head and the
project manager to communicate. It shouldn’t be the team’s role to choose between
managers when conflict occurs. Whether in person or through virtual systems,
managers can prevent friction by setting clear project objectives from day one and
working together to create a successful product.
5. Juggling priorities
It can be difficult for team members to juggle priorities in a matrix structure if
managers don’t work together. If the department head believes their tasks are most
important and the project manager thinks the same, the team may have trouble
determining which manager’s guidance to prioritize.
Solution: When team members have trouble prioritizing tasks because of
miscommunication among managers, it’s up to the managers to discuss the tasks of the
team and determine what should be done first. Most issues that have the potential to
arise from the matrix structure can be solved with strong collaboration, communication,
and clarity across teams.
Improve the matrix

Divisional structure Functional structure

Focus An organizational structure A structure organized by
grouped by product, job function or activities
service, market, or such as marketing,
geographic region. finance, communications,
and IT.
Hierarchy Decentralized hierarchical Clear and established
structure, with divisional hierarchy.
managers.
Authority and control By divisional management. By the top management of
 each function.
Communication Horizontal channels across Vertical channels within
divisions. each function.
Adaptability Agile and responsive to Slower to adapt to market
changes in the market. shifts and changes.
Sustainability Most suitable for Best for companies with
companies with diverse standardized products and
products and services and services and stable
flexible environments. environments

Trends in Organizational Structure

What trends are influencing the way businesses organize?

To improve organizational performance and achieve long-term objectives, some

organizations seek to reengineer their business processes or adopt new technologies
that open up a variety of organizational design options, such as virtual corporations and
virtual teams. Other trends that have strong footholds in today’s organizations include
outsourcing and managing global businesses.

1. Reengineering Organizational Structure

Periodically, all businesses must reevaluate the way they do business. This
includes assessing the effectiveness of the organizational structure. To meet the
formidable challenges of the future, companies are increasingly turning to reengineering
—the complete redesign of business structures and processes in order to improve
operations. An even simpler definition of reengineering is “starting over.” In effect, top
management asks, “If we were a new company, how would we run this place?” The
purpose of reengineering is to identify and abandon the outdated rules and fundamental
assumptions that guide current business operations. Every company has many formal
and informal rules, based on assumptions about technology, people, and organizational
goals, that no longer hold. Thus, the goal of reengineering is to redesign business
processes to achieve improvements in cost control, product quality, customer service,
and speed. The reengineering process should result in a more efficient and effective
organizational structure that is better suited to the current (and future) competitive
climate of the industry.

2. The Virtual Corporation

One of the biggest challenges for companies today is adapting to the technological
changes that are affecting all industries. Organizations are struggling to find new
organizational structures that will help them transform information technology into a
competitive advantage. One alternative that is becoming increasingly prevalent is
the virtual corporation, which is a network of independent companies (suppliers,
customers, even competitors) linked by information technology to share skills, costs,
and access to one another’s markets. This network structure allows companies to come
together quickly to exploit rapidly changing opportunities. The key attributes of a virtual
corporation are:
 Technology. Information technology helps geographically distant companies form
alliances and work together.
 Opportunism. Alliances are less permanent, less formal, and more opportunistic
than in traditional partnerships.
 Excellence. Each partner brings its core competencies to the alliance, so it is
possible to create an organization with higher quality in every functional area and
increase competitive advantage.
 Trust. The network structure makes companies more reliant on each other and
forces them to strengthen relationships with partners.
 No borders. This structure expands the traditional boundaries of an organization.

In the concept’s purest form, each company that links up with others to create a virtual
corporation is stripped to its essence. Ideally, the virtual corporation has neither a
central office nor an organization chart, no hierarchy, and no vertical integration. It
contributes to an alliance only its core competencies, or key capabilities. It mixes and
matches what it does best with the core competencies of other companies and
entrepreneurs. For example, a manufacturer would only manufacture, while relying on a
product design firm to decide what to make and a marketing company to sell the end
result.

Although firms that are purely virtual organizations are still relatively scarce, many
companies are embracing several characteristics of the virtual structure. One example
is Cisco Systems. Cisco uses many manufacturing plants to produce its products, but
the company owns none of them. In fact, Cisco now relies on contract manufacturers for
all of its manufacturing needs. Human hands probably touch fewer than 10 percent of all
customer orders, with fewer than half of all orders processed by a Cisco employee. To
the average customer, the interdependency of Cisco’s suppliers and inventory systems
makes it look like one huge, seamless company.

3. Virtual Teams

Technology is also enabling corporations to create virtual work teams.

Geography is no longer a limitation when employees are considered for a work team.
Virtual teams mean reduced travel time and costs, reduced relocation expenses, and
utilization of specialized talent regardless of an employee’s location.

When managers need to staff a project, all they need to do is make a list of
required skills and a general list of employees who possess those skills. When the pool
of employees is known, the manager simply chooses the best mix of people and creates
the virtual team. Special challenges of virtual teams include keeping team members
focused, motivated, and communicating positively despite their locations. If feasible, at
least one face-to-face meeting during the early stages of team formation will help with
these potential problems.