Management: Organization Structure

Management
Module 8:
Organization Structure
Study Question 1: What is organizing as a
management function?
 Organizing and organization structure

 Organizing
The process of arranging people and other
resources to work together to accomplish a
goal.
 Organization structure
 The system of tasks, workflows, reporting
relationships, and communication channels
that link together diverse individuals and
groups.
Study Question 2: What are the traditional types of
organization structures?
 Functional structures
 People with similar skills and performing
similar tasks are grouped together into
formal work units.
 Members work in their functional areas of
expertise.
 The authority is usually centralized in one
person
 An organization with functional structure is
commonly described as a flat organization,
with everyone reporting to one senior
executive.
Figure 6.2 Functional structures in a business, branch bank,
and community hospital.
 Potential advantages of functional

structures:
 Specialization - The functional organizational
structure helps in achieving the benefits of
specialization of work. Every functional in charge
is an expert in his area and can help the
subordinate to perform better in his area.
 Production of Workload - It reduces the
burden on the top executives. There is pointed
supervision in the enterprise, and every function
in charge looks after his functional area only.
 Potential advantages of functional

structures:
 Executive Development - A functional
manager is required to have expertise in one
function only.
 More Efficiency - Thereby bringing expertise
in performance and reduction in costs.
 Better Control - The expert knowledge of
the functional managers facilitates better
control and supervision in the Enterprise.
 Potential disadvantages of functional

structures:
 Limited Perspective - A functional manager
tends to create boundaries around himself
and thinks only in terms of his own
department rather than the whole
enterprise.
 Delay in Decision Making - There is a
general lack of coordination among the
functional executives which causes the delay
in decision making.
 Potential disadvantages of
functional structures:
 Functional Silos – Employees may
develop an extreme attachment to their
own group that impede coordination
within organization.
 Divisional structures
 Group together people who work on the
same product or process, serve similar
customers, and/or are located in the
same area or geographical region.
 Different types of Divisional

Structure
 Product structure
 Geographical structure
 Customer structure
 Process structure
Figure 6.3 Divisional structures based on product,
geography, customer, and process.
 Potential advantages of divisional

structures:
 Improved coordination.
 Clear points of responsibility.
 Expertise focused on specific
customers, products, and regions.
 Potential disadvantages of divisional

structures:
 Duplication of resources and efforts
across divisions.
 Conflict on degree of decision-making
 Lack of flexibility in job transfer
 Matrix structure
 Combines functional and divisional structures
to gain advantages and minimize
disadvantages of each.
 Used in:
 Manufacturing
 Service industries
 Professional fields
 Non-profit sector
 Multi-national corporations
Figure 6.4 Matrix structure in a small multi-project
business firm.
 Potential advantages of matrix

structures:
 Promotes the development of teams within
projects or program
 Better communication
 Greater flexibility among members
 It allows sharing of skills of the specialist
among the different project groups.
 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.
 The problem of “who reports to whom” may
escalate leading to conflict.
Study Question 3: What are the newer types of
 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 composed of
members from different functional departments.
 Project teams are convened for a specific task or
project and disbanded once completed.
 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.
 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.
 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.
Figure 6.5 A network structure for a Web-based
retail business.
 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.
 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.
 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.
 Informal structures 
 A “shadow” organization made up of the
unofficial, but often critical, working
relationships between organization members.
 Potential advantages of informal structures:
 Helping people accomplish their work.
 Overcoming limits of formal structure.
 Gaining access to interpersonal networks.
 Informal learning.

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Management

 Organizing and organization structure

 Potential advantages of functional

 Potential advantages of functional

 Potential disadvantages of functional

 Different types of Divisional

 Potential advantages of divisional

 Potential disadvantages of divisional

 Potential advantages of matrix

 Potential disadvantages of matrix

 Potential advantages of team

 Potential disadvantages of team

 Potential advantages of network

 Potential disadvantages of network

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