Ot CH-3
Ot CH-3
Fundamentals of Organization
Structure
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Contents of chapter
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What is Organizational Structure?
Definition:-
• Organizational structure is a
system used to define a hierarchy
within an organization.
• It identifies each job, its function
and where it reports to within the
organization.
• This structure is developed to
establish how an organization
operates and assists an
organization in obtaining its goals
to allow for future growth.
Key components in the definition of organization structure
Pros Cons
• Clear communication and • Dictatorship interms of
chain of command. Leadership.
• Cost reduction i.e • Work delays due to
administrative cost. dependency on management.
• Fast implementation of of
• Employees feel disconnected
decisions.
in result reduce work
• Improved work quality and
efficiency.
reduction in task replication.
• Lack of authority in
managers.
Two approaches of Organizational structures
Decentralized Structure
– In such type of organizations, day-to-day tasks and the decision-
making processes are delegated to the supervisors at the middle and
lower level by the top management for fast and effective decisions and
to improve efficiency.
– By letting the middle and lower level executives jump in the process
of decision-making, the top management can focus on other major
decisions.
– It distributes authority and decision making power at lower levels
which might include departments, groups, or business units.
– This also increases the responsibility and accountability of the
employees.
Pros and cons of Decentralized Structure
Pros Cons
• Better customer service. • Difficult coordination.
• Better staff motivation. • Expensive process.
• Quick decisions. • Unnecessary cost increase
• Effective communication. due to benefits by external
• Improved supervision and factors.
control.
by Gizaw B.
Organization chart
The organization chart is the visual representation of a whole set of
underlying activities and processes in an organization.
by Berhanu T
Vertical Organization Designed for Efficiency:-
Vertical structure is dominant :-
Specialized tasks
Strict hierarchy,
Many rules Vertical communication and reporting systems
Few teams, task forces, or integrators
Centralized decision making
Horizontal Information Sharing
Horizontal linkage refers to communication and coordination
horizontally across organizational departments.
The following devices are structural alternatives that can
improve horizontal coordination and information flow.
Each device enables people to exchange information.
Information Systems:
A significant method of providing horizontal linkage in
today’s organizations is the use of cross-functional information
systems.
Computerized information systems enable managers or frontline
workers throughout the organization to routinely exchange
information about problems, opportunities, activities, or decision.
Direct Contact
– A higher level of horizontal linkage is direct contact between managers
or employees affected by a problem.
Task Forces:
– Liaison roles usually link only two departments.
– When linkage involves several departments, a more complex device
such as a task force is required.
– A task force is a temporary committee composed of representatives
from each organizational unit affected by a problem.
– Each member represents the interest of a department or division and
can carry information from the meeting back to that department.
– Typically, they are disbanded after their tasks are accomplished.
by Berhanu T
Horizontal Organization Designed for Learning
by Berhanu T
Organization design alternatives
•A company can be organized in a number of ways.
All engineers are located in the engineering department, and the vice
president of engineering is responsible for all engineering activities.
by Berhanu T
Disadvantages:-
Duplication of effort.
The necessity of having a relatively large number of
managers.
It poses serious problems of coordination and control.
It may create gaps between head offices and branch
offices.
It is costly to host many geographically dispersed
departments. by Berhanu T
Matrix structure:
With a matrix structure, the company is
organized around teams assembled for
specific tasks.
Team members usually report to more than one
person the team leader, and the supervisor for
the team member’s functional area.
Sometimes, an organization’s structure needs to
be multi-focused in that both product and
function or product and geography are
emphasized at the same time
by Berhanu T
Con`t-----
by Berhanu T
•In a matrix organization structure, every employee has
two superiors.
by Berhanu T
Con`t----
Both dimensions of structure are permanent and balanced, with
power held equally by both functional and a project manager.
Matrix structure is suitable when organizational tasks are uncertain,
complex and highly interdependent or when an organization has
to cope with more than one function or project.
In large organizations employees from various functional
departments are from time to time assigned to one or more projects.
On completion of the project these employees revert back to their
respective departments until the next assignment to a project
by Berhanu T
Strengths
Achieves coordination necessary to meet dual
demands from customers
Flexible sharing of human resources across
products
Suited to complex decisions and frequent
changes in unstable environment
P Best in medium-sized organizations with
multiple products
Best in medium-sized organizations with
multiple products
by Berhanu T
Weaknesses
Causes participants to experience dual authority, which can
be frustrating and confusing
Means participants need good interpersonal skills and
extensive training
Is time consuming; involves frequent meetings and conflict
resolution sessions
Will not work unless participants understand it.
Requires great effort to maintain power balance.
Best in medium-sized organizations with multiple products
by Berhanu T
Horizontal structure
A recent approach to organizing is the horizontal
structure, which organizes employees around core
processes.
Organizations typically shift toward a horizontal
structure during a procedure called reengineering.
Reengineering, or business process reengineering,
basically means the redesign of a vertical organization
along its horizontal workflows and processes.
A process refers to an organized group of related tasks
and activities that work together to transform inputs
into outputs that create value for customers.
by Berhanu T
Con`t-----
Re engineering changes the way managers think
about how work is done.
Rather than focusing on narrow jobs structured into
distinct functional departments, they emphasize core
processes that cut horizontally across the organization
and involve teams of employees working together to
serve customers.
by Berhanu T
Strengths and Weaknesses of Horizontal Structure
Strengths:
by Berhanu T