Module : 7

Asst. Prof.Subject
Harshil Panchal
: P.E.M.
Topic : (B) Organizational Structure
 Organization

 Organizational structure aligns and relates

parts of an organization, so it can achieve its
maximum performance. The structure
chosen affects an organization's success in
carrying out its strategy and objectives.
 Should understand the characteristics,
benefits and limitations of various
organizational structures to assist in this
strategic alignment.
 Background

 Organizational structure is the method by which work flows

through an organization. It allows groups to work together within
their individual functions to manage tasks.
 Organizational structures tend to be more formalized—with
employees grouped by function (such as finance or operations),
region or product line. Less traditional structures are more loosely
woven and flexible, with the ability to respond quickly to changing
business environments.
 Organizational structures have evolved since the 1800s. In the
Industrial Revolution, individuals were organized to add parts to
the manufacture of the product moving down the assembly line.
Organizational Diagram
 Importance Of Organization

 Efficient Administration
 Resource Optimization
 Benefits Specialization
 Promotes Effective Communication
 Creates Transparency
 Expansion and Growth
 Types Of Organization

 Line Organization
 Functional Organization.
 Line And Staff Organization.
 Line Organization


 Line Organization

 Line organization is the basic framework for the whole

organization. It represents a direct vertical relationship
through which authority flows.
 This is the simplest and oldest, known as chain of
command or scalar principle.
 The authority flows from top to the lower levels. Every
person is in charge of all the persons under him and
he himself is accountable to his superior only.
 Other Names : Departmental Organization, Scaler
Organization, Vertical Organization.
Line Organization (Formulation)
Pros and Cons of Line Type of Organization
 Staff Organization

 Under this form of organization, the whole

job of management is divided according to
the type of function involved.
 Hence it is known as functional organization.
 Every person has to perform a special task
under this organization. Therefore, it is
called specialized or functional organization.
Staff Organization (Formation)
Staff Organization (Formation)
 Line and Staff Organization

A) Definition
 To Preserve the precision and simplicity of line organization and at
the same time to take advantage of the specialization under
functional organization this type of organization is formed.

B) Formation
 The characteristic feature of line and staff organization that line
officials do managerial work as usual, but they are assisted by the
experts.
 This Group of experts is known as “employees”
Line and Staff Organization
 Line and Staff Organization

A)Functions Of the Staff

 The Purchase department renders services also; the finance
department does the function of controlling also; the
planning and controlling departments carry out the function
of achieving co-ordination among different departments.

B) Personnel Staff
 When a manager is provided with an assistant to give advise
and help in carrying out his activities, he is called personal
staff.
 There are two types of personnel staff : either it gives advise
or it assists in routine work.
Line and Staff Organization
 Conflicts : Causes

 Due To Position and types of authority

 Differences in viewpoint
 Poor Human Relations
 Overlapping Authority and responsibility
 Misuse of staff personnel by top
management
 Conflicts : Remedies

 Integrate line and staff personnel into a work

team.
 Areas Of Responsibilities and authority.
 By Holding both line and staff personnel are
accountable for the results of their own
activities.
 Departmentalisation

 Real Task In Designing an organization structure

is to identify all the activities of the organization
and group them Properly, This Process of
grouping the activities is commonly known as
departmentation.
 It is the process of grouping activities, and
delegating activities to managers to supervise
the resulting divisions and to guide the staff,
giving the managers responsibility for the
performance of the divisions
Why Departmentalisation Is
Required ?

 It Helps an organization take advantage of functional

specialization
 Defines the role of each individual and helps him/her
know the part he/she is to play in total activities of the
company.
 It facilitates control, coordination and communication.
 Provides the necessary platform to build loyalty among
members of the organisation.
 It helps a manager identify and locate sources of skills,
information and competence to take certain vital
managerial decisions.
 Four Major Structural
alternatives Of Departmentation

1. Functional Structure.
2. Divisional Structure.
3. Hybrid Structure.
4. Matrix Structure.
Functional CEO
Structure

Director Director
Operations HP.
Director Director
Marketing Sourcing
 Divisional Structure

 Divisional Structure is a type of departmentalization in which positions are grouped

according to similarity of products, services or markets.
 The Process of dividing large functional pyramids into smaller, more flexible,
administrative units is called divisionalization.
 A Divisional structure creates a set of essentially autonomous small companies in
terms of products, services or markets.
 Its Is Designed To promote independent and self-contained units.

 There Are Three Major Forms Of Divisional Structure

1. Product Division
2. Geographic division
3. Customer Division

 The Form Of Divisional Structure chosen depends on the rationale for

divisionalization.
Product Divisions
Geographic Divisions
Customer Divisions

• Jt. (Joint)
• SGM (Senior General Manager)
• GM ( General Manager)
Hybrid Structure
Matrix Structure
 Span Of Control

 The span of control in management suggests estimating the optimum

number of subordinates managed by a single supervisor.
 It is a primary factor that determines the shape of the organization. It
involves all the management activities in the business than just supervision
and control.
 Delegation of such activities would leave managers free to handle key
strategic issues.
 The Number of subordinates a manager has to supervise has direct bearing
oil the degree to which managers can interact with and supervise
subordinates.
 The Span of control refers to the number of subordinates a superior can
supervise efficiently and effectively.
 The Span Of Control is a very important principle that emphasizes the need
for coordination among the subordinates working under a particular
manager.
Tall or Narrow Structure
 Tall or Narrow Structure

 Having many levels within an organization has some disadvantages.

 Firstly, as the number of levels increase, the effort and expenditure
involved in managing them also increases. Extra costs are incurred
oil hiring additional managers and staff for their assistance, and for
coordinating departmental activities.
 These costs are referred to as overheads and are a burden to the
organization. Thus, having a large number of levels is an expensive
affair.
 The second disadvantage of a tall structure is that communication
gets unduly complicated. It is much more difficult to communicate
the objectives, policies, plans and procedures in organizations with a
tall structure as compared to the organizations with a flat structure.
 Tall or Narrow Structure

 This is because of omission and misinterpretation of

messages while they are being transmitted from one level
to the other levels of the organization.
 The presence of a number of levels dilutes the
information as it passes from the source to the receiver.
Thus different levels sometimes act as 'communication
filters.’
 Finally, in an organization with a tall structure, numerous
departments and levels make the planning and controlling
tasks complicated. A plan made at the top level may
appear to be definite and complete, but as the plan is
subdivided at lower levels, it may lose its clarity.
 Tall or Narrow Structure

 The controlling task also becomes difficult due to additional levels

and managers.
 Due to these disadvantages, many organizations opt for
downsizing. According to Bartol and Martin, "Downsizing is the
process of significantly reducing the layers of middle
management, increasing the span of control, and shrinking the
size of the workforce for purposes of improving its efficiency and
effectiveness. Another term which is synonymously used with
downsizing is "restructuring".
 Restructuring is the process of making a major change in the
organizational structure that often involves reducing management
levels and possibly changing some major components of the
organization through divestiture and/or acquisition.“
Flat or Wide Structure
 Flat or Wide Structure

 A flat structure has a wide span of control and fewer hierarchical

levels as shown in Figure. The classical school of management
emphasized the need to specify the number of subordinates for
an organization to have an effective span of management.
 The operational management theorists, on the other hand, are
of the opinion that it is not possible to determine a specific
number of subordinates that a manager can effectively
supervise as there are too many underlying variables in any
management situation.
 While interacting with his subordinates, a manager should
therefore, identify those aspects that consume a majority of his
time. This would help him to work out solutions to reduce these
time pressures and determine the best span of management.
Also, it will enable him to extend his span of management
without destroying effective supervision.
 Flat or Wide Structure

 In Flat Structure, tasks are highly inter-related.

As a result, control and coordination are
negatively affected.
 Nowadays, the span of management is
primarily decided by the environment in which
the subordinates are being supervised.
 Some of the factors that determine an
organization’s span of control are the amount
of span time spent by the supervisor with his
or her subordinates, the flow of
communication in the organization, the
capability of the supervisor, etc.
 Flat or Wide Structure
 A Poor Span Poses problems such as,

1. Over Supervision
2. Delay In Decisions
3. Problems In Communication
4. Decreased levels of initiative an morale
5. Less opportunity for responsibility and
development
6. Higher Costs
 Formal v/s Informal
Organization

A) Formal Organization : A Formal Organization is

a group of people working together cooperatively,
under authority, towards goals that mutually
benefit the participants and the organization.

B) Informal Organization : An informal

Organization is a network of personal and social
relations not established or required by the
formal organization but arising spontaneously as
people associate with one another.
 Differences Between formal
and informal Organizations
Formal Basis of Informal
Organisation Comparison Organization
Official General Nature Unofficial

Authority and Major Concepts Power and politics

Responsibility

Position Primary Focus Person

Delegated By Source of leader Given by group

Management power

Rules Guidelines for Norms

behaviour
Reward and Sources of control Sanctions
penalties
Formal And Informal
Organization
Formal v/s Informal
Organization Model
 Formal v/s Informal
Organization Model

 Even As the formal organization grows to an immense size, informal groups tend to remain
small and stay restricted to personal relationships.
 The Emergence of informal organizations within a formal framework is a natural process.

 Three Behavioural variables have been found to influence such a Process

1. Employees may behave in a manner different from the one

specified b.
2. Employees often interact with different people who posses
different maturity levels and attitude and they tend to associate
with people who share similar views, such an affiliation need not
be affected by their normal organizational positions.
3. The Set of attributes, beliefs and values that some workers hold
call be very different from the organization expects of them. Such
Workers may form an informal group to share their common
attitudes, beliefs etc.