ORGANIZATION STRUCTURE

CEPB323 Project Management & Construction

Mr Mohd Zakwan Ramli
ORGANIZATION STRUCTURE & CHART

Levels/hierarchy Activities/work performed

An organization chart illustrates: by each personnel

Reporting structure Positions (departments)

authority

Organization
structure
Differentiation Integration
ORGANIZATION STRUCTURE & CHART (CONT.)

 Differentiation
 means that the organization is
comprised of many different
organizational units that work on
different kinds of tasks, using
different skills and work methods
and procedures.
 There is differentiation in an
organization due to job
specialization and the division of
labour to do specific tasks that has
been subdivided from bigger tasks.

Job specialisation

Division of labour
ORGANIZATION STRUCTURE & CHART (CONT.)

 Integration
 is a process in which differentiated units in an organization work together and coordinate their efforts
to achieve the organizational goals.
 Any job activity in the organization that has a linkage between different units in the organization is said
to perform an integrative function.
 example when there is a problem about the foundation of a machine for a factory, the construction
engineer who has to make a decision whether to approve the contractor’s work may need to consult
the structural design engineer who designed the foundation as well as the mechanical engineer who
designed the machine. The need for, degree of and effort for integration would be greater for a more
highly differentiated organization and vice versa.
 Coordination is “the procedures that link the various parts of an organization for the purpose of
achieving the organization’s overall mission.
 THE VERTICAL STRUCTURE

Hierarchal levels

understand certain relevant issues such as reporting relationships, authority and responsibility.

Authority Span of controls Delegation

• Authority is the legitimate right
to make decisions and to tell
and instruct other people
what to do.
• person at a higher position in
the organization structure has
a relatively higher authority.
• Board of directors
• CEO
• Top management
team
• Span of control refers to the
number of subordinates who
report directly to a manager.
• A tall organization structure -
longer time in communication
and decision making.
• A wide organization structure -
faster communication and
decision making.
• Example – figure 2
and figure 3
• is the assignment of new or
additional responsibilities to a
subordinate who are positioned
at a lower level in the
organization.
• Responsibility, authority,
accountability – must be given to
subordinates.
• Figure 4 – steps in
effective delegation
 THE VERTICAL STRUCTURE (CONT.) Span of controls

 The optimal span of control would

maximize effectiveness because:
 maintain good control over
subordinates.
 It is not too narrow such that it
leads to over-control with an
excessive number of managers
overseeing a small number of
subordinates.

 The span of control should be

wider when:
 The work is clearly defined
 Subordinates are highly trained
and have access to information.
 The manager is highly capable
and supportive.
 Subordinates prefer autonomy to
close supervisory control.
 Jobs are similar.
THE VERTICAL STRUCTURE (CONT.)
THE HORIZONTAL STRUCTURE

The horizontal differentiation of an organization is very much closely related to the vertical
differentiation since the elements work simultaneously. Also known as departmentalization.

Line departments
• are units in the organization that deal directly with the
organization’s principal activities to produce the primary
goods and services to sell to their customers.
Staff departments
• are units in the organization that provide specialized services to
support line departments’ activities and their existence is due to
the existence of the line departments i.e. there is no staff
departments if there is no line departments.

Matrix 3 basic approaches to Functional

organization. departmentalization organization.

Divisional
organization.
THE HORIZONTAL STRUCTURE (CONT.)

 Functional organization
 has departmentalization around specialized activities, business functions or based on the nature of the
activities, such as production, marketing, human resources, etc.
 However functional organizations that are highly differentiated may face difficulty of coordination
across functions.
 potential advantages for a functional organization:
 When people with similar skills are grouped, more efficient equipment can be purchased and discounts
 Monitoring of the environment is more efficient.
 Performance standards are better maintained.
 People have greater opportunity for specialized training and in-depth skill development.
 Technical specialists are relatively free from administrative work
 Decision making and lines of communication are simple and clearly understood
THE HORIZONTAL STRUCTURE (CONT.)

 Functional organization (cont.)

 potential disadvantages for a functional organization:
 People may be only concern about their own functional tasks and functional department rather than about the
company as a whole.
 Executives and managers may not acquire knowledge and expertise of other areas of the business and in the
organization.
 employees may face challenges to become managers at other departments in the organization in the future. It
would also be a problem for them to change jobs to avoid boredom because of doing the same job for many
years.
THE HORIZONTAL STRUCTURE (CONT.)

 Divisional organization
 has departmentalization based on product, customers, or geographic regions.
 The organization groups all functions into one division and all divisions have the same duplicated
functions.
 each division has its own operations, marketing and finance departments.
 This would enable each division to function as a separate business unit or profit center to work more or
less autonomously to achieve the goals of the entire organization.
 It is also more flexible compared to functional structure and is therefore able to adapt rapidly to
change particularly in an unstable environment.
THE HORIZONTAL STRUCTURE (CONT.)
 Divisional organization (cont.)
Product organization
• all functions that are
needed for a particular
product are organized
Types of divisional
under one product
manager and in one
division.
• The product manager
would have managers in
charge of each function
reporting to him.
Customer and geographical
organization
• all functions that are needed
for a particular customer
group or geographic region
organization are organized under one
manager and in one division.
• The manager would have
functional managers
reporting to him.
• Examples of regional divisions
for Avon, a cosmetic product
company are North America,
Western Europe, Latin
America, Central and Eastern
Europe, and Asia-Pacific
regions.
THE HORIZONTAL STRUCTURE (CONT.)
 Divisional organization (cont.)
THE HORIZONTAL STRUCTURE (CONT.)
 Divisional organization (cont.)
 Advantages of product organization:  Disadvantages of product organization:
 Information needs are managed more  difficult to coordinate across product lines
easily. Less information is required because and divisions.
people work closely on one product and
 Although managers learn to become
need not worry about other products.
generalists, they may not acquire the
 People have a full-time commitment to a depth of functional expertise that develops
particular product line. in the functional structure.
 Task responsibilities are clear; When things  Duplication of functions and activities
go wrong in a functional organization, across many product divisions is expensive.
functional managers can blame the other
 Top management may not have control
departments.
over decision making because decision
 People receive broader training. Because making is decentralized to the individual
they need a wide variety of skills to produce division managers.
the particular products.
 Advantage of customer and geographical
organization structure:
 The organization would be able to focus on
customer needs and provide faster and
better service.
 THE HORIZONTAL STRUCTURE (CONT.)
 Matrix organization
 is a hybrid of functional and divisional organization.
 It has more than one reporting relationship in which some personnel and manager report to two or
more superiors who are functional manager and product / project manager.
 advantages of the matrix organization structure:
 Key resources are shared across several important programs or
products.
 Communication is fostered and more effective and efficient
because different groups would depend on each other.
 Decision making is decentralized at a lower level in the
organization where information is processed properly and
relevant knowledge is applied by the executives and
managers who are directly facing the issues or problems.
 Better responsiveness to customer needs due to the above
advantages.
 Benefit of creative ideas due to cross-functional work.
 Dual career development is facilitated because executives
and managers have the opportunity to work in a functional
capacity and for a project or product related tasks.
 disadvantages of the matrix organization
structure:
 violates the unity-of-command principle
(report to one superior) that may cause a
lot of communication and management
problems.
 Confusion and conflict can arise because
employees do not have a single superior
to whom they feel they are responsible to.
 responsibilities may be unclear, there may
be competing priorities, and
accountability may be difficult to define.
 may encourage managers who share
subordinates to jockey for power and
may instruct the subordinates to give
priority only to his project.
THE HORIZONTAL STRUCTURE (CONT.)
 Matrix organization (cont.)