Reinventing The Organisation

REINVENTING THE ORGANISATION: NEED OF THE HOUR
“REINVENTING THE ORGANISATION: NEED OF THE HOUR”
Contributors: Members of Group 7

Name Roll Number
Riya Goel 1474
Yuvika Puri 1445
Harshit Garg 1479
Shruti Rastogi 1480
Shivam Aggarwal 1483
Palak Raina 1555
Nitish Gaba 1553
Mentor: Dr. Poonam Sethi

(Associate Professor, Hindu College)
Submitted as a part of IA for the paper of HRM
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CONTENT
S. No. Topic Page No.

1. Abstract 3
2. Introduction 4
3. Research Methodology 7
4. Data Collection 8
5. Findings & Conclusion 37
6. Future recommendations 49
7. Bibliography 50
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ABSTRACT
This research paper aims at conceptualising the functioning of organisations in modern era. The purpose is to
provide a flexible solution to the problems that are faced by organisations while structuring and functioning
themselves. It also focuses on how the 6 key elements i.e., work specialisation, departmentalisation, chain of
command, span of control, centralisation and decentralisation, and formalisation.
The study employed two methods: firstly, qualitative method in which we used existing data in order to gain a
better insight into the possibilities for improvement of the organisational structure. Secondly, quantitative method
in which we conducted survey with the help of a questionnaire. In this we generally targeted HR, Managerial
employee, Non-Managerial Employee and Interns.
After doing the qualitative and quantitative research, we found out that in the pre and post Covid scenario, a new
type of organisational structure has developed named as “Hybrid Organizational Structure” and based on that
we tried to reinvent an organisational structure which can solve not all but at least some problems that we
encountered in the structures so far. This reinvented model also eliminates the disadvantages posed by the latest
hybrid structures in existence. But this structure is not a full-fledged solution to all the problems as the
organisations evolve over time and so the organisational structure.
Key Words: Reinvention, Organisation, Organisational structure, modern organisation, key elements, Hybrid
Structure.
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INTRODUCTION
Description
When we hear the word reinventing the organisation, usually people think that it means to completely change
what the organisations look like and what they do. In some situations, all of the things will need to change, but
the real meaning of reinvention is not to start again, but to create a new version of the organisation.
In the past, reinvention usually took place because someone thought that it might be a good idea. They had
time to plan and to put strategies into place that could be rolled out over a period of time. But today we live in a
business world where we either change or we die. Global markets, governments, environmental issues, flexible
work forces and many other things now dictate how we run our businesses. Although many of the choices about
why we need to reinvent have been taken out of our hands, but how we reinvent is still very much our decision.
For all this reinvention process, the first thing that needs to happen is to get rid of preconceived ideas but this
does not mean throwing out your value system or the things that you have worked on and achieved in the past.
Rather, it means that we take those things and prepare our minds to be bold enough to move them to the next
level, or if necessary, replace them with something more relevant. It really is ok to change our mind and re-
evaluate our thought processes. Things around us change and so must we.
No other topic in management has undergone as much change in the past few years as that of organizing
and organizational structure. Managers are re-evaluating traditional approaches to organize work in their search
for organizational structures that can achieve efficiency but also have the flexibility necessary for success in
today’s dynamic environment. Hence, we are also trying to add something new to the series of past researches
that can handle the problems of present-day organisational structures.
Review of Literature
• PRE-CLASSICAL ERA
On reviewing the contributions of pre-classical theorists, it is clear that their emphasis was more on
developing some specific techniques to solve some identified problems. The main Contributors include:
Robert Owen (1771-1858) pioneered the field of human resources management and also considered his
employees as being equally important as his machines. He invented the ‘silent monitor’ which was used
as a means of implementing discipline and reward and is considered a precursor to staff appraisal.
Adam smith (1723-1790) pioneered the concept of management (Kwok, 2014) and identified division of
labour and specialisation as major drivers of productivity. He also discovered ‘the invisible hand’
principle which highlighted the importance of aligning the incentives of labour with the goals of the
organisation.
Charles Babbage (1792-1871) is considered a giant in the field of operations research and management
science. He emphasized the importance of work specialisation and the idea of profit sharing to improve
productivity. He invented a mechanical calculator, a versatile computer and a punch-card machine and is
considered the father of modern computing.
These and other pre-classical contributors presented ideas that became the foundation upon which
organisation theories are built.
• CLASSICAL APPROACH
On reviewing the contributions of classical theorists, it is clear that their emphasis was more on these 6
pillars- departmentalisation, division of labour, scalar and functional process, coordination,
structure and span of control (Onday, 2016). Contributors to this theory include:
Adam Smith (1723-1790) pioneered the division of labour which highlighted the positive effects of
specialisation with regards to overall productivity of the organisation.
McCullum (1815- 1878) built on the general principles of smith’s organisation and concentrated on the
vertical flow of information and designed the first organizational chart (Shafritz, Ott, & Jang, 2005).
F.W. Taylor (1856-1915) further built on the works of both authors and focused on increasing
productivity by using scientific methods to discover the one best way of dividing up task and least
fatiguing production method in the design of the organisation.
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Max Weber (1864-1920) introduced bureaucracy and defined it as a specific set of structural
arrangements, that informed the functionality of organisations.
Henry Fayol (1841-1925) primarily contributed the fourteen principles of management that birthed
successful organisations and are still rules managerial processes today.
These writers concentrated on structure and that is why their approach sometimes is characterized as
‘structural framework of organisation. But they ignored the human relations aspect and undermined the
role of human factor.
• NEO-CLASSICAL APPROACH
On reviewing the contributions of neo-classical theorists, it is clear that their emphasis was on
encompassing approaches and theories that focus on the human side of an organization. According to
Chakrabarty and Chand (2012), the four major pillars of this theory are scalar and functional
procedures, the division of labour, span of control, and structure. Contributors to this theory include:
Elton Mayo, who is also known as the father of Neo- Classical Approach. He pioneered the Hawthorne
studies which formed the basis for this theory. Other contributors to this theory include Abraham H.
Maslow, Frederick Herzberg, Douglas Mc Gregor, Rensis Likert, and Keith Davis who all worked
to inspire and promote the drive for human relations, which posit that workers react mainly to the societal
setting of the workplace, containing societal habituation, group customs and relational dynamics (Sarker
& Khan, 2013).
This approach is analysed in 3 parts, namely: Hawthorne Experiments, Human relations movement and
Behavioural science thinking
• MODERN APPROACH
On reviewing the contributions of modern theorists, it is clear that their emphasis is on improvement upon
both the classical and neo-classical approach to management. They view the organization as a dynamic
open system which has to adapt to changes in its environment. This theory still has a major influence in
contemporary society. Its distinctive features are its reliance on empirical research data, conceptual-
analytical base, and, more importantly, it’s integrating nature. Some of the contributors of this theory
include: F.E. Kast, J.E. Rosenzweig, R.A. Johnson, P.R. Lawrence, J.W. Lorsch, J. Woodward.
This approach is analysed in 3 parts, namely: Quantitative Approach, System Approach, and Contingency
approach. (Ferdous, 2017)
Hence, after reviewing the literature we can say that restructuring of the organisation is a process that
mainly involves decisions about six key elements: work specialization, departmentalization, chain of
command, span of control, centralization and decentralization, and formalization.
Research Gap
The study of reinventing the organisation have number of gaps in the research. At first the problem starts with
the classical school of thought in which they viewed the organization as a closed system that does not interact
with its environment as they focused mainly on the structural and technological aspects of it (Onday, 2016),
However, it can no longer be denied that organizations are open systems that interact with their environment. Its
assumptions are oversimplified and mechanistic and views the organization as a machine without people. People
are seen as a means to an end and the theory does not care about the feelings of workers in carrying out their job,
neither does it give them room to contribute to improving their job functions (Onday, 2016). Consequently, it
does not explain fully the behaviour of humans in organizations, and thus it cannot adequately deal with the
complexities of an organization structure and functioning. Even though organizations want to be more efficient
through standardization of skills and methods, it cannot expect a standard and emotionless behaviour from its
workforce. Another major limitation is the lack of flexibility in the application of bureaucracy with regards to
multi-tasking and team work which are relevant in today’s organization. This theory is considered obsolete
(Onday, 2016).
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After this the neoclassical theory has its own limitations. Firstly, its assumptions do not have scientific
legitimacy and suffer from an experimental partiality (Ferdous, 2017). Another limitation is that its use, in reality,
is very difficult as it necessitates essential modifications in the philosophy and approach of both administration
and workforces (Sarker & Khan, 2013). Also, the theory is just a modification of the classical theory and as such,
lacks a unified approach. It began as an idea to compensate for the lack of human interactions in the classical era.
The Hawthorne study also failed to show any significant correlation between workplace conditions and
productivity.
The last one is the modern organisational theory which includes quantitative approach, system
approach and contingency approach. Mathematical models that come under quantitative approach cannot fully
account for individual behaviour and attitudes with this technique, it does not remove risk but just strives to lessen
it, and decisions are frequently made on limited information. It is assumed that all the variables affecting the
problem can be quantified in numerical terms which is not always true. Because decisions are frequently made
on inadequate knowledge, the research should have placed a greater emphasis on them. After this the system
approach talks about the way organisations actually work and solve problems by applying different techniques
and methods but has no appeal in theory. The theory assumes that most of the organisations are big, complex and
open systems and thus it cannot be applicable to smaller organisations. This approach is often criticized as being
too abstract and vague so it fails to be easily applied to a practical approach.
The other and the last approach is contingency approach and it states that there is not just one management
approach that fits every organisation. But the critics argue that it is confusing to the practice of management by
stressing that it all depends on the situation and also does not recognise the influence of management concepts
and practices on Environment.
Need to Study
The criticism that was faced by the past researches/theories compelled us to do a research on this topic. And the
issues that organisations face in the modern era while restructuring themselves also arouse the need as well.
By time every organisation has to evolve and reinvent themselves. As the organisations that reinvent
themselves by time tend to broaden their focus beyond the financial curve and manage three shorter but vitally
important hidden curves, these are tracking the basis of competition in their industry, renewing their capabilities,
and nurturing a ready supply of talent. In essence, they turn conventional wisdom on its head and learn to focus
on fixing what doesn’t yet appear to be broken.
Hence, this study helped in finding the solution of the problems mentioned above to some extent.
Objectives of Study
1. As the organizational structure provides guidance to all employees by laying out the official reporting
relationships that govern the workflow of the company. A formal outline of a company's structure makes it
easier to add new positions in the company, as well, providing a flexible and ready means for growth. So,
mainly our first objective is to do a reality check on how structured organisations work in the modern era.
2. Second objective includes the analysis of different types of organisational structures that actually work in
the modern era.
3. Third objective is to focus on areas lacking in modern approach. As modern approach in itself is also not a
pack of solutions for all type of organisation, so we’ll mainly focus on what must be included in modern
approach so that it can benefit different types of organisation that exist in present world.
4. Fourth objective is to focus on techniques that can help the constantly adapting environment. Today
environment is dynamic & full of uncertainties. No one can predict the environment accurately. So, our
focus will be directed towards such techniques that keep the organisations active in changing environment
& help them to remain competitive.
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5. Fifth objective is to focus on how the 6 key elements (work specialization, departmentalization, chain of
command, span of control, centralization and decentralization, and formalization) affects the restructuring
of organisational structure.
6. At last, our objective is to build a business model that will be based on the outcomes of our survey.
RESEARCH METHODOLOGY
Research strategy
The research held with respect to this research paper was an applied one, but not new. Rather, numerous pieces
of previous academic research regarding reinventing the organisation already exist in different parts of the world.
Hence, the proposed research took the form of a new research but on an existing research subject. In order to
satisfy the objectives of the research paper, both qualitative and quantitative research was held.
The qualitative research was held with the help of existing data in order to gain a better insight into
the possibilities for improvement of the organisational structure. The main characteristics of our qualitative search
was that it was mostly appropriate, while its outcomes were not measurable and quantifiable. Its basic advantage,
which also constitutes its basic difference with quantitative research, was that it offers a complete description and
analysis of our research subject, without limiting the scope of the research and the nature of participant’s
responses. However, the effectiveness of qualitative research was heavily based on the skills and abilities of
researchers, while the outcomes may not be perceived as reliable, because they mostly came from researcher’s
personal judgments and interpretations.
The quantitative research was held in the form of Survey-questionnaire which consisted of 4 categories and
each of the category consists of 9 to 10 questions out of which mostly were multiple-choice questions. The aim
was to conduct the survey with around 250-300 people who are currently working in an organisation and out of
these we got 166 responses. The target people constitute of HR, Managerial employees, Non-Managerial
employees and interns. The main characteristics of our quantitative research is that it is in-depth information
about the preferences of the audience. The outcome is quite reliable, as participants of the research faced close-
ended questions. Therefore, there are fewer chances of getting vague information or wrong information from the
participants. Close-ended question’s answers are more specific than the open-ended questions. Responses to
open-ended questions are more detailed and scattered. The outcome of our quantitative research can be used
multiple times. Data collected for one research purpose can be used for the prior study of another research
problem.
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DATA COLLECTION
(Qualitative & Quantitative Research)
Organization
In general terms an organization is an entity comprising of multiple people, such as an institution or an association
that has a collective goal and is linked to an external environment.
An organization is influenced by many external and internal factors. External factors include politics,
country’s economy, and legal rules and regulations; whereas internal factors include plans, objectives, and
policies of an organization. Internal factors can be controlled by an organization; however, external factors are
beyond the organization’s control. An organization requires constant caution and adaptability to effectively
manage situations arising due to such factors.
Traditional Organisations vs Modern Organisation

Today there are two main flows of organization run concurrently; One Traditional Organization, established in
between 20th century another is Modern Organization emerged in this ongoing century. There are huge
differences between these two trends.
Traditional organization represent the organizational structure in a business is hierarchical, meaning power
flows vertically and upward, and employees are departmentalized. All employees follow a chain of command.
Such as a manager is the chief coordinator of all department. Each department has a head who report to the
manager. Like the military system-very hierarchical, organized, disciplined. Every department has its own rules
and regulations as well as and every employee has own job description and accountability to his superior. There’s
strictly follow their own business strategy that’s set in annual economic year. All the goal achievement plan are
set before and difficult to change. Always traditional organization is fixed and rigid.
Modern Organization means a boundaryless organization which are networking together and collaborating
more than ever before. They are well-suited for rapid innovation and therefore ideal for companies in the growing
technology industry. Its main concept is to diversify its activities and connectivity as a result it can accept new
challenges and can set a goal frequently. Modern style of management largely depends on soft skills – consensus
building, relationships, listening, and understanding, taking the team along with you willingly than dragging them
along with you. (Jahan, 2016)
Life Cycle of an Organisation

The four stages of development in an organization's life cycle include the following:
1. Startup
The beginning stage of development is characterized by an inconsistent growth rate, a simple structure and
informal systems. At this stage the organization is typically highly centralized. "Dotcom" companies are a good
example of startup companies.
2. Expansion
The expansion stage is evidenced by rapid, positive growth and the emergence of formal systems. Organizations
at this stage typically focus on centralization with limited delegation.
3. Consolidation
The consolidation stage is characterized by slower growth, departmentalization, formalized systems and moderate
centralization.
4. Diversification
The diversification stage occurs when older, larger organizations experience rapid growth, bureaucracy and
decentralization.
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As an organization grows or passes from one stage of development to another, carefully planned and well-
conceived changes in practices and strategies may be necessary to maximize effectiveness. There are no
guarantees that an organization will make it from one stage to the next. In fact, a key opportunity for leadership
is to recognize indicators that suggest an organization is in a risky or unhealthy stage and to make appropriate
structural adjustments.
Organizational Theories
Organisation theory is the study of organisational design, relationships and structures. It focuses on dimensions
such as level of organisation formalisation, specialisation, standardisation, hierarchy of authority, complexity,
size, goals and strategy. These dimensions provide a way of measuring and analysing organisation’s performance.
(Daft, 1997)
Evolution of Organisational Theories

In tracing the history of management, one comes across various schools of thought that have outlined principles
to guide management practices. These schools of thought may be divided into 3 distinctive phases: 1. Classical
Management Theory; 2. Neo Classical Theory; 3. Modern Management.
1. CLASSICAL MANAGEMENT THEORY

Rational economic view, scientific management, administrative principles, and bureaucratic organisation
characterises this phase. While the rational economic view assumed that people are motivated by economic gains
primarily; scientific management of F.W. Taylor and others emphasised one best way of production etc;
administrative theories personified by Henri Fayol etc looked at the best way to combine jobs and people into
an efficient organisation; bureaucratic organisation theorists led by Max Weber looked at ways to eliminate
managerial inconsistencies due to abuse of power which contributed to ineffectiveness. (NCERT Business
Studies Part 1, 2007)
Classical management theory is mainly based on the belief that workers only have physical and economic
needs. Unlike more modern workplace management theories, it does not take into account social needs or job
satisfaction. Instead, classical management theory advocates a specialization of labour, centralized leadership and
decision-making, and profit maximization. It primarily deals with the anatomy of formal organizations and also
views one as a machine and the employees as parts of the machine.
Designed solely to streamline operations, increase productivity and enhance the bottom line, this management
theory arose in the late 19th century and gained prominence through the first half of the 20th century. While not
as widely subscribed to in modern times, the classical management theory offers some principles that remain
valid, to an extent, in small business settings in regard to manufacturing. (jacquelynpica, 2021)
Contributions of Classical Management theory
1. This approach offers a convenient framework for the education and training of managers.
2. It focuses attention on what mangers actually do.
3. This approach highlights the universal nature of management.
4. It provides a scientific basis for management practice.
5. It also provides a starting point for researchers to verify the validity and improve the applicability of
management knowledge. Such knowledge about management is effectively presented. Classical
approach provides a foundation on which the science of management can be built.
Classical approach is based on 3 main pillars- scientific management, administrative management and
bureaucracy
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A. Scientific Management Theory by Taylor:

F.W. Taylor or Fredrick Winslow Taylor, also known as the ‘Father of scientific management’ proved
with his practical theories that a scientific method can be implemented to management. Taylor gave much
concentration on the supervisory level of management and performance of managers and workers at an
operational level.
Principles
Let’s discuss in detail the five principles of management by F.W Taylor.
i. Science, not the Rule of Thumb- This rule focuses on increasing the efficiency of an organisation
through scientific analysis of work and not with the ‘Rule of Thumb’ method. Taylor believed that
even a small activity like loading paper sheets into boxcars can be planned scientifically. This will
save time and also human energy. This decision should be based on scientific analysis and cause and
effect relationships rather than ‘Rule of Thumb’ where the decision is taken according to the
manager’s personal judgement.
ii. Harmony, Not Discord- Taylor indicated and believed that the relationship between the workers and
management should be cordial and completely harmonious. Difference between the two will never
be beneficial to either side. Management and workers should acknowledge and understand each
other’s importance. Taylor also suggested the mental revolution for both management and workers
to achieve total harmony.
iii. Mental Revolution- This technique involves a shift of attitude of management and workers towards
each other. Both should understand the value of each other and work with full participation and
cooperation. The aim of both should be to improve and boost the profits of the organisation. Mental
Revolution demands a complete change in the outlook of both the workers and management; both
should have a sense of togetherness.
iv. Cooperation, not Individualism- It is similar to ‘Harmony, not discord’ and believes in mutual
collaboration between workers and the management. Managers and workers should have mutual
cooperation and confidence and a sense of goodwill. The main purpose is to substitute internal
competition with cooperation.
v. Development of Every Person to his Greatest Efficiency- The effectiveness of a company also
relies on the abilities and skills of its employees. Thus, implementing training, learning best practices
and technology, is the scientific approach to brush up the employee skill. To assure that the training
is given to the right employee, the right steps should be taken at the time of selection and recruiting
candidates based on a scientific selection.
These five (5) principles of scientific management process involved experiments, observation, analysis,
and inference which were applied to create a cause-and-effect relationship. (Taylor Principles of Scientific
Management, 2019)
Contributions
(i) Productivity
One of scientific management's greatest accomplishments is increasing productivity. By studying
the activities of workers, scientific management discovered methods to make every worker more
efficient. Time and motion studies and other workplace studies analysed work operations and
discovered the most effective and efficient ways to perform jobs. By discovering how to maximize
the efforts of everyone in a company, profitability could increase, making organizations better able
to compete in the global marketplace.
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(ii) Offshore Markets

The development of offshore markets is one of the most significant developments that scientific
management has produced in the 21st century. As a result of its rigorous analysis of labour
techniques, many functions that once were accomplished in the United States are now performed
overseas. Scientific management measured the most effective and cost-efficient manners to produce
goods and services. Frequently, because of the high labour costs in America, companies moved
production of goods and provision of certain services to India, China, Korea and other countries,
where labour costs and taxes are much lower.
(iii) Total Quality
Total quality is a direct result of scientific management. Many principles of quality improvement
and the Six Sigma method of quality management trace their origins to scientific management. The
philosophies of continuous improvement, constantly seeking better ways to improve quality, are
also directly related to scientific management. Japanese management, which led to the quality
movement, traces many of its principles to scientific management. The automotive industry and the
military have also greatly improved the quality of their products and services by stressing quality
improvement techniques.
(iv) Division of Work
Dividing work between workers and supervisors is another direct result of scientific management.
Breaking a job into parts and making the work as systematic as possible have produced greater
results and standardization. The project management process of today, used by most companies to
manage large projects, is directly related to the principles of scientific management. Supervisors
also benefit from scientific management through the systematic performance management processes
used in most corporations today. The typical organizational chart for organizations is also a product
of scientific management principles. (bizfluent, 2011)
B. Administrative Management Theory by Fayol:
As organizations grew and became more complex, need for systematic understanding of the overall
management process was felt. Managers became more concerned with management of organizations than
with improving the efficiency of individual jobs. They tried to identify the functions of a manager with
emphasis on co-ordination of resources towards the achievement of stated objectives. This stream of the
classical approach is known as administrative theory or functional approach or management process
approach. Henry Fayol, also known as the ‘father of modern management theory’ gave the first new
perception of the concept of management. He introduced a general theory that can be applied to all levels
of management and every department. The Fayol theory is practised by the managers to organize and
regulate the internal activities of an organization. He concentrated on accomplishing managerial efficiency.
Classification of Activities according to Fayol:-

Fayol classified all business activities into six categories
(i) Technical (Manufacturing or production of products)
(ii) Commercial (buying, selling and exchange).
(iii) Financial (search for and optimum use of capital).
(iv) Accounting (recording including statistics),
(v) Security (protection of persons and property), and
(vi) Managerial.
The first five categories are known as the operating activities of business. According to Fayol the last
category has been most neglected and therefore, he concentrated on the analysis of managerial activities.
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Principles
The fourteen principles of management created by Henri Fayol are explained below.
1. Division of Work-
Henri believed that segregating work in the workforce amongst the worker will enhance the quality of the
product. Similarly, he also concluded that the division of work improves the productivity, efficiency,
accuracy and speed of the workers. This principle is appropriate for both the managerial as well as a technical
work level.
2. Authority and Responsibility-
These are the two key aspects of management. Authority facilitates the management to work efficiently, and
responsibility makes them responsible for the work done under their guidance or leadership.
3. Discipline-
Without discipline, nothing can be accomplished. It is the core value for any project or any management.
Good performance and sensible interrelation make the management job easy and comprehensive. Employees
good behaviour also helps them smoothly build and progress in their professional careers.
4. Unity of Command-
This means an employee should have only one boss and follow his command. If an employee has to follow
more than one boss, there begins a conflict of interest and can create confusion.
5. Unity of Direction-
Whoever is engaged in the same activity should have a unified goal. This means all the person working in a
company should have one goal and motive which will make the work easier and achieve the set goal easily.
6. Subordination of Individual Interest-
This indicates a company should work unitedly towards the interest of a company rather than personal
interest. Be subordinate to the purposes of an organization. This refers to the whole chain of command in a
company.
7. Remuneration-
This plays an important role in motivating the workers of a company. Remuneration can be monetary or non-
monetary. However, it should be according to an individual’s efforts they have made.
8. Centralization-
In any company, the management or any authority responsible for the decision-making process should be
neutral. However, this depends on the size of an organization. Henri Fayol stressed on the point that there
should be a balance between the hierarchy and division of power.
9. Scalar Chain-
Fayol on this principle highlights that the hierarchy steps should be from the top to the lowest. This is
necessary so that every employee knows their immediate senior also they should be able to contact any, if
needed.
10. Order-
A company should maintain a well-defined work order to have a favourable work culture. The positive
atmosphere in the workplace will boost more positive productivity.
11. Equity-
All employees should be treated equally and respectfully. It’s the responsibility of a manager that no
employees face discrimination.
12. Stability-
An employee delivers the best if they feel secure in their job. It is the duty of the management to offer job
security to their employees.
13. Initiative-
The management should support and encourage the employees to take initiatives in an organization. It will
help them to increase their interest and make then worth.
14. Esprit de Corps-
It is the responsibility of the management to motivate their employees and be supportive of each other
regularly. Developing trust and mutual understanding will lead to a positive outcome and work environment.
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These 14 principles of management are used to manage an organization and are beneficial for prediction,
planning, decision-making, organization and process management, control and coordination.
Contributions
(i) Facilitates Organizational Structure
One of the keys of the Henri Fayol 14 principles of management is the organizational structure.
Fayol talked about a hierarchical structure in which the top levels of management act as forceful
leaders. While this was standard procedure in his mining company, the hierarchical structure is still
the model for many small businesses today. Although more companies are adopting a flat structure,
the top-down model as described by Fayol remains popular as a means of ensuring that decisions
are implemented from senior level to the rank-and-file.
(ii) Promotes the Team Concept
Although there are advantages and disadvantages of administrative management, one of Fayol’s
lasting theories were the idea that employees should subordinate their private interest to the general
interest of the company. This is a foundational theory of the team concept that has become so
prevalent in many small businesses. Rather than having employees work individually on projects,
many companies group workers with diverse skills and talents into a team. This helps shore up any
weaknesses because employees with opposing talents work together to make up for each other’s
deficits. For example, a modern team could include an employee with an outgoing personality, an
employee that is introverted and analytic, and an employee that can generate dozens of great ideas.
Fayol also valued team spirit, which he called “esprit de corps.” He believed that business leaders
who cultivated a sense of common goals among their employees would find that their workers were
more willing to share their knowledge with colleagues.
(iii) Motivates Employees Through Fair Compensation
While the Fayolism advantages and disadvantages are still debated, one theory that continues to
prove true is the idea that business leaders must compensate employees in a manner that motivates
them to perform above standard. Salaries and wages are always a delicate subject, especially as it
relates to gender pay equality. Fayol, however, went further than just talking about money,
believing
that non-monetary compensation was equally important. Today, it’s easy to see examples of that
kind of compensation, such as awards handed out to outstanding employees, and company retreats
in which management and employees interact as human beings without worrying about their status
at the office.
(iv) Fayol’s Principles of Management Considerations
When considering the application of this system, it’s important to evaluate all the Fayolism
advantages and disadvantages before proceeding. One of the disadvantages is that Fayol’s theory
was developed based solely on his own managerial experiences, which means he didn’t undertake
any further research. As a result, he wasn’t able to fully develop a full understanding of Fayolism
advantages and disadvantages, believing strongly that his system only produced benefits. Another
thing to remember when considering the advantages and disadvantages of administrative
management is that some theories are prisoners of the era in which they were developed. For
example, in Fayol’s day, authority and control over employees was the norm. That isn’t the case in
modern society, which means you have to revise some of Fayol’s theories to make them more
applicable to current standards. (The Advantages of Fayol's Principles of Management, 2014)
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C. Bureaucracy Theory by Weber:

A German scientist, Max Weber, describes bureaucracy as an institution that is highly organized,
formalized, and also impersonal. He also developed the belief that there must be a fixed hierarchical structure
for an organization and clear rules, regulations, and lines of authority that regulate it. He analysed the
formation and administration of public bureaucracies, which happen to be the oldest form of organization.
Weber evolved an ideal type of bureaucracy as a conceptual model for analytical purposes.
Max Weber’s Bureaucratic Form – 6 Major Principles

Max Weber listed six major principles of the bureaucratic form as follows:
1. A formal hierarchical structure – In a bureaucratic organization, each level controls the level below
it. Also, the level above it controls it. A formal hierarchy is the basis of central planning and centralized
decision-making.
2. Rules-based Management – The organization uses rules to exert control. Therefore, the lower levels
seamlessly execute the decisions made at higher levels.
3. Functional Specialty organization – Specialists do the work. Also, the organization divides
employees into units based on the type of work they do or the skills they possess.
4. Up-focused or In-focused Mission – If the mission of the organization is to serve the stockholders,
board, or any other agency that empowered it, then it is up-focused. On the other hand, if the mission
is to serve the organization itself and those within it (like generating profits, etc.), then it is in-focused.
5. Impersonal – Bureaucratic organizations treat all employees equally. They also treat all customers
equally and do not allow individual differences to influence them.
6. Employment-based on Technical Qualifications – Selection as well as the promotion of employees
is based on technical qualifications and skills. (Bureaucratic Theory by Max Weber, 2019)
Contributions
(i) Specialisation: A bureaucratic organisation provides the advantages of specialisation because every
member is assigned a specialised task to perform.
(ii) Structure: A structure or form is created by specifying the duties and responsibilities and reporting
relationships in a command hierarchy. Structure sets the pace and framework for the functioning of
the organization.
(iii) Rationality: A measure of objectivity is ensured by prescribing in advance the criteria for decision-
making in routine situations.
(iv) Predictability: The rules regulations, specialization, structure and training impart predictability and
thereby ensure stability in the organization. Conformity to rules and roles in the structural framework
bring about order to cope with complexity.
(v) Democracy: Emphasis on qualifications and technical competence make the organization more
democratic. Officials are guided by the prescribed rules, policies and practices rather than by
patronage or other privilege treatment.
2. NEO-CLASSICAL MANAGEMENT THEORY
Neoclassical theory of management is usually linked to Elton Mayo's human relation movement. Mayo, Elton
pioneered the neoclassical approach, and his subordinates performed the Hawthorne experiment to construct
this theory’s foundation. This theory is the extended version of classical theory, where behavioural science
gets involved in the management. As per this theory, an organisation is a social system, and an organisation’s
performance purely depends on the workers and gets affected by human causes. The neoclassical theory
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affirms that a person is motivated by various reasons and desires to fulfil specific requirements. The
neoclassical theory states that an organisation is a mix of both informal and formal aspects of the organisation.
This aspect was ignored in the classical theory. The organisation’s informal structure is majorly formed due
to the social interaction with workers; this affects and gets affected by an organisation’s formal structure.
Contribution
Neoclassical theory has made significant contribution to an understanding of human behaviour at work and
in organization. It has generated awareness of the overwhelming role of human factor in industry. This
approach has given new ideas and techniques for better understanding of human behaviour. Contributors to
this approach recognize an organization as a social system subject to the sentiments and cultural patterns of
the member of the organization, group dynamics, leadership, motivation, participation, job environmental,
etc constitute the core of the neoclassical theory. This approach changed the view that employees are tools
and furthered the belief that employees are valuable resources. It also laid the foundation for later
development in management theory.
Neo- Classical theory is analysed in 3 parts, namely: Hawthorne Experiments, Human relations movement
and Behavioural science thinking
A. Hawthorne Experiments
George Elton Mayo is considered the father of neo-classical approach. He was the leader of the team
which conducted the famous Hawthorne Experiments. These experiments were conducted during 1924-
32 at a plant of the Western Electric Company. The plant was located at Hawthorne near Chicago in USA.
A brief description of these experiments is given below:
1. Illumination experiment: The object of this experiment was to assess the effect of illumination
on employees’ output. Two groups were selected from among the employees. One group was
placed in the room where lighting remained constant. The other group was placed in another room
where lighting varied periodically. Surprisingly, the output of both the groups increased steadily.
It was concluded that lighting was a minor factor and there were other more important factors
influencing the output. At this stage, Mayo and his team was invited to conduct further studies.
2. Relay assembly test room studies: These studies were conducted in three different groups. The
test group consisted of six female workers, Frequent changes were made in working conditions
such as shorter working hours, rest periods, hot lunch, friendly and informal supervisors, free
interaction among members of the group, etc. Productivity of the group increased even when the
improvements in working conditions were withdrawn. It was concluded that socio-psychological
factors, e.g., special attention, recognition, sense of group pride and belonging exercise a greater
influence on productivity than working conditions.
3. Mass interview programme: A large number of workers were interviewed to judge their attitudes
and opinions on the factors influencing productivity. It was found that the opportunity to talk freely
about things that are important to workers had a positive effect on their morale and productivity.
4. Bank wiring observation room study: In this experiment, a group of fourteen workers was put
under close observation. The pay of every member was made dependent on the performance of
the group as a whole. It was found that the informal group had its own norms of performance and
various forms of social pressure were exercised to enforce these norms. As a result, output could
not increase despite group incentive scheme.
Contributions
(i) A work group is not merely a techno-economic unit. It is also a social system with a culture of its
own.
(ii) Workers are not merely rational economic beings motivated simply by money. They are also socio-
psychological beings and respond to the total work situation.
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(iii) Social and psychological factors exercise a greater influence on employee behaviour and performance
than physical conditions of work.
(iv) Workers act or react not as individuals but as members of a group. The informal groups have their
own norms and beliers. These groups and their leader exercise an overriding influence on the attitudes,
behaviour and performance of individual employees.
(v) Workers respond to the total work situation. Their behaviour and performance are conditioned by
factors inside and outside the work place.
(vi) Complaints and criticism by employees are manifestations or symptoms of deeper dissatisfaction.
B. Human Relations Approach

Hawthorne Experiments laid the foundations for human relations movement in management. Subsequent
research contributed several concepts and techniques of human relations. Human relations school is a socio-
psychological approach to management. It suggests that a business enterprise is a social system in which
group norms exercise significant influence on the behaviour and performance of individuals. Workers cannot
be motivated by economic rewards alone. They require social satisfaction at the workplace. Therefore,
managers should create such a climate in the organization that workers can feel happy. Employee counselling,
participative decision-making, cordial supervision, job enrichment and other techniques have been suggested
for keeping workers happy and satisfied.
The human relations school is based on the following ideas

1. The individual: According to the human relations school, each person is unique. He brings certain
attitudes, beliefs, values, skills, etc, to the job situation. Therefore, an individual is motivated by not only
economic factors but by several social and psychological factors.
2. The work group: Work is a social experience and most workers find satisfaction in social or informal
groups. The norms of such groups determine to a great extent the attitudes and performance of workers.
Therefore, managers should maintain good inter personal and inter-group relations to maximize
productivity.
3. The leader: As the leader of a work group, a supervisor/manager should provide a pleasant work climate
wherein employees are allowed to have a say in the decision-making process. He can gain respect and
obedience by adjusting to various personalities and situations.
4. The work environment: A positive work environment enables employees to satisfy their needs as well
as to achieve organizational goals. Positive work environment consists of clearly defined goals,
performance linked rewards, feedback on performance, participative decision-making, interesting and
growth-oriented work, open communications, etc.
Contributions
(i) Human relations school has a moral justification. Employees are human beings and they are entitled
to be treated with respect and dignity.
(ii) Human relations approach helps to satisfy the social and psychological needs of employees. Such
satisfaction is likely to improve productivity and reduce costs. Sound human relations can result in
the optimum utilization of resources.
(iii) Human relations school highlights the people side' of organizations. It therefore, avoids the imbalance
caused by over-emphasis on technical and administrative aspects.
(iv) A true concern for workers, (those vital machines) would yield rich dividends.
(v) Human relations school focuses attention on inter-personal relations and dynamics of work groups.
(vi) It revolutionized management training by stressing people management skills and managerial styles.
C. Behavioural Science Approach
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Human relations movement focused on interpersonal relations and overlooked the wider subject of
organizational behaviour. Organizational behaviour involves the study of attitudes, behaviour and
performance of individuals and groups in organizational setting. Behavioural approach includes the issue
of organizational behaviour. It is also known as human resource approach because it stresses upon
development of human beings for the benefit of both the individual and the organisation.
Behavioural approach is multi-dimensional and inter-disciplinary in nature. Under it the knowledge drawn
from behavioural sciences, e.g., psychology, sociology, anthropology, etc. is applied to understand,
explain and predict human behaviour. Therefore, this approach is also known as behavioural science
approach.
The main propositions of behavioural science approach are as follows:
(i) An organisation is a socio-technical system.

(ii) Individuals differ in terms of their attitudes, perceptions and value systems. Therefore, they react
differently to the same situation.
(iii) People working in an organization have their needs and goals which may differ from the organization's
needs and goals. Management should achieve fusion between organizational goals and human needs.
(iv) A wide range of factors influence relations among people (inter-personal relations).
(v) People's behaviour as individuals may be different from their behaviour as members of a group.
(vi) Persons working together in an organization form their own informal groups. Such groups have their
own norms, culture and communication systems.
(vii) Informal groups exercise a significant influence on the attitudes, behaviour and performance of
employees.
Thus, behavioural approach has made significant contributions towards the development of management
thought particularly in the fields of group dynamics, motivation, communication and leadership. It has served
as the basis of organisational behaviour. However, this approach errs by identifying management with
psychology.
3. MODERN MANAGEMENT THEORY

Management theories represent ideas that provide recommendations for management strategies, frameworks
and tools that organizations can implement to aid their workforce or culture. Leaders can use these theories
as guidance to meet organizational goals or motivate employees. They can also apply ideas from different
theories rather than solely relying on one management theory. Modern management theory represents one of
the numerous theories used by organizations. This theory recognizes that today's organizations face rapid
change and added complexities, with technology serving as both a potential cause and solution for these
factors.
When implementing this theory, managers use technology and mathematical techniques to analyse their
workforce and make decisions. This theory serves as a response to classical management theory, which
believes workers solely work for monetary gain. The modern management theory believes that employees
work for numerous reasons, including to achieve satisfaction, happiness and desired lifestyles. With this
theory, managers understand employees' behaviours and needs and can implement strategies to meet those
needs and support their skill development over time.
Contributions
1. Boosts productivity: Modern management theory uses mathematical and statistical methods to assess
performance within an organization. Managers can use this data to understand employee behaviours and
develop solutions that maximize the potential of their workforce. For example, they may implement
processes that make employees' tasks more efficient or offer training programs to improve their skills.
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2. Aids decision-making: Modern management theories often provide managers insights into the factors
they need to examine, which they can use to evaluate their organization or department. When managers
know what to look for, it can help them identify problems and begin coming up with potential solutions.
The use of mathematical techniques also enables them to use data to support those solutions and final
decisions.
3. Improves employee engagement: As mentioned, the modern management theory examines employees'
motivation for working beyond financial gain. Managers who utilize this theory can then identify and
implement processes or procedures that take employees' varying needs into account. If employees feel
satisfied at work, it can boost their morale and engagement and make them want to continue working for
the organization.
4. Promotes objectivity: The modern management theory emphasizes the use of mathematical techniques.
These techniques allow managers to make decisions based on data and evidence rather than personal
opinions or feelings. They also enable the testing of different options to assess which one best supports
the organization. As a result, managers can implement more effective solutions.
5. Enables adaptability: Modern management theory recognizes that today's organizations often existing
within rapidly changing environments. This theory emphasizes the importance of recognizing the
influence of internal and external factors on business and encourages managers to use several techniques
and approaches to work with them. For example, managers can use new technology to streamline
processes or perform statistical modelling when developing solutions. (Modern Theory of Management:
Definition, Benefits and Types, 2021)
Modern theory comprises of 3 main approaches: Quantitative approach, system approach and contingency
approach
A. Quantitative Approach
The quantitative approach to management uses statistics and mathematical techniques to solve complex problems.
Depending on the business area, managers may use techniques like computer simulations or information models
to assess performance. This analysis enables them to understand what is working and what is not within the
business, then develop solutions to solve or improve the issues they find. Managers can also use these techniques
and data to determine the benefits or risks of different ideas. This approach can help managers make objective
decisions based on data and facts, rather than personal opinions or feelings, that support the business.
This modern management approach often consists of three branches:
• Management science: Management science focuses on the use of mathematical and statistical methods to
form effective business solutions and achieve goals. Examples of these tools include the Program
Evaluation Review Technique (PERT), the critical path method (CPM) and sampling. Managers can use
these tools in various situations, including project management, budgeting and developing schedules.
• Operations management: In operations management, managers implement practices that help make
business and production processes more efficient. Depending on the situation, this method may require
managers to restructure or redesign their processes. Some of the tools they use include forecasting, quality
control methods and project planning. Often, these managers aim to make more or better products through
the more efficient processes they implement.
• Management Information System: A management information system (MIS) represents a database that
organizes an organization's data, and managers use this system to support informed decision-making. This
system collects and stores real-time data, allowing managers to run reports on areas like financials,
timelines, personnel and inventory. Managers can then monitor this information and use it to assess
performance and make improvements or develop solutions as needed.
Contribution
• It establishes relationships amongst quantifiable variables of decision-making situations and facilitates
disciplined thinking.
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• Mathematical models help to derive precise and accurate results by analysing complex statistical data.
• It is useful in areas of planning and control where data is available in quantitative terms. Decisions are
based on data and logic rather than intuition and judgment.
• Computer-based Statistical packages are available which facilitate analysis of qualitative data also
(dummy variables are used to analyse the non-quantifiable data).
Criticism
• Mathematical models cannot fully account for individual behaviours and attitudes.
• The time needed to develop competence in quantitative techniques may delay the development of other
managerial skills.
• Mathematical models typically require a set of assumptions that may not be realistic in an industrial
setting.
• Among the different functions of management, its use is limited in organizing, staffing and directing. It
applies more in planning and control functions.
• It does not eliminate risk but only attempts to reduce it.
• It assumes that all the variables affecting the problem can be quantified in numerical terms which is not
always true.
• Decisions are often based on the availability of limited information. (Quantitative Approach to
Management - Explained - The Business Professor, LLC, 2021)
B. System Approach
The systems approach of management states that organizations represent a complex collection of various
components that work together to reach a common goal. An organization is made up of numerous subsystems,
such as different departments. Managers using this theory examine how these subsystems interact with and affect
one another, rather than analysing them separately. They must also consider their surrounding environment and
external factors that influence or affect these systems. The systems approach further defines an organization by
dividing it into different components.
These components demonstrate how different parts of the organization work together toward a common goal:
• Inputs: Inputs represent the factors that are needed to create goods and services. For example, inputs may
include raw materials, capital, technology or information.
• Transformational process: Transformational processes represent the activities or abilities that convert the
organization's inputs into outputs. For example, these processes may include employees' work tasks or
operational activities.
• Outputs: Outputs represent the results produced by an organization. These outputs may include products,
services and financial results, such as profits.
• Feedback: Feedback represents information related to the organizations' outcomes or outputs. Leaders can
use this information to influence or make decisions related to the organization's inputs.
The main features of systems approach are as follows:

(i) An organization is a unified and purposeful system consisting of several interconnected. interacting
and interdependent parts.
(ii) The parts or components of a system are called sub-systems. Each sub-system influences the other
sub-systems and the system as a whole. Different sub-systems are tied together into an organic
whole through goals, authority flows, resource flows and information flows.
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(iii) The position and function of each sub-system can be analysed and understood only in relations to
the other subsystems and to the organization as a whole. Similarly, the organization as a system can
analysed and understood only by reference to its environment. The concept of "holism" is central to
the systems approach.
(iv) Each sub-system derives its strength by its association and interaction with the other sub-systems.
As a result, the collective contribution of the organization is greater than the aggregate of individual
of its sub-systems. This is known as synergy.
(v) Every system has a boundary that separates it from its environment. The boundary determines
which parts are internal to the organization and which are external. For instance, employees are
within the boundary whereas creditors and customers are external to a business firm.
(vi) Systems are of two types. An open system continually interacts with its environment (the forces
lying outside it) whereas a closed system is self-contained and isolated from the environment.
(vii) A business enterprise is an open and dynamic social system. It draws inputs (raw materials,
machinery, labour, finance information, etc.) from its social environment. It converts these inputs
into outputs (products and services, etc.) with the help of conversion process. The conversion or
transformation process consists of production and marketing activities and it is also called
throughput. It supplies them to the environment. Business is an adaptive system. It is probabilistic
not deterministic; several variables influence it.
(viii) The reaction or response of the environment to the outputs is known as Feedback is useful in
evaluating and improving the functioning of the system. Therefore, feedback is the key to systems
control. As an open system, an organization has to adapt its structure and processes to the
environment changes which affect its internal functioning. In other words, an organization has to be
a steady state and in a state of dynamic equilibrium in relation to the external environment. A
steady state means internal equilibrium and stability. When an organization's functioning is
temporarily disturbed (say, due to power shortage) it may strive to maintain balance and regain its
original position. However, if the power shortage becomes a regular phenomenon, it may have to
modify its production schedule of install a power plant or adopt any other adaptive. response. It has
to move from its original state to a new state or equilibrium, i.e., dynamic equilibrium. Thus,
organizations use maintenance (for steady state) and adaptive (for dynamic equilibrium)
mechanisms in order to ensure their survival and growth.
(ix) Some systems tend to disintegrate or dissipate their energy and to become inactive. This tendency is
called entropy. On the other hand, other systems have the tendency (called negative entropy)
towards order, activity, perpetuation, etc. These are able to generate the required energy and surplus
to sustain themselves.
(x) Organizations operate on the principle of equi-finality, which means that they have several
alternative ways of doing the same thing or achieving the same goal. Different initial conditions and
paths are permissible to reach a single final state. Similarly, a given initial condition or state may be
adopted to reach different final states.
Contributions
(i) The systems approach examines inter-relationship and inter-dependency between different parts of
an organisation. It suggests balance between different sub-systems so as to ensure the efficiency
and growth of the system.
(ii) The systems approach calls attention to the dynamic and adaptive nature of organisations. A change
in environment calls for modification in the organisation. It acknowledges environmental influences
which were overlooked in the earlier approaches.
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(iii) The systems approach represents a balanced thinking on organisation and management. It exerts
managers to avoid analysing problems in isolation and to develop an integrated or holistic thinking
in place of fragmented and piece meal approach.
(iv) The systems approach stresses the dynamic and multidimensional nature of organisations. It
provides a strong conceptual framework for meaningful analysis and understanding of
organisations. It recognises the interaction between different variables in the environment. It
provides clues to the complex behaviour of people in the organisation.
Criticisms
The systems approach has been criticised of the following grounds:
(i) Lack of Unified Theory: Systems approach does not offer a unified theory which can be applied to
all types of organisations.
(ii) Vague and Abstract: The systems approach is too abstract to be of much use to practising managers.
It indicates inter-relationship and inter-dependence between various parts of the organisation. But it
fails to spell out the precise relationship between different sub-systems.
(iii) Narrow View of Organisation Environment Interface: The systems approach recognises interface
between an organisation and its environment. But it does not present a complete view of this interface.
(iv) Application: The systems approach does not provide an action framework applicable to all types of
organisations.
The systems approach is often criticized as being too abstract and vague. It cannot directly and easily
be applied to practical problems. It does not offer specific tools and techniques for the practising
executive. Moreover, this approach does not recognize difference in systems. It fails to specify the
nature of interaction and interdependencies particularly between an organization and its external
environment, it fails to offer a unified body of knowledge
C. Contingency approach
The contingency management approach states that there is not just one management approach that fits
every organization. It believes that the optimal management style depends on the situation. Leaders who
utilize this theory do not adopt a single management style and instead must identify and use different styles
for different situations. As a result, these leaders also develop additional traits and skills that ensure they
can employ various management approaches effectively. The use of diverse styles can help make these
leaders more flexible and adaptable in the workplace.
This theory outlines three variables that it believes influence an organization's structure: the organization's
size, the technology & it’s uses and the leadership styles. An effective manager understands these factors
and how they may impact performance
Contributions
The main contributions of the contingency approach are as follows:
(i) Contingency approach provides a clear view of the realities of the managerial job. The classical approach
suggests pre-conceived principles and techniques as having universal validity ignoring the situational
differences. The contingency approach avoids this organic stand and suggests situation specific solutions.
It is free from value judgements and exhorts managerial choices to be made in the light of environment
factors. To this extent, the approach is open minded and pragmatic.
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(ii) Contingency approach has common sense value and wide-ranging practical utility. It widens the horizons
of managers from the concepts, principles and techniques of management theory. It goads them to be alert
and adaptive to changing situational needs. It promotes analytical, critical and multi-dimensional thinking
with the help of which managers can innovate new and better approaches and widen their choice.
(iii) The contingency approach does not suggest that the findings of earlier approaches are useless. Rather it
attempts to integrate them and make them contingent upon the demands of the situation. It recognizes that
managerial functions and principles are useful but should be used with discretion and care to suit the
specific situation.
(iv) The approach accepts that organizations and their environment are too dynamic to be always effectively
managed in the same manner. Managers must be capable of changing their approach and style to match
the changes in the environment. This approach stresses the need for a comparative study of organizations
so as to develop guidelines for coping with different situations.
(v) The contingency approach is more eclectic than the other approaches. It recognizes that management
thought has not advanced to the point at which definite prescription for the best way to manage in every
situation is made available.
Criticisms
The contingency approach is not free from criticism. Critics argue that it adds confusion to the practice of
management by stressing that, it all depends on the situation. The manager is swamped with so many ideas which
are humanly impossible to comprehend. He has no tested and proven prescriptions to depend upon. Critics also
point out that without a theoretical foundation, it is almost impossible to research to gain valuable information,
or develop a knowledge base. Some critics argue that the approach does not incorporate all aspects of the systems
theory. The approach is very complex and suffers from paucity of literature. It suggests a reactive strategy for
coping with the environmental changes. A proactive approach would be more effective for managers. It is also
said that there is nothing new in contingency theory because even classical theorists like Fayol cautioned
managers to use principles in the light of changing conditions.
The contingency approach does not recognise the influence of management concepts and practices on
environment. Moreover, literature on contingency approach is yet not adequate. Some experts call contingency
approach as mere common sense. However, contingency approach is much more than common sense. It requires
the ability to correctly diagnose the situation and the skill of choosing the managerial style that meets the
requirements of the situation.
Organisational Structure
An organisational structure explains how various tasks are distributed in order to achieve a company's aim. It
describes an employee's job duties and obligations in a corporation. Employees with more authority will be
promoted further up the organisational ladder. Furthermore, the more well-organized a structure is, the more
efficiently a business may work.
Process of developing an organisational structure
1. Plan the future.

First Answer: Where is the company headed? What do one want to do that he/she haven’t done yet?
Plan out as far into the future as much possible. For newer organizations, this covers the next three to five
years. For more established organizations, aim for 10 or more years.
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2. Consider the past.

In terms of how departments or teams work together, consider what has worked well and what hasn’t.
For example, are certain departments at odds with each other? Do certain teams compete because your reporting
structure encourages unhelpful rivalries?
Think of it this way: If someone have a one-story house with a crack in the foundation, the problem will only
escalate when you add more floors onto your house.
3. Build the organizational structure.

Piece together an organizational structure – without names.
At this stage, your focus should be on establishing:
• The optimal, most efficient workflow
• Achieving business goals
• Serving customers well
There are many ways by which you can organize your employees:
• By function (sales, marketing, accounting/finance, etc.)
• By region
• By product line
The organization can be vertical, hierarchical, flat or matrixed.

For each position, or box, list five to six bullet points describing job responsibilities.
4. Fill in the people.

If there is an established organization with existing employees, now add their names.
It’s both necessary and difficult to objectively decide how an existing employee may or may not naturally be
suited to the re-defined role. As an employee may not fit a role as precisely as they previously did, one can
identify new competencies needed.
A plan can be created and executed to develop those competencies. Alternatively, perhaps the employee is now
better suited for another role in the company.
Determine whether each employee is a good fit going forward. Being a good fit means:
• The employee has the necessary skill level to perform well.
• The employee has the desire to take on the role.
If an employee’s skill level isn’t up to par, then there will be a need to invest money and time for training.
Conversely, an employee may have the skill set but doesn’t enjoy the work, or the new role brings a level of
pressure or attention that they don’t want.
The principle of weighing skill versus desire also applies to recruits and new hires.
5. Balance authority and responsibility.

No matter where they fit within the organizational structure, give your employees equal measures of authority
and responsibility.
Otherwise, they can feel confined and become frustrated and disengaged.
6. Fill in employee data and metrics.

Include key metrics on your organization chart to give you a comprehensive picture of the person identified in
each role. This will also reveal a much larger story about the company.
These metrics can include tenure and performance ratings. Doing this will help to:
• Uncover risk factors so that it can help in planning ahead. For example, if there is an employee whose
title or salary doesn’t align with his tenure? This person could be at risk of leaving the company.
• Identify the kind of contribution each employee makes: loyal, hard-working and supportive “middle of
the pack,” destined for increased levels of responsibility and authority, etc.
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• Engage in succession planning so that it can help in finding out which employees may be good candidates
to take over a role in the event of another employee’s promotion or departure.
7. Practice robust performance management of employees.

Review employees continually throughout the year to reduce the frequency of updates to the structure.
This will also help to avoid the risk of organizational bloat, which indicates a tolerance for underperformers and
complacency with status.
Bloated businesses can be fat and happy but are usually lacking in preparation for the future and in establishment
of strategic goals. Over the long run, bloat never serves a business well.
8. Review your organizational structure annually.

This helps ensure relevancy and to plan for the next 12 months.
The structure should have an evolutionary life, not a static life:
• Does the structure still represent how the business is performed and what the workforce needs?
• Have any of the business goals changed that has necessitated a change to the structure?
• Has the working relationship between any departments become dysfunctional?
• Is there any need to add people? If so, where and why?
• Will this decision force to adjust a department?
Importance of organisational structure
(i) It serves as a management planning tool.

Organizational structure is important for any growing company to provide guidance and clarity on
responsibilities and reporting relationships. It can serve as a road map for hiring employees and future
expansion.
(ii) It can improve decision making and communication.
Organizational structure can be designed to promote the flow of information from employees to
managers responsible for making business decisions. Executive level management can use
organizational structure channels for sending information to managers or employees responsible for
completing business functions.
(iii) It can help with employee engagement.
It allows employees to better understand how their work fits into the organization’s vision and mission.
It gives them more clarity, helps manage expectations, and enables teamwork.
(iv) It provides a visual directory.
Organizational structure is commonly communicated through the use of an organizational or org chart.
These diagrams can be used as a management tool—for planning purposes, or as a personnel directory.
(v) It can help future-proof your business.
Your structure affects your organization’s ability to carry out your strategy and objectives. As you look
to further your business, your structure will act as the backbone to guide you through. (5 Reasons
Organizational Structure is Important, 2021)
Factors affecting Organisational structures
External factors
• Development of a new technology
• Transformation of customer preferences and expectations
• New laws and regulations
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• Changes in national and global economic conditions

• Change in trade and exchange policies
• Transformation of social and cultural values
• Innovations and various obstacles encountered with rivals and competitors
Internal factors
• Innovations in manufacturing processes or development of new procedures
• Introduction of ideas aimed to offer greater customer value and improve customer satisfaction
• Logistic changes that bring the product/service more or less close to customers, suppliers, and the
market
• New products and service design
• Appointment of new managers and administrators
• Outdated training courses, inadequate information management (Organisational Change: what is
and why is it important, 2020)
Types of Organisational Structure
1) LINE ORGANISATIONAL STRUCTURE
Line organisation refers to a direct chain of command through which authority flows from top to bottom. There
is a straight unbroken line (scalar chain) in which all orders and communications flow down the line. According
to Lundy, “line organisation is characterised by direct lines of authority flowing from top to the bottom of the
organisational hierarchy and lines of responsibility flowing in an opposite but equally direct manner.” Line
organisation is also known as ‘scalar” or “hierarchical” organisation due to a series of uninterrupted vertical
relationships which connect the positions and tasks of each level with those above and below it. Every superior
has complete command over his subordinates and every subordinate is directly accountable to only one superior
immediately above him. There is, therefore, unity of command. Each department is self-contained as the
subsidiary service functions are under the charge of the departmental head. There are no separate advisory or
staff units attached to it. All persons on the same level of authority are independent of one another. The line of
authority not only serves as the avenue of command to operating personnel but also provides the channel of
communication, coordination and accountability in the enterprise.
Types of Line organisational structure
(1) Pure line organisation: In this type of organisation, activities at a particular level are similar, every
employee performs by and large same type of work. The divisions exist solely for convenience of
supervision and control. Pure line organisation is seldom used in modern industry as nature of work is
rarely identical in all cases. It may, however, be found as part of some specified groups such as inspection.
(2) Departmental line organisation: In a departmental line organisation, the enterprise is divided into
departments. Each supervisor and workers under him perform similar work but their work differs from
that performed in other departments. This makes for unity of control and differentiation of work. In such
organisation, interdepartmental relationships should be clearly defined to facilitate coordination and
control.
Merits
Line organisation offers the following advantages:
(i) Simplicity: Line organisation is the simplest and the oldest form. It is easy to establish and simple
to operate. Due to direct relationship, the lines of authority and responsibility are easily understood
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by employees. Every employee knows clearly his position in the organisation. There is clear-cut
identification of authority and responsibility.
(ii) Quick decisions: As each executive has full authority for a job, required decisions can be made
easily and quickly. Necessary instructions can be quickly transmitted due to direct and simple lines
of communication. No staff experts are to be consulted while taking decisions. Communication is
orderly and effective.
(iii) Unified control: Line organisation facilitates unified supervision and control because each
subordinate report to one superior. The superior has direct and close contact with his subordinates.
It also conforms to the scalar principle of organisation. Interdepartmental coordination can be
achieved through personal contact between the line managers.
(iv) Economy: Line organisation is less expensive as there are no staff specialists.
(v) Coordination: As all activities relating to one department are under the control of
one person, coordination becomes easier.
Demerits
Line organisation suffers from the following drawbacks:
(i) Over-burdening: In line organisation, key executives are overburdened with administrative
work. Reflective thinking is reduced as their energies and time are consumed in operating details.
A single executive cannot meet the diversified and varied demands of his department as his
abilities are limited and no staff support is available to him. He is bogged down in myriad details
and cannot pay proper attention to each job.
(ii) Lack of specialisation: A particular manager has to perform all types of activities concerning
his department. Therefore, there is absence of expert advice in line organisation. Lack of
specialisation reduces the effectiveness of management and efficiency of operations. Every
manager is likely to become “jack of all trades” and “master of none”.
(iii) Autocratic leadership: As one executive control all the activities of a department, there is
danger of authoritarian rule. Concentration of authority at the top reduces scope for initiative and
morale at lower levels: Red tape, Nepotism and favouritism are likely to grow. There may be
lack of team-spirit and cooperation on the part of subordinates. There is practically no upward
communication and the organisation is deprived of the suggestions for improvement.
(iv) Difficulty in staffing: It is difficult to recruit and train executives who can perform the diverse
functions of a department. Over-emphasis on departmental goals may result in lack of
cooperation and coordination. In the absence of strong horizontal relationships team-spirit may
be low.
(v) Instability: Line organisation is rigid or inflexible. The success of the enterprise depends on a
few key executives. There is little scope for expansion of business beyond their capabilities.
Example:
Toyota’s production system and its organizational structure had long been lauded as the most efficient and
effective, which created a culture of excellence. They use what they call a just-in-time (JIT) production system,
which means raw materials are delivered to the production facility just as they are needed. This level of production
is possible because of Toyota’s organizational structure, and that structure has undergone some significant
changes since 2013. Let’s look more closely at the organizational structure of the company before 2013, and then
take a look at what has changed and why.
For most of its existence, Toyota’s organizational structure was based on a traditional Japanese
business hierarchy in which the most senior executives make all of the decisions for the entire organization. It is
typified by little delegation of authority, and all information flows one way: from the top down. For example,
executives in U.S. plants are closely monitored by a Japanese counterpart who makes sure the American executive
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is following structured protocols. This is called centralized decision making. While centralized decision making
supports the business goals and strategies identified by the board of trustees.
2) FUNCTIONAL ORGANISATIONAL STRUCTURE
Under functional organisation, there are a number of specialists, each having authority over a particular function
or a group of related functions throughout the organisation. Each specialist has control over the function under
his charge, no matter where that function is performed in the organisation. He controls all the individuals working
in that functional area. For instance, the personnel department would recruit, train and develop people required
for all other departments of the organisation. Functional authority permits a specialist in a given set of activities
to enforce his directive within limited and clearly defined scope of authority. Every employee gets orders and is
accountable to several specialists.
Functional organisation can be used at higher as well as at lower levels of management. At the higher
levels, it involves the grouping of all functions into major functional departments and placing each department
under an expert’ executive. Each functional head issue order throughout the organisation with respect to the
function in question. Every subordinate receives orders from several functional heads and is accountable to all of
them for their respective functional areas. The purchase manager will purchase materials required by all the
plants, the marketing manager will sell products of all the plants and the finance manager will supervise financial
transactions of all the departments.
Merits
Functional organisational structure has following merits:
(i) Specialisation: There is complete specialisation of work and every worker receives expert guidance of
several specialists. Functions are performed more effectively as each manager is responsible for one
function rather than a multiplicity of functions. Fullest possible use can be made of special skills and the
efficiency of operations is high. Specialists derive job satisfaction as they enjoy command authority.
(ii) Reflective thinking: The burden of operating details on top executives is reduced and they can
concentrate better on long-term strategic planning. Each functional incharge looks after one functional
area only. Executives have ample time for creative thinking.
(iii) Better supervision: As each supervisor is an expert in his area of work, supervision and control are
likely to be better. Decisions can be taken and implemented effectively.
(iv) Democratic control: One man control is replaced by joint control. Joint supervision and Common
control promote cooperation, job satisfaction and morale among operations (Scope for expansion: The
growth and expansion of the enterprise is not confined to the limited capabilities of a few line managers.
(v) Standardisation: Every functional head has functional authority wherever his function is performed.
Therefore, it facilitates standardisation of methods, equipment and operations.
Demerits
Functional organisation suffers from the following drawbacks
(i) Poor discipline: Functional organisation violates the principle of unity of command as a person receives
orders from several bosses. Multiple lines of command weaken discipline and control. There is diffusion
of authority and overlapping of efforts. Workers get confused due to multiple sources of command and
their loyalty becomes divided. Chaos and disorder may arise. Conflicting orders result in frustration and
low morale at lower levels.
(ii) Divided responsibility: It is not possible to fix responsibility for results on specific individuals. Lines
of authority and responsibility are not clearly defined. Multiple subordination encourages buck passing.
It is difficult to ascertain the causes of poor performance. It is a complex structure.
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(iii) Lack of coordination: Functional specialists operate with considerable independence, think in terms of
departmental interests and have a narrow outlook. Conflicts frequently arise among specialists of equal
rank. Lack of overall perspective makes coordination and team work difficult. “Every functional
manager considers his function the most important one, tries to build it up and is prone to subordinate
the welfare of the other functions if not of the entire business, to the interests of his units.”
(iv) Delay in decision making: Decision problems involving several specialists cannot be taken quickly as
consultation of all functional managers is required. Speed of action is hampered due to divided control.
Prompt action becomes difficult and the organisation tends to be inflexible.
(v) Uneconomical: Functional organisation is not only complex in operation but expensive. Several
specialists have to be appointed at a heavy expenditure. Clerical work is also increased: It becomes
difficult to judge whether activities are worth their costs.
(vi) Lack of executive development: Narrow specialisation hampers the development of all round
executives. Few overall managerial positions are available and succession of top executive positions
becomes difficult.
Example:
Indian operator Bharti Airtel announced a new organisational structure for its Indian and South Asian
operations. The new structure, which takes effect from August 1, will have two distinct customer business units
that focus on business-to-customer and business-to-business segments. The new structure is aimed at providing
greater functional and business synergies and in providing a common interface to customers, resulting in an agile
and de-layered organisation. Chairman and managing director Sunil Bharti Mittal said: “This new organization
structure marks a major step towards building an organization of the future.” The business-to-customer unit will
consist of market operations and consumer business. It will serve retail customers, homes and small offices by
combining mobile, tele media and digital TV segments along with other new businesses such as m-commerce,
m-health and m-advertising. It will be headed by K Srinivas. The company has divided the market operations in
India and South Asia in three regions. Ajai Puri will look after the north, east and Bangladesh operations; Vineet
Taneja will head south and Sri Lanka, while Raghunath Mandava will look after operations in the west. The
business-to-business unit will focus on serving large corporate and carriers through Bharti Airtel’s portfolio of
telecommunication solutions. Drew Kelton will continue to lead that organization.
3) LINE AND STAFF ORGANISATIONAL STRUCTURE

Line executives stand in the primary chain of command and are directly concerned with the accomplishment of
primary objectives. But they are generalists and therefore, staff positions are created to provide advice. Specialists
are attached to line managers to provide specialised advice and information on specific managerial problems.
Staff personnel are experts in their respective functions. They are purely of advisory nature and have no power
of command outside their own departments. Generally, the substantive functions which directly contribute to the
overall goals of the organisation are classified as line and others as staff positions. Staff serves as a supplement
to line. Staff advice and counsel is not binding on line managers. In the following chart, the solid lines indicate
line positions and the dotted lines reflect staff positions. Line and staff organisation is a combination of the line
structure (which concentrates control too much) and the functional structure (which divides control too much). It
is an attempt to combine the advantages of specialisation and unity of command. The line position serves to
maintain unity of command while the staff wing provides expert advice and counsel for efficient management.
The need for staff positions arises when the work of an executive increases and its efficient performance requires
expert guidance which he himself cannot provide due to his limited capabilities.
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Merits
The advantages of the line and staff organisation are as follows:
(i) Planned specialisation: The line and staff organisation provide the benefits of planned. Specialisation.
There is bifurcation of conceptual and executive functions. Line managers are relieved of the
housekeeping job, for which they lack time and skills. They can concentrate on executive functions and
they get expert advice or counsel from staff specialists. Expert knowledge is brought to bear upon
managerial problems. There is ample scope for creative thinking.
(ii) Balanced decisions: Staff specialists provide adequate information and expert advice at the right time
so that line executives can take better decisions.
(iii) Discipline: Unity of command is maintained. Staff cannot issue instructions to subordinates in line
departments. There is a direct chain of command which facilitates discipline and control.
(iv) Undivided responsibility: Each line officer is fully responsible for the results of his department. There
is clear flow of authority to those responsible for operations.
(v) Flexibility: There is greater scope for growth and expansion. General and specialised staff can be
employed at various levels to help managers cope with additional work. New activities, can be added
without disturbing the basic structure.
Demerits
Line and staff organisation suffers from the following drawbacks:
(i) Conflicts: There is generally a conflict between line executives and staff specialists. There is a danger
that staff may encroach upon line authority and line may ignore staff advice. Jealousies and friction
between line and staff reduce operational efficiency of the enterprise. There is a wide difference between
the orientations of line and staff. Line managers tend to be practical while staff men tend to be more
theoretical.
(ii) Lack of coordination: In practice, it is very difficult to make a clear-cut allocation of duties between
line and staff executives. Lack of well-defined authority results in confusion and lack of coordination.
Team-work and harmony of effort may suffer.
(iii) Ineffective staff: Staff men may not perform their job well because they are not. Accountable for the
results. Staff may be ineffective because it lacks authority to get its advice implemented. Line executives
may resent staff and may blame staff for their own failures in implementing recommendations
successfully.
(iv) Expensive: Line and staff structure is more expensive than the line organisation because two separate
sets of personnel are required.
(v) Lack of creativity: Line managers may depend too much on staff for advice and guidance. This
dampens original thought, judgement and initiative on the part of line executives. Staff specialists may
be blamed for recommendations unsuccessfully implemented by the managers.
Example:
The companies like insurance companies, engineering firms, law firms, regulatory agencies, etc. generally adopt
this type of organisation structure. In other words, organizations that need isolated technical advice to assist
employees who handle or manage the day-to-day operations on the front line implement this type of
organisational structure.
4) PROJECT ORGANISATIONAL STRUCTURE
The project structure consists of a number of horizontal organizational units to complete projects of a long
duration. Each project is vitally important to the organization. Therefore, a team of specialists from
different areas is created for each project. The size of the project team varies from one project to another.
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The activities of the project team are coordinated by the project manager who has the authority to obtain
advice. And assistance of experts both inside and outside the organization. The core of the concept of
project organization is to gather a team of specialists to work on and complete a particular project. The
project staff is separate from and independent of the functional departments. Project organization is
employed in aero-space, aircraft manufacture, construction and professional areas like management
consulting. In such organizations, projects are subject to high standards of performance and there is a
strong emphasis on horizontal relations among specialists. For example, Lockheed Corporation of USA
makes extensive use of project structure for its aircraft manufacturing programmes. In industrial concerns,
project teams may be structured to facilitate the designing and development of new products. Project
management (moulding the organization around specific projects) has been developed to deal with
situations where production and marketing strategies do not fit into a purely functional organization
Generally, project organization is appropriate when the enterprise is undertaking tasks that have defined
goals, that are frequent and unfamiliar to the present structure, that are complex due to interdependence
of tasks and that are crucial to the success of the firm. According to Terry “It is a preferred means
whenever a well-defined project must be dealt with or the task is bigger than anything the organization is
accustomed to”.
A project team is a temporary set-up. Once the project is complete, the team is disbanded and the
functioning specialists are assigned some other projects.
Merits
Project organization offers the following benefits:
(i) Organization provides concentrated attention that a complex project demand. It permits the timely
completion of a project without disturbing the normal routine of rest of the organization. It can be used to
consolidate diverse actions towards the completion of the project while retaining the advantages of
functional specialists. It allows maximum use of specialized knowledge.
(ii) Project organization provides a logical approach to any challenges in the form of a large project with
definite beginning, end and clearly defined result. It cuts manager’s job to a reasonable level, spreads
decision-making and facilitates communications through lateral relationships.
(iii) Reason for the success of project organization is that the project often requires highly talented
professionals who find it difficult to work creatively in any structured set-up. The idea of being part of a
team of skilled professionals working on a tangible project acts as a powerful motivator. Project
organization encourages initiative and creativity on the part of project staff by giving them a free hand to
accomplish work.
(iv) Project organization has been found to fit a number of widely-varying situations, from building
contractors and advertising agencies to accounting and consulting firms. The increasing complexity of
projects that require the highly specialized experts and rapid changes from one project to another often
demand the flexibility provided by project structure. It accommodates the formal ideas of classical
thinking together with the team and participative ideas of behavioural contributions.
Demerits
Thus, the project organization provides flexibility, coordination of resources, fixation of responsibility and check
over project work. However, the project structure suffers from the following drawbacks:
(i) There is organizational uncertainty because a project manager has to deal with professionals drawn from
diverse fields. Often, they differ in approach and interest. There is lack of clearly defined responsibility,
clear communication lines and measurement yardsticks. Lack of prescribed organizational processes
make the job of a project manager very frustrating. There is danger of over-specialization. In addition,
30
lack of awareness of project problems and personal prejudices on the part of top people may jeopardize a
project.
(ii) A project manager is responsible for project outcomes. But the ongoing conventional organization does
not give him unlimited authority. Therefore, budgets, manpower and control are serious problems.
(iii) Organization uncertainties may lead to interdepartmental conflicts. People have fear of being forgotten at
the time of promotion due to separation from the main structure. There may be role conflicts, poor loyalty
and underutilization of resources. Excessive supervision and multiple controls cause frustration.
Decisions may be based on scanty data due to pressure for completion of projects-on time.
(iv) There is considerable fear among personnel that the completion of a project may result in loss of job. The
feeling of insecurity and varying status creates considerable worry.
Example:
Example of Functional Project Organizational Structure for Manufacturing
A team using a functional organizational structure in manufacturing shows the straightforward reporting structure
of each department to the executive. The functional managers (the manufacturing manager, marketing manager,
engineering manager, etc.) are responsible for coordinating all parts of the project, as indicated by the green
highlight in the below image. Note the true horizontal coordination of the project. This example also shows that
existing departments in the organizational structure (finance, HR, etc.) may not typically be involved in projects.
Example of Projectized Project Organizational Structure for Construction

Construction teams most commonly use projectized organizational structures. Dedicated project managers
coordinate all aspects of the project, and multiple project managers report to the company executive. Other
supporting departments may also exist to run the business operations of the company.
Example of Matrix Project Organizational Structure for Software Development

Software development project management structures can vary widely, but they most often optimize for cross-
functional teams. The matrix structure is a visualization of such cross-functional reporting, wherein each technical
specialist reports to both a head of their discipline and the product owner (in lieu of a project manager).
5) MATRIX ORGANISATIONAL STRUCTURE

Matrix organization or grid organization is a hybrid structure combining two complementary structures-
functional departmentalisations with pure project structure. Functional structure is a permanent feature of the
matrix organization and retains authority for the overall operation of the functional units. Project teams are created
whenever specific projects require a high degree of technical skill and other resources for a temporary period.
Functional departments create a vertical chain of command while the project teams form the horizontal chain.
The functional or vertical lines of authority interact product or horizontal lines, thereby forming a matrix or grid.
Thus, a matrix organization is a two-dimensional structure, a combination of pure project structure and the
traditional functional structure. Members of particular project team are drawn from the functional departments
and are placed. under the direction of a project manager. A project manager has overall responsibility for the
success of the particular project. He has authority over the members of the project staff. On the completion of a
project, the project team is dissolved and its members including the project manager revert or return back to their
respective departments for reassignment to new projects. They may again be assigned to another project. Each
project has a definite time duration. The matrix organization originated in the defence and aero-space industries
in the USA. It differs sharply from the typical one boss command structure based on the principle of unity of
command. Matrix organization has been defined as "any organization that employs a multiple command system
that includes not only the multiple command structure but also related mechanisms and an associated
31
organizational structure and behaviour pattern. Sometimes, Interix and project organization are considered as one
and the same. However, there is a distinction between the two. In the project organization, separate identifiable
units are created for executing large projects. Every project manager has complete responsibility for the project
and complete authority for the use of resources required for its accomplishment. Such organizational units or
projects are like semi-autonomous divisions. On the other hand, in matrix organization, the project manager
shares resources with the functional managers. He does not have complete authority for the use of resources. Pure
project organization is suitable for organizations dealing with a small number of long-term manufacturing
projects. Projects of short duration are undertaken through matrix organisation.
Matrix organization has been developed to meet the needs of large and complex organizations which require a
structure more flexible and technically oriented rather than the functional structure. Temporary project teams are
tailored to the successful completion of particular projects. For instance, chemical, mechanical, industrial and
electronic engineers may work together with physicists, accountants and other professionals to develop a new
product. Project manager’s authority flows horizontally while functional manager’s authority Flows vertically.
Matrix organization is used in industries with highly complex product systems e.g., aerospace industry where
project teams are created for specific space or weapon systems.
Merits
Matrix organization provides the following benefits:
(i) It helps to focus attention, talent and resources on a single project which facilitates better planning and
control. Specialists from several functional departments provide a pool of expertise, particularly technical
skills. The project manager can keep a track on the progress of work to ensure the completion of project
in time. Specialized knowledge is available to all projects on an equal basis.
(ii) It is more flexible than the traditional functional structure. It can better respond to the inevitable changes
in market conditions, technology, etc. that occur as work progresses or a project. Effective information
system enables the organization to respond quickly to project needs and customer desires.
(iii) Provides an environment in which professionals can test their competence and make maximum
contributions. More emphasis is placed on the authority of knowledge than the rank of an individual in
the organizational hierarchy. Matrix organization pushes decision-making down the chain of command.
(iv) It provides motivation to the project staff as they can focus directly on the completion of a particular
project. It also improves communication by encouraging direct contact and reducing the inhibitions
arising from the formal rank. The problem of coordination is reduced in so far as the project manager acts
as the integrator of personnel from diverse disciplines. Responsibility for a particular project is clearly
defined. Lines of communication are short and well-established.
(v) Each project is assigned the physical resources and personnel it requires. Thus, unnecessary duplication
is avoided. Functional departments provide support to projects. Project people revert back to their
functional departments when the project is completed. There is no sense of job insecurity. A better balance
between time, cost and performance is obtained. Interactions between specialists encourage creativity and
broadening of vision.
Demerits
Matrix organization suffers from the following limitations:
(i) It violates the principle of unity of command. Each employee has two bosses—the functional boss and
the project manager. During his assignment a project, he works under the command of the project
manager. In addition, he receives orders from his permanent supervisor. This creates role conflict or
32
confusion and may create jurisdictional. Conflicts in the organisation. Multiple flows of authority may
create problems of vertical coordination.
(ii) The scalar principle is also violated as there is no definite hierarchy. Project managers and functional
managers are distinct but do not stand in a scalar relationship. Working relationships are not very clear.
Balance of power between functional managers, and project managers is not clear.
(iii) Conflicts may arise due to the heterogeneity of team members. People are drawn temporarily from
different departments. Project manager does not have line authority over his heterogeneous group of
personnel. This results into problems of coordination.
(iv) In matrix organisation, organisational relationships become very complex. Apart from the formal
relationships, informal ones also arise creating problems of coordination.
(v) The success or failure of the functional group depends upon its performance in the project. This may
lead the group to emphasize its own function even at the cost of the overall project. As a result, conflicts
arise between the functional groups. Personnel often lack commitment to project goals and their morale
tends to be low. (Gupta, 2018)
Example:
Starbucks, one of the leading coffee chains is another great example of matrix organization. Let’s look at the
individual features and see how this example of matrix structure stands out in today’s business world
Functional Hierarchy
The corporate headquarters has several functional divisions, such as finance, marketing and human resources.
They make decisions and implement policies that every subsidiary must abide by. Top-down monitoring and
management help in maintaining business standards across the globe. The Chief Executive Officer and other
important decision-makers oversee the functioning of these independent departments at the headquarters.
Therefore, a functional hierarchy helps in organization-wide development and implementing growth strategies.
Geographic And Product-Based Divisions
As the name suggests, geographic divisions are based on the physical locations of business operations. In addition
to global markets (e.g., Middle East and Europe), Starbucks has finer divisions such as Western, Southeast and
Northeast. Every local manager report to at least two people—geographic head (e.g., President of Africa
Operations) and functional head (e.g., Marketing head). On the other hand, product-based divisions address the
various product lines. For example, there is one division for coffee, another for baked goods and another for
merchandise. Starbucks can focus on product expansion, thereby making the best use of a matrix structure.
After we analysed and reviewed the literature so as to understand how the organisations evolved over time and
what different types of structures exist today in the modern era.
However, what we noticed was all these structures that were based on some common parameters which were:
1. DEPARTMENTALISATION
Once jobs have been divided up through work specialization, they have to be grouped back together so
that common tasks can be coordinated. The basis on which jobs are grouped together is called
departmentalization. Every organization will have its own specific way of classifying and grouping work
activities.
Today's View:
Large organizations often combine forms of departmentalization. For example, a major Canadian
photonics firm organizes each of its divisions along functional lines: its manufacturing units around
processes, its sales units around seven geographic regions, and its sales regions into four customer
groupings. Two popular trends in departmentalization are the use of customer departmentalization and
the use of cross-functional teams.
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Five common forms of Departmentalization that we can found these days
34
2. SPAN OF CONTROL
How many employees can a manager efficiently and effectively manage? This question of span of control
is important because, to a large degree, it determines the number of levels and managers an organization
needs. All things being equal, the wider or larger the span, the more efficient the organization. However,
at some point, wider spans reduce effectiveness. When the span becomes too large, employee performance
can suffer because managers may no longer have the time to provide the necessary leadership and support.
Today's View:
The contemporary view of span of control recognizes that many factors influence the appropriate number
of employees a manager can efficiently and effectively manage. These factors include the skills and
abilities of the manager and the employees, and the characteristics of the work being done. For example,
the more training and experience employees have, the less direct supervision they need.
3. DEGREE OF FORMALISATION
Formalization refers to the degree to which jobs within the organization are standardized and the extent
to which employee behaviour is guided by rules and procedures. If a job is highly formalized, the person
doing that job has little freedom to choose what is to be done, when it is to be done, and how he or she
does it. The degree of formalization varies widely among organizations and even within organizations.
For example, at a newspaper, news reporters often have a great deal of discretion in their jobs. They may
pick their news topics, find their own stories, research them the way they want to, and write them up,
usually within minimal guide lines. In contrast, employees who lay out the newspaper pages do not have
that type of freedom. They have constraints-both time and space that standardize how they do their work.
Today's View:
Although some formalization is important and necessary for consistency and control, many of today's
organizations seem to be less reliant on strict rules and standardization to guide and regulate employee
behaviour.
For example - A store's policy states that no orders or work will be taken post 2pm, but its 3pm already
and a customer approaches, the employee present at that time is aware of the rule but still fulfils the
demand of the customer, as he wanted the repairs to be done on the same day and he knew that this was
possible.
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Has this employee done something wrong? He did "break the rule. But by breaking the rule, he actually
brought in revenue and provided the customer good service.
4. CHAIN OF COMMAND
The chain of command is the continuous line of authority that extends from upper organizational levels
to the lowest levels and clarifies who reports to whom. It helps employees answer questions such as "Who
do I go to if I have a problem?" or "To whom am I responsible?"
Today's View:
For example, at the Michelin plant in Tours, France, managers have replaced the top-down chain of
command with "birdhouse" meetings, in which employees meet for five minutes at regular intervals
throughout the day at a column on the shop floor to study. Simple tables and charts to identify production
bottlenecks. Instead of being bosses, shop managers are enablers. In addition, information technology has
provided employees with immediate access to information instead of waiting to hear from someone higher
up in the chain of command.
5. DE/CENTRALISATION
In some organizations, top managers make all the decisions and lower-level managers and employees
simply carry out their orders. At the other extreme are organizations in which they make decisions. making
is pushed down to the managers who are closest to the action.
Today's View:
Most organizations start with a centralized model, where a founder makes all the decisions. As the
businesses grow and diversify their environments become complex. These businesses need to become
more flexible and responsive, resulting in decentralized decision making.
Decentralization also leads to employee empowerment, which means giving more decision-making
authority to employees.
For example, the Bank of Montreal's some 1000 branches are organized into "communities"-a group of
branches within a limited geographical area. Each community is led by a community area manager, who
typically works within a 20-minute drive of the other branches. This area manager can respond faster and
more intelligently to problems in his or her community than could a senior executive in Toronto.
6. WORK SPECIALISTION
Adam Smith first identified division of labour and concluded that it contributed to increased employee
productivity. Early in the twentieth century. Henry Ford applied this concept in an assembly line, where
every Ford employee was assigned a specific, repetitive task.
Today's View:
Today we use the term work specialization to describe the degree to which tasks in an organization are
subdivided into separate jobs. The essence of work specialization is that an entire job is ne done by one
individual but instead is broken down into steps, and each step is completed by a different person.
Individual employees specialize in doing part of an activity rather than the entire activity. When work
specialization was implemented in the early twentieth century, employee productivity rose initially, but
when used to extreme, human diseconomies from work specialization-boredom, fatigue, stress, poor
quality, increased absenteeism, and higher turnover-more than offset the economic advantages. Most
managers today see work specialization as an important organizing mechanism but not as a source of
ever-increasing productivity. McDonald's uses high work specialization to efficiently make and sell its
products, and employees have precisely defined roles and standardized work processes.
Some real-life examples -

Apple’s corporate structure has the downside of low flexibility. Hierarchy typically prevents lower levels of the
structure to flexibly respond to current business needs and market demands. For example, the company’s product-
based divisions must wait for directives from the CEO or other top executives to proceed in implementing changes
that address trends in the market for consumer electronics.
36
Google is a highly successful organization; it maintains a horizontal organization structure.
The organizations using flat structures such as Google are seen to be more creative and innovative.
It has a weak line of authority due to the fact that the chain of command from top to bottom is short and the span
of control is wide.
After evaluating all these parameters, we tried to follow the quantitative method of data collection to check
whether our theoretical evaluation was justified or not. And for this we prepared a questionnaire, which was
used as an interview guide for the researcher. Some certain questions are prepared, so as for the researcher to
guide the interview towards the satisfaction of research objectives.
Here is the link of google form consisting of questionnaire:

https://forms.gle/a6R4pbdcQ5TVZW426
FINDINGS & CONCLUSIONS
What we noticed from the responses is as follows –
Diversity of responses:
Since our questionnaire was based on the types of organizational structures, we did not restrict it to one level,
rather diversified it so that we have a clear picture based on the real-life experiences.
Majority of the people filling the questionnaire were currently a part of their respective organizations, so their
responses presented a better picture too.
37
Majority of the people were satisfied with the structure of their organization.
Since, we mentioned about six different parameters (on which an organization is based) in our research, so we
asked questions based on the same to check if those parameters exist or not in the real scenario. So, here we
present the inferences based on the same.
(A) DEPARTMENTALISATION:
Question: Are there different departments/divisions in your organization?
38
Inference - Departmentalisation exists.

The organisations are divided into various different departments based on their respective functions each of
them is performing.
Now, the type of departmentalization can vary based on the scale of operation, the product lines the company
deals in and many other factors too.
(B) SPAN OF CONTROL:
Question: How many people are you accountable to?
39
Managerial employees
The response is similar in this case, showing that the span of control of the managers depends on the
organization too, its size, its functions and many more.
Non-managerial employees
The response states that a wider span of control is being followed in today's scenario where one employee is
managed by and accountable to more than one person.
Interns
This also indicates towards the wider spans.
Inference- The trend of wider span is followed in the modern era and it shows that a wider span of
control is consistent with the manager's efforts, employees don't feel burdened, empower them and
increase flexibility.
(C) DEGREE OF FORMALISATION:
Managerial Employees
Question - Do you practice informal relations with your subordinates?
40
80% managerial employees practice informal relations implying they are working in close harmony with each
other and ensure friendly behaviour too.
Interns
Question- Are you hesitant to ask questions or overwhelmed by the work?
This inference clearly shows that the interns are also confident working in the environment implying that they
are comfortable with the work environment and this is possible only if the people in the management make
them feel comfortable by being a little informal.
Inference - Some degree of informalisation is necessary to make everyone feel comfortable in the work
environment.
(D) CHAIN OF COMMAND:
Question - Is the chain of command followed in your organisation?
Since, majority of people admitted that the chain of command is followed sometimes. This reveals that even in
the present scenario flow of information does not take place through a proper chain of command.
Inference - Flow of information should be done through a proper and predefined chain of command.
Coordination and communication are important aspects of the chain of command so as to ensure that
there is smooth flow of information across the organization.
(E) DE/CENTRALISATION
Managerial employee
Question - Is the decision-making authority granted to the lower level of management too?
41
This shows that most of the organizations in today’s world are decentralized, and as we will move ahead with
the inferences part, we will gather the insight that most of the employees are satisfied too.
HR
Question - How is the decision-making process in your organization?
This shows that the decision-making process is moderate implying that it flows through a chain and then a final
decision is taken.
Inference - Decentralized decision-making is being practiced. In case of large scale or diversified

organizations this becomes a necessity too.
(F) WORK SPECIALISATION
Question: On a scale of 1 to 5, how dedicated is your organization to diversity and inclusivity.
42
Interns
Question: Do you work for the profile you've applied to or you are a part of other tasks too?
Interns are most of the time involved in a variety of activities for their overall development and that they can
have a better functional knowledge too.
However, this may not be the case with the people working for full time
Hybrid Work Model
Question: Do you prefer work in office or home?
43
Comfortable with both
Inference - In the post covid scenario most of the employees have adjusted themselves to work either
from home or office.
This shows that organizational structures these days are a mix of hybrid structure and hybrid work
model too.
Now, after doing our qualitative and quantitative research, we were not very satisfied with the responses of the
employees working in the modern type of organisations.
Wherein we found out that in the pre and post Covid scenario, a new type of organisational structure has
developed named as “Hybrid Organizational Structure”
What are Hybrid Structures?
Hybrid organizational structure is a framework that uses more than one reporting structure at the workplace. For
example, the combination of functional and product structures forms a hybrid organizational structure.
In a hybrid organizational structure, employees are asked to work on multiple projects and report to multiple
bosses. Under an ideal scenario, an engineer working on a project reports his project manager. However, in the
hybrid structure, the engineer might be asked to work on another project for a brief period if a need arises, leading
to a situation where he reports to both the project manager.
Similar to the other models this, structure also has its pros and cons –
Advantages
1. High Flexibility: It allows the organization to optimize the value of employees by engaging them with multiple
projects.
2. Optimal use of human resource: Organizations with hybrid structures rarely feel the workforce scarcity
because they can quickly transfer suitable candidates from one project to another.
3. Functional knowledge and progress of employees:
Hybrid structure helps employees learn new processes and improve functional knowledge within a short period.
Employees who work under hybrid structures tend to progress quickly in their professional careers.
4. Increases employee loyalty:
Adding to point 3, it increases employee loyalty. Employees feel that their skill sets are valued, so they stay with
the organization for a longer period.
5. Facilitates better coordination:
It also creates a shared vision and facilitates better coordination between the projects or teams.
6. Increases productivity and efficiency:
The hybrid structure increases productivity and efficiency by making employees feel more invested in their
positions.
7. Decentralized decision making:
Since, hybrid is a mix of different types of organisational structures, so they follow the principle of
decentralization i.e., decision making authority is even with the lower levels of management too.
8. Optimum use of resources:
Optimum use of available resources is possible with the hybrid organizational structure. Resources are valuable
and if they are put to the best use, they can help the company achieve its financial goals. Under this organizational
structure, wastage of time and resources can be completely avoided.
A hybrid organization is operational in both, the public as well as the private sector
44
As we can see that these structures have a long list of advantages, so we tried to explore some real-life
organisations, that have adopted this structure to carry their operations effectively and efficiently:
1. STARBUCKS: Starbucks implements a mix of three organizational structures: functional structure,
geographical structure and product-based structure.
2. JOHNSONS & JOHNSONS and Oracle: We also found that slowly and gradually they are also adopting
Hybrid structure.
Every coin has two sides and this structure too has its own disadvantages:
Disadvantages
1. Leads to conflicts: A hybrid organizational structure creates conflicts in reporting. It also leads to scheduling
conflicts if an employee is needed for both projects at the same time.
According to Corporate Finance Institute, a hybrid organizational structure leads to conflicts between vertical
functions and horizontal product lines.
2. Leads to low productivity: The hybrid structure can lead to chaos and low productivity if the roles and
responsibilities of the managers are not identified and communicated properly.
3. Burdened employees:
The workload in organizations with a hybrid structure is high because employees are asked to carry out additional
project tasks besides their day-to-day functional tasks. Employees often feel burnout and pressure of over
delegation in hybrid structures.
So, to overcome these problems we tried to reinvent an organisational structure which can solve not all but at
least some problems that we encountered in the structures so far.
Here is the link of the diagram of our model

https://www.mindmeister.com/map/2090344479?t=2hSwjVpe1F
In this structure i.e., "Hybrid 2.O" there is a mix of Functional Structure, Matrix Structure, Process
based decentralized structure and a hybrid work model too, wherein employees will be allowed to work from
home.
A McKinsey research found that 80 percent of remote workers enjoy working from home, and 69 percent are
just as or even more productive working from home than from the office. However, working remotely all the
time is new to most of us and not the preferred option for many.
Where at the Topmost level, board of directors, CEO and a Managing Director head the entire organization
categorised as
Top Level 1 - Board of Directors
Top Level 2 - Chief Executive Officer
Top Level 3 - Managing Director
Then the organization is based on the basis of functions as Sales, Production, Finance, HR, R&D, headed by the
respective heads.
Now, since we have designed this structure in a quite broad way and we have shown two product categories so
the sales and production department follow a matrix type of organizational structure, including a product manager
for each product type, delegating authority and responsibility to a project manager who eventually gets all the
tasks done.
Whereas, R&D follows a process-based structure. A project manager is also appointed here.
Then the HR function is following a simple/normal structure.
45
Despite all this, the organization also focuses on providing proper guidance, mentorship, training to support the
employees and help them to grow individually to ensure good quality work.
It also uses various technology-based tools to ensure proper working.
Being a mix of different types of structure this forms our "Hybrid 2.O".
Since, we identified some parameters after reviewing the literature, this structure is also framed on the basis of
those ones only:
1. Departmentalization: The basis on which jobs are grouped together is called departmentalization. The
"Hybrid 2.O" also follows this as all similar activities relating to sales, production, finance are grouped
under their respective departments following the latest form where cross functional teams can work
together.
(Cross Functional Teams - Teams that are made up of a group of individuals, who are experts in various
specialties and who work together - to increase knowledge and understanding of various organizational
tasks.)
Since it's a recommended model and a highly flexible one, organizations can adopt and modify this
structure based on the scale of their operation. They can increase or decrease the number of departments.
2. Span of Control: This structure follows a wider span of control, following the trend in recent years which
are consistent with manager's efforts to reduce costs, speed up decision making, increase flexibility,
empower employees and get closer to the customer's as well.
"Hybrid 2.O" depicts a broader span of control where every working person is controlled by or
accountable to his immediate head.
To ensure that this does not create a burden for the employees too, a person is not accountable to more
than two bosses.
And to ensure that the performance does not suffer due to these wider spans there is a project manager at
every subsequent level responsible for getting the tasks done effectively and efficiently too.
But yes, initially the organisation would need to invest in the training and development of its employees
so that everyone is well equipped with whatever it takes to smoothly carry out their respective roles.
3. Chain of Command: The continuous line of authority that extends from the upper level which is very
clearly followed in "Hybrid 2.O" as it uses more than one reporting structure and it's not that it is quite
rigid as along with the organizational structure it also follows a hybrid work model too which talks about
some quick reporting modes and not the traditional and lengthy ones.
For instance, the new concept of 'Birdhouse meetings' where employees meet for five minutes at regular
intervals throughout the day anywhere to study some simple tables and charts to identify production
bottlenecks and give progress reports too.
Weekly catch-ups and check-in meetings are a great way and this is followed in “Hybrid 2.O” too (refer
to the diagram link that is given above). This parameter also covers authority, responsibility,
accountability, delegation and many more, which are clearly defined in this diagram as to who will report
to whom.
4. Decentralization: "An organization can never be completely centralized or decentralized." This

statement is taken from the above explanation only. Keeping this in mind, while designing the structure
of "Hybrid 2.O" we made it a decentralized one.
As the lower-level managers are in 'closer to the action' and they typically have more detailed knowledge
about the problems and how best to solve them than the top managers do, here as well the lower-level
managers have decision making powers relating to their own roles and are accountable to their immediate
heads. This also leads to an ease in performing the operations from anywhere (be it office or home)
46
5. Degree of Formalization: Some formalization is always important and necessary for consistency and
control. “Hybrid 2.O” has also adopted this to some extent. The rules and policies so formed within the
organization are as per the needs of the employees and the importance of the same has been explained to
them clearly so that they understand the importance of adhering to them.
Since the organization is a decentralized one there may arise some situations where even the lower-level
employees can exercise their freedom of taking the decisions on the spot. However, this would never
mean that all the organizational rules are thrown out of the window.
For example: In spite of the higher-level managers being harsh and rude to the employees they can make
smart use of technology. Like, Hive Desk is an automated tool that tracks the time and activity of
employees during work hours. By taking periodic screenshots and monitoring activity levels, it helps keep
inefficiency at bay, thereby promoting accountability. Whereas some informal meetings can always be
organized or all the employees (irrespective of their designations) can have lunch in the same canteen so
as to ensure that a friendly environment always exists.
6. Work Specialisation: As mentioned above, Hybrid 2.O depicts a broader view of an organization and
is designed for diversified organizations. So, all the tasks are subdivided into separate jobs so that the
people performing them gradually get specialised in doing so.
As the organization has various departments which have their own set of jobs to be completed, clusters
have been broken into smaller units to ensure each and every activity is done in the best possible way
without putting a burden on the employees.
As we analysed Hybrid 2.O on some basic parameters, we can also list the numerous advantages it has starting
from
• Higher flexibility,
• Remote working,
• Optimum use of human and other resources,
• Better coordination,
• Proper regulation,
• Decentralized decision making,
• Increased productivity & efficiency
• Development of cross functional skills
• Improved communication (by a mix of hybrid structure and work model too)
and this list will go on.
This reinvented model also eliminates the disadvantages posed by the latest hybrid structures in existence in the
following ways –
Less burden - Since, in the complex departments of production and sales a matrix type of structure is followed
wherein at every lower level a project manager is doing the tasks and is accountable to two heads.
Hence, the division of all the activities in smaller units each headed by a superior ensures that no one is
overburdened. Adding to this, the place of work is flexible and can be adjusted as per the suitability of the
employees so it also adds to the satisfaction of the employees.
Improved communication - The use of technology in such a diverse organization has led to better
communication at all the levels of management. The higher authorities can also keep a track of all the employees
(even of the ones who are even working as staff.) The organization follows a mix of informal and formal
organizations which is also a result of faster decision making and confidence in the employees.
47
Lesser Conflicts - As explained in the point above, if there are no communication barriers the chances of conflicts
are reduced and the presence of a superior at every level also ensures that all the working people are at peace and
work with harmony for achieving the ultimate goals of the organization.
Adding to this, “Hybrid 2.O” just represents a framework of a well-defined organizational structure.
So, it can be easily modified based on the departments, product divisions, geographical locations and many more.
The diagram below shows “Hybrid 2.O” modified for an organization working on medium scale dealing only in
one product category.
Here is the link for the above diagram

https://miro.com/app/board/o9J_ljTtOeo=/
After showing a detailed analysis of “Hybrid 2.O”, it is likely to state that no structure is perfect and has to be
modified depending on the needs of different organizations.
However, some situations may arise where “Hybrid 2.O” also fails to yield the desired results.
For instance, as we pointed Starbucks to be using a hybrid structure already,
Some articles show that despite the adoption of a hybrid structure it is facing some internal challenges including
complacency of employees, and main corporate strategic management challenge in implementing it across all the
associated organizational culture development.
Links of the articles
https://business-essay.com/starbucks-companys-internal-and-amp-external-challenges/
http://panmore.com/starbucks-coffee-company-organizational-culture
So, if we forecast that Starbucks adopts “Hybrid 2.O” and introduces matrix division at the most complex
departments and introduces some more technology-oriented systems across all the geographical locations
then there may be a possibility that this either proves to be a success for them or maybe it turns out to be a failure
too, in terms of employee reluctance to adhere to the technological modes of reporting even after proper training
is provided.
Thus, to sum up we would like to say that, organizational structures in organizations evolve over time. As an
organization grows in terms of employees and product lines, the senior management team amends the
organizational structure to streamline communication and workflow. Whenever there is a change in
48
organizational structure, employees are trained to realign their responsibilities and follow changed reporting
procedures.
No matter what structural design managers choose for their organization, it should always help employees work
in the most efficient and effective way possible to meet the organization's goals.
FUTURE RECOMMENDATIONS
For future, we would recommend that the team performing such research should firstly delve deeper into how
these structures evolved over time, then try to analyse the current scenario and draw a valid comparison between
the two.
After this a proper planning should be done as to how this research would be helpful to improve the current
situation and eliminate the problems.
For this, the research methodology should be prepared properly and the quantitative research is the base for
further analysis so it becomes necessary to ensure that it is conducted in a fair manner and from a diverse group
of people.
Recommendations to create some more suitable structures:
Many small businesses start with few employees and even fewer managers. As the business grows, owners often
create an organizational structure to react to changes, rather than creating a thoughtful plan that prepares for
future growth. Planning ahead is the best way to create an organizational structure that helps your business grow,
even if you’ve already been in business for a while.
(a) Planning is important: So, plan accordingly and create a Management and staff structure that best suits the
needs of your business model.
(b) Organize by Function: Carefully look at the functions your organization is performing. Typical business
functions include production, marketing, sales, finance, human resources and information technology.
(c) Combine Functions: Many small businesses give multiple responsibilities to different department or
function heads to save money, especially if the function only requires part-time attention. For example,
companies often combine bookkeeping and human resources, marketing and sales or office administration
and information technology. Set benchmarks that alert you to the fact it’s time to separate these functions
because the workload or your revenues justify it.
(d) Create a chain of command: An organizational structure should clearly define the authority, responsibility,
accountability of each level. So, that everyone knows who is accountable to whom. Alongside, the span of
control should be visible clearly.
(e) Communicate your structure: An organizational structure isn’t a top-secret document and will work best if
every employee, down to the lowest worker on the chain of command, knows your structure. Have a company
meeting to explain the reason you have created the structure, how it will benefit the company, who reports to
whom and any grievance procedures.
An organizational structure isn’t a top-secret document and will work best if every employee, down to the lowest
worker on the chain of command, knows your structure. Have a company meeting to explain the reason you have
created the structure, how it will benefit the company, who reports to whom and any grievance procedures.
Organizational structures in organizations evolve over time.
As an organization grows in terms of employees and product lines, the senior management team amends the
organizational structure to streamline communication and workflow. Whenever there is a change in
49
organizational structure, employees are trained to realign their responsibilities and follow changed reporting
procedures.
No matter what structural design managers choose for their organization, it should always help employees work
in the most efficient and effective way possible to meet the organization's goals.
BIBLIOGRAPHY
(2011, May 8). Retrieved from bizfluent: https://bizfluent.com/info-8375509-four-types-management-

theory.html
5 Reasons Organizational Structure is Important. (2021, july 12). Retrieved from https://balancepointhcm.com:
https://balancepointhcm.com/5-reasons-organizational-structure-is-important/
Bureaucratic Theory by Max Weber. (2019, March 17). Retrieved from toppr:
https://www.toppr.com/guides/fundamentals-of-economics-and-management/evolution-of-management-
thought/bureaucratic-theory-by-max-weber/
Daft, R. L. (1997).
Ferdous, J. (2017). A JOURNEY OF ORGANIZATION THEORIES: FROM CLASSICAL TO MODERN.
International Journal of Business, Economics and Law.
Gupta, D. C. (2018). Management Principles and Applications . New Delhi: NKM Publishers Pvt. Ltd.
jacquelynpica. (2021, 5 8). Classical Management Theory Explained. Retrieved from villanovau website:
https://www.villanovau.com/
Jahan, S. (2016). Modern Organization VS Traditional Organization.
Kwok, A. C. (2014, April 25). The Evolution of Management Theories: A Literature Review. Retrieved from
www.ny.edu.hk/.
Modern Theory of Management: Definition, Benefits and Types. (2021, april 13). Retrieved from
www.indeed.com: https://www.indeed.com/career-advice/career-development/modern-theory-of-
management
NCERT Business Studies Part 1. (2007).
Onday. (2016). Classical Organization Theory: From Generic Management of Socrates to Bureaucracy of
Weber. International Journal of Business and Management Review, 4, 87-105.
Organisational Change: what is and why is it important. (2020, August 3). Retrieved from
https://www.thecoachingheads.com/: https://www.thecoachingheads.com/organisational-
change/organisational-change-essentials/
Quantitative Approach to Management - Explained - The Business Professor, LLC. (2021, july 16). Retrieved
from www.thebusinessprofessor.com: https://thebusinessprofessor.com/en_US/management-leadership-
organizational-behavior/quantitative-approach-to-management
Sarker, M. S., & Khan, M. R. (2013). Classical and neoclassical approaches of management: An overview.
IOSR Journal of Business and Management.
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Shafritz, J. M., Ott, J. S., & Jang, Y. S. (2005). classics of Organization Theory.
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https://smallbusiness.chron.com/advantages-fayols-principles-management-78162.html
51

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REINVENTING THE ORGANISATION: NEED OF THE HOUR

“REINVENTING THE ORGANISATION: NEED OF THE HOUR”

Contributors: Members of Group 7

Mentor: Dr. Poonam Sethi

Submitted as a part of IA for the paper of HRM

S. No. Topic Page No.

Traditional Organisations vs Modern Organisation

Life Cycle of an Organisation

Evolution of Organisational Theories

1. CLASSICAL MANAGEMENT THEORY

Contributions of Classical Management theory

A. Scientific Management Theory by Taylor:

(ii) Offshore Markets

B. Administrative Management Theory by Fayol:

Classification of Activities according to Fayol:-

C. Bureaucracy Theory by Weber:

Max Weber’s Bureaucratic Form – 6 Major Principles

2. NEO-CLASSICAL MANAGEMENT THEORY

B. Human Relations Approach

The human relations school is based on the following ideas

C. Behavioural Science Approach

(i) An organisation is a socio-technical system.

3. MODERN MANAGEMENT THEORY

The main features of systems approach are as follows:

Process of developing an organisational structure

1. Plan the future.

2. Consider the past.

3. Build the organizational structure.

The organization can be vertical, hierarchical, flat or matrixed.

4. Fill in the people.

5. Balance authority and responsibility.

6. Fill in employee data and metrics.

7. Practice robust performance management of employees.

8. Review your organizational structure annually.

Importance of organisational structure

(i) It serves as a management planning tool.

Factors affecting Organisational structures

• Changes in national and global economic conditions

Types of Organisational Structure

1) LINE ORGANISATIONAL STRUCTURE

2) FUNCTIONAL ORGANISATIONAL STRUCTURE

3) LINE AND STAFF ORGANISATIONAL STRUCTURE

4) PROJECT ORGANISATIONAL STRUCTURE

Example of Projectized Project Organizational Structure for Construction

Example of Matrix Project Organizational Structure for Software Development

5) MATRIX ORGANISATIONAL STRUCTURE

Five common forms of Departmentalization that we can found these days

Some real-life examples -

Google is a highly successful organization; it maintains a horizontal organization structure.

Here is the link of google form consisting of questionnaire:

FINDINGS & CONCLUSIONS

What we noticed from the responses is as follows –

Question: Are there different departments/divisions in your organization?

Inference - Departmentalisation exists.

(B) SPAN OF CONTROL:

Question: How many people are you accountable to?

(C) DEGREE OF FORMALISATION: