APPLY

ORGANIZATION
THEORIES FOR
EFFECTIVE
BUSINESS
MANAGEMENT
 OBJECTIVES
K: Identify the different organization theories;
S: Explain the fundamentals of the organizing
function in business organizations;
A: Apply organization theories in solving
business cases.
 WHAT YOU NEED
TO KNOW
There are two main classifications of theories regarding
organizational design (how management achieves the right
combination of differentiation and integration of the
organization’s operations, in response to the level of uncertainty
in its external environment). According to Robbins &
Coulter(2009): Traditional and Modern Traditional pertains to
the usual or old fashion ways while modern refers to
contemporary or new design theories.

Traditional Theories include:

SIMPLE
This organizational design has a few departments, wide spans of control, or a
big number of subordinates directly reporting to a manager: has a centralized
authority figure and has very little formalization of work: usually used by
companies that start as entrepreneurial ventures.

Simple Organizational Design

Strengths Weaknesses
 Flexible ❖ The risk that overdependence with
❖ Fast decision-making and result over-dependence on a single person
❖ Clear accountability ❖ No longer appropriate as the
company grows
FUNCTIONAL
This organizational design groups together similar or
related specialties. Jobs are grouped in departments with the
specified skills and/or business functions.

Example of the functional organization includes:

a. An English department for a particular school teaches all the

English subject regardless of what grade level the students
are.
b. The municipal water district is responsible for all the water
needs in a particular town.
c. The purchasing department of an enterprise buys all the
materials, supplies, and other resources required by an
enterprise, whether these inputs are required by marketing,
finance, accounting, human resources, or other departments.

Functional Organizational Design

Strengths Weakneses
 Cost-saving advantages  Managers have little
 Management is facilitated knowledge of other units’
because workers with similar function
tasks are grouped
DIVISIONAL
This organizational design is made
up of separate business divisions or
units, where the parent corporation acts
as overseer to coordinate and control the
different divisions and provide financial
and legal support services.

Example of the divisional organization

includes:

1. NORSU set up university branches

located in the different towns in
Negros Oriental.
 2. Health Centers set up “barangay health units” to provide the
health services of each barangay in the town.

Divisional Organizational Design

Strengths Weaknesses
 Focused on results  Possible duplication of activities
 Managers are responsible for and resources
what happens to their products  Increased cost and reduced
and services efficiency
Modern Theories include:

TEAM DESIGN
This organizational design is made up of workgroups or
teams. They define team structures such as roles and
responsibilities, and they collaboratively identify working
arrangements that allow their team to deliver on their
purpose and goals.
 Team Organizational Design
Strengths Weaknesses
 Better Communication  Potential conflict
 Teams Resolve Problems  Some people are not team
Quicker players
 Flexible and Empowered  Under-performing
Workforce employees hide behind the
 Empowerment of team team
members and reduced
barriers among functional
areas
MATRIX-PROJECT
DESIGN
This refers to an organization design
where specialists from different departments
work on projects that are supervised by a
project manager. This design results in a
double chain of command wherein workers
have two managers - their functional area
manager and their project manager-who
share authority over them.
 Divisional Organizational Design
Strengths Weaknesses
 A specialist is involved in the  Task and personality conflicts
project  The potential conflict between
 Increased communication managers and projects
efficiency  Authority confusion
 Improved employee motivation  Reduced employees effectiveness
 Increased teamwork  Increased management overhead
 Maximize resource usage costs
 Increase professional development
 PROJECT DESIGN
It refers to an organizational design
where employees continuously work on a
project.

Project Organizational Design

Strengths Weaknesses
 Flexible designs  Task and personality conflict
 Fast decision making
BOUNDARY-LESS
DESIGN
This refers to an organization design where
the design is not defined or limited by vertical,
horizontal, and external boundaries. There are
no hierarchical levels that separate employees,
no departmentalization, and no boundaries that
separate the organization from customers,
suppliers, and other stakeholders. The key to
this design is electronic communication, where
information is shared with the member
enterprise with distinct competencies.
 Boundary-less Organizational Design
Strengths Weaknesses
 Highly flexible  Lack of control
 Responsive and draws on  Presents communication
talent where it is found difficulties
• Cabrera,H. PhD, Altarejos, A, PhD, Benjamin, R., et al 2016.
ORGANIZATION AND MANAGEMENT. PASIG: VIBAL GROUP.
• Orjalo, V., Frias,S. & Pefianco, E., et al 2016.
ORGANIZATION AND MANAGEMENT Phoenix Publishing
House
• Studocu. (n.d.). Math 12 ABM Org Mgt Q2-Week 1 -
ORGANIZATION THEORIES FOR EFFECTIVE BUSINESS
MANAGEMENT for - Studocu.
https://www.studocu.com/ph/document/leyte-normal-
university/the-teaching-profession/math-12-abm-org-mgt-q2-
week-1/20682187