Systems Plus College Foundation

College of Computing and Information Sciences

ORGANIZATIONAL MANAGEMENT
(OMC)

CCSI5B/ CCSI5B/ CCSI5E

WEEK 4(September 13 -14,2023)

Dorwin M. Rivera, BSA, LLB

Lecture 3
DESIGNING THE ORGANIZATIONAL STRUCTURE
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OBJECTIVES

At the end of the lesson, the student shall be able to:

Discuss and explain the making of organization;

 Discuss and explain the types of organizational structure;

 Discuss and explain the types of organization
 Give the features of line organization, line and staff, and functional structure;
 Explain why organizational change is necessary; and
 Give the advantages and disadvantages of the different organizational structures.

DEFINITIONS OF ORGANIZATIONAL STRUCTURE

The organization structure is reflected in chart or drawn in boxes representing different

departments and sections. It is a visible representation of the total company set-up and the
underlying activities and processes. There are three components of organization structure:

1. Organization structure designates formal reporting relationship. It includes the number

of levels in the organizational hierarchy and it also defines the span of control of
managers and supervisors.

2. Organization structure identifies the grouping together of individuals according to

functions into departments. It specifies the grouping of departments and sections into
the total organization.

3. Organization structure includes the design of communication linkages. This ensures that
coordination and integration of efforts towards goal achievement are affected among the
different sectors.

The three elements of structure pertain to both vertical and horizontal aspects of organizing. The
first two elements are structural framework reflected in the vertical hierarchy in the organization

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chart. The third element pertains to the horizontal interactions to provide information and
effective coordination across departments.

TYPES OF ORGANIZATIONAL STRUCTURE

Designing the organizational structure is ordinarily considered as a matter of choice among a

large number of alternatives. After considering the major jargons of organizational design, we
have to look back to the purpose and objectives that shall be suited to the needs of the company
to be competitive in its industrial world.

Looking on the many companies' organizational structure, we all find them that there are line,
line and staff, and staff type organizations. Putting boxes in the structure is a matter of top
management choice.

THE LINE ORGANIZATION

At the early stage of the company's operation, Management wanted more control of the
operation. Along this line of thinking top management decision making is more centralized. Line
managers are those elements who have responsibility and authority for the direct
accomplishments of the primary objectives of the organization. The vertical line of authority
emanates from the top of the organization down the chain of command. Line managers have
clearly defined roles to play. This requires understanding of the nature of line authority and the
line relationships.

The Features of the Line Organization

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1. The Line Authority

Managers identified in the line are getting direct command from the top of the line. The
line within the company is the relationship that identifies and connects people in the
chain of command. Decision has to be approved on the next higher level unless minor
decisions are authorized.

2. The Line as the Chain of Command

The command relationship exists between each superior and subordinates. In accepting
the line responsibility, it is clear that the line managers serve only as staff assistant to the
top of the line. They are subordinates to his superior's authority and responsibility. The
manager obligates himself to obey his command.

3. The Chain of Communication

The members of communication are the connected existence thru a line communication.
There is the existence of vertical line direct from the top executive to the line managers.
The horizontal lines indicate the process of horizontal communication between line
managers. The development of line relationship is the channel through which managers
can proceed most effectively in coordinating company activities.

4. The Line as Carrier of Accountability

The line element is the means of establishing the manager's functions of accountability
for results. He is accountable for the results of his operating decisions. He has to
maintain the integrity of his define work and held responsible for doing it properly. It
stresses and emphasizes responsibility that the line is a line of accountability and
responsibility.

Advantages of Line Organization

The line organization has the following principal advantages:

1. Organizational problems are solved quickly as top management is in control of decision-

making. The red tape is at minimum level as there is centralization of authority.

2. Responsibility is well-defined. The simple line of communication is present. Single

accountability can be maintained and better organizational control is achieved.

3. Less overhead expenses on additional staff as line managers also provide functional
activities to the top executives.

The Disadvantages of Line Organization

When the organization expands its operation and growth becomes inevitable and management
refuse to heed the idea for change, the following are the disadvantages:

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1. There will be an increase in the load of line managers. They will be overburden with
the conceptual and technical activities. It will result in the loss of effectiveness unless
they are highly talented and dedicated.

2. The chain of command becomes longer as instruction has to pass through channels.
The layer of supervision and actions create red tape.

3. There will be the existence of the inadequacy of managerial specialization. The

company's expansion program maybe at stake.

4. Over centralization of decision and authority tends to develop dependent managers

and supervisors. This will hamper the development of managerial creativity and
initiative.

ORGANIZATIONAL CHANGE

As the company starts to grow from infancy to more advance stage, it begins to find changes
necessary in its structure. Organizational change has to adapt to the changing conditions brought
about by business expansion or economic development in the internal and external
environments.

Organizational innovation is the adoption of an idea or new pattern of behavior in the industrial
market. The changes in market conditions and the continuing growth of the company must be
sustained to make complete the change process. The following elements must be present:

1. Need. The need occurs when managers or top management become dissatisfied
with the present performance. The need exists when present clients are not satisfied
with the products, quality or service. It also exists when new demands are not meet
with current personnel and procedures. Dissatisfaction is necessary to unfreeze
management from the current ways of doing things.

2. Idea Generation. A new idea is generated due to felt need for change. It is encourage
by open communication from the top management level up to operating
departments. It encourages creativity to solve present problems. Open discussions
should match felt needs. An open idea is made into a written proposal and
submitted to top management for consideration.

3. Adoption of the Idea. After considering the proposed idea, the top management has
to adapt new policy guidelines to implement the proposed change. When minor
change is only necessary informal guidelines would be enough.

4. Idea Implementation. When top management makes a go signal and managers are
ready to assume responsibility, the implementation stage begins. Training new
employees would be necessary or a more modern machine or equipment will be put
in place. The budget has to be provided.

5. Availability of Human Resources. A new idea implementation would require new

breed of employees. This could be done through internal or external training

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programs. The employees must have great perceptions on the change/s necessary
and the skills to implement it.

THE GROWTH OF LINE AND STAFF ORGANIZATION

The maturing organization has to adapt to change. The above discussions would point out
that change is not easy to implement. Nevertheless, the organization has to grow and
prosper. Management would not allow itself to be stagnant in their operation or be left out
in their corporate advancement.

As the organization moves forward in the corporate arena, top management would like to
free themselves of menial jobs that could possibly be assigned to staff assistants. Managers
in the line department need also new breed of staff that could handle research projects or
make formal studies for the improvement of its products and services. The need for more
people becomes apparent as new demand becomes imminent.

Features of the Line and Staff Structure

1. The line managers are still directly responsible to the top executives or those above the
line in the organizational structure.

2. The specialist positions are created and given recommendatory functions.

3. The influence of the staff executive is mainly one of ideas and recommendation.

4. The recommendation of staff executive should have the prior approval of the line
managers above him before implementation.

5. The staff executive has to coordinate closely with his line managers in carrying out plans,
programs and other activities inherent to the department.

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Advantages of Line and Staff Organization

When properly crafted, a thorough analysis of the demand is made for the corporate growth
and expansion, the Line and Staff Organization are as follows:
1. The accountability for objectives and the end results could still be carried from
the heads of the departments.

2. The internal lines could be traced in each of the staff departments with the
functions of study, research and advisory in nature.

3. The line continues through functional groupings which represent the primordial
activities of the department.

4. The line executives will be free of study and research activities which he could
delegate to staff executives, thus, improve performance on basic department
functions.

5. The line and staff organization has the best features of the line and functional
type as to effectiveness of control, operating efficiency and economy.

THE BIRTH OF FUNCTIONAL STRUCTURE

Company grows rapidly with good management. New opportunities are open for either
vertical or horizontal integration. Vertical integration could be defined as the operation of
another line of product or services which is different or similar to the present organization.
The expansion program would need new sets of specialists.

Horizontal integration, on the other hand, could be backward or forward movement of the
company. This is to effectively control the supply of materials in its present operation or the
processing of new products and marketing the same. Executive innovations would demand
the shift to functional structure. Under this set-up the mother company still maintains
control of the new divisions through its Board of Directors and Stockholders. The concrete
examples could be that of San Miguel Corporation, Shoe Mart and other growth-oriented
companies.

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Features of the Functional Structure

1. Creation of a new Division to produce and market new products or services.

2. Assignment of Staff Specialists from the ranks of staff executives who are assets in
the company's expansion program.
3. Functional structure could be the results of decentralization and specialization to
facilitate the ease of establishing control.
4. Create profit centers and delegate authority and responsibilities to where the action
takes place.
5. The Central Management makes overall decisions in planning, organizing, directing
and controlling to proceed towards uniformity and effective coordination.

Advantages of Functional Structure

1. Functional structure unburdens top executives of the minute details of product

diversification.
2. It encourages the development of managerial talents and provides motivation to
excel.
3. It provides products and markets' emphasis creating more sales volume through
systematized marketing system.
4. It gets more action at the right place and time.
5. It stimulates the formation of small cohesive group of managers that plans
operational details.
6. Managerial talents are developed. Team effort is the center of the game.
7. It demands a high degree of group efforts to communicate effectively with
subordinates.

Disadvantages of Functional Structure

Over simplification may create loss of control of the operating units.

1. Assignments of favored personnel staff may create feeling of jealousy among

executives.

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2. Accounting and auditing system must be effectively implemented to assure

operational viability and profitability.
3. Over staffing is not economical in functional set up.

OTHER ORGANIZATIONAL STRUCTURES

The Bureaucratic Structure

The government is a large organizational structure. It has the features of the three other
organizational systems discussed. Bureaucratic dimension provides standardized and
impersonal way to control organization. The mechanisms for effective control are set in place
for the hiring of qualified personnel to ensure predictable outcome.

The ability of the bureaucratic structure to function efficiently depends upon its authority
structure. Rational authority is prepared over other system of control as basis for internal
decision making. Supposedly, it should facilitate the allocation of scarce resources in
increasing demand of complex social system.

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Features of Bureaucratic Organization

1. There are standard operation procedures to follow bounded by rules.

2. Specific duties and responsibilities are specified in job descriptions and job
specifications.
3. There is division of labor and its job holder has to be given the necessary authority.
4. There exists a hierarchy of authority. It follows a chain of command in the
organization ladder.
5. Technical competence should be the basis in hiring key positions. They should be
equipped with the necessary training and eligibility.
6. All actions must be in writing. Record keeping must be in place and made part of the
functions and knowledge base on specific jobs.

Advantages of Bureaucratic Organization

1. It provides a standardized and impersonal system of control.

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2. The rational control is the fundamental idea.

3. There is a system of mechanism in the hiring of qualified personnel.
4. Managers are provided with specific guidelines in decision making.
5. Standardized procedures are set in place.

Disadvantages of Bureaucratic Organization

1. Too much paper work is involved.
2. Records are always necessary.
3. Hiring of personnel is usually based on favoritism.
4. Friends and family connection is the name of the game in any transaction.
5. Graft and corruptions is prevalent at all levels.
6. Rules could be twisted to favor few individuals with connections.

The Matrix Structure

There could be a shift of structural design as the company grows and prospers. Matrix structure
could be the answer when organization finds that functional structure should be combined with
horizontal linkages. The functional mana and line product managers are given equal authority to
make decisions within the context of their responsibility

Features of Matrix Structure

Matrix organization is designed for expanding client's demands and when the company operates on
medium to high uncertainty due to unstable market situation. It has to answer external efficiency
and effectiveness to take advantage of the prevailing environment. The following are its features:

1. Product development is given priority.

2. Profit centers are created with careful budgeting and planning.
3. Formal delegation of authority and responsibility
4. Coordination is established with product or functional managers.
5. Objectives and goals are properly defined.

Advantages of the Matrix Structure

1. It achieves adaptability to the changing environmental conditions.

2. There is effective coordination in the functional or product divisions.
3. Efficiency in the centralized functional divisions.
4. Results in better alignment between corporate and division levels.
5. Achieves effective coordination both within and between product lines.

Disadvantages of the Matrix Structure

1. Develops potential for excessive administrative overhead.

2. When authority and responsibility are not properly put in place, it develops conflicts
between functional and operating divisions.
3. Organizational structure may change from time to time due to uncertainty of operation.

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OFFICIAL SFPC LECTURE DISCLAIMER

It is not the intention of the author nor the publisher of this lecture to have
monetary gain in using the textual information, imageries, and other references
used in its production. This lecture is only for the exclusive use of a bonafide
student of System Plus College Foundation.

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In addition, this lecture or no part of it thereof may be reproduced, stored in a

retrieval system, or transmitted, in any form or by any means, electronic,
mechanical, photocopying, and/or otherwise, without the prior permission of
Dorwin Rivera.

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