ORGANIZATION STRUCTURE

By J.J
Objectives
• Understand about the concept of organization and organization
structure
• Understand types of organizational structures, their advantages and
disadvantages
• Understand the evaluation pattern and major points to be covered in
OST
Organization and Organization structure
Group of individuals(large or small) working together in order to
achieve a common goal

Systematic arrangement of people working with an organization

IMPORTANCE OF ORGANIZATIONAL STRUCTURE

• It enables members to know what their responsibilities

• It frees the manager and the individual workers to
concentrate on their respective roles and responsibilities
• It coordinates all organization activities so there is minimal
duplication of effort or conflict.
• Avoids overlapping of function because it pinpoints
responsibilities.
• Shows to whom and for whom they are responsible
Formal organization structure catagories
1. Simple Structure(also known as line, vertical structure)
2. Functional structure
3. Divisional Structure
4. Matrix structure
5. Virtual structure
1. Simple organization structure( Line/Vertical)

• Organizations have only direct, vertical relationships

• Departments directly involved in accomplishing primary goals
• Authority flows from top to bottom
 Advantage and disadvantages of line structure

• Simple to work • Can suffer from a lack of

• Promotes the unity of command. specialization at levels and
• Fixed responsibility and tasks at • Can overburden few levels to
each level their breaking points
• Stable form of organization • Division of work is not based on
any scientific plan but on the
whims of the manager

Useful in small scale business, continuous process industries

2. Functional organization structure

• Organizations groups employees according to a specialized or similar set of roles

• One of the most commonly used structure
• Operates well in stable environment
Advantage and disadvantages of Functional
structure
• The team is managed by an • The functional organization may
experienced person with a have unhealthy competition
high ability and skills working with the other areas
• The team members work with • Another disadvantage of
other people in the field and it functional organization structure is
allows sharing of thoughts and that these functional groups may
knowledge  not be able to communicate more
often which decreases flexibility
and innovation.
3. Divisional organization structure

• Grouping of
activities or
departmentation
on the basis of
product, market
or geography
Advantage and disadvantages of Divisional structure

• An advantage of a divisional • may result in too great of a

structure is that each division sense of autonomy among each
can operate as a separate, self- division.
sufficient unit  • may be more expensive to
• Another advantage of a operate. Because each division
divisional structure is that it operates as a separate entity
allows for a high degree of
specialization.
 Hybrid Structures
Product
Divisional
President
Structure

President President President President

Cadillac Buick Pontiac Chevrolet

Vice-
Vice- Vice- Vice- Functional
President,
President, President, President, divisional
Human
Production Marketing Finance structure
Resources

Manager Manager Manager Manager Geographical

Region I Region II Region III Region IV divisional structure

A Hypothetical example of what GM might use

13
4. Matrix organization structure

• Organization designed to achieve specific results by using team of

specialists from different functional areas in the organization

C
Advantage and disadvantages of Matrix structure

• Allows team members to share • Confusion over authority and

information more readily across responsibility
task boundaries  • High prospect of conflict
• Strong coordination between • Administration cost
product/project
• Fast response to change
4. Virtual organization structure

• Organization designed to achieve specific results by using team of

specialists from different functional areas in the organization
Advantage and disadvantages of Virtual structure

• Lower Overhead Costs  • Reputational Risks

• Improved Employee Satisfaction. • Security and Compliance Issues.
• Larger Talent Pool • Lack of sociability
• Improved Employee Retention
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