ORGANIZATIONAL STRUCTURE AND

DESIGN

Presented By –
Ashwani solanki
Praful Raj
Manish sangwan
Mohit
ku Jyoti
CONTENT
Organisational design and structure.
Four building blocks of organisational design and structure.
Design factors affecting organisational structure
Types of organization structure
Forms of organization structure
Differentiation and Integration
Line and staff structure
Centralization & Decentralization
Informal Structure
Case Study
Research Paper
Reference
Organisational Design
Organization Design refers to the process of
coordinating the structural elements of an
organization in the most appropriate manner. It is
developments in or changes to the structure of an
organization.
Organization Design is deliberate effort to line up your
structure, systems, measures, people and policies with
the vision and goals that you have as an organization.
“Organization design” involves the creation
of roles, processes and structures to ensure that
the organization’s goals can be realized.
Some people associate organization design with
the mechanical arrangement of positions and
reporting lines on the organization chart
Organisational Structure
An organizational structure is a system that outlines
how certain activities are directed in order to achieve
the goals of an organization. These activities can
include rules, roles, and responsibilities.
The organizational structure also determines how
information flows between levels within the company.
For example, in a centralized structure, decisions flow
from the top down, while in a decentralized structure,
decision-making power is distributed among various
levels of the organization.
Organizational structure is a system used to define a
hierarchy within an organization. It identifies each job,
its function and where it reports to within the
organization. This structure is developed to establish
how an organization operates and assists an
organization in obtaining its goals to allow for future
growth.
Building blocks of organisational design and
structure
There are various building blocks to Org. design and structure some
of the are-:
Divide the total workload into tasks that can logically and
comfortable be performed by individuals or groups. This is
referred to as the division of work.
Combine tasks in a logical and efficient manner. The grouping of
employees and tasks is generally referred to as
departmentalization.
Specify who reports to whom in the organization. This linking of
departments results in an organizational hierarchy.
Set up mechanisms for integrating departmental activities into a
coherent whole and monitoring the effectiveness of that
integration. This process is called coordination.
Design factors affecting organisational
structure

There are multiple factors that affect organisational

structure they are -:
Environment
Strategy
Technology
Human resources
Environmental factors
Organizations are open systems so they have to
receive different inputs from the environment and
to sell a variety of outputs to their environment.
As a result, it is crucial to comprehend what the
external environment is and which elements are
likely to be significant. Factors of the external
environment – such as uncertainty, level of
competition, and resources – are important in
figuring out organizational design. The
environment of an organization could possibly be
described as general or specific.
The general environment consists of cultural,
economic, legal-political, and societal conditions
within the areas where the business functions.
The specific environment comprises its owners,
company’s market, industry standards,
competition, suppliers, distributors and
government agencies with which an organization
will have to interact to grow and survive. A
company usually is a lot more worried over the
composition of its specific environment than of its
general environment.
Strategic factors
Strategy determines a course of action to direct
various organizational activities. It makes plans to
co-ordinate human and physical resources to work
towards a common objective. Strategy is pre-
requisite to organization structure and also follows
it. The relationship between strategy and
organization structure is depicted as follows:
Strategy planning  organizational structure
overall organizational goals
Strategies to diversify product lines or
markets require decentralized transition as
decision-making is done at wider level and
strategies for organizations working in
stable environment. Where managers do
not diversify their operations, require a
centralized organization.
 Technology factors
The technology for manufacturing goods and
services also affects the organization structure.
In case of mass production technology,
mechanistic organization structure is more
appropriate, while in case of continuous
production or small scale production technology,
the appropriate from is organic structure. This is
because mass production technologies involve
standardization and specialization of work
activities and continuous or unit production
technologies require low levels of standardization
and specialization
Human resources factor
This basically refers to the people working In the
organisation. People working in the organisation
should be skilled and work efficiently while working in
teams or with higher management because an
organisational structure consists of multiple level of
employees and employees should be able to work
properly and in harmony with others so that a work
flow is maintained at all times.
Types of organization Structure
1. Hierarchical org structure
2. Functional org structure
3. Horizontal or flat org structure
4. Divisional org structures (market-based, product-based
, geographic)
5. Matrix org structure
6. Team-based org structure
7. Network org structure
1. Hierarchical organization structure

The pyramid-shaped organizational chart we referred

to earlier is known as a hierarchical org chart.
 It’s the most common type of organizational
structure–
the chain of command goes from the top (e.g., the
CEO or manager) down (e.g., entry-level and low-
level employees) and each employee has a supervisor. 
Hierarchical Org Chart Example
2. Functional organization structure

Similar to a hierarchical organizational structure

 A functional org structure starts with positions with the
highest levels of responsibility at the top and goes down
from there.
Primarily, though, employees are organized according to
their specific skills and their corresponding function in the
company. Each separate department is managed
independently
Functional Org Chart Example
 3. Horizontal or flat organization
structure

A horizontal or flat organizational structure fits companies

with few levels between upper management and staff-
level employees.
 Many start-up businesses use a horizontal org structure
before they grow large enough to build out different
departments,
but some organizations maintain this structure since it
encourages less supervision and more involvement from
all employees.
Horizontal or Flat Org Chart Example
4. Divisional organization structure

A company’s divisions have control over their own

resources, essentially operating like their own
company within the larger organization.
Each division can have its own marketing team, sales
team, IT team, etc.
This structure works well for large companies as it
empowers the various divisions to make decisions
without everyone having to report to just a few
executives
 Market-based divisional org structure
Divisions are separated by market, industry, or customer type. A large consumer goods company, like Target or
Walmart, might separate its durable goods (clothing, electronics, furniture, etc.) from its food or logistics divisions . 
 Product-based divisional organization structure
Divisions are separated by product line. For example, a tech company
might have a division dedicated to its cloud offerings, while the rest
of the divisions focus on the different software offerings––e.g.,
Adobe and its creative suite of Illustrator, Photoshop, etc.
 Geographic divisional organization structure
Divisions are separated by region, territories, or districts, offering
more effective localization and logistics. Companies might establish
satellite offices across the country country or the globe in order to
stay close to their customers.
5. Matrix organization structure

A matrix organizational chart looks like a grid, and it

shows cross-functional teams that form for special
projects.
For example, an engineer may regularly belong to the
engineering department (led by an engineering
director) but work on a temporary project (led by a
project manager).
The matrix org chart accounts for both of these roles
and reporting relationships.
Matrix Org Chart Example
6. Team-based organization structure

It’ll come as no surprise that a team-based

organizational structure groups employees according
to (what else?) teams––think scrum teams or 
tiger teams.
A team organizational structure is meant to disrupt the
traditional hierarchy, focusing more on problem
solving, cooperation, and giving employees more
control.
Team-Based Org Chart Example
7. Network organization structure

These days, few businesses have all their services

under one roof, and juggling the multitudes of vendors,
subcontractors, freelancers, offsite locations, and
satellite offices can get confusing.
A network organizational structure makes sense of the
spread of resources.
It can also describe an internal structure that focuses
more on open communication and relationships rather
than hierarchy.
Network Org Structure Example
Forms of organization Structure

Tom Burns and G. M. Stalker identified two basic

forms of organizational structure: 

• Mechanistic Structure
• Organic Structure
Mechanistic Structure
Belief upper management is better capable of
making decisions
Management instructions must be followed
Communication and control must proceed
through hierarchical routes
More emphasis toward completing a task opposed
to achieving company goals
Employees are more jobs specialized and placed
into certain departments
Low differentiation of tasks
Organic Structure
Large network of authority, control, and
communication
Problem solving is encouraged by all employees
Employees are more goals oriented than job
orientated
Employee empowerment is encouraged
 DIFFERENTIATION
• Process of deciding how to divide the work in an organization.
• Ensures that essential tasks are assigned to one or more jobs.
Four Dimensions of Differentiation by Lawrence and Lorsch

1.Manager’s goal orientation

2.Time orientation

3.Interpersonal orientation

4.Formality of structure

FORMS OF DIFFERENTIATION:
 Horizontal Differentiation
 Vertical Differentiation
 Spatial Differentiation
HORIZONTAL DIFFERENTIATION:
 Differentiation between organizational subunits
 Based on employees’ specialization
 Increases with specialization and departmentalization

DEPARTMENTALIZATION
The process of breaking up organizations into coherent units.
Functional Organization: The type of departmentalization based on the
activities or functions performed (e.g., sales, finance).
Product Organization: The type of departmentalization based on the products
(or product lines) produced.
Matrix Organization: The type of departmentalization in which a product or
project form is superimposed on a functional form.
VERTICAL DIFFERENTIATION:
 Difference in authority and responsibility in
organizational hierarchy
 Tall, narrow organizations-greater vertical
differentiation
 Flat, wide organizations-less vertical differentiation
 Tall structures have many levels of authority relative to
the organization’s size.
 Flat structures have few levels but wide spans of
control.
SPATIAL DIFFERENTIATION

 Geographic dispersion of offices, plants and personnel

 Increase in no. of locations-increases complexity but necessary,
 May give organization political and legal advantages in a country

 Horizontal, vertical and spatial differentiation indicate the

width, height and breadth of an organizational structural
needs
INTEGRATION

Definition- The process of coordinating the different

parts of an organization.

• Designed to achieve unity among individuals and

groups .

• Supports a state of dynamic equilibrium - elements of

organization are integrated, balanced.
VERTICAL INTEGRATION:
Hierarchical referral
Rules and procedures
Plans and schedules
Positions add to the organization structure
Management information system

HORIZONTAL INTEGRATION:
Liaison roles
Task forces
Integrator positions
Teams
 Line Organization:
 Line organization is the simple and oldest type of
organization followed in an organization. Under line
organization, each department is generally a complete self-
contained unit.

 A separate person will look after the activities of the

department and he has full control over the department.
Line Organisation:
 The same level executives do not give or receive orders
amongst themselves. But they receive orders from their
immediate boss and give orders to their subordinates.
Hence, all the heads are responsible to the general
manager, the general manager, in turn, is responsible to
the shareholders who are the owners.

 This type of organisation is followed in the army on the

same pattern. So, it is called military organisation. Under
type of organisation, the line of authority flows from the
top to bottom vertically. So it is called line organisation.
Characteristics of line organisation
 It consists of direct vertical relationships.
 Authority flows from top-level to level to bottom level.
 Departmental heads are given full freedom to control their
departments.
 Each member knows from whom he would get orders and to
whom he should give his orders.
 A senior member has direst command over his subordinates.
Operation of this system is very easy.
 Existence of direct relationship between superiors and
subordinates.
 The superior takes decisions within the scope of his authority.
Suitability
(i) This type of organisation is suitable to small size business
units.

(ii) Where the activities are of routine nature or machine based.

(iii) If the business activities are service mined.

(iv) Where the number of persons working is small.

(v) The business operation is simple in nature.

(vi) A business unit which has straight methods of operations.

Line and staff Structure
 The line officers have authority to take decisions and
implement them to achieve the objectives of the organisation.

 The line officers may be assisted by the staff officers while

framing the policies and plans and taking decisions
organisation.
 The authority flows from top level to the lower level of the
organisation through the line officers while the staff officers
attached to the various departments advise the departments.
The staff officers are not in a position to compel the line
officers to follow the advice by them. Each department is
headed by a line officer who exercises full authority regarding
the planning. 
Types of staff

Personal staff
 

Specialized staff

General staff
assistant
Functions of staff officers:
The staff officers assist the line officers in the planning of
business activity.

The board of directors frames the policies of the

business on the basis of recommendations given by the
staff officers.

The managers can get the advice from the staff officers
regarding the selection. ‘training’ placement and
remuneration fixation the personnel
 Functions of staff officers
The staff officers give regarding the method of improving the
product, the technique of reducing the cost of production,
increasing the profits of the concern.

The staff officers prescribe the procedures to be followed by the

line officers in the execution of policies and programs.

Staff officers of a department help the manager in the

preparation of budget of the department.

the staff officers may be called to solve the administrative

problems encountered by the line officers in general.
 Arguments of staff officers against line
officers
The staff officers have only theoretical academic knowledge
but not practical knowledge.
The staff officers go beyond their sphere of activity and
assume that they have line officer’s authority.
Much of the advice given by the staff officers is impractical
Since the staff officers unnecessary increases the
paperwork of the line officers.
The staffs give advice without considering the nature of
business as a whole.
Staff officers are very much interested in becoming line
officers of the organisation rather than impairing advice to
them.
Solution to the conflict between line officers
and staff officers

Both line officers and staff officers should clearly understand the
nature of relationship prevailing between them.

A separate staff member should be appointed to bring about

co-operation between the line officers and staff officers.

The line officers should be encouraged to use the advice of staff

officers.

Only qualified persons should be selected and placed as staff

officers.
Solution to the conflict between line
officers and staff officers
The staff officers should be convinced by the line
officers if their advice is not accepted
The responsibility for results could be fixed on both
line officers and staff officers
Only experienced persons alone should be
promoted as line executives..
Remove the fear of the line officers and staff officers
whether the new ideas of advice would be properly
put into use or not.
Advantages of line and staff
organisation Disadvantages of line
and staff organisation
Advantages of line and staff organization Disadvantages of line and staff organization

Facilitates to work faster and better If powers are not defined then get confusion

Specialization is attained Line officers may reject advice without any

reason for their action

Enables to utilize experience and advice Staff officers are not responsible if favorable
results are not obtained

Officers can take sound advice Difference between line and staff officers will
defeat the very purpose of specialization

New technology or procedure can be Line officers blame staff officers for
introduced without any dislocation unfavorable results and want to get rewards
for favorable results
Promotes efficient functioning of line officers

Very good opportunity is made available to

young person to get training
What is Centralization &
Decentralization

 Centralized organization: the authority to make important

decisions is retained by top level managers
 Decentralized organization: the authority to make
important decisions is delegated to managers at all levels
in the hierarchy
Forces for (de)centralisation
 Delegation of Authority

 A manager alone cannot perform all the tasks assigned to

him. In order to meet the targets, the manager should
delegate authority.
 Delegation of Authority means division of authority and
powers downwards to the subordinate. Delegation is about
entrusting someone else to do parts of your job.
 Delegation of authority can be defined as subdivision and
sub-allocation of powers to the subordinates in order to
achieve effective results.
Delegation of authority is the base of superior-subordinate relationship,
it involves following steps:-

Assignment of Duties - The delegator first tries to define the task

1.
and duties to the subordinate. He also has to define the result
expected from the subordinates. Clarity of duty as well as result
expected has to be the first step in delegation.
Granting of authority - Subdivision of authority takes place when a
2.
superior divides and shares his authority with the subordinate. It is
for this reason, every subordinate should be given enough
independence to carry the task given to him by his superiors. The
managers at all levels delegate authority and power which is
attached to their job positions. The subdivision of powers is very
important to get effective results.
Creating Responsibility and Accountability - The delegation
3.
process does not end once powers are granted to the subordinates.
They at the same time have to be obligatory towards the duties
assigned to them. Responsibility is said to be the factor or obligation
of an individual to carry out his duties in best of his ability as per the
directions of superior. Responsibility is very important. Therefore, it
Reasons to Decentralize Authority
It encourages the development of professional managers.
Managers are able to exercise more autonomy but it can
lead to a competitive climate.

Reasons to Centralize Authority

When the managers are not skilled enough and would
need further training which can be expensive.
When there are new administrative costs because new
divisions need to be formed.
Decentralization can mean duplication of functions.
Arguments for Centralization
Centralization can facilitate coordination.
Centralization can help ensure that decisions are
consistent with organizational objectives.
Centralization can avoid duplication of activities by
various subunits within the organization.
By concentrating power and authority in one
individual or a management team, centralization can
give top-level managers the means to bring about
needed major organizational changes.
Arguments for Decentralization
Top management can become overburdened when
decision-making authority is centralized.
Motivational research favours decentralization.
Decentralization permits greater flexibility—more
rapid response to environmental changes.
Decentralization can result in better decisions.
Decentralization can increase control
Limitations of Centralization

Development of low level managers are hampered .

Opportunity given to exercise initiative and judgment
is negligible .
It is a costly affair and delays decision making .
It creates problems of effective communication
No scope of specialization as a person may have to
look into many things
Limitations of Decentralization
It creates problems in coordination between different
units of the organization.
May result in higher administrative expenses as
qualified managers a needed for different divisions
Due to different policies and procedures of each unit
in a decentralized organization inconsistencies may
arise in organizational activities
Examples of Centralization
Dictatorship: Dictatorships are usually ruled by a single powerful figure,
the easy-to-spot sign of a centralized organization. If you can stop the
leader, you can destroy the entire group.
Military: Traditionally, the military has been the classic example of top-
down or hierarchical management. The General orders the Captain who
orders the Lieutenant who orders the…
Government: Governments are classic top-down structures lead by the
President or Prime Minister, followed by Senators or Ministers who each
have a team below them. Right at the bottom are the voters who get to
have their say with a single vote every couple of years.
Television: TV shows are created by centralized organizations that
decide what we watch and when we watch it. And, if think literally
about it, one message is sent down the airwaves for us to watch at the
other end
Examples of Decentralization
Open Source Software: There are two decentralized organization
examples in the computing world. The first is Open Source
Software. Think Linux. It’s freely available, thousands of volunteers
update it and nobody owns it.
Peer to Peer Software: Peer to Peer software is uses bits of
information contributed by many people. For example, Bit Torrent
downloads a part of the overall file from numerous computers
spread across the globe.
The Internet: This is the classic decentralized organization example
of our time. It was deliberately created to overcome the limits of a
centralized military command and the threat of missile attack. This
decentralized structure is built upon the humble hyperlink that
connects all the separate pages, websites and networks.
Informal Organization Structure

The informal organization is the interlocking social

structure that governs how people work together in
practice. It is the aggregate of behaviours, interactions,
norms, personal and professional connections through
which work gets done and relationships are built among
people who share a common organizational affiliation or
cluster of affiliations.
Characteristics
Evolving constantly
Grass roots
Dynamic and responsive
Excellent at motivation
Requires insider knowledge to be seen
Treats people as individuals
Flat and fluid
Trust and reciprocity
Difficult to pin down
Essential for situations that cchange quickly or are not yet
fully understood
Limitations of Informal Structure
Resistance to change
Role conflict
Rumour
Conformity
Undermine discipline
Power politics
Interpersonal and intergroup conflicts
Firmly embedded within every informal organization
are informal groups and the notorious grapevine

Informal groups. Workers may create an informal group to go

bowling, form a union, discuss work challenges, or have lunch
together every day. The group may last for several years or only a few
hours. Sometimes employees join these informal groups simply
because of its goals. Other times, they simply want to be with others
who are similar to them. Still others may join informal groups simply
because they want to be accepted by their co-workers.

The grapevine. The grapevine is the informal communications

network within an organization. It is completely separate from — and
sometimes much faster than — the organization's formal channels of
communication.
 Grapevine characteristics
Oral -> mostly documented
Fast (hours instead of day)
Crossing organizational boundaries
inaccuracy:-deletion of crucial details
Not controlled by management
Advantages
 Spreads rapidly
 Feedback is quick
 Group cohesiveness
 Good news that exist
 Substitute for formal channel of communication

Disadvantages

 The grapevine is not trust worthy always as it doesn’t follow official path
of communication & is spread more by gossips and unconfirmed report
 Untruth information most of the time
 Partial information only spreads(rumours)
 Hampers the goodwill of the organization or the people.
 How Factors affect Organizational Design?

 Any company should adopt an organizational design that would serve its strategic
purpose, instead of it being the other way round. For example, if a bike-
manufacturing company wants to expand its business into sports goods and
apparel, then the resources that will be needed for this will definitely impact the
company’s organizational design.

 If the company was operating in a market-oriented organizational design structure,

now it will have to adopt a product-oriented organizational design model. If it is
planning to open offshore units, then it will have to adopt the geography-oriented
organizational business model or else they will end up selling baseball bats in India
and duke balls in the US.
• To design a smoothly-functioning, efficient organizational design, the
managers have to take a lot of factors in mind. Not only do they have to
consider the clients and business side, but also the implementation too. The
most important factor is the company vision. Depending on what the
company wants to achieve, the managers will design objectives that the
employees will adhere to while working.

• This combination of strategy and implementation is crucial in ensuring

success and business growth for companies in the long run. Organizational
strategy can be defined as the “Articulation of a Vision”. During making these
strategies, companies consider the competitive position they hold on the
table.
CASE STUDY
CASE STUDY-1.
How Coca Cola Fizzled Out on Globalization

• An infamous example of a big corporation facing disastrous consequences from

making frequent shifts in its organizational designs is Coca Cola.

• when globalization seemed like an indispensable business strategy, the-then

CEO of Coca Cola, the late Roberto Goizueta had stated on record that there was
no demarcation between global and local any longer, ushering in his tagline
− Think Global, Act Global.
• This led to an unprecedented degree of globalization and
standardization in the business functioning of the company.
• Within a couple of years, Coca Cola was generating a much larger share
of its revenues in offshore locations.
• However, this success was short-lived, and with the Asian crisis at the
beginning of 1999, Coca Cola had lost more than 70 Billion Dollars.

• The next in line, CEO Douglas Daft took over and introduced an
aggressive shift in the opposite direction. His mantra was − Think Local,
Drink Local. 
•  However, that reshuffling and restructuring of the organizational
working model also failed.

• What could be the reason of failure?

 REASON
•  As people had gotten into an established way of working.

• One of the biggest reasons behind this global debacle was that with the
frequent changes in working structure, the line of communication and the
hierarchy of working got affected.

• Employees couldn’t keep a track of the different responsibilities they were

handed after every change and this hampered their overall performance.
This lead to confusion, cynicism, and job-insecurity in the minds of the
employees.
 CONCLUSION
• After studying the strategy maps of hundreds and thousands of
organizations, experts now confirm that there is no single organization that
can claim to implement a perfect structure to all of its operations. In short,
an Ideal Organizational Design Model is a myth.

• Organizations, now much wiser after their disastrous past experiences, have
now stopped aiming for a perfect design and have instead started focusing
on a work-plan that helps them run a large organization harmoniously, while
avoiding any large conflicts between its numerous departments.

• Managers now believe in sending out clear design objectives to their team
members, which ensures a different approach to managing resources and
implementing business strategies. This minimizes job ambiguity and
enhances focus towards work.
• They have realized now that it’s futile trying to work towards developing a
framework that exploits the similarities between different countries. They
now focus more on maximizing their output by modifying their business
model and managerial style to accommodate the difference between various
countries.
 Organizational Design - Case Study 2
• Let us take a look at a case study which is named as − The Perfectionism of Larry Wells.

• Larry Wells, a successful businessman and a good negotiator had acquired a major
retailer after seeing good business potential in it. Through his excellent managing skills
and hard work he could use all his experience of business and start a profitable
venture. When the business grew, he employed more and more staff to keep up with
the demands at the workplace. However, he had a strictly confidential manner of
managing the operations.

• Being the manager of the company and the owner of the business, he kept the
dealings and numbers close to his chest. His hesitation in sharing details about the
business extended to all the managers, even directors of the company. Despite
requests from the staff to trust them with decisions and details, he wouldn’t divulge
details which he thought only he should be privy to. Because of the lack of autonomy
among managers of different departments, there were many areas on which they
couldn’t take timely decisions, and had to wait for Larry to give them his attention.
• As business was expanding, this process of working made Larry lag behind all
his competitors soon. All important decisions were put on hold till he could
spare time for it. This method of pulling all the strings himself had ensured
high quality of output in the initial stages, however dealing with every
situation personally was disastrous time-management.

• The clients who had given more business to Larry’s company, after being
impressed by the quality of output seen during the company’s initial years,
began looking for faster and more efficient service-providers. Ultimately
Larry’s company was sold out to another big organization, never realizing the
full potential it had in its initial years.
Pitfalls of Micro-Managing Model of Business

 Micro-managing resources is often the most common pitfall that first-time

managers fall into.

 Because the project is new and the experience of managing is also first-time, a new
manager feels the pressure of impressing his seniors by delivering excellent output,
so that he can justify the management’s decision of promoting him.

 This approach may appear fine to begin with, when the manager tries to get a first-
hand experience of the process and tries to understand its functioning. However,
when the work starts to expand and additional efforts are needed to keep the
efficiency going, the company will hire more resources to keep up with the
demand.
CONCLUSION
• If the manager does not give up his micro-managing nature during this time,
he will keep the entire team held up for him to take the final important
decisions and steps. He will stall all other processes and departments while
inspecting the progress of one department, which will cost the entire team
a lot of time.

• At this stage, a manager needs to stop micro-managing and allow freedom

of functioning and autonomy to his team and trust them to come up with
ways to handle any situations that may arise in his absence.
RESEARCH PAPER
Organizational Design and Structure The five functions are
embedded in all of the
Working Paper generic organizational
designs and structure
September18, 2016
Mohammed R. Ahmed, DBA

Apple, Microsoft, Google, and Facebook are good examples of companies that
were started by individuals in their homes, garages, or dormitories. These
companies have been very successful in the marketplace because their
organizational designs and structures supported their respective strategies in the
marketplace. A review of the organizational histories of these companies (or any
other startup) will show that designs and structures evolve with growth in business
and changes in the environment.
The organizational design and structure process starts with the identification of the
basic functions in a business, including marketing, finance, human resources,
general operations, and technology. Management has to think about precisely how
to embed these five functions within the design and structure in order to ensure
survival in the marketplace and to generate profit and growth. A startup company
may choose to focus on only one of the basic functions, such as operations
management, while developing a product or service. Once the product or service is
developed and ready for marketing, the company then has to start thinking about
designing a business model that can effectively introduce the product or service
into the market.
• As the startup company plans to enter the product or service into the market, it has
to include the five basic functions of organizational design and structure. The five
functions are embedded in all of the generic organizational designs and structures
because the businesses have to focus on marketing for generating revenue;
operations for developing products or delivering services; financing and investing
for raising money; managing costs to boost profit; human resources for motivating,
training, evaluating, and rewarding employees; and technology for establishing and
maintaining connections between the organization and customers or suppliers.

• Each company develops its organizational design and structure in order to achieve
a specific organizational goal. The organizational goals are achieved through
formulating and implementing specific strategies. A company’s strategy is
developed by analyzing the strengths and weaknesses within the internal
environment of the company, and by assessing the opportunities and threats in the
external environment. The internal environment includes the five functional areas
including marketing, finance, human resources, and technology. This is one reason
why the organizational design and structure of all types must embed the five
functions.
A structure based on the five basic functions may be further divided based on the
size of the firm and the nature of the business. A sole proprietor may perform all
five functions for the organization, but in a large organization, these functions may
be divided into several sub-functions, and these sub-functions may be performed
by hundreds or even thousands of people. The organizational design and structure
for both small and large firms still includes the five basic functions of a business.
The five basic functions are also present in all of the generic structures, such as
“The inclusion of five functions in the organizational design and structure builds
the foundation for designing and building an effective organizational structure.”
• The process involved in designing and building a structure for a house is similar to
designing and building a structure for an organization. For instance, the structure
of a house includes four walls and a roof to provide protection against wind, rain,
and other external forces. Similarly, a business needs five basic functions embedded
within the design and structure to develop a solution to a customer’s problem, and
to deliver a product or service that is valuable for both the company and the
customer. Furthermore, these functions are important for the business to survive in
the marketplace and withstand economic, technological, social, cultural, political,
and legal threats from the external environment.

• The organizational design and structure must adapt with the changing environment.
The theories and concepts that were developed decades ago may provide a basic
understanding of how organizations were designed then, given that a structure is
built based upon the environment surrounding the company. It is important to
understand that the generic designs and structures that were used in the past may
not fit the current environments surrounding the respective businesses. The process
of organizational design and structure development may still therefore be useful for
managers concerned with general business survival and improvement.
 CONCLUSION
• companies have been very successful in the marketplace because their
organizational designs and structures supported their respective strategies in the
marketplace.

• basic functions in a business, including marketing, finance, human resources,

general operations, and technology. Management has to think about precisely
how to embed these five functions within the design and structure in order to
ensure survival in the marketplace and to generate profit and growth.

• The inclusion of five functions in the organizational design and structure builds
the foundation for designing and building an effective organizational structure.”

• The process of organizational design and structure development may still

therefore be useful for managers concerned with general business survival and
improvement, but it is necessary to keep up with the changes.
REFERENCE

Working Paper
Working paper # 17, version 1.
About the Author
http://www.professorahmed.info

https://www.researchgate.net/publication/309549972_Organization
al_Design_and_Structure_10
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