Organizational

Structure
UNIT-IV
Organization

An organization is a group of people who

together work to achieve a common goal.
 Organizational Structure
Organizational structure defines how tasks are
divided, grouped, and coordinated in
organizations.
 The role of structure in an organization

President

Vice President Vice President Vice President

Marketing Sales Production

Manager Manager Manager Manager Manager Manager

A Simple Organization structure

Why do we need an organizational structure?

 Organizational chart displays the structure of the

organization and shows the relationships between
organizational members and the ranks of all the
positions in the organization.

 Organizational chart clarifies for each member

what they are supposed to do and who they
report to.
Importance of Organisational
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.

 It establishes relationship between individuals, groups and

departments.

 Promotes team work

Key elements for designing the
organizational structure

 Work Specialization
 Departmentalization
 Chain of Command
 Span of Control
 Centralization and Decentralization
 Formalization
Key elements for designing the
organizational structure

 To what degree are activities subdivided

into separate jobs?
 Work Specialization (or) Division of Labor
Key elements for designing the
organizational structure

 On what basis will jobs be grouped

together?
 Departmentalization
Key elements for designing the
organizational structure

 To whom do individuals and

groups report?
 Chain of Command
Key elements for designing the
organizational structure

 How many individuals can a

manager efficiently and effectively
direct?
 Span of Control
Key elements for designing the
organizational structure

 Where does decision making authority

lie?
 Centrlization and Decentralization
Key elements for designing the
organizational structure

 To what degree will there be rules and

regulations to direct employees and
mangers?
 Formalization
Key elements for designing the organizational
structure

Question Answer

To what degree are activities

Work Specialization (or)
subdivided into separate
Division of Labor
jobs?

On what basis will jobs be

Departmentalization
grouped together?

To whom do individuals
Chain of Command
and groups report?
Key elements for designing the organizational
structure

Question Answer

How many individuals can a

manager efficiently and Span of Control
effectively direct?

Where does decision making Centrlization and

authority lie? Decentralization

To what degree will there

be rules and regulations
Formalization
to direct employees and
mangers?
Key elements for designing the
organizational structure
Work Specialization or Division of Labor:
 The degree to which tasks in an organization are
subdivided into separate jobs.

 It refers to the subdivision of work into separate jobs

assigned to different people. Subdivided leads to job
specialization.
 Key elements for designing the
organizational structure
Work Specialization
Examples:
 Henry Ford became rich and
famous by building
automobiles on an assembly
line, demonstrating that work
can be performed more
efficiently by using a work
specialization strategy.

Work on Automobile
Key elements for designing the
organizational structure
Work Specialization:
 Benefits: Greater Efficiency and Lower Costs.

 Limitations: Over specialization can result in fatigue,

poor quality, human feels boredom.
Key elements for designing organizational structure

Departmentalization:
 Departmentalization specifies how employees
and their activities are grouped together.
 It involves dividing an organization into
different departments, which perform tasks
according to the departments specializations in
the organization.
Key elements for designing organizational structure

Forms of Departmentalization:

1. Functional Departmentalization

2. Product Departmentalization

3. Geography Departmentalization

4. Process Departmentalization

5. Customer Departmentalization
Key elements for designing organizational structure
Forms of Departmentalization:
Functional Departmentalization
 Grouping activities based on functions
performed.

Functional
Departmentalization

Production Marketing
Finance Department
Department Department
Key elements for designing organizational structure
Forms of Departmentalization:
Functional Departmentalization: Example

Hospitals

Intensive
Research Surgery
Care Units
Key elements for designing organizational structure
Forms of Departmentalization:
Functional Departmentalization: Example

Travel
Agency

Ticket Visa Insurance Currency Package

Sales Services Advisors Exchange Tours
Key elements for designing organizational structure
Forms of Departmentalization:
Product Departmentalization:
 Departmentalize jobs according to the type of
products.

Reliance

Jio
Jewels Footwear Petroleum
Phones
Key elements for designing organizational structure
Forms of Departmentalization:
Geography Departmentalization:
 When a firm is departmentalized on the basis of geography.

Product
Sales

Western Southern Mid Western

Zone Zone Zone
Key elements for designing organizational structure
Forms of Departmentalization:
Process Departmentalization:
 It works for processing customers as well as products. (For Ex, Passport
Offices and Manufacturing Companies)

Receiving
license in RTO

Validation by Processing by
Payment
motor vehicles the licensing
Collection
division department
Key elements for designing organizational structure
Forms of Departmentalization:
Customer Departmentalization:
 Grouping activities on the basis of common customers.

Microsoft

Individual Large Software

Person Corporations Developers
Key elements for designing organizational structure
Chain of Command:
 It is a formal line of authority and
communication within the organization.
 It demonstrates who formally reports to
whom within the organization.
 The vertical lines in the chart represent
chain of command.
Key elements for designing organizational structure
Key elements for designing organizational structure
Chain of Command:
 Authority: the rights inherent in a
managerial position to give orders and to
expect them to be obeyed.
 Unity of Command: the concept of unity of
command is that each person on the
organization chart has one manager.
Key elements for designing organizational structure
Span of Control:
 The number of subordinates a manager can
efficiently and effectively direct.
A wide span of control indicates that many
people are reporting to a manager.
A narrow span of control indicates that only
a few people are reporting to a manager.
Key elements for designing organizational structure
Span of Control:
Example below shows a Narrow span of
control of 4 for the marketing manager

Marketing
Manager

Marketing Market Tele sales Customer

Assistant Researcher Supervisor Care Assistant
Key elements for designing organizational structure
Span of Control:
Example below shows a wide span of control
of 7 for the marketing manager

Marketing
Manager

Market Tele sales Customer

Asst. 1 Asst. 2 Asst. 3 Asst. 4
Researcher Supervisor Care Assistant
Key elements for designing organizational structure
Span of Control:
A wide span of control is possible when
employees perform routine jobs, because
there is less frequent need for direction or
advice from supervisors.
A narrow span of control is necessary when
employees perform complex tasks, because
these employees tends to require more
supervisory decisions and coaching.
Key elements for designing organizational structure

Centralization and Decentralization:

 Centralization means the degree to which
decision making is concentrated at a single
point in an organization.
 Decentralization means the degree to which
decision making is spread throughout the
organization.
Key elements for designing organizational structure
Centralization and Decentralization:

Nestle food company, has decentralized marketing

decisions to remain responsive to local markets, but it
has centralized production activities to improve cost
effectiveness.
Key elements for designing organizational structure
Formalization:
 Formalization means the degree to which
organizations standardize behavior through
rules, procedures, and formal training.
 McDonald’s restaurants and most other efficient fast-
food chains typically have a high degree of
formalization because they rely on standardization of
work processes as a coordinating mechanism.
Employees have precisely defined roles, how many
pickles should be applied and how long each item
should be cooked.
Organizational Designs

 Organization design is a process in which managers

develop or change their organization’s structure.
 It is the process of coordinating the key elements
of organizations in the most appropriate manner.
Organizational Designs
 Even the most precisely designed
organizations will face the need to change at
one time, adjusting to the realities of
technological changes, accidents, company
enter new business, when they merge with
other companies.
 Organization designs must be flexible as well.
 Organizational Designs

1. The Simple Structure

2. The Bureaucracy
3. The Matrix Structure
4. The Team Structure
5. The Virtual Organization
6. The Boundaryless Organization
Organizational Designs
The Simple Structure:
 An organization structure characterized by a

• Low Degree of Departmentalization

• Wide Spans of Control

• Authority Centralized in a Single

Person

• Little Formalization
Organizational Designs
The Simple Structure:

Owner

Sales Sales Sales Sales

Cashier
Person Person Person Person
 Organizational Designs
The Bureaucracy: (excessively complicated administrative
procedure.)
 Standardized work process.
For Example:
 Banks, where you keep money,
 The department store where you buy clothes.
 Organizational Designs
The Bureaucracy: The Bureaucracy is characterized by
highly routine operating tasks achieved through
• Specialization

• Very formalized rules and regulations

• Tasks grouped into functional departments

• Centralized authority

• Narrow span of control

• Decision making that follows the chain of

command
Organizational Designs
The Matrix Structure:

 An organization structure that creates dual lines of

authority and combines functional and product
departmentalization.
 It is used in advertising agencies, aerospace firms,
research and development laboratories, construction
companies, hospitals, government agencies, universities,
management consulting firms, and entertainment
companies.
 Organizational Designs
The Matrix Structure:

Matrix Structure (College of Business Administration)

Organizational Designs
The Team Structure:

A structure in which entire organization is

made up of work teams is known as Team
Structure.
 Organizations in which autonomous work
teams are organized in parallel fashion such
that each performs many different steps in
the work process.
Organizational Designs
The Team Structure:

 Brings together people with different

skills in order to meet a particular
objective.
 Teams have the authority to make final
decisions.
 Organizational Designs
Team Structure Example: Project Team Development

Executive Team:
Technical, System Administrator, Training

Process Team A: Receiving Process Team B: Inspection of

Material, Picking Material, Materials, Enhancement in
Shipping Material
Process
Organizational Designs
The Virtual Organization:
 It requires forming alliances with multiple external
partners

 The essence of the virtual organization is that it

is typically a small, core organization that
outsources major business functions:
 Also referred to as modular or network organization

 It is highly centralized, with little or no

departmentalization.
Organizational Designs
The Virtual Organization: Example

Design
Company

Finance Logistics
Company Company
Core
Company

Sales &
Manufacturing
Marketing
Company
Company
Example: A virtual organization
Textbook is published by McGraw-
Hill Education
Putting the textbook and
supplemental material together is
done by a virtual team.
The authors live in Texas, Michigan,
and New York
The editors work in Illinois
The text compositors are in India
Deadlines are coordinated by the MH
editors in Illinois, to pull the book
together and arrange for distribution
 Organizational Designs
The Boundaryless Organization:

 It may be defined as an organization structure that can

avoid all the barriers.

 The boundaryless organization seeks to

 Eliminate the chain of command,

 Have limitless spans of control, and

 Replaces departments with empowered teams.

 Organizational Designs
The Boundaryless Organization:
The key features of boundary less organization
include
 knowledge-sharing,

 absence of hierarchy and

 bureaucracy.
Organizational designs:
Types of boundarylessness

 Vertical Boundaries
 Horizontal Boundaries
 External Boundaries
 Geographic Boundaries
 Organizational designs:
Types of boundarylessness

 VERTICAL BOUNDARIES
 It divide management from employees & divide
layers of management from each other.
 Do the different layers communicate
effectively ?
 Organizational designs:
Types of boundarylessness

 HORIZONTAL BOUNDARIES
 It divide divisions & departments within a
corporation from each other.

 Do different functional areas cooperate with or

compete against each other ?
 Organizational designs:
Types of boundarylessness

EXTERNAL BOUNDARIES
 It divide a company from others in its value chain.
 How well does a company collaborate with its
customers & suppliers ?
 Organizational designs:
Types of boundarylessness

GEOGRAPHIC BOUNDARIES
 These boundaries are a special form of horizontal
boundary.
 How well does a company cross the national &
cultural boundaries that divide its international
operations from each other & itself from foreign
markets ?
REFERENCES
REFERENCES
THANK YOU