ORGANIZATIONAL STRUCTURE

MEANING

• Structure refers to how tasks are divided, resources deployed and how the departments co-
ordinate in order to achieve the goals.

• It is the sum of ways an organization assigns its people/employees to distinct tasks/jobs and co-
ordinates them.

• It describes the existing divisions and clusters of tasks and people within an organization.

• It identifies the responsibilities, directing and reporting relationships of people and departments.

• For example, in a college, there would be divisions such as Biology, Chemistry, Mathematics,
Physics etc. These are headed by a particular person who looks after the efficient running of the
department. This is the structure of that college.

FEATURES/CHARACTERISTICS

Structure has following characteristics:

 Formalization is the degree to which jobs are standardized through rules, clear job
descriptions and standard procedures.

 The standard procedure for obtaining a leave, or the way how a particular job has
to be done or how a product is to be priced.

 Specialization i.e. the degree to which organizational tasks are sub divided into separate
jobs. It is sometimes also referred to as division of labor.

 Boeing has engineers who specialize in designing wings and others who design
airplane doors. Among those who design doors, some focus only on the hinges,
others on the locking mechanisms that keep the doors sealed at 35, 000 feet.

 Hierarchy of authority describes reporting relationships and how many people report to
a particular manager i.e. the span of control of a manager.
  Centralization restricts decision making to few individuals, usually at the top of the
organization.

The span of control is influenced by the following factors: (the detailed explanation is given in
the back-up document)

• Job complexity

• Job similarity

• Geographic proximity of supervised employees

• Abilities of managers

• Amount of coordination

• Degree of employee empowerment

• Ability of management

• Technology

IMPORTANCE TO THE ORGANIZATION

• Structure translates the vision of the organization.

• It ensures flow of communication.

• Reporting relationships

• Career Path

• KRAs

• Span of control

• Power and authority

DETERMINANTS OF STRUCTURE

• External/outside business environment

 • Technology used by the organization

• Objectives/Mission

• People and Culture

• Size of the organization

TYPES OF STRUCTURES

I. FUNCTIONAL STRUCTURE

• A simple single level of management structure.

• It works best when the organization has few products, few locations, few types of
customers, a stable environment and routine technology.

CEO

ACCOUNTIN
MANUFAC-
TURING
SALES R&D G AND
FINANCE

II. DIVISIONAL STRUCTURE

• A division is a collection of functions working together to produce a product.

• Divisions create smaller, manageable parts of a firm.

• These could be product-based, geographical location based or market based.

• PRODUCT STRUCTURE

• The divisions are created according to the goods and/or services produced such as
detergents, soaps, cosmetics, clothes etc or the washing machine division,
lighting division and the television division.

CEO

SOUP DIVISION NUTS DIVISION

MANUFACTURING SALES MANUFACTURING SALES

• GEOGRAPHIC STRUCTURE

• Such divisions are based on the area or region of locations of the organization
such as the Northern region, the Eastern region, the Western region and the
Southern region.

• For example, Apple has a geographic structure with the Global Headquarters
heading the Apple divisions of Apple U.S.A, Apple Europe, and Apple Pacific.
 CEO

NORTHERN EASTERN WESTERN SOUTHERN

DIVISION DIVISION DIVISION DIVISION

• MARKET STRUCTURE

• The divisions are based on the type of customer and the market segments the
organization caters to such as large business customers, small business customers,
individual and institutional customers.

CEO

CORPORATE INDIVIDUAL

CUSTOMERS CUSTOMERS

CUSTOMER CUSTOMER
SALES SALES
SERVICE SERVICE

III. MATRIX STRUCTURE

• Used when both technical expertise and product innovation and change are important for
meeting organizational goals.
 • The product managers and functional managers have equal authority within the
organization and employees report to both of them.

• Useful in a highly fluctuating environment where there is a pressure for two or more
critical outputs, such as for in depth knowledge and new products.

IV. TALL AND FLAT STRUCTURES

• A tall structure has many levels of authority relative to the size.

• It is a centralized structure that discourages initiative and can distort verbal

communication.

• A flat structure has few levels but a wide span of control i.e. more number of people
report to a single manager.

• This increases autonomy among the subordinates and is suitable in an unstable

environment.

• A flat structure is getting maximum work done with the minimum number of people.

A STUDY ON STRUCTURE

A study conducted had the following findings related to how structure is perceived to be in various sectors
in India:
• The I.T. sector was less formal i.e. the employees have considerable freedom in carrying out
work. The IT sector was also seen as least routine which means that newer tasks and challenges
give multiple opportunities to the employees to grow and develop themselves.

• The heavy industry sector was the most routine, with maximum adherence to rules and
regulations. One possible reason for this outcome could be its requirements of assembly-line and
automation, which leaves less room for non-routine activities.

• The financial sector was in-between the heavy industry and IT sector. One of the possible reasons
for this could be the reforms initiated in the financial sector post 1990s (when Indian economy
was opened for globalization) changed the working styles of these organizations.

• The results also showed that with the increase in age, experience and hierarchical level,
routinization and adherence to rules and regulations increased. One can conclude from this
finding that advancing age, experience and hierarchical level make a person rigid and inflexible in
approach.

• At the same time increase in age, experience, and hierarchical level also led to an increase in
autonomy dimension. This means that empowerment enjoyed by people increases with age,
experience and hierarchy. The autonomy dimension is often used in establishing informal
relations and networking within the organizations. It enables to expedite the work irrespective of
the bureaucratic hassles. It can be concluded that in the Indian context there is the presence of
‘informal structure’, which refers to the informal relationship network among people occupying
higher strategic positions.

CASE EXAMPLES

Reliance Industries in 2006, formulated its growth strategy to suit the changing business
environment. It created such a structure that was less bureaucratic and enabled decisions to be
made faster. It was flexible to adapt to the needs of the employees and hence Reliance went for a
multidivisional structure with the operational and day to day decisions taken by the business units
independently function wise i.e. manufacturing, HR, etc. Also, the coordination of these divisions
was done by an Executive Committee while the top management had to take all strategic
decisions.
Zee Telefilms Limited has a flat organizational structure with few levels of hierarchy. It
provides ample opportunities for vertical as well as cross functional growth to its performers.
According to the company’s growth policy, a management trainee can reach the level of
Executive Vice President within a span of 12-15 years.

In Sony Corporation each network company is delegated with authority from the corporate
headquarters, and pursues the management of their respective business domains as self-contained,
autonomous business units. To enable each network company to operate autonomously, essential
support functions and R&D laboratories are transferred from the corporate headquarters to each
unit. In addition, companies and divisional companies were formed under the network company
structure.

The organizational structure at Tata Power is as follows:

BOARD OF DIRECTORS

COMPANY SECRETARY

GENERAL
MANAGER/CEO

MANAGER LOAD
MANAGER MARKETING MANAGER FINANCE
DISPATCH

Infosys Technologies Limited has adopted a free form organization devoid of hierarchies.
Everyone is known as associates irrespective of his position in the company. Software
development is undertaken through teams and the constitution of teams is based on the principle
of flexibility. A member who might have been team leader in one project may be replaced by
another member of the same team for another project. This system not only helps in creating the
feeling of equality but also helps in developing project leaders.

Unilever's new organization provides single point accountability and has fewer management
layers to deliver faster decisions and faster execution. HUL and group have about 15,000
employees with a total of 1200 managers. The Apex body consist of a Non-executive Chairman
(Unilever), 4 Executive Directors and 5 Independent non-executive Directors. The functional
distribution is as follows:

• Sales and Marketing

• Human resources

• Commercial

• Information Technology

• Research

• Technical

The category distribution is as follows:

• Soaps and Detergents

• Exports

• Processed foods

• Beverages

• Personal products

• Ice-creams

• Others
 For Wipro Technologies, the hierarchical structure is as follows:

CHAIRMAN

CEO

VERTICAL MANAGER

DELIVERY MANAGER

PROJECT MANAGER

MODULE LEADER

PROJECT ENGINEER

NTPC i.e. the National Thermal Power Corporation has a complex structure with many levels of
management.

ITC has a 3-tier management structure with the Chairman and the board of Directors at the top for
strategic supervision followed by a Corporate Management Committee for strategic management and the
SBU CEO is in the third tier for executive management.
REFERENCES

PAPERS AND BOOKS

Daft Richard L., Organizational Theory, Change and Design, India Edition, 2004

Pareek Udai, Beyond Management: Essays on the process of institution building, 1981

Porter Lyman W., Hitt Michael A., Black Stewart J., Management, 2005

Rawat Preeti and Kumar Satishchandra, A Study of Perceived Organization Structure in Three Different
Sectors of Indian Organizations

Santra Tirumala and Giri Vijai N., Effect of Organizational Structure on Organizational Effectiveness
through Face-to-Face Communication, ICFAI University Press, 2006

Shukla Madhukar, Understanding Organizations, 1999

WEB LINKS

www.scribd.com/doc/6655871/reliance

www.sony.net/sonyinfo/news/press/index.html

www.zeetelevision.com