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Note on Organization

Structure
Presented by

Hriniya Bose
Aakanksha Vats
Introduction

Organizations enable people to coordinate
their efforts and get their things done.

Organization structure: Pattern of
organizational roles, relationships &
procedures to enable coordinated
action
Organization structure functions:
Variety of activities according to division of labor
that defines specialization, standardization and
departmentalization of tasks and functions
Coordinating of activities through integrating
mechanisms such as hierarchical supervision,
formal rules, procedures, training etc.
Defines the boundaries of organization and its
interfaces with the environment or other
organizations and institutions with which it must
interact.
Organization Structure-Central
Concepts
Division of
Labor
Coordination
Mechanisms
Distribution of
Decision
rights
Organizational
boundaries
Informal
structure
Political
structure
Legitimate
basis of
authority
Division of labor
Extent of horizontal and vertical specialization of jobs
Grouping of activities according to goods and services
the firm markets
Or to the function, knowledge and skills that firm uses to
produces its goods and services.
Tradeoffs: Highly specialized jobs focus attention,
development of skills whereas extreme specialization
increases coordination costs and low job satisfaction
Coordination Mechanisms
Coordinate independent activities of members of
organization
Modes : Vertical and Horizontal coordination
Choice of coordination depends on the degree to
which integration issues are routine vs
exceptional.
Coordination is costly, and at time inefficient use of
time.
Decision Making: Information flow
Allocation of different rights:
Right to initiate, approve, implement and control various types of strategic
and tactical decisions.
Vertical dimension (different levels): Degree of centralization or decentralization of
decision making authority.
Horizontal dimension: decisions involving around the different activities at same level.
Decision rights should be allocated keeping in mind the goal congruence
and the incentives of the various members of the organization.
Informal
Structure

Essential for
information flows
and to get the work
done.

During organization
transformation,
informal structure
needs to be taken
into account.
Political
structure

Existence of
Political
coalitions
Legitimate
basis of
authority

Defined by
ones
existence,
charisma and
status
Other
dimensions

Efficiency of
resource utilization
Efficiency of time
utilization
Responsiveness to
environment
Adaptability over
time
Accountability
Organization structure-Basic
forms
Matrix
Divisional
Functional structure
Activities are grouped together by
common function, from bottom to top.
Employees are committed to achieving
goals of their functional departments.
Functional structure
Planning and budgeting is by function & reflects cost of
resources used in each department.
Encourages collaboration, efficiency & quality within the
function but affects the other department.
Promotes economies of scale
Reduces duplication, promotes in depth skill development of
employees
Weakness: inability to respond to environmental changes;
restricted view of goals for employees.
Best suited for small to medium organizations.
Eg: manufacturing firms, Government orgs (NPCIL,
BPCL etc)


Divisional Form
Diverse occupational specialties are put
into formal groups by similar products or
services, customers or clients, or
geographic regions.

Divisional Form

Coordination among various division is maximized.
Budgeting and planning is on a profit basis.(each division
run on separate business)
Degree of autonomy in taking decisions that are strategic
and involves resource commitments.
Disadvantage: organization loses economies of scale;
coordination among various divisions in case of common
customers and salesperson.
Works best for medium or large sized organizations.
Industry example
Product divisions group activities
around similar products or services:
Time Warner has different divisions for
magazines, movies, recordings, cable
television, and so on.

Industry example
Customer divisions group activities based on common
customers or clients : Ford Motor Co. has separate
divisions for passenger-car dealers, for large trucking
customers, and for farm products customers. A savings
and loan might be structured with divisions for making
consumer loans, mortgage loans, business loans, and
agricultural loans.
Industry example
Geographic divisions group activities around
defined regional locations: The Federal Reserve
Bank has 12 separate districts around the United
States. The Internal Revenue Service also has
several districts.

Hybrid Forms

Alignment of corporate and divisional
goals
Functional expertise
Adaptability and flexibility in divisions
Conflicts between corporate departments
and divisions
Eg: Hewlett-Packard Co., Microsoft
Matrix Form
Both divisional and functional structures
are implemented
simultaneously.
Dual Reporting


Hybrid Forms
Dual hierarchy has benefits:
Dual authority structure reflects upon environmental pressure.
(Function & product or function & region)
External changes and interdependence requires linkage between
vertical & horizontal directions.
Economies of scale in flexible terms of usage of people and
equipment.
Strengths: meet multiple demands, resources flexibly allocated, skill
development for employees.
Problems: Lack of jurisdictional clarity; dual reporting causes role
ambiguity, hamper career development.
Organizations find it difficult to install matrix structure and usually
fails due to the domination by one of the authority structure.

Industry Example

Starbucks follows matrix structure to achieve
customer satisfaction.
Transition: Airtel
Emerging Organizational
Structures

Alternate to Weberian bureaucratic structure,
known as network structure.
The division of labour in a Network structure is
envisaged in terms of different types of
Knowledge workers who may act as individual
contributors or clusters defined in terms of
expertise it provides.
Co-ordination through cross-functional teams



Decision rights are pushed as far down below
There is blurring of boundaries between
organization
& its environment
Leads to flatter
organization
structures

Structure is fluid, dynamic and depends on actions
taken by people mobilizing personal ties
Instead of shifting the responsibility up the
management ladder, flat structures empower
employees to take charge, help make decisions
and feel responsible for the companys success
KPMG wants to make their hierarchy flatter similar
to Apple or Facebook.

FUNCTIONAL DIVISIONAL MATRIX NETWORK
Division of
Labour
By Inputs By outputs By inputs &
outputs
By knowledge
Coordination
mechanisms
Hierarchical
Supervision,
plans,
procedures
Division GM &
corporate staff
Dual reporting
relation
Cross-
functional
teams
Decision
Rights
Highly
centralized
Separate
strategy &
execution
Shared Highly
decentralized
Boundaries Core/ periphery Internal/
external
markets
Multiple
Interfaces
Porous &
changing
Importance of
Informal
Structure
Low Modest Considerable High
Politics Inter-functional Corporate-
division, inter
division
Along Matrix
dimensions
Shifting
coalitions
Basis of
Authority
Positional &
functional
expertise
GM responsible
& resources
Negotiating
skills &
resources
Knowledge &
resources
Advantages & Disadvantages of Network Organization
SIEMENS
Make the company more agile and
competitive.
It will eliminate a layer of organization
comprising a group of 14 regional units, each
overseen by its own CEO. Shedding the layer
won't cost any jobs
More streamlined and closer to the markets
Strengthening the regions, whose heads are
our customers' most important contacts.
History of Organization
Structure
1910- German Social scientist max Weber
Ideal Bureaucracy
1.Strict hierarchy, rules & decision rights
2.Clear differentiation of tasks &
responsibilities
3.Vertical separation of plans & execution
4.Technical criteria for recruitment &
promotion
1930s Mayo & Roethlisberger Informal social relations
at work
Realistic behavioural foundations, political relations
within the organization, implications of bounded
rationality
1960s Effective organization structure is based on a
fit or alignment between organizations & various
aspects of the organization.
1970/80s OS can be changed by active managerial
designs V/S OS is determined by environmental
constraints.