structural considerations

& types of structure

INTRODUCTION
We usually conceive of organisation
structure as a chart consisting of boxes In
which the name of position or designation of
personnel is written in a hierarchical order
along with the depiction of relationship that
exist between various positions.
To a strategist, an organisation structure is
not only a chart but much more.

WHAT IS ORGANISATION
STRUCTURE?
A organisation structure is the way how
tasks and sub-tasks required to implement a
strategy are arranged.
The diagrammatical representation of
structure could be an organisation chart but
chart shows only the skeleton.
The flesh and blood that bring to life an
organisation are several mechanisms that
support the structure.

 All these cannot be depicted on a

chart, but a strategist has to grapple
with the complexities of creating the
structure, making it work, redesigning
when required, and implementing
changes that will keep the structure
relevant to the needs of the strategies
that have to be implemented.
In short, we can say that the effective
implementation of strategy requires
the right O.S.

STRUCTURAL
MECHANISMS

Defining the major tasks required to

implement a strategy.
Grouping tasks on the basis of common
skill requirements.
Sub-division of resposibility and
delegation of authority to perform
tasks.
Coordination of divided responsibility.
Design and administration of
information system.

 Design and administration of the control

system.
Design and administration of the
appraisal system
Design and administration of the
motivation system.
Design and administration of the
development system.
Design and administration of the
planning system.

DEFINITION
Orgaisation structure is the formal
system of task and authority
relationships that control how people
coordinate their actions and use
resources to achieve organisational
goals.
-Gareth R. Jones.
Orgaisational Theory

TYPES OF ORG.
STRUCTURE

There are various types of organisational

structures which are as follows..
Simple organisational structure
Functional structure
Divisional structure
SBU structure
Matrix structure
Network structure
other structures

SIMPLE ORG. STRUCTURE

The widely prevailing organisational
structure found in respect of very small
enterprises is a simple one.
This structure is the most elementary
form of structure and it appropriate
for a organisation that is owned and
managed by one person.

MERITS
Quick decision making.
Ability to change with market signals.
Power is centralised.
Informal and simple org. systems.
Control of all the bss activities.

DEMERITS
Ignore strategic decisions
Taking everything on ones head has its
own risks and disadvantages.
It does not encourage the development
of future managers.
This structure becomes Inadequate as
the bss expands.

FUCTIONAL STRUCTURE
In this structure, the organisation is
designed on the basis of the basic
functions, namely, production, finance
and accounting, marketing and personnel.
the need arises for specialised skills and
delegation of authority to managers who
can look after different functional
areas.

 The functional structure is commonly

found in small companies and also in
large companies with single product line
or narrow product ranges.
This structure seeks to distributes
decision making and operational
authority along functional lines.

MERITS
Efficient disribution of work through
specialisation.
Provides clear definition of functions
and responsibilities.
Delegation of day-to-day operations.
Time for Focus on strategic decisions.
Improve development of functional
expertise.
Simplifies training.

DEMERITS
Crates difficulty in coordination among
different functional areas.
Leads to functional, and line and staff
conflicts .
Promotes narrow specialisation and
potential rivalry or conflict.

DIVISIONAL STRUCTURE
As organisation structure expands and
diversifies, divisional structure comes
into existence.
Functional structure is inadequate when
growth and complexity increasing in terms
of geographic expansion, market
segmentation and diversification.
These types of organisations divide the
functional areas of the organisations to
division.

 This structure is diversify among

various divisions, where one division is
responsible for one product, and one
manager to get one product(or service)
produced and marketed.
According to the product
characteristics, various divisions are
established.

MERITS
Each product line gets concentrated
attention.
It places responsibilities for profits at
the divisional level.
It facilitates measurement of unit
performance.
Good training ground for strategic
managers.
Encourages general management
development.

DEMERIS
If there are too many divisions, coordination
becomes complex and difficult.
Problem with the extent of authority given
to division managers.
Potential for policy inconsistencies between
divisions.
Increase the problems of top management
control.
It may give rise to conflicts between various
divisions.

SBU STRUCTURE
A SBU has been defined by sharplin, as
any part of bss orgaisationn which is
treated separately for strategic
management purposes.
When organisations face difficulties in
managing divisional structure, it
becomes difficult for the top
management to exercise strategic
control.

 SBU is the discrete element of the bss

serving specific product market with
readily identifiable competitors and for
which strategic planning can be
conducted.
SBU commonly found among enterprises
having bss spread over a vast
geographical area.

MERITS
Advantages of decentralization.
Improve coordination between divisions.
Channels accountability to distinct bss
units.
Encourages general management
development.
Facilitates distinct and in-depth bss
planning at a corporate & bss level.

DEMERITS

The role of the group vice president can

be difficult to define.
Difficulty in defining the degree of
autonomy for the group vice presidents
and division managers
Make coordination difficult.
Increases problems of central
management control.

MATRIX STRUCTURE
Matrix structure is a combination of
structures, so it becomes popular.
It may take the form of combining
product and geographical divisions or
functional and divisional structure.
Such type of structure is created by
assigning functional specialists, who
normally work in a department in their
area of specialisation.

 In matrix organisation structure, usually

employees have two bosses to whom
they may have to report.
This type of structure exists in large
multi-projects organisations so that
they can move employees to any team
wherever their services are needed.
This structure is widely used in
construction, marketing, aerospace, and
highly technological industries.

MERITS
It promotes development to the
managers through increased involvement
in decision making.
Combination of advantages of different
alternative structures.
Allow individual specialists to be
assigned where their talent is the most
needed.
Provides good exposure to specialists in
general management.

DEMERITS
Dual accountability creates confusion
and difficulty.
Requires a high level of vertical and
horizontal coordination.
Shared authority may create
communication problems.
Scope for conflicts.
It may take more time for decision.

NETWORK STRUCTURE
A network design is a cluster of
different organizations whose actions
are coordinated by contracts and
agreements rather than through a
formal hierarchy of authority.
More often one organization takes the
lead in creating the network as it
searches for a way to increase
effectiveness.

 The network design typically consists of

several satellite organizations behaved
around a core firm.
Network design offers flexibility,
innovation, quick to threats and
opportunities and reduced costs and
risks.
Network designs accommodate
strategic alliances among competing
firms.

OTHER
ORGANISATIONAL
STRUCTURES

There are also some other types of

organisational structures which are as
follows..
Product-based structures
Customer-based structures
Process-based structures
Geographic structure
intrepreneurial structure

PRODUCT-BASED
STRUCTURE
The grouping of activities on the basis
of the product or product lines is
followed by organisation where there is
a need to delegate to a division all
function related to that particular
product or product line.
Such a need arises when the strategy
adopted requires exclusive attention to a
product or a group of product.

 Expansion and diversification strategies

may required a product based structure
as it facilitates the addition or deletion
of product divisions.

CUSTOMER-BASED
STRUCTURE
In some organisatations division may be
created on the basis of the customer group
served.
The rationale foe customer based structure
is that grouping of activities on the basis of
customer would enable the organisatation
to provide exclusive attenntion to separate
and distinict customer group.

 Thus , an organisation may have

individual sales divisions and
institutional sales divisions to serve
consumers and instititutions
respectively.

PROCESS-BASED
STRUCTURE
In organisations where production
or service is
organised on the basis of processes (or
equipments), a process-based structure
is feasible.

GEOGRAPHIC
STRUCTURE

Multi-plant or multi-unit organisations

which have several factories and offices
dispersed geographically are usually
organised on the basis of geographic
structure.
This type of structure evolves in the
process of expansion and diversification.

 When an organisation acquires another

firm or wishes to set up additional
factories at different sites, geographic
structure is a natural choice.

ITREPRENEURIAL
STRUCTURE
The interpreneurial
structure offers

the benefits of revitalizing

organisations to act as intrepreneurs to
apply inclusive attention to the
development of new ideas, products or
services.
The interpreneurial structure benefits
where it is possible to manage and
coordinate several small groups and the
organisation is in a position to risk time
and resources when projects are not
successful.