Determinants of

Organizational
Structure

Determinants of
Organizational Structure
Environmen
t

Size

Technology

Environment

Internal
Factors

External
Factors

Organizational structure
depends upon the
environment, specially
External
Environment/Factors.

Customer

i.e. whether the external

environment is stable or
dynamic

International
Environment

Culture
Economic

Technology

Organizational structure depends

upon technology as well
If technology is
simple then
Technology
is
Mechanistic
simple
structure
will be
good

If technology is
advanced then
organic
Or or
complicated/Advanced
advanced
organizational
structure will be
needed.

Size
If organization is big
& lots of people are working then
It requires
HIGH DEGREE
OF DISCIPLINE
&
COMMAND
a formally structured chain of command

Types of
Organizational Structure

Types of organization
structures
Line organization
Line & staff
organization
Functional
organization

Project
organisation

Matrix
organisation
Divisional
organization

Line
Organization
Line organizationis the most oldest
and simplest method of administrative
organization.
According to this type of organization,
the authority flows from top to bottom
in a concern.
The line of command is carried out from
top to bottom.

Features
of Line Organization
1. It is the most simplest form of organization.
2. Line of authority flows from top to bottom.
3. Specialized and supportive services do not take
place in these organization.
4. line officers independently take decisions in their
areas and spheres.
5. This kind of organization always helps in bringing
efficiency in communication and bringing stability to a
concern.

Merit
s
Simplest-It is the most
simple and oldest method of
administration.
Unity of Command-In these
organizations, superiorsubordinate relationship is
maintained and scalar chain
of command flows from top to
bottom.

Better discipline-

control is unified &

concentrates on one
person and therefore,
he can independently
make decisions of his
own.
The

Unified control ensures

better discipline.

Flexibility-
There is a- co-ordination between the top most
authority and bottom line authority.
Since the authority relationships are clear, line
officials are independent and can flexibly take
the decision. This flexibility gives satisfaction of
line executives.

Prompt decision-Due to the factors of fixed

responsibility and unity of command, the officials
can take prompt decision.

Fixed responsibilityIn

this type of organization,

every line executive has got fixed authority,

power and fixed responsibility
attached to every authority.

Scalar chain

Scalar Chain (line of authority)

. Formal chain of command running
from top to bottom of the
organization,
Scalar Chain
is the number of different levels of
authority through which decisions are
passed in the organization.

Were we can see

Scalar chain
?

like

military

Over relianceThe line executives decisions are

implemented to the bottom. This results in over-relying on the line
officials.
Lack of specialization-
A line organization flows in a scalar chain from top to bottom and
there is no scope

for specialized

functions.

For example, expert advices whatever decisions are taken by line

managers are implemented in the same way.

Demeritsline organization
structure

Demerits

Inadequate communication-The policies

& strategies which are framed by the
top authority are carried out in the
same way.
This leaves no scope for communication
from the other end.
The complaints and suggestions of
lower authority are not communicated
back to the top authority. So there is
one way communication.
Lack of Co-ordination-Whatever
decisions are taken by the line officials,
in certain situations wrong decisions,
are carried down and implemented in
the same way.
.. , the degree of effective coordination is less.
Authority leadership-The line officials
have tendency to misuse their authority
positions.?

2-Line & Staff OrganizationIn types of organization structure

Line and staff organization is a modification of

line organization
it is more complex than line organization.
According to this administrative organization,
specialized and supportive activities are
attached to the line of command by
appointing staff supervisors &
staff specialists are attached with the line
authority.

President
Line

Legal councilSTAFF

Public relations advisor- staff

vice
President- line

Engineering
staff

Personnel
staff
Plant manager-

Supervisor
machine shop
Workers

Supervisorassembly
level
Workers

Line authority
Line
authority
or
function is a Direct or
main function of an
individual
or
department. It involves
Direct and Legitimate
Authority
over
subordinates.
It decides what to
do, and when to do it.
eg., Production for a
Manufacturing company.

Staff Authority on the

other
hand
is
an
assistant function as it
guides line managers or
functions
into
performing a specific
activity.
They
are
more
specialized
and
therefore
provide
advice
to
Line
authority.
eg., Human Resource
(HR) for a Manufacturing

Features -of Line & Staff

Organization
1. Line and Staff Organization is a compromise of line organization.
It is more complex than line concern.
2. Division of work and specialization takes place in line and staff
organization.
3. The whole organization is divided into different functional areas to
which staff specialists are attached.
4. Efficiency can be achieved through the features of specialization.
5. There are two lines of authority which flow at one time in a
concern :
Line Authority
Staff Authority
6. Power of command remains with the line executive and staff
serves only as counsellors.

Merits of Line & Staff Organization

Relief to line of executives-here

advice and counselling

provided to the line executives it divides the work between the two.
The line executive can concentrate on the execution of plans -----so they get
relieved of dividing their attention to many areas.

Expert advice-it

facilitates expert advice to

the line executive at the time of need.
The planning and investigation related to different
matters can be done by the staff specialist and
further
line officers can concentrate on execution
of plans.

Benefit of Specialization

-here

division
of whole concern done in 2 types of authority
divides the enterprise into parts and functional
areas. This way every officer or official can
concentrate in its own area.

Better co-ordinationit deals to provide better decision making & concentration

remains in few hands. This feature helps in bringing coordination in work as every official is concentrating in their
own area.

Benefits of Research and

Development-?
Through the advice of specialized staff, is dr so the line executives
get time to execute plans by taking productive decisions which are
helpful for a concern. This gives a wide scope to the line

executive to bring innovations and go for research

work in those areas. This is possible due to the
presence of staff specialists.

Training-
Due to the
presence of
staff
specialists &
dr expert
advice it
serves as

ground
for training 2
da line
officials.

Demerits of Line & Staff

Organization
Lack of understandingIn line & staff dr r 2 types of authority flowing at
one time. This results in the confusion between the
two. As a result, the workers are not

able to understand as to who is their

commanding authority. Hence the
problem of understanding can be a
hurdle in effective running.
Lack of sound advice-
The line official
get used to the expertise advice of the staff. At times the staff
specialist also provide wrong decisions which the line
executive have to consider. This can affect the efficient

Contd
Line and staff conflictsLine and staff are two authorities which are flowing at the same
time. The factors of designations, status influence sentiments
which are related to their relation, can pose a distress on
the minds of the employees. This leads to minimizing of coordination which hampers a concerns working.
Costly- In line and staff concern, the concerns have to
maintain the high remuneration of staff specialist. This proves
to be costly for a concern with limited finance.

Functional
Organization

Functional
organisation

Suggested by

F.W. Taylor

Functional
Organizatio
n

This is an organization in which we can define

As its a system in which functional department
are created to deal with the problems of business at
various levels.

Features
Entire organizational activities divided into
specific functions such as operations, finance,
marketing and personal relations.
2. Three authorities exist- Line, staff and
function.
3. Each functional area is put under the
charge of functional specialists and he has
got the authority 2 give all decisions
regarding the function whenever the function
is performed throughout the enterprise.
4. Principle of unity of command does not
apply to such organization as it is present in
line organization.

Merits
1. Specialization-Better division of labour takes place which results in
specialization of function and its consequent benefit.
2. Effective Control-Management control is simplified as the mental
functions are separated from manual functions. Checks and balances
keep the authority within certain limits. Specialists may be asked to judge
the performance of various sections.
3. Efficiency-Greater efficiency is achieved because of every function
performing a limited number of functions.
4. Economy-Specialization compiled with standardization facilitates
maximum production and economical costs.
5. Expansion-Expert knowledge of functional manager facilitates better
control and supervision.

Demerits
1. Confusion-The functional system is quite complicated to put
into operation, especially when it is carried out at low levels.
Therefore, co- ordination becomes difficult.
2. Lack of Co- ordination-Disciplinary control becomes weak as a
worker is commanded not by one person but a large number of
people. Thus, there is no unity of command.
3. Difficulty in fixing responsibility-Because of multiple
authority, it is difficult to fix responsibility.
4. Conflicts-There may be conflicts among the supervisory staff of
equal ranks. They may not agree on certain issues.
5. Costly-Maintenance of specialists staff of the highest order is
expensive for a concern.

Divisional Structure

Divisional Structure
OF McDonald's

DIVISIONAL STRUCTURE-

or departmental
organisation involving
grouping of people or
activity ,
With similar
characteristics into da
single department or
units,

self cantered
structures
& these departments
operate well if these
were small
organisations,
Organisational goals
are prescribed by
organisational policies
n plans ,
Here decisions are
generally
decentralized
N decisions guide their
own activities

Thedivisional organizational structureorganizes the

activities of a business
around geographical, market, or
product and service groups.
Every division would handle its own

accounting, sales and marketing, engineering,

production, and so forth.
The divisional structure is useful when a company has many
REGIONS, MARKETS, OR PRODUCTS.
OVERALL , it can cause

higher total cost

Advantage of Divisional Structure

Accountability.This approach makes it much
easier to assign responsibility for actions and
results.

Competition.The divisional structure works well in

markets where there is a great deal of competition, where
local managers can quickly shift the direction of their
businesses.

Culture.You can use this structure to create a culture at

the divisional level that most closely meets the
needs of the local market.

Contd

Multiple offerings. When a company has a

large number of product offerings, or different
markets that it services, and they are not
similar, it makes more sense to adopt the
divisional structure.
Speed. This tends to faster responses to local
market conditions.
Bz many people r engaged

Disadvantage of Divisional Structure

Cost.When you set up a complete set of functions within each
division, there are likely to be more employees in total than would be
the case if the business had instead been organized under a purely
functional structure. Also, there must still be a corporate
organization, which adds more overhead cost to the business.

Inefficiencies. When there are a number of functional

areas spread among many divisions,

no one functional area will be as efficient as would have been the

case if there had instead been one central organization for each
function.

Contd

Rivalries. The various divisions may have no incentive to work

together, and may even work at cross-purposes,

Strategic

focus.-

Each division will tend to have its own strategic direction, which
may differ from the strategic direction of the company as a whole.

Divisional organisation
types
Departmentation by
product
Departmentation by
customers
Departmentation by
area
Departmentation by
time

Departmentation by Product

In product or service departmentation, every major

product is organised as a separate department each
department looks after the production, sales and finance
of one product.
Product departmentation is useful when product
expansion and diversification,
General motors has 6 divisions- which are decentralized ,
Ex- Pontiac, chevrolet .

Departmentation by Area

Area departmentation is very useful to a large-scale

enterprise whose activities are geo-graphically spread
over a wide area.
Under territorial or geographical departmentation,
activities are divided into zones, divisions and branches.
Overall- such divisions are specially useful for large org,
dat r geographically spread out Banks, insurance
companies, transport companies, distribution agencies are
examples of such enterprises.

Departmentization by area - dr will be a separate vice

president of marketing who s responsible for promotion
of the product
In EASTERN REGION,
NORTH WESTERN REGION,
SOUTHERN & SO ON..

Departmentati
on by
Customer

Departmentation by Customer
Under this basis of departmentation,
activities aregrouped according to DIFFERENT type of
customers.
This type of departmentation is useful for banks,
departmental stores, etc., which sell a product or service
to a number of distinct and clearly defined customer
groups.
Each department specialises in serving a class of customers.

particular

For example, a large readymade garment store may have

a separate department each for women, children and
men. A bank may have separate loan departments for
large-scaleand small-scale businessmen.

Departmentation by Time
Under this basis activities are grouped on the basis of the
time of their performance.

For example,a factory operating twenty-four hours may have

threedepartments, one each for morning, day and night
shifts. The idea is to obtain theadvantages of people
specialised to work in a particular shift.
HOSPITALS & OTHER PUBLIC UTILITY COMPANY such astelephone.
Were telephone companies hv day n evening shift n night
1v.

Project
Organization

These are temporary organizational

structures formed for specific
projects for a specific period of
time & once the goal is achieved,
these are DISMANTLED

What basically happen here is that

for any special or specific project
various specialist from various
department
(Viz. Production, Engineering,
Quality control, Marketing etc) are
brought together.
Once the work is completed they go
back to their respective
departments.

Features of Project
Organization
1. When project is clearly defined on what to do
& what to achieve basis.
2. The project is separate & unique & it cant be
done as a part of daily work.
3. Different activities requires different types of
skills & specialization.
4. The project must be temporary in nature.

MATRIX
ORGANIZATION

Anorganizational structurethat facilitates the

horizontal flow ofskillsandinformation.
It is used mainly in themanagementof
largeprojectsorproduct
developmentprocesses,
drawingemployeesfrom differentfunctional
disciplinesforassignmentto ateamwithout
removing them from their respectivepositions.

Employees in
amatrixorganizationreportonday-todayperformanceto the project orproduct
managerwhoseauthorityflowssideways
(horizontally) across departmental boundaries.
They also continue to report on their overall
performance to the head of
theirdepartmentwhose authority flows
downwards (vertically) within his or her
department.