Organization Structure

Faculty: Anmol soi sir

Presented by:
Princy
Shirin
Radhika
Swati
What is an Organization Structure ?

 An organization Structure is the way in which the tasks

and subtasks required to implement a strategy are
arranged.
 Organization Structure refers to the way tasks are divided
up, how the work flows, how this flow is coordinated and
the forces and mechanisms that allow this coordination to
occur.
 The organizational chart cannot fully capture the
organizational structure but gives us a place to begin when
studying it.
Features of good organization structure

 Unity of objective - An organization is sound when

it facilitates the accomplishment of objectives.
 Division of work - The activities of every member of
the organization should be confined, as far as
possible, to the performance of single function.
 Span of control - Every manager should have a
limited number of subordinates reporting to him
directly. Span should be neither too wide nor too
narrow.
Contd….

 Scalar principle - There should be a clear chain of command

extending from top to bottom of the organization. Every
subordinate should know who his superior is and who his
subordinates are.
 Functional Definition - The duties(functions), authority and
responsibility of every position should be clearly defined so as
to avoid duplication of work and overlapping of functions.
 Coordination - The organization structure should facilitate
unity of effort and coordination among different individuals
and groups. Channels of communication should be open and
clear.
Structural Mechanism

 Defining a major tasks required to implement a

strategy.
 Grouping tasks on the basis of common skill
requirement.
 Subdivision of responsibility and delegation of
authority to perform tasks.
 Coordination of divided responsibility.
 Design and administration of the information system.
Contd……

 Design and administration of the control system.

 Design and administration of the appraisal systems.
 Design and administration of the motivation system.
 Design and administration of the development
system.
 Design and administration of the planning system.
Structure & Strategy

 Acc. To Chandler,
 Structure & Strategy have a two way, reciprocal relationship.
 The strategy changes require structure changes to acquire
economic efficiency.
 The structure flows from the strategy. Once in a place, the
structure tends to influence, how present strategies are
implemented and also how future strategies would be
formulated.
 It is the continual process of matching the structure of an org.
with its chosen strategy.
Stages of Development

 Stage1
Small scale enterprises, managed by single person,
Entrepreneur-owner-manager.
Characteristics:- Simplicity of objectives, operations and
management.

 Stage 2
Bigger than stage 1 in terms of size and operations.
Characteristics:- Functional specialization or process
orientation.
Contd….

 Stage 3
Large and widely scattered organization generally having units or
plants at different places.
Characteristics:- Semi autonomous and linked to the headquarters
but functionally independent.

 Stages 4
Most complex form, large multiplant, multiproduct organizations
that results from the related and unrelated diversification
strategies.
Characteristics:- The corporate head quarters assume the
responsibility of providing strategic direction and policy
guidelines.
Types of Organizational Structure

 Entrepreneurial Structure
 Functional Structure
 Divisional Structure
 SBU Structure
 Matrix Structure
 Network Structure
Entrepreneurial Structure

OWNER-
MANAGER

EMPLOYEES
 Entrepreneurial Structure is the most elementary form of
structure and is appropriate for an organization that is owned
and managed by one person.
 A small-scale industrial unit, a small proprietary concern, or
mini-service outlet may exhibit the characteristics of
Organizations which are based on an entrepreneurial structure.
 Typically, these organizations are single-business, product or
service firms that serve local markets.
 The owner-manager looks after all decisions, whether they are
day-to-day operational matters or of a strategic nature.
 Advantages:

• Quick decision-making as power is centralized.

• Timely Response to environmental changes.

• Informal and simple organization systems.

 Disadvantages:

• Excessive reliance on owner.

• Ignore strategic decision.

Functional Structure

Chief Executive
Officer

Public Relation

Finance

Marketing

HRM

Production

Legal
 Need arises for specialized skills and delegation of authority
to managers who can look after different functional area. The
Functional structure seeks to distribute decision-making and
operational authority along functional lines.

 Advantages :-
1) Efficient distribution of work through specialization
2) Delegation of day-to-day operational functions
3) Providing time for the top management to focus on strategic
decisions.
 Disadvantages:-
1) Creates difficulty in coordination among different functional
areas.
2) Creates specialists which results in narrow specialization,
often at the cost

 Of overall benefit of the organization.

• Leads to functional and line and staff conflicts
 Divisional Structure
CEO

LEGAL
FINANCE

GM
GM

MARKETING MARKETING

OPERATIONS OPERATIONS

DIVISION A DIVISION B
 When growth and increasing complexity in terms of
geographic expansion market segmentation, and
diversification make. the functional structure inadequate. Some
form of divisional structure is necessary to deal with.

 Advantage:-
 Enable grouping of functions required for the performance of
activities related to a division.
 Generate quick response to environmental changes.
 Enable the top management to focus on strategic matters.
 Disadvantage:-
 Problem in the allocation of resources and corporate overhead
cost.
 Inconsistency arising from the sharing of authority between
the corporate and divisional levels.
 Policy inconsistency with different divisions.
 Matrix structure
CEO

Finance Marketing HRM Operations

PM - A

Functional
Specialist
PM - B

PM - C
 When a need to work on major products or projects each of
which is strategically significant.
 For the duration of the project, the specialists from different
areas from a group or team and report to a team leader.
 They also may work in heir respective department
simultaneously.
 Once the project is completed the team members revert to the
parent departments.
Advantages

 Allow individual specialists to be assigned where their talent

is the most needed.
 Fosters creativity because of the pooling of diverse talents.
 Provides good exposure in general management.

Disadvantages
 Dual accountability creates confusion and difficulty for
individual team members.
 Requires a high level of vertical and horizontal combination.
 Shared authority may create communication problem.
Network Organizational Structure

Project
Group M
Structure
Function
Region A
X
Structure
Structure

Corporate
Headquarter

Function
Region B
Y
Structure
Structure
Project
Group N
Structure
 The increasing volatility of the environment, coupled with the
emergency of knowledge based industries, has led to the
creation of a network structure.
 Also known as spider’s web structure or the virtual
organization.

Advantages
 Permits concentration on core competencies of the firm.

 Adaptability to cope with rapid environmental changes.

Disadvantages

 Loss of control and lack of coordination as there are several

partners,
 Risk of overspecialization as most tasks are performed by
others.
 High costs as a duplication of resources could be there.
 SBU STRUCTURE

CEO

GROUP GROUP GROUP

HEAD-SBU-1 HEAD-SBU-2 HEAD-SBU-3

DIVISON DIVISONS DIVISION

S-A,B,C -D,E,F S-G,H,I
 A Strategic Business Unit (SBU) has been defined by Sharplin
as “Any part of a business organization which is treated
separately for strategic management purposes”.
 When organizations face difficulty in managing divisional
operations due to increasing diversity, size & no. of divisions,
it becomes difficult for the top management to exercise
strategic control.
 Here the concept of SBU is helpful in creating an SBU
organizational structure.
Advantage

 Establish coordination between divisions.

 Facilitates strategic management and control of large, diverse
organizations
 Fixes accountability at the level of distinct business units.
 “Any part of a business organization which is treated
separately for strategic management process.
 When management find difficulty in managing divisional
operations then the concept of an SBU is helpful in creating
an organizational structure.
Disadvantage

 Too many different SBUs to handle effectively in a large,

diverse organizations.
 Difficulty in assigning responsibility and defining autonomy
of heads.
 Addition of another layer of management between corporate
and divisional management.
Organizational Design

 Organizational Design is to create the right structure, that fits

the requirements of the strategy to be implemented.
 Organizational Design has two dimensions, each with several
sub – dimensions.
 Structural dimensions describe the internal characteristics of
an organization.
 Contextual dimensions describe the organizational setting that
influences & shapes the structural dimensions.
 Organizational Design

Structural Contextual
Dimensions Dimensions

Formalization Environment

Specialization Goals & Strategy

Hierarchy of
Authority Culture

Centralization Technology

Professionalism Size
Personnel
Ratios
Structural Dimensions
 Formalization
It is the amount of written documentation, including procedures, job
descriptions, regulations and policy manuals.
 Specialization
It is the degree to which organizational tasks are sub-divided into separate
jobs.
 Hierarchy of Authority
It describes who reports to whom and the span of control for each
manager. Span of control is the number of subordinates reporting to a
superior.
 Centralization
It is the extent to which decision-making is done by the top management.
Decentralization is the extent to which authority to make decision is
delegated to lower levels of management.
Cont…

 Professionalism
It is the level of formal education and training of employees.
 Personnel Ratios
It refers to deployment of people to various functions and departments.
There could be an administration ratio, clerical ratio or ratio of indirect to
direct labour employees.
Contextual Dimensions

 Environment
 Goals & Strategy
 Culture
 Technology
 Size
Development of Organization Design

I. Identification of key activities necessary to be performed for

the achievement of objectives & realization of mission
through the formulated strategy.
II. Grouping of activities that are similar in nature & need a
common set of skills to be performed.
III. Choice of structure that could accommodate the different
groups of activities.
IV. Creation of departments, divisions, etc. to which the group
of activities could be assigned.
V. Establishing inter-relationship between different departments
for the purpose of coordination & communication.
THANK YOU