Module 8: Organizational

Structures
At the end of this lesson, you should be able to;
1. Distinguish the various types of organization structures
2. Differentiate formal from informal organizations
Organizational Structure
Organizational structure is defined as the system of how tasks
are to be allocated, who reports to whom, who has the authority and
what are the coordinating mechanisms and interaction patterns to
ensure that work is done. Various parts of the
organization
Organizational
Workflows
structure
Reporting relationships
creates order
Communication channels
Why organize?

•People can accomplish more if they

work together than if they work
separately
•People should be grouped according to
tasks where they specialize in.
FUNCTIONAL STRUCTURE
Functional Structure is also
commonly described as a flat CEO
organization, with everyone
reporting to one senior
executive who dominates the Human
Manufacturing Finance Accounting
decision-making. Resource
Advantages
• It is simple. The senior executive could readily
obtain information and act rapidly when
required.
• Develop expertise among members
• Requires little cost to maintain
Disadvantages
• Difficulty in implementing organization-wide
programs, such as innovation and cost reduction.
• The level of coordination and cooperation
(department attitude or functional silos) *SILO
MENTALITY - an attitude found in some organizations
that occurs when groups do not want to share
information with others in the same company.
• Abuse of power
DIVISIONAL STRUCTURE
In divisional structure, members of the organization who are grouped
together work on the same product, service, process, or serve similar
customers. This is common to organizations that have diverse
operations covering many products, customers, processes and
territories.
Types:
• Product Structure – The grouping of members and jobs is by product
or service
• Geographical Structure – the grouping of members
and jobs is by location of activity.
• Customer Structure – the grouping of members and
jobs is by customers served
• Process Structure – the grouping of members and jobs
is by related work process.
 PRESIDENT

VP/COSMETICS VP/HOUSEHOLD
DEPT NEEDS DEPT

Production Production
Marketing Finance Marketing Finance

PRODUCT STRUCTURE
 PRESIDENT

REGION I REGION II

Production Production
Marketing Finance Marketing Finance

GEOGRAPHICAL
 PRESIDENT

Corporate Individual
Accounts Clients

Accounting Accounting
Marketing Finance Marketing Finance

CUSTOMER STRUCTURE
 PRESIDENT

Corporate Individual
Accounts Clients

Accounting Accounting
Marketing Finance Marketing Finance

CUSTOMER STRUCTURE
Advantages
• It facilitates diversification
• Decision-making and control is distributed
among the heads of the divisions or middle
management
• Responsibility and accountability of division
managers
Disadvantages
• Increase in cost due to the duplication of the
functional departments within each division
• Degree of decision-making (conflict with policies of
the central headquarters)
MATRIX STRUCTURE
Matrix Organization combine the functional and divisional structures.
Workers belong to at least two groups at the same time.
CEO

PRODUCTION MARKETING ENGINEERING

MANAGER MANAGER MANAGER

Project Engineer
Analyst
Manager A
Advantages / Disadvantages
ADVANTAGE
• It promotes the development of teams within projects or
programs.
• It facilitates coordination
• Sharing of skills
DISAVANTAGE
• The two-boss system may create confusion
• Power struggle between a leader of the functional dept and
a leader of the project team.
TEAM STRUCTURE
Team Structure is created to complete special projects, to solve
problems or to accomplish daily tasks. They may be composed of
permanent or temporary teams.
Advantage:
• Pooling of skills from different groups

Disadvantages
• Temporary in nature (level of commitment is reduced)
• Interpersonal conflict
 PRESIDENT

Engineering
Marketing Dept
Dept

TEAM LEADER TEAM LEADER

Member 2 Member 2
Member 1 Member 3 Member 1 Member 3

TEAM STRUCTURE
Network Structure

Network structure is
formed by having a
core of full-time
employees working
together with outside
partners who provide
support or supply
services.
Virtual Structure
Virtual Structure eliminates
boundaries among units that
compose the organization by
using information technology IT
and the internet to communicate
with members and accomplish
specific objectives.