Forms of Organization Structure

Manmeet Kaur 80909107029 CSE-A

Organization
An organization is social unit which is deliberately constructed and reconstructed to seek specific goals. -Talcott Parsons An organization is a system of consciously coordinated activities of two or more persons. There are four characteristics of organization:- i) communication, ii) cooperative efforts, iii) rules and regulations, iv) common objectives. - Chester Barnard

Organization Structure

The organizational structure, control systems, culture, and human resource management systems that together determine how efficiently and effectively organizational resources are used.

Why have an Organization Structure?

All organizations have to organize what they do A clear structure makes it easier to see which part of the organization does what There are many ways to structure an organization

Factors Affecting Organization Structure

The Organizational Environment

The quicker the environment changes, the more problems face managers. Structure must be more flexible (i.e., decentralized authority) when environmental change is rapid.

Strategy
Different strategies require the use of different structures. A differentiation strategy needs a flexible structure, low cost may need a more formal structure. Increased vertical integration or diversification also requires a more flexible structure.

Technology
The combination of skills, knowledge, tools, equipment, computers and machines used in the organization. More complex technology makes it harder for managers to regulate the organization. Technology can be measured by: Task variety: the number of new problems a manager encounters. Task analyzability: the availability of programmed solutions to a manager to solve problems.

Human Resources
Highly skilled workers whose jobs require working in teams usually need a more flexible structure. Higher skilled workers (e.g., CPAs and doctors) often have internalized professional norms and values. Managers must take into account all four factors (environment, strategy, technology and human resources) when designing the structure of the organization.

Forms of Organization Structure

Ways to Forms of Organization Structure

By Function

By Product Or Activity

By Area

By Customer

By Process

Functional Structure
The functional design is also known as U-form organization ( U stands for Unity) This groups positions into departments according to their main functional areas Some of the main functions of most organizations are those of production, marketing, finance, human resources, legal, research and development and so on The chain of command in each function leads to a functional head who in turns reports to the top manager

Functional Structure

Advantages of Functional Structure

Functional Design enhances operational efficiency as well as improvement in the quality of the product because of specialists being involved in each functional area Resources are allocated by the function Functional Design facilitates ease in communication and coordination within the departments, since the activities are all related, in one way or another, to the same specialized areas

Disadvantages of Functional Structure

Functional Design encourages narrow specialization rather than general management skills so that functional managers are not well prepared for top executive position Functional Units may be so concerned with their own areas that they may be less responsive to overall organizational needs Coordination across functions is more difficult to achieve and it may seriously delay responses to the dynamic of environment affecting the entire organization because such responses must go through the chain of command

Product Structure
In this type of structure, the units are formed according to the type of product More useful in multi-line corporations, where product expansion and diversification and manufacturing and marketing characteristics of the production are of primary concern While the general policies are decided upon by the top management within the philosophical guidelines of the organization, each division is autonomous and strive to improve and expand its own product line Each Divisional General Manager is responsible for its costs, profits, failures and successes

Product Structure

Advantages of Product Structure

In this type of organizational structure, the responsibility as well as accountability is traceable thus making the division heads sensitive to product improvements in response to changing customer taste Product structure facilitates the measurement of managerial as well as operative results and the contribution of each product line to the total profit of the organization can be evaluated

Disadvantages of Product Structure

This type of structure is that it promotes fierce internal competition which may or may not be healthy

Furthermore, there may be lack of cooperation among different divisions and this tendency can be detrimental to the broader goals of the organization

Global Geographic (Area) Structure

A structure under which global operations are organized on a geographic basis International operations are put on the same level as domestic operations Global division managers are responsible for all business operations in their designated geographic area Often used by firms in mature businesses with narrow product lines By manufacturing in a region, the firm is able to reduce cost per unit and price competitively Difficult to reconcile a product emphasis with a geographic orientation New R&D efforts often ignored because divisions are selling in mature market

Global Geographic (Area) Structure

Advantages of Global Geographic (Area) Structure

Serve local needs better Positive competition More effective communication between firm and local customers

Disadvantages of Global Geographic (Area) Structure

Conflict between local and central management Duplication of resources and functions

Customer Structure

Structure where different customer groups have different needs

Organizations with several separate and distinct markets accounting for major portions of their sales often organize based on these markets or customers.

Customer Structure

Vice president

Manager Priority customer

Manager Regular customer

Process Structure

This type of organization in large companies is based on the firms product. The entire company may be organized by product, with separate sales, advertising, marketing, and so on, along with staffs for each, or some functional units may remain centralized.

Process Structure

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