 Definition of Organizational

Structure
 Forms Of Organization Structure
 Line Organization Structure
 Staff Organization Structure
 Functional Organization Structure
 Organizational Structure refers to the
differentiation (differences in the
orientations among the managers if
different departments and differences
in formal structure among these
departments) and integration
(quality of the state of collaboration for
achieving unity) of activities and
authority, role and relationships.
 Organisation Structure refers to
the pattern of relationships
among individuals and
department in an organisation
 Organisation Structure is the
framework through which the
organisation operates.
 Classification of organisation
structure is based on various
activities which are grouped
together to create departments
and units & prescribing their
relationships in the organisation.
 Organizational structure also
refers to the well – defined jobs,
each bearing a definite
authority, responsibility and
accountability.
 Four pillars of Organizational
Structure
Division of Labour
Scalar and functional processes
Structure
Span of control
There are 7 types of
Organisation Structure
◦ Line
◦ Line & staff
◦ Functional
◦ Divisional
◦ Project
◦ Matrix
◦ Free-form
 Line Organisation Structure
 Linesof authority and
instructions are vertical, i.e. they
flow from the top to the bottom.

 The unity of command is

maintained in a straight and
unbroken line. It implies that
each subordinate receives
instructions from his immediate
superior alone and is responsible
to him only.
 All
persons at the same level of
org. are independent of each other.

 Thisstructure specifies
responsibility and authority for all
the positions limiting the area of
action by a particular position
holder.
 Line & Staff Organisation Structure

 Refers to a pattern in which staff

specialists advise managers to perform
their duties.

 Staff managers provide advice to the line

manager who are generally specialists in
the field.

 Staff positions are purely advisory in

nature. They have a right to recommend
but have no authority to enforce their
preference on other dept.

 The line executives are the “DOERS” or

commanders, where as, the specialists
are the “THINKERS” or advisors.
Secretary GM PRO

Manager-Finance Manager-Personal

Manager Production Manager Marketing

Production Engg. Sales Officer

Foreman Sales Supervisors

Workers Salesmen
 ADVANTAGES
 Planned Specialisation
 Quality Decisions
 Prospect for Personal Growth
 Training Ground For Personnel

DISADVANTAGES
 Lack Of Well Defined Authority
 Line & Staff Conflicts

Suitability
 Not suitable for small org. as it is quite costly

for them.
Functional Structure
Product Structure
 Flat Structure
 Vertical Structure
 Matrix Structure
 Functional structure is created by grouping the
activities on the basis of functions required for
the achievement of organizational objectives.
 Functions are classified into

“Basic”(essential: e.g. production, marketing, in

manufacturing organization),
“Secondary”(subparts :e.g. marketing is further
divided into market research, advertising,
sales…etc) &
“Supportive” (e.g. finance, accounting,
personnel, industrial relations)functions
according to their nature and importance.
 Authority relationships in functional structure
may be in the form of line, staff & functional.
 C l a r k J o h n s o n
C E O

E x e c . V . PS . e n i o r V . SP e . n i o r V . P
F i n a n c e & A S d t mo r ie n s . L o g i s t i c s

V . P . T a Vx . P . C o n t r o l V l e . rP .
D i s t r i b u t i o n

V . P . M I S D i r e c t o r
C o r p . P l a n n D i n i r ge c t o r
T r a n s p o r t a t i o n
Characteristics of functional structure:

1.Specialization by functions

2.Emphasize on sub goals

3.Pyramidal growth of the organization

4.Line and Staff divison

5.Functional
authority relationships
among various departments.

6.Limitedspan of management and tall

structure.
 ADVANTAGES:

 Result into high degree of specialization

 Brings order & clarity in the org.

 Promotes professional achievements, provides

satisfaction to the specialist.

 Resources can be saved

 High degree of control and coordination of

functions.
 DISADVANTAGES:

 Judging the performance of each dept is

difficult.

 Slow Decision Making process

 Lack responsiveness necessary to cope

up with new & rapidly changing work
requirements.

 Offers usually line & staff conflict &

interdepartmental conflict and results in
inefficiency.
 Suitability

 Required when small org. grows &

business activities become more &
more complex.

 Works better if org. has one major

product or similar product line.
 A
division is a collection of functions working together to
produce a product.
 Divisions create smaller, manageable parts of a firm.
Divisions develop a business-level strategy to compete.
A division has marketing, finance, and other functions.
Functional managers report to divisional managers who
then report to corporate management.
◦ Product structure: divisions created according to the type of product
or service.
◦ Geographic structure: divisions based on the area of a country or
world served.
◦ Market structure: divisions based on the types of customers served.
 C E O
C o r p o r a t i o n

C o r p o r a t e
M a n a g e r s

W a s h i n g M a L c i gh hi n t ei n g T e l e v i s i o n
D i v i s i o n D i v i s i o n D i v i s i o n
 C E O
C o r p o r a t i o n

C o r p o r a t e
M a n a g e r s

N o r t h e r nW e s t e r n S o u t h e r nE a s t e r n
R e g i o n R e g i o n R e g i o n R e g i o n
 C E O
C o r p o r a t i o n

C o r p o r a t e
M a n a g e r s

L a r g e B u S s m i n a e l sl s B u sE i d n u e cs as t i o In n a d l i v i d u a
C u s t o m e C r us s t o m e I nr s s t i t u t i o C n us s t o m e r
 Product departmentalization involves the grouping of all
activities necessary to manufacture a product or
product line.

 Preferred for product expansion & diversification

when manufacturing & marketing characteristics of each
product are of primary concern.

 Used when the product is relatively complex & a great

deal of capital is required for plant and facilities.

 Each product division contains the functions necessary to

that service the specific goods or services it produces
 CEO

Func.
Managers

Sales Design Production

Manufacturing Manufacturing Manufacturing

= Product Team Manager = Team member

 Advantages
 Coordination within product lines made
easier

 More adaptable to changes in environment

(e.g., can shut down a division when a
product is no longer selling)

 Responsibility for failures, successes

identifiable

 Competition across divisions can serve as a

motivator
 Disadvantages

 Redundancy of functions across divisions

(e.g., marketing, R&D)

 Competition for resources, power

 Lack of development of expertise in

functional areas
 FLAT STRUCTURE reduces the
levels of management.

 Widens span of control of

management at various levels
of organisation.

 More decentralized with

regard to decision-making
ADVANTAGES:
 More delegation of authority
 More clear policy
 Development of managers for higher

positions because of their initiative &

authority to make decisions.
DISADVANTAGES:
 Tendency of overloaded superior to

become bottlenecks in decision making

 Requirement of highly trained

managerial personnel.
◦ Tall structures have many levels of authority
relative to the organization’s size.
 As levels in the hierarchy increase, communication
gets difficult.
 The extra levels result in more time being taken to

implement decisions.
 Communications can also become garbled as it is

repeated through the firm.

◦ Flat structures have few levels but wide spans of
control.
 Results in quick communications but can lead to
overworked managers.
 Narrow span of control

 Large number of management levels

 More centralized decision making

ADVANTAGES:
 Close Supervision
 Close control of subordinate activities
 Fast communication between superior &

his subordinate
DISADVANTAGES:
 Creation of many levels of management
 High cost to the organisation
 Excessive distance between lowest level

& highest level in the organisation.

 Matrix Organization

 In a matrix organization a vertical as well

as lateral communication and information
flow is allowed.

 The matrix organization integrates

functional responsibility with product
responsibility.

 It is a combination of the functional and

the product org. structure.
 A product manager is responsible for the
total performance of the product and

 Will have the production manager, the

marketing manager, the accounts
manager as his counterparts in the
manufacturing, marketing, and
accounting functions respectively.
 These functional managers report
to the functional head vertically
and product manager laterally.

 MOS is used in big companies

having diverse business activities

 The structure enjoys the

advantages of a functional as well
as of a product organization.
◦ Matrix structure: managers group people by
function and product teams simultaneously.
 Results in a complex network of reporting
relationships.
 Very flexible and can respond rapidly to change.

 Each employee has two bosses which can cause

problems.
 Functional manager gives different directions
than product manager and employee cannot
satisfy both.
◦ Product Team Structure: no 2-way reporting and
the members are permanently assigned to the
team and empowered to bring a product to market.
 CEO

Func.
Managers

Sales Design Production

Product
Team Managers

team A

Product
team B
Product Team
Product
team C

= two boss employee

 CEO

Func.
Managers

Sales Design Production

Manufacturing Manufacturing Manufacturing

= Product Team Manager = Team member

 Many large organizations have divisional
structures where each manager can select
the best structure for that particular
division.
◦ One division may use a functional structure, one
geographic, and so on.
 This ability to break a large organization
into many smaller ones makes it much
easier to manage.
 Design Of Matrix Structure

 In MOS, a project manager is appointed to

coordinate the activities of the project.

 A subordinate in matrix structure may

receive instructions from two bosses.

 Matrix superior has to share the facilities

with others.

 He reports in a direct line to the up, but does

not have a complete line of command below.
 MD

Manufacturing Finance Personnel Material

Product Product- Finance Personnel Material

Manager-A ion MGR-A Mgr-A Mgr-A Mgr-A

Product Production- Finance Personnel Material

Manager-B MGR-B Mgr-B Mgr-B Mgr-B
Advantages of the matrix organization

 It attempts to retain the benefits of both

structures ( functional organization and
project organization).

 Coordinates resources in a way that

applies them effectively to different
projects.

 Staff can retain membership on teams

and their functional department
colleagues.
Disadvantages of the matrix organization

 Potential for conflict between functional

vs. project groups.

 Greater administrative overhead.

 Increase in managerial overhead