Course Content
Definition and importance of management Functions of management Managerial roles Evolution of management thought Types of management environment
Meaning and importance of planning Principles of planning Purpose of planning Types of plans Planning tools Process of planning Planning challenges Making plans effective Management by objectives
Meaning and Importance of Organizing Structure and Designs of Organizations Principles of Organizing Process of Organizing Delegation Coordination Centralization and Decentralization Informal Organizations
Meaning and Importance of Staffing Human Resource Planning Recruitment and Selection Training and Development Performance Management Reward Management Separation
Meaning and Importance of Directing Leadership Motivation Communication Group Dynamics Conflict Management
Meaning and Importance of Controlling Elements of Control Characteristics of Effective Controls Control Process Role of Control in an Organization Tools of Controlling
Overview of Strategic Management SWOT Analysis Strategy Formulation Strategy Implementation Strategy Evaluation
Organization Culture Ethics and Social Responsibility Managing Innovation and Change Diversity and Inclusion Corporate Governance Globalization
Principles and Practices of Management
About Lesson

Organizational structures

Organization structure may be defined as the sum total of the ways in which a going concern divides its distinct tasks and archives coordination among them. The human capital in an organization should be organized and structured appropriately to enable a given strategy to achieve its aims, goals and objectives.

Determinants of organization structure

Typically, and practically, the structure of an organization may be influenced by factors such as:

  1. The age and size of an organization: The older and larger an organization, the more organized and standardized will be its behavior, politics, processes and processes. Because of these factors’ changes are more difficult to implement in older and larger organizations than in infant and small organizations.
  2. Technical systems: The more a technical system controls the workforce, the more standardized will be the operating system and bureaucratic the organizational structure.
  3. Power or capacity of an individual or group of individuals to influence decisions or effect organizational outcomes. Sources of such power include reward power, legitimate power, coercive power, expert power and referent power.
  4. Environment in respective of variables concerning socio-culture, technology, economy, politics, legalities and ethics has strong influence on a structure of a given organization. The organization has to be structured in such a way that it can competitively survive in the market environment.
  5. The type of strategy adapted: The organization has to be structured in such a way that it matches strategies in put to drive it to greater heights.
  6. Operational processes and technology: The nature of the tasks undertaken by the operating core of an organization has an important influence on the various aspects of organizational structure. The more sophisticated and complex the technology of an organization, the more elaborate the structure becomes.
  7. The type of organization: The nature of an organization’s accountability   has a very strong effect on the structure. The way of structuring various organizations in various sectors such as public, manufacturing, service, construction, service etc will very much depend on the expectations of benefactors and beneficiaries.

Types of organizational structures

The type of structure adapted by an organization will vary from one organization to another and such structures may include:

1.The functional structure

This structure is typically found in medium sized organizations with narrow, rather than diverse product ranges. It is a structure that groups its people together on the basis of their technical and specialist expertise.

Advantages of a functional organizational structure

  1.  The top management is in touch with all operations.
  2.  Control mechanisms are simplified.
  3.  Responsibilities are clearly defined.
  4.  Managers easily specialize in specific areas.
  5.  Workers in a functional organizational structure tend to more cohesive

Disadvantages of a functional organizational structure

  1.  It encourages development of sectional interests which may conflict with the needs of the organization as a whole
  2.  Functional structures are only best suited in a stable environment
  3.  Promotes narrow specialization and functional rivalry
  4.  Coordination between functions is very difficult.
  5.  Adapting to new practices is very difficult

2. Product based structure

This is a type of structure that groups its operations according to the products. It is a popular structural form in a large organization having a wide range of products and services.

Advantages of a product-based structure

  1.  It enables diversification to take place
  2.  It copes better with problems of technological change
  3.  Continuous utilization of equipment by staff enables them to be experts
  4.  By grouping staff in the product-based structure, it enables staff to reduce fatigue

Disadvantages of this product-based structure

  1.  Each general manager may promote his own group products to the detriment of other parts of the company
  2.  Top management is forced to spend valuable time controlling general managers. Close control by top management tends to demotivate general managers
  3.  By continuing working in the product-based areas, managers are deprived of the chance to know the operations in other departments.
  4.  Managers tend to develop Empire building mentality due to excessive experience acquired in product-based department.
  5.  Specialization in product-based department blunts manager’s initiative

3. Geographically based structure

This structure groups operations on a geographical basis. It is usually developed where the realities of a national or international network of activities make some kind of regional structure essential for decision making and control.

Advantages of a geographical based structure

  1.  Regional structured networks facilitate in control of activities effectiveness
  2. Network of activities make some kind of regional structure essential for decision making
  3.  Improves functional co-ordination within the target market
  4.  Provides excellent training ground for higher level general managers
  5.  Allows tailoring of strategy to the needs of each geographic market

Disadvantages of geographically based structure

  1.  Can result in duplication of staff services at the headquarters and district level
  2.  Poses problem of deciding whether headquarters should impose geographic uniformity or geographic diversity
  3.  Management spends a lot of funds by engaging services of senior functional managers at headquarters to provide direction and guidance to line managers in the region.

4. The matrix organizational structure

It is a combination of different structures in one big structure. These structures are developed to co-ordinate activities in highly complex industries such as aircraft manufacturers where functional and product type of structures have not been able to meet organizational demands.Matrix structures are often adopted because there is more than one factor around which a structure could be built.

Advantages of a matrix structure

  1. Quality of decision making where interests conflict.
  2.  Direct contact replaces bureaucracy.
  3.  Increases managerial motivation.
  4.  Development of managers through increased involvement in decisions.

  Disadvantages of matrix structure

  1. Takes longer time to finalize decision making.
  2. Unclear job and task responsibilities.
  3. Unclear cost and profit responsibilities.
  4. High degree of conflicts.
  5. Dilution of priorities.
  6. Creeping bureaucracy.
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