UNIT – II

DESIGNING
ORGANIZATIONAL
STRUCTURES
BASIC CONCEPTS RELATED TO
ORGANIZATION

The term organization is used in the

following ways:
۩ Organization as Entity
۩ Organization as Group of people
۩ Organization as Structure
۩ Organization as process
 DEPARTMENTATION

The first real task in designing an

organization structure is the
identification of activities and group
them properly.

The process of grouping activities is

commonly known as Departmentation.
NEED for DEPARTMENTATION

The basic need for departmentation

arises because of specialization of work
and the limitation on the number of
subordinates that can be directly
controlled by a supervisor.
 IMPORTANCE OF
DEPARTMENTATION

1. Advantages of Specialization
2. Fixation of Responsibility
3. Development of Managers
4. Facility in Appraisal
5. Feeling of Autonomy
BASES OF DEPARTMENTATION

The most commonly used bases are:

1. Function
2. Product
3. Territory
4. Process
5. Customer
FUNCTIONAL DEPARTMENTATION

Board of Directors

MANAGING DIRECTOR

PRODUCTION MARKETING FINANCE PERSONNEL

MARKET RESEARCH ADVERTISING SALES

NEWS PAPERS RADIO

MAGAZINES TV
PRODUCT DEPARTMENTATION

Chief Executive

Car Division Truck Division Bus Division

PRODUCTION MARKETING FINANCE PERSONNEL

 TERRITORIAL
DEPARTMENTATION
Head Office

EASTERN CENTRAL NORTHERN SOUTHERN WESTERN

ZONE ZONE ZONE ZONE ZONE

DIVISION 1 DIVISION 2 DIVISION 3 DIVISION 4

BRANCH 1 BRANCH 2
PROCESS DEPARTMENTATION

MANAGER
(Production)

SPINNING DYEING WEAVING FINISHING

CUSTOMER DEPARTMENTATION

MARKETING
MANAGER
(Production)
MANAGER

Whole Sale Retail Hire Export

Purchase
 DECENTRALIZATION

Decentralization applies to the

systematic delegation of authority in an
organization-wide context.

Decentralization is used to denote

dispersal of physical facilities place-wise
or function-wise.
FACTORS DETERMINING DEGREE
OF DECENTRALIZATION
۩ Size of Organization
۩ History of Organization
۩ Management Philosophy
۩ Availability of Managers
۩ Pattern of Planning
۩ Control Techniques
۩ Decentralized Activities
۩ Rate of change in organization
۩ Environmental Influences
 LINE ORGANIZATION

Line Organization structure is also

known as scalar, military or vertical
organization and perhaps is the oldest
form.

This concept holds that in any

organization or hierarchy derived from a
scalar process, there must be a single
head who commands it.
 LINE ORGANIZATION (contd…)

Line Organization can be designed in two ways:

1. Pure Line Organization: Similar activities are

performed at a particular level.

2. Departmental Line Organization: Entire

activities are divided into different
departments on the basis of similarity of
activities.
PURE LINE ORGANIZATION

Chief Executive

FOREMAN A FOREMAN B FOREMAN C

Workers Workers Workers

 DEPARTMENTAL LINE
ORGANIZATION

Production
Manager

Foreman Foreman Foreman Foreman

(Spinning) (Weaving) (Dyeing) (Finishing)

Workers Workers Workers Workers

 CHARACTERISTICS OF LINE
ORGANIZATION
۩ Lines of authority and instructions are
vertical.
۩ The unity of command is maintained in a
straight and unbroken line.
۩ All persons of the same organization are
independent of each other.
۩ This structure specifies responsibility and
authority for all positions limiting the area of
action by a particular position holder.
MERITS OF LINE ORGANIZATION

 Simplicity
 Discipline
 Prompt Decision
 Orderly communication
 Easy supervision and control
 Economical
 Overall development of Managers
 DE MERITS OF LINE
ORGANIZATION

X Lack of Specialization
X Absence of Conceptual Thinking
X Autocratic Approach
X Problems of Coordination
X Lack of Ground work for subordinates’
Training
LINE AND STAFF ORGANIZATION

It refers to a pattern in which staff

specialists advise line managers to
perform their duties.

In actual practice, sometimes it is

difficult to determine which departments
are line or staff.
LINE AND STAFF ORGANIZATION

The problem can usually be solved by

classifying activities within an
organization in two ways:
1. That which is substantive (direct) in its
contribution – Line activities
2. That which is objective (indirect) in its
contribution – Staff activities
LINE AND STAFF ORGANIZATION

Secretary GENRAL MANAGER Public Relations

Officer

Manager (Finance) Manager (personnel)

Manager - Production Manager - Marketing

Production Engineer Production Engineer

Workers Workers
MERITS & DEMERITS OF LINE AND
STAFF ORGANIZATION
MERITS:
 Planned Specialization
 Quality Decisions
 Prospect for Personal Growth
 Training Ground for Personnel

DEMERITS:
X Lack of well defined Authority
X Line and Staff conflicts
FUNCTIONAL ORGANIZATION

It is created by grouping the activities on the basis

of functions required for the achievement of
organizational objectives.
CHARACTERISTICS:
1. Specialization by functions
2. Emphasis on sub-goals
3. Pyramidal growth of Organization
4. Line and staff division
5. Limited span of management
6. Functional authority relationships among departments
FUNCTIONAL ORGANIZATION

Head Quarters

Production Marketing Finance Personnel

Plant 1 Plant 2 Plant 3

P M F P P M F P P M F P
 COMMITTEE ORGANIZATION

It can be defined as a body of persons

appointed to meet on an organized basis for
the discussion and dealing of matters brought
before it.
FEATURES:
1. Group of persons
2. Can deliberate only on matters that are
brought before it
3. Members of the committee draw authority
through delegation.
 MATRIX ORGANIZATION

Matrix Organization is the realization

of two-dimensional structure which
emanates directly from two dimensions
of authority.
1. Pure project structure
2. Functional structure
 VIRTUAL ORGANIZATION

Virtual Organization is a temporary network

of independent companies – suppliers,
customers, even erstwhile rivals – linked by
information technology to share skills, costs
and access to one another’s markets.

It will have neither central office nor

organization chart. It will have no hierarchy, no
vertical integration.
CELLULAR ORGANIZATION

It is a form of organization consisting of a

collection of self-managing firms or cells held
together by mutual interest. A cellular
organization is built on the principles of self-
organization, member ownership, and
entrepreneurship.

Each cell within the organization shares

common features and purposes with its sister
cells but is also able to function independently.
 TEAM STRUCTURE

A Team is a group of people in the

organization constituted for completing
certain assignments.
TYPES:
1. Lead Team
2. Cross-functional Team
3. Problem-solving Team
4. Self-managing Team
BOUNDARYLESS ORGANIZATION

It is a model that views organizations as having

permeable boundaries. An organization has
external boundaries that separate it from its
suppliers and customers, and internal
boundaries that provide demarcation to
departments.
This rigidity is removed in boundaryless
organizations, where the goal is to develop
greater flexibility and responsiveness to change
and to facilitate the free exchange of
information and ideas.
BOUNDARYLESS ORGANIZATION

The concept was developed at

General Electric and described in the
book The Boundaryless Organization:
Breaking the Chains of Organizational
Structure by Ron Ashkenas and others,
which was published in 1995.
 FLAT ORGANIZATION

Flat structure is that which reduces

the levels of management, widens span
of control of managers at various levels
of the organization, and is often more
decentralized with regard to decision
making autonomy.