Chapter 5

FORMS OF ORGANIZATIONAL STRUCTURE

 FORMS OF ORGANIZATIONAL STRUCTURE

 Organisation can structure themselves in almost an infinite

numbers of ways – according to specialization.
 It is possible to identify four basic forms of organizational
structure that reflect the general trends followed by most
firms:
 functional,
 divisional,
 matrix,
 international.

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 FORMS OF ORGANIZATIONAL STRUCTURE
Functional Structure
 Functional structure: form of business organization in which
authority is determined by the relationships between group
functions and activities.
 Used by most small to medium size firms.
 Structured around basic business functions (marketing,
operation, finance)
 The benefits of this approach include specialization within
functional areas and smoother coordination among them.
 In large company, co-ordination across function department
became more complicated.
 Functional organization also fosters centralization and makes
accountability more difficult.

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 Example of Functional Structure

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 FORMS OF ORGANIZATIONAL STRUCTURE
Divisional Structure
 Divisional structure is an organisational structure in which
corporate divisional operate as autonomous business under
the larger corporate umbrella
 A divisional (department that resembles a separate business
in producing and marketing its own product) organisation
relies on product departmentalisation
 Organization using this approach are typically structured
around several divisions (Department that resembles a
separate business in producing and marketing its own
products)

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 Example of Divisional Structure

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 FORMS OF ORGANIZATIONAL STRUCTURE
Matrix Structure
 Matrix Structure: Organization structure in which teams are
formed and team members report to two or more managers,
including a line manager & a staff manager
 Matrix structures rely heavily on committee & team authority.
 In some companies, the matrix organization is a temporary
measure, installed to complete a specific project and affecting
only one part of the firm (end project usually mean means the
end of the matrix).

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 Example of Matrix Structure

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 FORMS OF ORGANIZATIONAL STRUCTURE
International Structure
 International structure is the approaches to organizational
structure developed in response to the need to manufacture,
purchase, and sell in global market.
 Companies adopt a truly global structure in which they acquire
resource (including capital ), produce goods and services,
engage in research and development, and sell products in
whatever local market in appropriate, without any consideration
of national boundaries.

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 INFORMAL ORGANIZATION
 Informal organisation is an organisation within which people do
their jobs in different ways and interact with other people in way
that do not follow line of communication.
 Informal organisation is a network, unrelated to the firm's
formal authority structure, off everyday social interactions among
company employees.

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 INFORMAL ORGANIZATION
Formal Vs Informal Organization Systems

 The formal organisation of a business is the part that can be

seen & represented in chart form.
 The structure of a company, however, is by no meaning limited
to the organisation chart and the formal assignment of
authority.
 The informal organization – everyday social interactions among
employees that transcend formal jobs and job interrelations –
effectively alters a company’s formal structure.
 The informal organization can reinforce office politics that put
the interests of individuals ahead of those of the firm.
 Elements of informal organization are informal groups and the
organizational grapevine (Informal communication network that
runs through an organization).

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 INFORMAL ORGANIZATION

 Informal Group
 Informal groups are simply groups of people who decide to interact
among themselves.
 They may be people who work together in a formal sense or who just
get together for lunch, during breaks, or after work.
 They may talk about business, the boss, or non work-related topics like
families, movies, and sports.
 Their impact on the organization may be positive (if they work
together to support the organization), negative (if they work together
in ways that run counter to the organization’s interest), or irrelevant
(if what they do is unrelated to the organization.

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 INFORMAL ORGANIZATION

 The grapevine is an informal communication network that can

run through an entire organization.
 In order to control grapevine, managers must maintain open
channel of communication and responding vigorously to
inaccurate information.
 Grapevine can actually be an asset – by getting to the
information they receive and use the grapevine to sound out
employee reactions to new ideas.
 The manager can also get valuable information from the
grapevine and use it to improve decision-making.

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 INFORMAL ORGANIZATION
Intrapreneuring
 Intrapreneuring is a process of creating and maintaining the
innovation & flexibility of a small business environment within the
confines of a large organisation.
 Sometimes organisation actually takes steps to encourage the
informal organisation. Reason why this happen:
 Most experienced manager recognised that the informal organisation
exists whether they want it or not.
 Many managers know how to use the informal organisation to
reinforce the formal organisation
 The energy of the informal organisation can be harnessed to improve
productivity

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End of Topic 5