Organizational Structure

An organizational structure is a system that outlines how certain activities are directed in order
to achieve the goals of an organization. These activities can include rules, roles, and
responsibilities. The organizational structure also determines how information flows between
levels within the company.

Organizational Structures are Designed in two major forms:

1- Traditional Organizations
2- Boundaryless Organizations

Traditional Organization and Boundaryless Organization

 Describing a business as a traditional organization means that the company

employs one of the oldest types of organizational structure: the hierarchy, meaning
that power flows vertically and upward, and employees are departmentalized. All
employees follow a chain of command. Such as a manager is the chief coordinator of all
the departments.

 A boundaryless organization is an organization without boundaries; one that isn’t

confined to the stifling walls of its office. It is an organization where there aren’t any
major structures and the main approach to business is to allow information to flow
freely and ideas to be the driving force of efficiency, innovation, growth in the
company. Such a company is built to do one thing very well: to survive in a world that
is constantly changing.
Characteristics of Traditional and Boundaryless Organizations

 The traditional approach to an organization is to divide up employees by function,

creating separate departments or branches. This leads to a hierarchy where each
department has its manager, all of whom report to someone over them; if the
company keeps growing, more branches and more layers of management result.
Some key characteristics of a traditional organizational structure are:
1. Centralized and concentrated organization
2. Deep organizational structure
3. Rigid and static structure
4. Authority of individual
5. Inexistence of corporate culture
6. Unwillingness to organizational changes
7. Functional Decentralization

 In a boundaryless organization is that there is very little face to face communication

between employees. Employees mainly communicate with each other and collaborate
on projects using technology, such as via text, email, social media, video conferencing
and various other virtual methods of communication. This means that they don’t
actually have to turn up at work, and can work from different parts of the world at their
own convenient time. This makes it easier for the employees to achieve work-life
balance, since they don’t have to deal with geographically imposed barriers of working
together under confined walls of an office. Such an organization relies heavily on
technology.

Another characteristic of such a company is that the authority to make decisions is

put squarely in the hands of employees. They can make decisions and have complete
responsibility for the tasks and projects that are handed to them. This makes the
company much more efficient than a traditional one since it can change more quickly
and adapt to changing external factors.
 Some key characteristics of a Boundryless organizational structure are:
1. Decentralization of Organization
2. Shallow organizational structure
3. Flexible and innovative structure
4. Implies Teamwork
5. Implies existence of a corporate culture
6. Readiness for organizational changes
7. Implies Federal decentralization

Types of Traditional Organizational Structures

1- Simple Structure
 A simple structure organization is defined as a design with low
departmentalization, wide spans of control, authority centralized in a single
person, and little formalization. This type of design is very common in startup
businesses. For example, in a business with few employees, the owner tends to
be the manager and controls all of the functions of the business. Often
employees work in all parts of the business and don’t just focus on one job,
creating little if any departmentalization. In this type of design there are usually
no standardized policies and procedures. When the company begins to expand,
then the structure tends to grow and become more complex out of the simple
structure.

2- Functional Structure
 A functional structure is defined as a design that groups similar or related
occupational specialties together. It is the functional approach to
departmentalization applied to the entire organization, with each
department/function having a designated leader/manager.
3- Divisional structure
 A divisional structure is made up of separate, semi-autonomous units or
divisions under the supervision of a manager for each division. Within one
corporation there may be many different divisions and each division has its own
goals to accomplish. A manager oversees their division and is completely
responsible for the success or failure of the division. This gets managers to
focus more on the results knowing that they will be held accountable for them.
Types of Boundryless Organizational Structures:

1. Strategic Alliance Organizational Structure

 Strategic alliance organizations are formed when two companies that are in
the same or related industries form an alliance that will benefit both of them.
A strategic alliance is an arrangement between two companies to undertake a
mutually beneficial project while each retains its independence. The agreement is
less complex and less binding than a joint venture, in which two businesses pool
resources to create a separate business entity.
2. Modular Structure
 The modular structure divides a business into small, tightly knit strategic
business units, which focus on specific elements of the organization. This allows
a business to outsource all functions/units that are not essential to their core
purpose and only focus on what matters. Following shows the modular design
of a Health Federation Organization.

3. Network and Virtual Structure

 Network and Virtual organizations are similar to a modular organization in that
they will outsource their business functions. However, while virtual and modular
structures will only outsource the unimportant functions, a network organization
will outsource even the important stuff. Nevertheless, network and virtual
organizational structures allow a business to have a razor-sharp focus on the
core business of their organization.
Relative advantages and disadvantages

1- Long Decision-Making time

A traditional structural organization has many layers of management, which causes a
long time for the decisions to work their way through all the people that need to weigh
in on an issue. But due to the decentralization and shallow structure of a boundaryless
organization, decision making is quick.
2- Message Distortion
As directives move through a traditional hierarchy, the message can get distorted.
Each supervisor or manager may interpret your words differently until the message
that reaches employees has little resemblance to what you intended. But with a
boundaryless organization, each team coordinates directly with the authorities in
charge, making less possible for the message to get distorted.
3- Inability to adapt globally
The traditional organization has a headquarters. Decisions that affect the entire
company are made at the headquarters. This can be a disadvantage in a global
economy where people on the ground in specific locales need the authority to make
decisions to adapt the company’s strategy to the local population. This one-size-fits-all
decision making of the traditional organization may cause the company to lose global
customers. Whereas, with boundaryless organizations, the company’s employees have
the authority to make their own decisions and adjust the company’s strategy according
 to the local consumer market. This enhances the chances of the organization to
potentially increase its customers.
4- Rigid Experties
A traditional company usually has the rigid job descriptions that go with the traditional
style of organization. Due to this, you may find that employees limit their sense of
responsibilities and their skills to just what the job requires. This can kill spontaneity
and problem solving skills as employees increasingly declare “it’s not my job” when
confronted with issues. But a boundaryless organization allows flexibility of
composition and an innovative approach to problem solving by allowing employees to
work their way through a problem (by giving them the power of making their decisions
independently), this in turn increases employees expertise in problem solving to a high
degree of specialization.
5- Enhanced Communication and Coordination
The functional organizational structure creates an environment for communication,
because employees are related in terms of function or job context, meaning enhanced
coordination between employees. The nature of the functional structure, also provides
a clear-cut chain of command, and clearly establishes who reports to whom. Whereas,
with a boundaryless organization there is clearly an absence of communication and
responsibility, since each employee is working independently and making his/her own
decisions.
6- Polishing of Expertise
The traditional functional organizational structure relies on divisions of labor, which
with the passage of time turns/evolves employees into experts. Experts are an asset of
an organization that can bring innovations and can get problems get solved more
quickly and efficiently. But with a boundryless organization, due to dispersed
coordination of activities and independent working of employees, the company can
least expect their employees to develop the expertise required to boost up the
performance and position of the organization.
7- Economies of Efficiency
The term "economies of effciency" refers to the increasing efficiency and productivity
of an organization as its scope increases. By creating specialists, the traditional
structure makes it possible for each person to be more productive and efficient in
respective tasks, which can result in higher output, meaning increased scope of the
organization. Whereas, due to the lack of group communication, coordinated activities,
independent working of employees, and lack of set directives in a boundryless
organization reduces its chances to create experts, which in turn affects its hopes of
increased efficiency and productivity.

Conclusion
The function of the organization is a function of management which is aimed at
implementing activities and establishing a range of control and departmentalization. An
organization is a continuous process of implementing activities. The success of an
organizational management is the continuous solving of problem. A successful organization
possesses the following characteristics:
 the functionality of the system and organizational structure,
 institutionalized vision and creativity,
 orientation towards results,
 preparation of plans and implementation,
 successful business efficiency,
 support to the new organization.

Every organization needs a structure to work with. Organizational structures are designed in
two major forms, namely “Traditional Structure” and “Boundryless Structure” as we have
discussed, and each organizational structure is employed by a business according to its
needs, cultural values and limitations.