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Organizational Structure


Every organization needs to decide how to divide its work or activities, how to coordinate
all work – related activities and how to control these activities to ensure that goals are achieved.
The organization must consider its external environment and the internal systems and processes
used to transform inputs to outputs. A manager of any organization must ensure consistency
between the structure of the organization, the scale of its operations, the tasks at hand, the needs
of all stakeholders and the strategic direction of the organization. This consistency between
structure and operations distinguishes successful organizations from less successful ones.


An organization is defined as a group of people working, in a structured setting, towards

the achievement of a common goal. It is a collectivity with a relatively identifiable boundary, a
normative order, ranks of authority, communication systems, and membership coordinating
systems. This collectively exists on a relatively continuous basis in an environment and engages
in activities that are usually related to a set of goals; the activities have outcomes for organization
itself and society.

Organization Structure and Design

Organizational structure and organizational design are very closely related. The process
of choosing and implementing a structural configuration is referred to as organizational design.
Organizational executives should adjust the structural configuration of their organizations to best
meet the challenges faces at any given time.

The organizational structure is the formal structure that shows the intended configuration
of positions, job duties and lines of authority among different parts of the enterprise. This
structure emerges from the process of designing the organization. It reflects the goals the
organization and also reflects the contingency factors that impact on the organization design,
such as the organization’s size, environment, technology and strategy. The formal structure also
involves the decisions that are made about who has authority, how the organization and its

members will be divided up to achieve tasks and how activities will be controlled and

Organization charts are diagrams that depict the formal structure of organizations. A
typical chart shows the various positions, the position holders and the lines of authority that link
them to one another.

Fig. a partial organization chart for a university

Factors Influencing Organization Design

Some particular factors will have an impact on the choices made when designing the
organization: technology, environment and strategy. As organizations grow the structure is likely
to become more complex.

1. Technology: Organizations are said to arrange their internal structures to meet the dictates of
their dominant ‘technologies’ or work flows, this is known as the technological imperative. It
is basically the idea that if an organization does not adjust its internal structure to the
requirements of the technology, it will not be successful. Technology is the combination of
resources, knowledge and techniques that creates a product or service output for an
organization. The match between structure and technology is important for the successful
design of organizations.

2. Environment: An effective organization design reflects powerful external forces as well as

the desires of employees and managers. As open systems, organizations need to receive
various inputs from their environment and sell various outputs to their environment.
Environment can be labeled as either:

a. General – that is, the set of cultural, economic, legal, political and educational
conditions found in the areas in which the organization operates.

b. Specific – which involves the mix of owners, suppliers, distributors, government

agencies and competitors with which it interacts.

3. Strategy: Organizational strategy is the process of positioning the organization in the

competitive environment and implementing actions to complete successfully. Organization’s
strategy will be driving its goals and vision, and an organizational design must be established
to achieve the vision.

Organizational Goals, Control and Coordination

The first of the structural building blocks are organizational goals. Two other components
of structure are control and coordination, which provide ways of ensuring that these subdivided
activities can be brought together to achieve the organizational goals.

1. Organizational Goals

In an organization, people are organized into a structure in order to work together to

achieve organizational goals. This involves breaking people and tasks up into units, allocating
authority and making other decisions about how things are done. A goal or objective is a
projected state of affairs that a person or a system plans or intends to achieve. Organizations may
be viewed as entities with goals. There are two types of organizational goals. The first centers on
how the organization intends to serve particular groups in society, or with social responsibility,
serve society as a whole. The second focuses on organizational survival.

• Output goals: These are the goals that define the organization’s type of business, and are
the basis of the mission statement that organizations often use to indicate their purposes.
Political organizations serve the common good, while culturally based organizations such

as church may emphasize contributions to their members. Social service organizations

such as hospitals are expected to emphasize quality care to patients.

• System goals: are concerned with conditions within the organization that are expected to
increase organizational survival. System goals may include growth, productivity,
stability, harmony, flexibility, prestige and human resource maintenance.

2. Control

Control is one of the basis management functions and is involved with ensuring the
organizations achieves what it is intended to achieve. Control is the set of mechanisms used to
keep actions and outputs (based on predetermined organizational goals) within predetermined
limits. Control deals with setting standards, measuring results against standards and instituting
corrective action.

Fig. the business and control process

Note the iterative nature of the process; in other words, controlling activities within an
organization is an ongoing process. Note the also that once the actual output is compared with
the objective or standard that has been set, the manager may need to decide whether to adjust the
standard (if it proves unrealistic or unachievable) or produces a different level of output in step
with the standard.

Policies, Rules and Procedures

Most organizations have a variety of policies, rules and procedures in place at any time.
Policy is thought of as a guideline for action that outlines important objectives and broadly
indicates how an activity is to be performed.

Rules and procedures are more specific, rigid and impersonal than policies. They
typically describe in detail how a task or series of tasks is to be performed. They are designed to
apply to all individuals under specific conditions. Examples of rules and procedures include
requirements for employees to:

• Wear certain apparel for certain jobs

• Follow particular steps for cleaning equipment (such as coffee machine)

• Conduct regular maintenance checks (such as of electrical equipment).


In order to enhance the operation of the organization, there must be ways to get all the
separate activities, people and units working together. Coordination is the set if mechanisms that
an organization uses to link the actions of its units into a consistent pattern. The greater the
specialization in the organization, the greater the need for effective coordination. Much of the
coordination unit is handled by the manager. Coordination methods can be personal or

• Personal methods of coordination: Personal methods of coordination produce synergy by

promoting dialogue, discussion, innovation, creativity and learning, allowing the
organization to address the particular needs of distinct units and individuals
simultaneously. Perhaps the most popular of the wide variety of personal methods is
direct contact between and among organizational members e.g. direct personal
communication and email. Committees, task forces and developing a shared set of values
are some other methods of coordination.

• Impersonal methods of coordination: Impersonal coordination methods are often

refinements and extensions of written procedures. Larger organizations have written

policies and procedures, such as schedules, budgets and plans, which are designed to
mesh the operations of several units into a whole.

Vertical Specialization

In most larger organizations, there is a clear separation of authority and duties by

hierarchical rank. This separation represents vertical specialization, which is a hierarchical
division of labor that distributes formal authority and establishes how critical decisions are made.
The division creates a hierarchy of authority, and a chain of command, that arranges work
positions in order of increasing authority. Organizations that have many levels in their
hierarchies can be described as tall. Others that have very few levels can be described as flat.

We also consider organizations in terms of how centralized or decentralized they are. The
degree of centralization of decision making authority is high if discretion to spend money, recruit
people and make similar decisions is retained further up the hierarchy of authority. The more
such decisions are delegated, or moved down the hierarchy of authority, the greater is the degree
of decentralization.

- Mechanistic Design: It is an organizational structure that tends to emphasize authority

and control, as well as specialization in jobs. Organizations of this type stress rules,
policies and procedures, specify techniques for decision making and emphasize well-
documented control systems backed by a strong middle management and supported by a
central staff. Mechanistic organizations tend to have a tall hierarchy and may resemble a
tall, thin pyramid with centralized decision-making staff at the top. This design
emphasizes vertical specialization.

- Organic Design: In this type of organization, there is much more flexibility in how things
are done, with fewer rules and procedures. More responsibility is placed in the hands of
workers, who are seen as competent and expert at what they do. Organic designs
emphasize horizontal specialization, and are more likely to have a flatter structure
because more responsibility is delegated to down workers. There are fewer layers of
hierarchy in these organizations.

Horizontal Specialization

Horizontal specialization is the division of labor through the formation of work units or
groups within an organization. It is often referred to as the process of departmentalization. Line
personnel are work groups that conduct the major business of the organization. Staff personnel
are groups that assist the line units by performing specialized services for the organization.

- Departmentalization by Function

Grouping individuals by skill, knowledge and action yields a pattern of functional

departmentalization and represents the most commonly used arrangement. The organization is
divided into main functional groups and within each of these groups employees in different
sections or department undertake separate and specialized tasks. In business organization
generally, marketing, finance, production and personnel are important functions.

- Departmentalization by Division, Geography and Customer

Alternatively, a divisional departmentalization may group individuals and resources by

products, services or clients/customers (e.g. automotive parts such as transmissions and engines).
Departmentalization by geography is the grouping of individuals and resources by geographical
territory (e.g. European, Asia-Pacific, and South American). Departmentalization by customer is
the grouping of individuals and resources by customers (e.g. government accounts, corporate
accounts, and university/college accounts).

- Departmentalization by Matrix

A matrix structure is a combination of functional and divisional patterns in which an

individual is assigned to more than one type of unit.

Emerging Forms of Organizational Design

Every organization will develop a unique design in response to its scale, technology,
environment and strategic aims and in terms of the choices it makes about goals, control,
coordination and vertical and horizontal specialization. Other factors may also have an impact on

design, such as the history of the organization, sudden changes, mergers and acquisitions and
geographical locations.

1. The Simple Design

The simple design is a configuration involving one or two ways of specializing

individuals and units. That is, vertical specialization and control typically emphasize
levels of supervision without elaborate formal mechanism and coordination mechanisms
are often personal. The organization visually resembles a pyramid with few staff
individuals or units.

2. The Bureaucracy

A bureaucracy is an ideal form of organization whose characteristics include a division of

labor, hierarchical control, and administration by rule.

o Machine bureaucracies are popular in industries with large-scale operations, such as

banks and are characterized the mechanistic design features.

o Professional bureaucracy often relies on organic features in its design. Universities,

hospitals, consulting firms usually adopt this design.

3. Divisionalized Design

It is an organizational structure that establishes a separate structure for each business or

division. Each division was treated as a separate business; each business competed
against the others. This structure is expensive because many similar staff and support
units must be developed for each division but it allows the organization greater flexibility
to respond to different market and customers.

4. The Conglomerate

Organizations that own several unrelated businesses are known as conglomerates. The
line between the divisionalized form and the conglomerate can often be confusing.
Synergies are potential links, as between computers and information systems, or between
financing and vehicle rentals, that create an entity with an output greater than its
individual parts. If there is synergy, we would call the organization divisionalized; if
there is little synergy, the organization is a conglomerate.

5. The Core-Ring Organization

An organization adopting a core-ring design takes on a two tiered structure, in which the
inner core work force represents the high value-adding members of the organization.
These employees often have higher job security, higher salaries, and better career paths.
The second tier of this structure is also known as the flexible ring and it is made up of a
contingent workforce. Traditionally, such services would be contained within the core of
a large bureaucratic organization but in the core-ring organization services such as
cleaning, information technology and specialist consultant can be more cost-effectively
contracted or outsourced.

Organizational Ethics


The issue of ethics and ethical behavior is receiving greater attention today. Unethical
behavior is a relevant issue for all employees. It occurs from the bottom to the top of an
organization. For example, a recent survey of 1,000 senior level executives revealed that as many
as one third lied on their resumes. Maybe this result should not be surprising because there are
more benefits to lying, such as a higher salary and stock options, and the competition for senior
management positions is fierce. There are a variety of individual and organizational
characteristics that contribute to unethical behavior. Organization behavior is an excellent
vantage point for the better understanding and improving workplace ethics. If organizational
behavior can provide insights about managing human work behavior, then it can teach us
something about avoiding misbehavior.


Ethics involves the study of moral issues and choices. It is concerned with right versus
wrong, good versus bad, and the many shades of gray in supposedly black and white issues.

Ethical behavior

Ethical behavior is behavior that is morally accepted as good and right, as opposed to bad
or wrong in a particular setting. Today a trend is clear: there are increasing demands that
government official, managers, workers in general and the organizations they represent all act in
accordance with high ethical and moral standards.

Ethics and Ethical Behavior in Organizations

It is now realized that not only individual and groups, but also a number of relevant factor
from the cultural, organizational, and external environment determine ethical behavior. Cultural
influences on ethical behavior are reflected by the impact of family, friends, neighbors,
education, religion and the media. Organizational influences come from ethical codes, role
models, policies and practices, and reward and punishment systems. The external forces having
an impact on ethical behavior include political, legal and economic developments.

A Model of Ethical Behavior

Ethical and unethical conduct is the product of a complex combination of influences. The
center of the model is the individual decision maker. He or she has a unique combination of
personality characteristics, values, and moral principles, leaning toward or away from ethical
behavior. Personal experience with being rewarded or reinforced for certain behaviors and
punished for others also shapes the individual’s tendency to act ethically or unethically. Finally,
gender plays an important role in explaining ethical behavior. Men and women have significantly
different moral orientations toward organizational behavior.

Fig. a model of ethical behavior

Next the model illustrates three major sources of influence on one’s role expectations.
People play many roles in life, including those of employee or manager. Ones expectations for
how those roles should be played are shaped by cultural, organizational and general
environmental factors. An organizations reward system can influence ethical behavior.
Individuals are more likely to ethically/unethically when they are incented to do so. Managers
are encouraged to examine their reward systems to ensure that the preferred types are being
reinforced. Because ethical or unethical behavior is the result of person-situation interactions, we
need to discuss both the decision maker’s moral principles and the organizations ethical climate.

Ethical Issues

Besides the obvious ethical concerns relating to the use of bribes, price fixing, or other illegal
activities, it is now recognized that ethics is important in the study of organizational behavior
because of the impact on the way employees are treated and how they perform their jobs. In
particular, the current ethical problems dealing with organizational participants concerning
sexual harassment, discrimination in pay and promotion, and the right to privacy are especially
relevant to the study of organizational behavior.

1. Sexual Harassment

Sexual harassment in the workplace can be defined as unwelcome sexual advances,

requests for sexual favors, or other verbal or physical conduct of a sexual nature. This
harassment has been prohibited as far back as the 1964 Civil Rights Act.

There are a number of steps that organizations are taking to ensure that their personnel do
not engage in sexual harassment and if they do are dealt with properly.\

• Taking the initiative to implement a meaningful program that address personal biases and
values that foster harassment of individuals based on sex.

• Developing and implementing a program that strives to change behaviors, not just
attitudes, in the short run.

2. Pay and Promotion Discrimination

There remains an ethical problem concerning equality of pay and promotion

opportunities for both women and minorities. There is considerable evidence that women and
minorities are denied access to the upper management ranks. This helps explain why average
salaries for women are often significantly lower than those for men in the same company.

One of the most commonly cited a reason for the lack of promotion is the glass ceiling
effect cited earlier under the diversity discussions. The U.S Department of Labor has even
recognized the glass ceiling as “artificial barriers based on altitudinal or organizational bias that
prevent qualified (women) from advancing upward in their organization into (senior)

management level positions”. Despite efforts to explain and deal with the problem, it continues
to exist.

To solve it, there must be a realization that the reasons for sex segregation patterns in
organizations are neither simple nor attributable just to women. Organizations must design and
implement programs that systematically attack discrimination and segregation at multiple levels
of the structure.

3. Employee Privacy Issues

In addition to sexual harassment and discrimination in pay and promotion, another major
ethical issue involves privacy in the workplace. In recent years, a number of developments have
occurred which directly influence employees’ right to privacy. One such development is a
computer technology that now makes it ever easier for employers to learn information about their
employees. Another is mandatory drug testing, a policy that has been instituted by many
organizations. A third is efforts of organizations to control the lifestyles of their employees.
Privacy issues are likely to be an increasing ethical concern in the years ahead. To more
effectively manage the privacy issue, organizations could take steps such as the following:

1. Tell the employees up front what types of limits the firm is going to put on their behavior.

2. Explain the reasons for these decisions. If employees are told up front, so that they can
understand what is happening and why, then they are less likely to feel that the firm is
snooping or trying to invade their privacy. They are more likely to understand that an
intrusion in their lives is minimal and designed to be helpful to all concerned.

Moral Principles Vary by Gender

Men and women view moral problems and situations differently. The two moral
perspectives are described as follows:

• A justice perspective draws attention to problems of inequality and oppression and holds up
an ideal of reciprocal rights and equal respects for individuals.

• A care perspective draws attention to problems of detachment or abandonment and holds up

and ideal of attention and response to need. Two moral injunctions, not to treat others
unfairly and not to turn away from someone in need, capture these different concerns.

This description underscores the point that men tend to view moral problems in terms of rights,
whereas women conceptualize moral problems as an issue of care involving empathy and

How to Improve the Organization’s Ethical Climate

A team of management researchers recommended the following actions for improving on the job

• Behave ethically yourself

• Screen potential employees

• Develop a meaningful code of ethics

1. They are distributed to every employee.

2. They are firmly supported by to management.

3. They refer to specific practices and ethical dilemmas likely to be encountered by

target employees.

4. They are evenly enforced with rewards for compliance and strict penalties for non

• Provide ethics training

• Reinforce ethical behavior

• Create positions, units and other structural mechanism to deal with ethics