You are on page 1of 8



Line organization structure is perhaps the oldest and the

simplest form of organization and is also known as scalar military, vertical or departmental
organizations. Under this organization the line of authority flows vertically from top to bottom.
There is a single head of the organization who commands the whole affairs. The chief
executive holds the authority and he delegates it to the subordinates and the subordinates
further delegate the authority to their subordinates and it reaches to the bottom.

Chief Characteristics of Line Organization:-

(i) It implies vertical relationships. The authority and instructions flow from the to the top
(ii) The principal of unity of command is followed, i,e, each subordinate receives instructions
only from his immediate superior and is responsible to him alone.
(iii) This structure specifies responsibility and authority for all the positions limiting the area of
action by a particular position holder.
(iv) All persons at the same level are independent and are only responsible to the chief


Under this form of organization, the entire activities of the organization are divided into
various departments on the basis of some similarity headed by one departmental
superintendent. Each department is self-contained unit in itself and is responsible only to the
chief executive.

Chief Characteristics of Departmental Line Organization:-

(i) This form is very simple in both understanding and implementation.

It can easily be explained to workers. They have no confusion in their authority. responsibility
and roles.
(ii) Shirking of responsibility is not possible under this form of organization because the
responsibility is fixed at each level of hierachy. Everyone knows to whom he is responsible and
who os responsible to him. In this way discipline is maintained in the organization.
(iii) Unification of authority, control and fixed responsibility ensure quick and prompt decision
making possible.
(iv) This form has the advantage of flexibility The adjustment and changes can easily to made
with the changing conditions due to unified control and fixed responsibility.
(v) It follows the principle of scalar chain. The executive head at the top of the line is
responsible for the acts of line personnel the commands the whole line and greater control,
discipline and better direction is possible.


As the nature suggests, Under functional authority relationships all activities of the
organization are grouped together according to various basic functions such as production,
marketing, finance and personnel etc. and each function is put under the charge of a specialist
who is fully responsible for carrying out the function well throughout the organization.

Chief Characteristics of Functional Organization Structure:-

(i) It ensures division of labour and enables the concern to enjoy the advantages of
specialization that is based on individual proficiency
and specialized knowledge.
(ii) It facilitates large scale production through specialization, standardization and availability
of experts specialized and technical knowledge.
(iii) Due to specialized services made available to the individuals, the efficiency of workers
improves at all levels of organization.
(iv) The system of flexible one. Any change in the organization can easily be incorporated
without distributing the whole organization.


This type of organization has been evolved to achieve the advantages of the two forms of
organization; line organization and functional organization, The first insists two much on the
unity of command while the later insists too much on decentralization on control. In order to
strike a happy balance between the two, the line and staff organization was evolved. In this
organization, the structure is basically that of line organization but staff officers who are
functional experts are provided to advice the line authorities in the performance of their

Chief Characteristics of Line and Staff Organization Structure:-

(i) This system combines the advantages of the line and the functional organization. The line
organization insists on unity of command and the functional organization insists on
decentralized of control for specialization purposes.
(ii) As because staff people are consulted before taking and decision. The quality of decision is
certainly high. Some methods adopted by IBM for effective organization.

A. Avoiding mistakes in organizing by Planning:

As with the other functions of managing establishment of objectives and orderly planning are
necessary for good organization.
(i) Planning for the Ideal:-
The search for an ideal organization to reflect enterprise goals under given circumstances is
the impetus to planning. The search entails charting the main lines of organization, considering
the organizational philosophy of the enterprise managers and sketching out consequent
authority relationships.
(ii) Modification for the Human Factor:-
If available personnel do not fit into the ideal structure and cannot or should not be pushed
aside, the only choice is to modify the structure to fit individual capabilities, attitudes, or
B. Avoiding Organizational Inflexibility:-
One basic advantage of organization planning is the avoidance of organizational inflexibility.
For example;- When performance was not as good as expected, chairman John Akers decided
that it was time for restructuring. One problem was that decisions which should have been
made by the marketing and main product groups were referred upward to the management
committee. Another concern was the company’s ineffectiveness in identifying market riches
and responding quickly with new product to fill the needs of customers. The old structure often
resulted in conflicts among various groups, such as battles among marketing groups over rival

To overcome these problems IBM responded in several ways. For one major tasks were assigned
and authority delegated to lower levels resulting in what might be considered mini IBM
companies. Personal computers, for examples, were combined with the typewriter division.
Similarly the midrange computer group was combined with the large main frame computer
unit. Although the main frame computer instill the market leader, its market share has been
ending, for some of its computing functions are now carried out by midsize computers.
C. Making Staff work Effective:-
(i) Understanding Authority Relationships:-
Managers must understand the nature of authority relationships if they
want to solve the problems of line and staff. As long as managers regard line and staff as
groups of people or groupings of activities confusion will result, Line and staff are authority
relationships and many jobs have elements of both.
(ii) Making Line Listen to staff:-
If staff counsel and advice are justifiable at all, it is because of the need for assistance either
from experts or from those freed from more pressing duties to give such assistance.

Organizational structure types

[edit]Pre-bureaucratic structures

Pre-bureaucratic (entrepreneurial) structures lack standardization of tasks. This structure is most

common in smaller organizations and is best used to solve simple tasks. The structure is totally
centralized. The strategic leader makes all key decisions and most communication is done by one
on one conversations. It is particularly useful for new (entrepreneurial) business as it enables the
founder to control growth and development.

They are usually based on traditional domination or charismatic domination in the sense of Max
Weber's tripartite classification of authority.
[edit]Bureaucratic structures

Weber (1948, p. 214) gives the analogy that “the fully developed bureaucratic mechanism
compares with other organizations exactly as does the machine compare with the non-
mechanical modes of production. Precision, speed, unambiguity, … strict subordination, reduction
of friction and of material and personal costs- these are raised to the optimum point in the strictly
bureaucratic administration.”[5] Bureaucraticstructures have a certain degree of standardization.
They are better suited for more complex or larger scale organizations. They usually adopt a tall
structure. Then tension between bureaucratic structures and non-bureaucratic is echoed in Burns
and Stalker[6] distinction between mechanistic and organic structures. It is not the entire thing
about bureaucratic structure. It is very much complex and useful for hierarchical structures
organization, mostly in tall organizations.

The term of post bureaucratic is used in two senses in the organizational literature: one generic
and one much more specific [7]. In the generic sense the term post bureaucratic is often used to
describe a range of ideas developed since the 1980s that specifically contrast themselves with
Weber's ideal type bureaucracy. This may include total quality management, culture
management and matrix management, amongst others. None of these however has left behind
the core tenets of Bureaucracy. Hierarchies still exist, authority is still Weber's rational, legal type,
and the organization is still rule bound. Heckscher, arguing along these lines, describes them as
cleaned up bureaucracies [8], rather than a fundamental shift away from bureaucracy. Gideon
Kunda, in his classic study of culture management at 'Tech' argued that 'the essence of
bureaucratic control - the formalisation, codification and enforcement of rules and regulations -
does not change in shifts focus from organizational structure to the organization's

Another smaller group of theorists have developed the theory of the Post-Bureaucratic
Organization.[8], provide a detailed discussion which attempts to describe an organization that is
fundamentally not bureaucratic. Charles Heckscher has developed an ideal type, the post-
bureaucratic organization, in which decisions are based on dialogue and consensus rather than
authority and command, the organization is a network rather than a hierarchy, open at the
boundaries (in direct contrast to culture management); there is an emphasis on meta-decision
making rules rather than decision making rules. This sort of horizontal decision making
by consensus model is often used in housing cooperatives, other cooperatives and when running
a non-profit or community organization. It is used in order to encourage participation and help
to empower people who normally experience oppression in groups.

Still other theorists are developing a resurgence of interest in complexity theory and
organizations, and have focused on how simple structures can be used to engender
organizational adaptations. For instance, Miner et al. (2000) studied how simple structures could
be used to generate improvisational outcomes in product development. Their study makes links
to simple structures and improviseal learning. Other scholars such as Jan Rivkin and Sigglekow[9],
and Nelson Repenning [10] revive an older interest in how structure and strategy relate in dynamic
[edit]Functional structure

Employees within the functional divisions of an organization tend to perform a specialized set of
tasks, for instance the engineering department would be staffed only with software engineers.
This leads to operational efficiencies within that group. However it could also lead to a lack of
communication between the functional groups within an organization, making the organization
slow and inflexible.

As a whole, a functional organization is best suited as a producer of standardized goods and

services at large volume and low cost. Coordination and specialization of tasks are centralized in
a functional structure, which makes producing a limited amount of products or services efficient
and predictable. Moreover, efficiencies can further be realized as functional organizations
integrate their activities vertically so that products are sold and distributed quickly and at low
cost [11]. For instance, a small business could start making the components it requires for
production of its products instead of procuring it from an external organization.But not only
beneficial for organization but also for employees faiths.
[edit]Divisional structure

Also called a "product structure", the divisional structure groups each organizational function into
a division. Each division within a divisional structure contains all the necessary resources and
functions within it. Divisions can be categorized from different points of view. One might make
distinctions on a geographical basis (a US division and an EU division, for example) or on
product/service basis (different products for different customers: households or companies). In
another example, an automobile company with a divisional structure might have one division for
SUVs, another division for subcompact cars, and another division for sedans.

Each division may have its own sales, engineering and marketing departments.
[edit]Matrix structure

The matrix structure groups employees by both function and product. This structure can combine
the best of both separate structures. A matrix organization frequently uses teams of employees to
accomplish work, in order to take advantage of the strengths, as well as make up for the
weaknesses, of functional and decentralized forms. An example would be a company that
produces two products, "product a" and "product b". Using the matrix structure, this company
would organize functions within the company as follows: "product a" sales department, "product
a" customer service department, "product a" accounting, "product b" sales department, "product
b" customer service department, "product b" accounting department. Matrix structure is amongst
the purest of organizational structures, a simple lattice emulating order and regularity
demonstrated in nature.

 Weak/Functional Matrix: A project manager with only limited authority is assigned to

oversee the cross- functional aspects of theproject. The functional managers maintain control
over their resources and project areas.
 Balanced/Functional Matrix: A project manager is assigned to oversee the project.
Power is shared equally between the project manager and the functional managers. It brings
the best aspects of functional and projectized organizations. However, this is the most difficult
system to maintain as the sharing power is delicate proposition.
 Strong/Project Matrix: A project manager is primarily responsible for the project.
Functional managers provide technical expertise and assign resources as needed.

Among these matrixes, there is no best format; implementation success always depends on
organization's purpose and function.

An organizational structure consists of activities such as task allocation, coordination and

supervision, which are directed towards the achievement of organizational aims.[1] It can also be
considered as the viewing glass or perspective through which individuals see their organization
and its environment.[2]

Many organizations have hierarchical structures, but not all.[citation needed]

Organizations are a variant of clustered entities.[citation needed]

An organization can be structured in many different ways, depending on their objectives. The
structure of an organization will determine the modes in which it operates and performs.

Organizational structure allows the expressed allocation of responsibilities for different functions
and processes to different entities such as the branch, department, workgroup and individual.

Organizational structure affects organizational action in two big ways. First, it provides the
foundation on which standard operating procedures and routines rest. Second, it determines
which individuals get to participate in which decision-making processes, and thus to what extent
their views shape the organization’s actions.[2]


Assets, liabilities and owners' equity are the three components that make up a
company's balance sheet. The balance sheet, which shows a business's financial condition at
any point, is based on this equation:
Assets = Liabilities + Owners' Equity
This equation is also the framework for keeping track of money as it flows in and out of your
company. Starting with the first penny you earn, you'll record in a general ledger each and every
transaction using a double-entry system of debits and credits. Assets get recorded on the top or
the left side of the balance sheet; liabilities and owners' equity are recorded on the bottom or the
right side of the balance sheet.
The information on each company's general ledger is unique to that business; however, all
companies classify their general ledger accounts as assets, liabilities or owners' equity.
Businesses use more specific accounts within each classification, for example, "current assets" or
"long-term liabilities," to organize and track their finances.
An asset is anything of value that your company owns — including cash. Assets get recorded on
the balance sheet in terms of their dollar values. Remember, even if you used credit to purchase
an asset, you still own it. Its full dollar value gets recorded on one side of the balance sheet as an
asset, and the amount you owe gets recorded on the other side of the balance sheet as a liability.
There are several types of assets:
• Current assets. These are assets with dollar amounts that continually change, for
example, cash, accounts receivable, inventory or raw materials your company uses to make a
product. They are listed on the balance sheet in order of their liquidity, or how fast they can be
converted into cash.
• Investments. Companies, like individuals, can own securities such as stocks and
bonds. Investments, like cash or property, are considered assets.
• Capital assets. Think of capital assets, also called plant assets, as permanent things
your company owns. Land, buildings, equipment and vehicles are common capital assets. So
are things like computers, furniture and appliances, as long as they remain for use within your
business and are not items you sell.
• Intangible assets. Patents, copyrights and other nonmaterial assets that have value are
referred to as intangible.
Anything a company owes to people or businesses other than its owners is considered a liability.
There are two types of liabilities:
• Current liabilities. In general, if a liability must be paid within a year, it is considered
current. This includes bills, money you owe to your vendors and suppliers, employee payroll
and short-term loans.
• Long-term liabilities. A long-term liability is any debt that extends beyond one year,
such as a mortgage.
Owners' Equity
Owners' equity, also called capital, is any debt owed to the business owners. For example, if you
invested $50,000 of your savings to start a business, that amount is recorded in a capital account,
also referred to as an owners'-equity account. In publicly traded companies, outstanding preferred
and common stock also represents owners' equity.
Your business's revenues and expenses are also recorded in capital accounts because they
relate to how much money your company makes over a period of time. At the end of each
accounting cycle, a business' profits get transferred to a capital account

Accounting is basically the system of making records, verifications and reporting of value of
assets, liabilities, expenses and income in the accounts books. The transactions are posted
chronologically to record changes in value of assets and liabilities.

On the other hand, Finance refers to the time, money and risk associated with a specific
business. Finance is different because it works on the accounting information to predict future
trends or to make decisions about the future.

Read more: What is different between finance and accounting? |


Accounting is basically the system of making records, verifications and reporting of value of
assets, liabilities, expenses and income in the accounts books. The transactions are posted
chronologically to record changes in value of assets and liabilities.

On the other hand, Finance refers to the time, money and risk associated with a specific
business. Finance is different because it works on the accounting information to predict future
trends or to make decisions about the future.
Accounting relates to preparation of accounting records, preparation, analysing and
interpretation of financial statements.
The study of finance consists of the study of money and capital markets (macroeconomics),
investments (management of personal and business portfolios), and managerial finance, the
actual management of the firm.


Thesystematicrecording, reporting, andanalysisoffinancial transactionsof abusiness.

Thepersoninchargeof accounting is known as anaccountant, and thisindividualis
typicallyrequiredto follow asetofrulesandregulations, such as theGenerally Accepted Accounting
Principles. Accountingallowsacompanytoanalyzethefinancial performanceof the business, and
look atstatisticssuch asnet profit.

Read more:

Accounting is defined by the American Institute of Certified Public Accountants (AICPA) as "the
art of recording, classifying, and summarizing in a significant manner and in terms of money,
transactions and events which are, in part at least, of financial character, and interpreting the
results thereof."[4]

Managerial finance is the branch of the finance that concerns itself with the managerial
significance of finance techniques. It is focused on assessment rather than technique.

The difference between a managerial and a technical approach can be seen in the questions one
might ask of annual reports. One concerned with technique would be primarily interested in
measurement. They would ask: are moneys being assigned to the right categories? Were
generally accepted accounting principlesGAAP followed?

This book introduces corporate financial management, based on the basic capital budgeting
framework and the time value of money. It focuses on theoretical formulations and correct
application of financial techniques that will help improve managerial and financial decisions. Based
on fundamental principles of accounting and finance like time value of money and after-tax cash
flows, it introduces readers to real-world constraints and complexities in the two fields.

Written in a simple and accessible manner, this book can be read by students of finance and
accounting courses, business professionals and general public alike.