A social unit of people, systematically structured and

managed to meet a need or to pursue collective goals

on a continuing basis.
SOLE PROPRIETORSHIP
Owned By a Single Person

PARTNERSHIP
Association of two or more businesses

Corporation
A corporation is a legal entity with its own rights, privileges and
liabilities separate from the members who created it.
ORGANIZATIONAL HIERARCHY
• Division of labor and patterns of coordination, communication,
workflow, and formal power that direct organizational activities.
• Subdividing work into separate jobs assigned to different people
• Potentially increases work efficiency
• Necessary as company grows and work becomes more complex
All Organizations have a management structure that determines the
relationships b/w functions and positions and subdivides and
delegates roles, responsibilities and authority to carry out defined
tasks.
It is a framework within which an Organization arranges it’s lines of
authorities and communications and allocates rights and duties.
Span of Control Span of control means the number of
individuals a person is responsible for
managing. A wide span of control indicates
that many people are reporting to a manager,
and a narrow span of control indicates that
only a few people are reporting to the
manager.
Number of people directly reporting to
the next level
• Assumes coordination through direct
supervision

Wider span of control possible when:

• Other coordinating mechanisms
present
• Routine tasks
• Low employee interdependence
Centralization and Decentralization
Centralization
Formal decision making authority is held
by a few people, usually at the top

Decision making authority is

dispersed throughout the organization

Decentralization
Formalization
• The degree to which an organization's policies,
procedures, job descriptions, and rules are written and
explicitly articulated.
• Formalization increases as firms get older, larger, and
more regulated
• Problems with formalization
• Reduces organizational flexibility
• Discourages organizational learning/creativity
• Reduces work efficiency
• Increases job dissatisfaction and work stress
Functional Organizational Structure
Organizes employees around specific knowledge
or other resources (e.g., marketing, production)

CEO

Finance Production Marketing

Divisional Structure
Organizes employees around outputs,
clients, or geographic areas

CEO

Lighting Consumer
Healthcare
Products Lifestyle
 ORGANIZATIONAL RELATIONSHIP

1. FORMAL RELATIONS
2. INFORMAL RELATIONS
ORGANIZATIONAL RELATIONSHIP

1. FORMAL RELATIONS
• Formal structure, through
departmentalization and work division,
provides a framework for defining managerial
authority, responsibility and accountability
Formal Structure

Should Well
not be defined
flexible jobs

Formal
Channeled Definite
Organization
individual and authority /
group efforts responsibility
ORGANIZATIONAL RELATIONSHIP
2. INFORMAL RELATIONS
• Informal structure is generally social, with blurred
or shifting lines of authority and accountability.
• It also has its own channels of communication,
which may distribute information more broadly
and rapidly than the formal communication
system.
Informal Structure
A network of personal / social
relationships, not established, required
by FORMAL organization but arising
spontaneously

Loosely
organized
Informal
organization
flexible

ill defined

Spontaneous
Spontaneous
1. Tall Organizational Structure
2. Flat Organizational Structure
3. Virtual Organizational Structure
4. Boundary less Organizational Structure
• Large, complex organizations often require a taller hierarchy.
• In its simplest form, a tall structure results in one long chain of
command similar to the military.
• As an organization grows, the number of management levels
increases and the structure grows taller.
• In a tall structure, managers form many ranks and each has a small
area of control.
ADVANTAGES:
1. The quality of performance will
improve due to close supervision.
2. Discipline will improve.
3. Superior - Subordinate relations will
improve.
4. Control and Supervision will become
easy and convenient.
5. The manager gets more time to plan
and organise the future activities.
6. The efforts of subordinates can be
easily coordinated.
7. Tall Organisation encourages
development of staff.
8. There is mutual trust between superior
and subordinates
DISADVANTAGES:
1. Tall Organisation creates many levels of
management.
2. There are many delays and distortion in
communication.
3. Decisions and actions are delayed.
4. It is very costly because there are many
managers. The managers are paid high
salaries.
5. It is difficult to coordinate the activities of
different levels.
6. There is strict supervision. So the
subordinates do not have any freedom.
7. Tall Organisation is not suitable for routine
and standardised jobs.
8. Here, managers may became more
dominating.
• Flat structures have fewer management levels, with each level
controlling a broad area or group.
• Flat organizations focus on empowering employees rather than
adhering to the chain of command.
• By encouraging autonomy and self-direction, flat structures attempt
to tap into employees’ creative talents and to solve problems by
collaboration.
ADVANTAGES
1. Flat Organization is less costly
because it has only few
managers.
2. It creates fewer levels of
management.
3. Quick decisions and actions can
be taken because it has only a
few levels of management.
4. Fast and clear communication is
possible among these few levels
of management.
5. Subordinates are free from close
and strict supervision and
control.
6. It is more suitable for routine and
standardized activities.
7. Superiors may not be too
dominating because of large
numbers of subordinates.
DISADVANTAGES
1. There are chances of loose control because
there are many subordinates under one
manager.
2. The discipline in the organization may be bad
due to loose control.
3. The relations between the superiors and
subordinates may be bad. Close and informal
relations may not be possible.
4. There may be problems of team work
because there are many subordinates under
one manager.
5. Flat organization structure may create
problems of coordination between various
subordinates.
6. Efficient and experienced superiors are
required to manage a large number of
subordinates.
7. It may not be suitable for complex activities.
8. The quality of performance may be bad
Issues with Tall vs Flatter Structures
• Firms moving toward flatter structures (delayering)
because taller hierarchies have:
• Higher mgt overhead costs
• Less information flow
• Less staff empowerment

• But also problems with flatter hierarchies

• Undermines management functions
• Increases workload and stress
• Restricts management career development
• Virtual organization can be thought of as a way in which an
organization uses information and communication technologies to
replace or augment some aspect of the organization.
• People who are virtually organized primarily interact by electronic
means.
• For example, many customer help desks link customers and
consultants together via telephone or the Internet and problems may
be solved without ever bringing people together face-to-face.
• A boundary less Organizational structure is a contemporary approach
in Organizational design.
• It is an organization that is not defined by, or limited to the horizontal,
vertical or external boundaries imposed by a pre-defined structure.
• It behaves more like an organism encouraging better integration
among employees and closer partnership with stakeholders.
• It’s highly flexible and responsive and draws on talent wherever it’s
found.
 The continuous line of authority that extends
from upper level of organization to lowest level of organization and
clarifies who reports to whom.
The rights inherent in a managerial position to tell people
what to do and expect them to do it.
The concept that a person should have one boss
and should report only to him.
• When a company expands to
Supply goods or services
Produces variety of diff. products
Engage in several diff. markets
in such conditions the company can adopt Departmentalization.
• Functional
• Product
• Customer
• Geographic
• Process
• Arranging the business according to what each section or department
does.
• Organizing according to the different types of products produced.
• Where different customer groups have different needs.
• It’s based on geographical or regional structure.
• Where products have to go through stages as they are made.
• Department can be staffed with specialized training.
• Shared management responsibility.
• Supervision is facilitated.
• Coordination within the department is easier.
• Inter department documentation of activities is not possible.
• Decision-making becomes slow.
• Delays when there are problems.
• Accountability and performance are difficult to monitor.
TYPES OF ORGANIZATIONAL CHARTS
1. Vertical charts
• It shows high-level management at the top with
formal lines of authority down the hierarchy, are most
common.
2. A left-to-right (horizontal) charts:
• It shows the high-level management at the left with
lower positions to the right. Shows relative length of
formal lines of authority, helps simplify understanding
the lines of authority and responsibility.
3. Circular charts
• It shows the high-level management in the center
with successive positions in circles. It shows the
outward flow of formal authority from the high-level
management. It reduces status implications.
VERTICAL CHART
CIRCULAR CHART
A LEFT-TO-RIGHT (HORIZONTAL) CHART
ADVANTAGES OF AN ORGANIZATIONAL CHART:
It provides a quick visual illustration of the organizational structure.
It provides help in organizational planning.
It shows lines of formal authority, responsibility and accountability.
It clarifies who supervises whom and to whom one is responsible.
It emphasizes the important aspect of each position. It facilitates management development
and training.
It is used to evaluate strengths and weakness of current structure.
It provides starting points for planning organizational changes.
It describes channels of communication.

DISADVANTAGES:
Charts become outdated quickly.
Does not show informal relationship.
Does not show duties and responsibilities.
Poorly prepared charts might create misleading effects.
The best loved by God are those that are rich, yet have the humility of
the poor, and those that are poor and have the magnanimity of the
rich.

-Sheikh Saadi-