MODULE 8

Organizational
Structure
What is an Organizational Structure?
▸ It is defined as the system of how task are to be allocated,
who reports to whom, who has the authority and what are
the coordinating mechanism and interaction patterns to
ensure the work is done.
▸ It creates order by arranging the various parts of the
organization, the workflows, the reporting relationships
and the communication channels.
▸ It promotes coordination of activities and performance
results to achieve the organizational strategies and
goals.
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Different Forms of
Organizational

Structure 3

A.) Functional Structure of

Organization
▸In functional structures, members with similar
skills
are grouped together into functional departments
such
as production, marketing, finance, human
resource.

▸The authority is usually centralized in one

person.

▸It is known also as a flat organization, with

everyone reporting to one senior executive who
dominates the decision making within the
organization.4
 A.) Functional Structure of
Organization
▸This simple structure is commonly found in
smaller business organizations that have one or
few
products or services.

▸It is also found in other institutions such as

government agencies, banks, hospitals, and
nongovernmental organizations.
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Functional Structure of
Organization

Advantages of
Functional Structure of Organization
•It is a simple structure, requires little costs to
maintain. •It promotes efficient use of resources
because of the specialization of task.
•Members can readily see their contribution to the entire
organization.
•Task assignments fits the expertise and trainings of
members.

Disadvantages of
Functional Structure of Organization
 •Employees may develop an extreme attachment to their own group
that may create the so called
“department attitude”.
•There is a difficulty and coordination and communication when
there is a need to increase or expand the size of the organization.
•Abuse of power in the central figure of authority or senior
executive. •Lack of check and balance in the senior executive can
negatively affect the organization.

B.) Divisional Structure

▸Members of the organization who are group together work on the same
product, service, process, or similar customers.
▸This is common to complex organization that have diverse operations,
covering many products,
customers, processes and territories.

Divisional Structure
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Advantages of a Divisional Structure

▸It facilitates diversification ( business functions is faster and easier
▸The power of management is reduced and task like decision making is
distributed among the heads of the division.
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Disadvantages of a Divisional Structure

▸Increase in costs due to duplication of the functional departments

▸Conflicts may occur between division manager and central headquarters

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Different Types of Divisional Structure

Product Structure – The grouping of members and jobs is by product or service.
Geographical Structure – The grouping of members and jobs is by location of activity.
Customer Structure – The grouping of members and jobs is by customers served.
Process Structure – The grouping of members and jobs is by related work process

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C.) Matrix Structure

▹It combines the functional and divisional structures.

Specialists from specific functional departments are
assigned to work on one or more interdisciplinary teams.
The head of the team serves as the project leader. The
project type structure consist of permanent teams, that cut
across functional departments to support specific projects
or programs.
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D.) Team Structure

▹Team Structure are created to complete special projects, to solve problems or to accomplish
specific tasks.

▹The team is cohesive and focused on the timely and effective completion of their assigned
projects and responsibility.

▹Main advantage: Pooling of skills from different divisions or groups within the organization to
swiftly and effectively carry out the special task assigned to them.

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E.) Virtual Structure
▹Virtual Structure eliminates the boundaries among
units that compose the organization by using
Information Technology and internet to communicate
with members and accomplish specific objectives .
▹Communication flows are rapid and information is
continuous.
▹Technology utilization is dominant.
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F.) Network Structure

▹Is formed by having a core of full time

employees working together with outside
partners who provide support or supply services.
It employs a minimum staff and mostly contracts
out or outsource the work to be done.
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The Six Elements

of Organizational
Structure
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1.) Specialization

▹Work specialization gives employees specific duties and

roles they are expected to perform within the company,
factoring in their qualifications and skills. Having
descriptions of duties for staff members helps the
organisation to fully meet the workforce needs and to ensure
there are no unnecessary duplications within roles.

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2.) Departmentalization
▹refers to how the organization breaks down the functions
and teams needed to run the company and carry out the
essential tasks. Departments are usually made up of staff
members who perform similar tasks in the same work area,
but could also be grouped by project, location, or however
the organisation sees fit to ensure increased productivity.

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3.) Chain of Command

▹The main purpose of an organizational chart is to illustrate
chain of command, and ensures that each employee has a clear
directive of who they should be reporting to within the company.
The manager responsible for a particular employee will assign
them tasks, provide deadlines and motivation, and communicate
important messages. If their staff member has an issue, the
manager can take this higher up the chain of command for more
support if necessary and to provide a resolution. A clear chain of
command ensures messages are being communicated effectively
between the relevant staff members.

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4.) Span of Control

▹The span of control is how many employees each
manager is given to oversee, and limits to their capacity is
set by the organisation. It ensures the efficiency of a
company isn’t compromised, as a manager will become less
effective at their job if they have too many staff members to
supervise and the amount of time they spend focussing on
each person will significantly reduce. Managers who are
positioned higher up in the chain of command will typically
oversee less staff members, as they will be directly
responsible for middle managers and supervisors

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5.) Centralization and

Decentralization
Centralization within a business means that
middle management does not have a significant input
to company decisions, and these are left to top level
management only. This is typical of a larger
organisation. Decentralization allows all level of
management to share their input on the goals and
visions of the wider company, which will then help to
 improve their individual teams.

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6.) Formalization

Organizational structures implement a degree of

formalization, and determines the procedures and rules
of a company, as determined by management. A
smaller organization might have less formal standards
because staff undertake multiples roles and duties, but
a larger organization would need to set more defined
elements to enable clarity for staff.
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ACTVITY FOUR:
You are the supervisor of a franchise convenience store that operates 24 hours a day and seven days a
week, or popularly known as 24/7 stores. To better distribute the tasks to each crew member in the store, you
are asked by the store manager, who is also the franchisee of the store, to prepare a draft of a simple
organizational chart composed of crew members who are assisting you every day in the store. The
organizational chart will be a functional type that will indicate the
respective units that separate the work being done by your crew members such as the
following:

a. checking the inventory of merchandise items;

b. ordering the merchandise items from your franchise head whenever needed;

c. inspecting the merchandise items delivered by the suppliers;

d. arranging the
merchandise items in
store shelves;

e. handling the cash

register;
f. cleaning the store area; and

g. providing security services.

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