Study Notes

Organizational Structure
Organizational Structure

Introduction

An organizational structure is a set of rules, roles, relationships and responsibilities that

determine how a company's activities should be directed to achieve its goals. It also governs
the flow of information through levels of the company and outlines the reporting relationship
among midlevel staff, senior management, executives and owners. It is effectively a hierarchy
for a company, though some organizational structures emphasize a near-total lack of
hierarchy.

Line Organization:

According to this type of organization, the authority flows from top to bottom in a concern.
The line of command is carried out from top to bottom. This is the reason for calling this
organization as scalar organization which means scalar chain of command is a part and parcel
of this type of administrative organization. Specialized and supportive services do not take place
in these organization.

Managing Director

Production Manager

Plant Superintendent

Foreman

Advantages of Line Organization:

 This kind of organization always helps in bringing efficiency in communication and

bringing stability to a concern.
 It is the most simple and oldest method of administration.
 In this type of organization, every line executive has got fixed authority, power and
fixed responsibility attached to every authority.
 Due to the factors of fixed responsibility and unity of command, the officials can take
prompt decision.

Disadvantages of Line Organization:

 A line organization flows in a scalar chain from top to bottom and there is no scope for
specialized functions.
 Authority leadership- The line officials have tendency to misuse their authority
positions. This leads to autocratic leadership and monopoly in the concern.

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Organizational Structure

Line and Staff Organization

Line and staff organization is a modification of line organization and it is more complex than
line organization. According to this administrative organization, specialized and supportive
activities are attached to the line of command by appointing staff supervisors and staff
specialists who are attached to the line authority. The power of command always remains
with the line executives and staff supervisors guide, advice and council the line executives.

There are two lines of authority which flow at one time in a concern :
 Line Authority
 Staff Authority

Advantages of Line and Staff Organization:

 Relief to line of executives- In a line and staff organization, the advice and
counseling which is provided to the line executives divides the work between the
two. The line executive can concentrate on the execution of plans and they get
relieved of dividing their attention to many areas.
 Benefit of Specialization- Line and staff through division of whole concern into two
types of authority divides the enterprise into parts and functional areas. This way
every officer or official can concentrate in its own area.
 Better co-ordination- Line and staff organization through specialization is able to
provide better decision making and concentration remains in few hands. This feature
helps in bringing co-ordination in work as every official is concentrating in their own
area.

Demerits of Line and Staff Organization:

 Lack of understanding- In a line and staff organization, there are two authority
flowing at one time. This results in the confusion between the two. As a result, the

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workers are not able to understand as to who is their commanding authority. Hence
the problem of understanding can be a hurdle in effective running.
 Line and staff conflicts- Line and staff are two authorities which are flowing at the
same time. The factors of designations, status influence sentiments which are
related to their relation, can pose a distress on the minds of the employees. This
leads to minimizing of co-ordination which hampers a concern’s working.
 Costly- In line and staff concern, the concerns have to maintain the high
remuneration of staff specialist. This proves to be costly for a concern with limited
finance.

Functional Organization

Functional organization has been divided to put the specialists in the top position throughout
the enterprise. This is an organization in which we can define as a system in which functional
department are created to deal with the problems of business at various levels. Functional
authority remains confined to functional guidance to different departments. This helps in
maintaining quality and uniformity of performance of different functions throughout the
enterprise.

 The concept of Functional organization was suggested by F.W. Taylor who

recommended the appointment of specialists at important positions.
 The entire organizational activities are divided into specific functions such as
operations, finance, marketing and personal relations.
 Complex form of administrative organization compared to the other two.
 Three authorities exist- Line, staff and function.
 Each functional area is put under the charge of functional specialists and he has got
the authority to give all decisions regarding the function whenever the function is
performed throughout the enterprise.
 Principle of unity of command does not apply to such organization as it is
present in line organization

Advantages of a Functional structure:

 Efficiency- Greater efficiency is achieved because of every function performing a

limited number of functions.
 Economy- Specialization compiled with standardization facilitates maximum
production and economical costs.

Disadvantages of a Functional structure:

 Confusion- The functional system is quite complicated to put into operation,

especially when it is carried out at low levels. Therefore, co-ordination becomes
difficult.

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Organizational Structure

 Lack of Co-ordination- Disciplinary control becomes weak as a worker is

commanded not by one person but a large number of people. Thus, there is no unity
of command.
 Difficulty in fixing responsibility- Because of multiple authority, it is difficult to fix
responsibility.

Divisional Structure

The centralized structure, known as a divisional organization, is more common in companies

with many large departments, markets or territories. For example, a food conglomerate may
operate on a divisional structure so that each of its food lines and products can have full
autonomy.

Advantages of a Divisional structure:

 The different departments have some flexibility to operate separately from the
company at large.
 It is more adaptable to customer needs.
 Individual departments have more autonomy and room for innovation.

Disadvantages of a Divisional structure:

 It risks accidental duplication of resources.

 It brings in poor communication and low interaction among different departments.
 It encourages internal competition across departments rather than uniting the
company against outside competitors.

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Flat structure

A flat structure is a decentralized organizational structure in which almost all employees

have equal power. This organizational structure is common in startups that take a modern
approach to work or don't yet have enough employees to divide into departments.

Advantages of a flat structure:

 Employees have more responsibility and independence.

 It improves communication and interaction among employees.
 It is faster to implement new practices or ideas, with less risk of error.

Disadvantages of a flat structure:

 Employees lack supervision.

 There could be confusion around reporting procedures.
 Employees lack or don't develop specialized skills.
 It has poor scalability as the company grows.

Matrix structure

The matrix structure is a fluid form of the classic hierarchical structure. This centralized
organization structure allows employees to move from one department to another as
needed.

Advantages of a matrix organization:

 Supervisors have the flexibility to choose the best employees for a project.
 It allows a dynamic org chart with varying responsibilities for employees.
 Employees have the opportunity to learn and foster skills outside their primary roles.

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Disadvantages of a matrix organization:

 There could be conflicts of interest between the needs for project organization and
department organization.
 The organizational chart is prone to regular changes.

Network Structure

A network structure is especially suitable for a large, multi-city or even international

company operating in the modern era. It organizes not just the relationships among
departments in one office location, but the relationships among different locations and each
location's team of freelancers, third-party companies to whom certain tasks are outsourced,
and more.
A network organization is a collection of autonomous firms or units that behave as a single
larger entity, using social mechanisms for coordination and control. The entities that make
up a network organization are usually legally independent entities (separate firms) but not
always

Advantages of a network structure:

 It improves understanding of how functional roles are distributed among onsite
employees, offsite employees, freelancers and outsourced third parties.
 It boosts flexibility for one department or location to delegate tasks to another.
 It drives employee communication, collaboration and innovation.
 It clearly outlines workflows and chains of commands in large businesses.

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Disadvantages of a network structure:

 It is complex, especially in regard to out-of-office processes.
 It is vague as to which employee, department or office should make the final
decisions.

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Organisational Change

Lewin's 3-Stage Model of Change:

Kurt Lewin developed a change model involving three steps: unfreezing, changing (Moving) and
refreezing. The model represents a very simple and practical model for understanding the
change process.

For Lewin, the process of change entails:

 Unfreezing – i.e. creating the perception that a change is needed. Before a change
can be implemented, it must go through the initial step of unfreezing. Because many
people will naturally resist change, the goal during the unfreezing stage is to create an
awareness of how the status quo, or current level of acceptability, is hindering the
organization in some way.
 Changing – i.e. moving toward the new, desired level of behavior. Lewin recognized
that change is a process where the organization must transition or move into this new
state of being. This changing step, also referred to as 'transitioning' or 'moving,' is
marked by the implementation of the change. This is when the change becomes real.
Change is a process that must be carefully planned and executed. Throughout this
process, employees should be reminded of the reasons for the change and how it will
benefit them once fully implemented.
 Refreezing i.e. solidifying that new behavior as the norm. Refreezing symbolizes the
act of reinforcing, stabilizing and solidifying the new state after the change. The
changes made to organizational processes, goals, structure, offerings or people are
accepted and refrozen as the new norm or status quo. Lewin found the refreezing step
to be especially important to ensure that people do not revert back to their old ways of
thinking or doing prior to the implementation of the change.

Planning Change

Resistance to change is a natural human response. With the relentless change that is occurring
in organization, knowing the causes of resistance as well as the strategies to cope with
resistance is one of the essential skills of a leader. Resistance and change go together. It is
virtually impossible to have significant change without resistance. Unfortunately, resistance is
usually viewed as bad and as something that is to be overcome. Resistance plays a positive
role too, by bringing attention to some of the neglected aspects.

An important strategy in dealing effectively with resistance is to understand its intensity. There
could be three levels for the resistance. Level 1 is the resistance to the change itself. People
simply oppose, question, or are confused by the change. Level 2 resistance is always deeper
and it indicates that there are other forces at work. This level of resistance appears in a number
of ways. Level 3 represents the deepest, most entrenched level of resistance. The problems are

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big and may seem overwhelming. The various sources of resistance and the coping
mechanisms include the following.

 Perceived Peripherality of Change: Implementation of change can be effective if the

introduced change is seen as critical and useful, which can be achieved by the
participation of the concerned people in the diagnosis of the issues or problems.
 Perception of Imposition: When people see the change as being imposed, they tend to
resist it. The resistance can be overcome by involving people in the introduction of
change at several stages.
 Indifference of the Top Management: The mangers are the role models. If their
attitude shows indifference, people also tend to resist change. The best way to
overcome resistance is by the commitment of the leader and by his/her active support
for change management.
 Vested Interests: The vested interests of people cause resistance to change. Once
people experience the change, they often enjoy it and may see its positive aspects.
 Complacency and Inertia: As change produces discomfort, it is resisted. The solution
to the problem is to introduce the change and help people experience new conditions.
 Fear of Large Scale Disturbance: The fear that the proposed change is likely to lead to
some other changes with unpredictable consequences might result in resistance.
Phasing out the change could help overcome the resistance.
 Fear of Inadequate Resources: Whenever the change requires additional resources in
the form of new skills, additional manpower, or budget, resistance is likely to be greater.
Genuine need for the resources need to be supported by the top management for
overcoming resistance.
 Fear of Obsolescence: People resist change as they fear that they may become
obsolete as they lack those skills which are required for coping with the change.
Organizations should provide opportunities to those people in the development of the
required skills, which could help to overcome resistance.
 Fear of Loss of Power: Any change would result in some roles in the organization to
lose power. This feeling of loss of power could lead to resistance. In order to overcome
this resistance, there is a need to redefine and redesign the roles.
 Fear of Overload: If the change is perceived to increase the work load of people, they
tend to resist the change. There is a need to bring in more of role clarity to overcome
the resistance.

Various tactics have been suggested to deal with resistance. These include education and
communication, participation, facilitation and support, negotiation, manipulation, and coercion.
In order to appropriately deal with resistance, it is necessary to understand the cause of
resistance and use appropriate strategies that may help to reduce the resisting forces in order to
sustain the change over a long time.

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