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What is an Organisational Structure

The organisational structure defines the organisations hierarchy of people and departments as well as how information flows within the organization. The organisational structure determines how and when information is distributed as well as who makes what decisions based on the information available. How job tasks are formally divided, grouped and coordinated.

The importance of the Organizational Structure

The Organisational Structure is important because it ensures that there is an efficient operation of a business and it clearly defines its workers and their functions. The organisational structure also helps define the hierarchy and the chain of command.

The Concept of Organisation Structure

Structure helps influence behaviour and relationships of jobs and functions Structure defines recurring activities and processes. Structure provides a purposeful and goaloriented behaviour.

The Designing the Process cont



Develop a clear mission statement for the organization. Focus the organisation structure around the mission statement. The mission statement should include the inter-relationship between workers at every level as well as inspiring innovation and ensuring efficiency.

The Designing the Process cont

3. Decide whether the organisation structure will be centralized and formal or decentralized and informal. For centralized and formal organisations, the organisation structure takes more of a top-down approach with strictly defined work roles. For decentralized and informal organizations, there is more of a cooperative approach with workers often performing a wide range of functions.

The Designing Process cont

4. The organisation structure can be department based or based on a particular project or process. Department -based organization structure is often divided into line functions (such as manufacturing) and staff functions (such as human resources).

The Designing Process cont

5. Design the overall chain of command for the organisation. If there is a single overall director or leader, determine the title for that role. If there are dual or multiple leaders, divide the overall company function between the various roles in a way that there is a clear unity of command.

The Designing Process cont

7. Add subordinate roles to the chain of command. Determine the process of reporting from subordinate to supervisor and make allowances for special circumstances (such as an emergency). Indicate if and how interactions across departments or projects will take place.

Designing the Process

8. Determine the authority and responsibility to be assigned to each position in the organization structure. Attempt to achieve a minimum of overlapping functions. Also, attempt to minimize any possible confusion by subordinates concerning which supervisors to consult with on specific issues.

The effects of structure on individual and group

The structure of any organisation will affect the following:1. Behaviour of how people act and work 2. Motivation of workers 3. Performance 4. Teamwork and cooperation 5. Intergroup and interdepartmental relationships


Functional structure this kind of organisational structure classifies people according to the function they perform in the organization. The organisation chart for a functional based organisation consists of: Vice President, Sales department, Customer Service Department, Engineering or production department, Accounting department and Administrative department.


Product structure a product structure is based on organizing employees and work on the basis of the different types of products. If the company produces three different types of products, they will have three different divisions for these products.


II. Line Structure: This has a very specific line of command. The approvals and orders in this kind of structure come from top to bottom in a line. Hence the name line structure. This kind of structure is suitable for smaller organizations. This is the sort of structure allows for easy decision making, and is very informal in nature. They have fewer departments, which makes the entire organization a very decentralized one.

Types cont..
III. Line and Staff Structure: Line and structure combines the line structure where information and approvals come from top to bottom, with staff departments for support and specialization. Line and staff organizational structures are more centralized. Managers of line and staff have authority over their subordinates, but staff managers have no authority over line managers and their subordinates.


The decision making process becomes slower in this type of organizational structure because of the layers and guidelines that are typical to it, and the formality involved.


Market Structure market structure is used to group employees on the basis of specific market the company sells in a company could have three different markets they use and according to this structure, each would be a separate division in the structure.


Geographic structure large organizations have offices at different place, for example there could be a north zone, south zone, west and east zone. The organizational structure would then follow a zonal region structure.


Matrix Structures This is a structure, which has a combination of function and product structures. This combines both the best of both worlds to make an efficient organizational structure. This structure is the most complex organizational structure.

Components of Organizational Structure

Organizational Design Management decisions and actions that result in a specific organization structure and work specification including:1. Work Specification: Specify to what degree the tasks are subdivided into separate jobs 2. Departmentalization: The basis in which jobs will be grouped together 3. Chain of Command: To whom do individuals and groups report to.

Organizational Structure cont..

4. Span of Control: The number of people that a can a manager efficiently and effectively direct. 5. Centralization and Decentralization: Where is the decision making authority? 6. Formalization: To what degree will there be rules and regulations to direct employees and managers?

Division of Labour/specialization
This is a process of identifying the specific jobs that need to be done and designing the people who will perform them. Job specialization can occur in 3 different ways: Personal Specialties: occupational and professional specialties e.g. accountants, engineers, scientists.


Division of Labour cont..



Horizontal Specialties: work is divided by the natural sequence order e.g. manufacturing plants divide work into fabricating and assembly. Vertical Specialties: Work is divided along the vertical plane of an organization from the lowest level manager to the highest level manager.

Delegation of Authority
Process of distributing authority downward in an organisation. Whether an organisation chooses to centralize or decentralize will be guided by: How routine and straightforward are the jobs required decisions? Are individuals competent to make decisions? Are individuals motivated to make the decisions?


2. 3.

Delegation of Authority cont..

Reasons to Decentralize Authority: It encourages the development of professional managers. Managers are able to exercise more autonomy but it can lead to a competitive climate.

Delegation of Authority cont

Reasons to Centralize Authority:1. When the managers are not skilled enough and would need further training which can be expensive. 2. When there are new administrative costs because new divisions need to be formed. 3. Decentralization can mean duplication of functions.

Departmental Bases

1. 2. 3.

The process of grouping jobs into logical units. The process in which an organization is structurally divided by combining jobs in departments according to some shared characteristics. Functional Departmentalization Geographical Product

Multiple Forms of Departmentalization


Functional Departmentalization

Vice President Marketing

Vice President Production

Vice President Finance

Vice President Training

Geographical Departmentalization
Nairobi Plant Manager Mombasa Plant Manager Johannesburg Plant Manager Bulawayo Plant Manager

Product Departmentalization
Consumer Products Industrial Products Marketing Products Training Products

This is the number of individuals who report to a specific manager. Three factors are important in determining optimum span of control:Required Contact Degree of Specialization Ability to communicate

Organizing cont
NB: The Importance of structure: Good organization structure does not by itself produce good performance but poor organization structure makes good performance impossible no matter how good the individual managers may be. (Drucker, 1989)

Group Exercise


Draw an organogram of an organization ensuring that it has clear units that ensure good communication, avoid duplication or overlapping, and avoid an unclear span of control. What are the disadvantages of the tall organizational structures as opposed to flat organizational structures?