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Determinants of

Organizational
Structure

Determinants of
Organizational Structure
Environmen
t

Size

Technology

Environment

Internal
Factors

External
Factors

Organizational structure
depends upon the
environment, specially
External
Environment/Factors.

Customer

i.e. whether the external
environment is stable or
dynamic

International
Environment

Culture
Economic

Technology

Organizational structure depends
upon technology as well
If technology is
simple then
Technology
is
Mechanistic
simple
structure
will be
good

If technology is
advanced then
organic
Or or
complicated/Advanced
advanced
organizational
structure will be
needed.

Size If organization is big & lots of people are working then It requires HIGH DEGREE OF DISCIPLINE & COMMAND a formally structured chain of command .

Types of Organizational Structure .

Types of organization structures Line organization Line & staff organization Functional organization Project organisation Matrix organisation Divisional organization .

The line of command is carried out from top to bottom. the authority flows from top to bottom in a concern. According to this type of organization.Line Organization Line organization is the most oldest and simplest method of administrative organization.  .

This kind of organization always helps in bringing efficiency in communication and bringing stability to a concern. 2. line officers independently take decisions in their areas and spheres. . It is the most simplest form of organization. Specialized and supportive services do not take place in these organization.Features – of Line Organization 1. 3. 4. 5. Line of authority flows from top to bottom.

Unity of Command- In these organizations.Merit s Simplest- It is the most simple and oldest method of administration. superiorsubordinate relationship is maintained and scalar chain of command flows from top to bottom. .

.Better discipline- control is unified & concentrates on one person and therefore. he can independently make decisions of his own.  The Unified control ensures better discipline.

Flexibility-  There is a. Prompt decision- Due to the factors of fixed responsibility and unity of command. Since the authority relationships are clear. This flexibility gives satisfaction of line executives. the officials can take prompt decision. line officials are independent and can flexibly take the decision. .co-ordination between the top most authority and bottom line authority.

Fixed responsibility In this type of organization. . every line executive has got fixed authority. power and fixed responsibility attached to every authority.

Formal chain of command running from top to bottom of the organization.Scalar chain Scalar Chain (line of authority) . Were we can see Scalar chain ? like military . Scalar Chain is the number of different levels of authority through which decisions are passed in the organization.

Over reliance The line executive’s decisions are implemented to the bottom. expert advices whatever decisions are taken by line managers are implemented in the same way. Lack of specialization-  A line organization flows in a scalar chain from top to bottom and there is no scope for specialized functions. This results in over-relying on the line officials. For example. Demeritsline organization structure .

. the degree of effective coordination is less. The complaints and suggestions of lower authority are not communicated back to the top authority.Demerits Inadequate communication- The policies & strategies which are framed by the top authority are carried out in the same way. Authority leadership- The line officials have tendency to misuse their authority positions.’. Lack of Co-ordination- Whatever decisions are taken by the line officials. are carried down and implemented in the same way.? . in certain situations wrong decisions. . This leaves no scope for communication from the other end. So there is one way communication.

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2-Line & Staff OrganizationIn types of organization structure Line and staff organization is a modification of line organization it is more complex than line organization. specialized and supportive activities are attached to the line of command by appointing staff supervisors & staff specialists are attached with the line authority. According to this administrative organization. .

line Engineering staff Personnel staff Plant manager- Supervisor – machine shop Workers Supervisorassembly level Workers .staff vice President.President Line Legal councilSTAFF Public relations advisor.

eg. It involves Direct and Legitimate Authority over subordinates. Human Resource (HR) for a Manufacturing . It decides what to do. Staff Authority on the other hand is an assistant function as it guides line managers or functions into performing a specific activity.Line authority Line authority or function is a Direct or main function of an individual or department. They are more specialized and therefore provide advice to Line authority. eg.. and when to do it. Production for a Manufacturing company..

Power of command remains with the line executive and staff serves only as counsellors. Line and Staff Organization is a compromise of line organization. There are two lines of authority which flow at one time in a concern : Line Authority Staff Authority 6. 5. Division of work and specialization takes place in line and staff organization. 3. Efficiency can be achieved through the features of specialization. 4. . The whole organization is divided into different functional areas to which staff specialists are attached.Features -of Line & Staff Organization 1. 2. It is more complex than line concern.

Merits of Line & Staff Organization Relief to line of executives- here advice and counselling provided to the line executives it divides the work between the two. Benefit of Specialization -here division of whole concern done in 2 types of authority divides the enterprise into parts and functional areas. The line executive can concentrate on the execution of plans -----so they get relieved of dividing their attention to many areas. The planning and investigation related to different matters can be done by the staff specialist and further line officers can concentrate on execution of plans. This way every officer or official can concentrate in its own area. Expert advice- it facilitates expert advice to the line executive at the time of need. .

This gives a wide scope to the line executive to bring innovations and go for research work in those areas. is dr so the line executives get time to execute plans by taking productive decisions which are helpful for a concern. This feature helps in bringing coordination in work as every official is concentrating in their own area. This is possible due to the presence of staff specialists.Better co-ordinationit deals to provide better decision making & concentration remains in few hands. . Benefits of Research and Development-?  Through the advice of specialized staff.

.Training-  Due to the presence of staff specialists & dr expert advice it serves as ground for training 2 da line officials.

Lack of sound advice-  The line official – get used to the expertise advice of the staff. This results in the confusion between the two. the workers are not able to understand as to who is their commanding authority. As a result. Hence the problem of understanding can be a hurdle in effective running. This can affect the efficient .Demerits of Line & Staff Organization Lack of understandingIn line & staff dr r 2 types of authority flowing at one time. At times the staff specialist also provide wrong decisions which the line executive have to consider.

the concerns have to maintain the high remuneration of staff specialist.In line and staff concern. This leads to minimizing of coordination which hampers a concern’s working. The factors of designations. .Contd… Line and staff conflictsLine and staff are two authorities which are flowing at the same time. Costly. can pose a distress on the minds of the employees. This proves to be costly for a concern with limited finance. status influence sentiments which are related to their relation.

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Functional Organization .

Functional organisation .

Taylor Functional Organizatio n This is an organization in which we can define As its a system in which functional department are created to deal with the problems of business at various levels.W.Suggested by F. .

Three authorities exist. 3. Principle of unity of command does not apply to such organization as it is present in line organization. 2.Line. 4. finance. Each functional area is put under the charge of functional specialists and he has got the authority 2 give all decisions regarding the function whenever the function is performed throughout the enterprise. staff and function. . marketing and personal relations.Features Entire organizational activities divided into specific functions such as operations.

2. 5.Merits 1. Checks and balances keep the authority within certain limits. Economy- Specialization compiled with standardization facilitates maximum production and economical costs. Expansion- Expert knowledge of functional manager facilitates better control and supervision. . 4. Efficiency- Greater efficiency is achieved because of every function performing a limited number of functions. Specialists may be asked to judge the performance of various sections. Effective Control- Management control is simplified as the mental functions are separated from manual functions. Specialization- Better division of labour takes place which results in specialization of function and it’s consequent benefit. 3.

They may not agree on certain issues. Therefore.Demerits 1. Lack of Co. Conflicts- There may be conflicts among the supervisory staff of equal ranks. there is no unity of command. . co. 3. Difficulty in fixing responsibility- Because of multiple authority. 2. 5. it is difficult to fix responsibility. Confusion- The functional system is quite complicated to put into operation. Costly- Maintenance of specialist’s staff of the highest order is expensive for a concern. Thus.ordination- Disciplinary control becomes weak as a worker is commanded not by one person but a large number of people. especially when it is carried out at low levels. 4.ordination becomes difficult.

Divisional Structure .

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Divisional Structure OF McDonald's .

DIVISIONAL STRUCTURE- or departmental organisation involving grouping of people or activity . self cantered structures & these departments operate well if these were small organisations. Here decisions are generally decentralized N decisions guide their own activities . Organisational goals are prescribed by organisational policies n plans . With similar characteristics into da single department or units.

Every division would handle its own – accounting.The divisional organizational structure organizes the activities of a business around geographical. The divisional structure is useful when a company has many REGIONS. OVERALL . sales and marketing. MARKETS. OR PRODUCTS. engineering. it can cause higher total cost . and so forth. or product and service groups. production. market.

 This approach makes it much easier to assign responsibility for actions and results.You can use this structure to create a culture at the divisional level that most closely meets the needs of the local market. The divisional structure works well in markets where there is a great deal of competition. Culture. . where local managers can quickly shift the direction of their businesses. Competition.Advantage of Divisional Structure Accountability.

Speed. and they are not similar.Contd… Multiple offerings. it makes more sense to adopt the divisional structure. When a company has a large number of product offerings. Bz many people r engaged . This tends to faster responses to local market conditions. or different markets that it services.

. Also. Inefficiencies. no one functional area will be as efficient as would have been the case if there had instead been one central organization for each function. When there are a number of functional areas spread among many divisions. there are likely to be more employees in total than would be the case if the business had instead been organized under a purely functional structure.Disadvantage of Divisional Structure Cost. which adds more overhead cost to the business. there must still be a corporate organization. When you set up a complete set of functions within each division.

Strategic focus. The various divisions may have no incentive to work together.- Each division will tend to have its own strategic direction. and may even work at cross-purposes.Contd… Rivalries. which may differ from the strategic direction of the company as a whole. .

Divisional organisation types Departmentation by product Departmentation by customers Departmentation by area Departmentation by time .

every major product is organised as a separate department each department looks after the production. . Product departmentation is useful when product expansion and diversification. chevrolet ….Departmentation by Product In product or service departmentation. General motors has 6 divisions. Ex. sales and finance of one product.which are decentralized .Pontiac.

divisions and branches. transport companies. distribution agencies are examples of such enterprises.such divisions are specially useful for large org. insurance companies.  Under territorial or geographical departmentation. activities are divided into zones. Overall. . dat r geographically spread out Banks.Departmentation by Area Area departmentation is very useful to a large-scale enterprise whose activities are geo-graphically spread over a wide area.

dr will be a separate vice president of marketing who s responsible for – promotion of the product In EASTERN REGION. NORTH WESTERN REGION.. . SOUTHERN & SO ON….Departmentization by area .

Departmentati on by Customer .

This type of departmentation is useful for banks. etc.. which sell a product or service to a number of distinct and clearly defined customer groups.Departmentation by Customer Under this basis of departmentation. particular For example. activities are grouped according to DIFFERENT type of customers. A bank may have separate loan departments for large-scale and small-scale businessmen. . departmental stores. a large readymade garment store may have a separate department each for women. children and men. Each department specialises in serving a class of customers.

HOSPITALS & OTHER PUBLIC UTILITY COMPANY such astelephone….a factory operating twenty-four hours may have three departments. day and night shifts. Were telephone companies hv day n evening shift n night 1v….Departmentation by Time Under this basis activities are grouped on the basis of the time of their performance. The idea is to obtain the advantages of people specialised to work in a particular shift. For example. . one each for morning.

Project Organization These are temporary organizational structures formed for specific projects for a specific period of time & once the goal is achieved. these are DISMANTLED .

What basically happen here is that for any special or specific project various specialist from various department (Viz. Engineering. . Quality control. Production. Marketing etc) are brought together. Once the work is completed they go back to their respective departments.

2. . 3. The project is separate & unique & it can’t be done as a part of daily work. When project is clearly defined on what to do & what to achieve basis.Features of Project Organization 1. Different activities requires different types of skills & specialization. 4. The project must be temporary in nature.

MATRIX ORGANIZATION .

  drawing employees from different functional  disciplines for assignment to a team without removing them from their respective positions. It is used mainly in the management of large projects or product development processes. .An organizational structure that facilitates the horizontal flow of skills and information.

Employees in a matrix organization report on day-today performance to the project or product manager whose authority flows sideways (horizontally) across departmental boundaries. . They also continue to report on their overall performance to the head of their department whose authority flows downwards (vertically) within his or her department.