Types of Organization

Development in Organization
Types of Business Organization
Group 2 Presenters:
Jobeth C. Bedayo
Rolly Santiago
Erica Raiza Gonzaga
Mary Joy Jaron
Organization
Organization refers to a collection of people, who are
involved in pursuing defined objectives. It can be
understood as a social system which comprises all
formal human relationships. The organization
encompasses division of work among employees and
alignment of tasks towards the ultimate goal of the
company
Organizational Structure
An organizational structure is a system that outlines
how certain activities are directed in order to achieve the
goals of an organization. These activities can include
rules, roles, and responsibilities provide guidance to all
employees by laying out the official reporting
relationships that govern the workflow of the company.
A formal outline of a company's structure makes it easier
to add new positions in the company, as well, providing
a flexible and ready means for growth. The
organizational structure also determines how
information flows between levels within the company.
Types of Organization
 Line Organization
Line organization structure is the oldest and simplest
form of organization. In these organizations, a
supervisor exercises direct supervision over a
subordinate. Also, authority flows from the top-most
person in the organization to the person in the lowest
rung. This type of an organization is also called a
military organization or a scalar-type organization.
Advantages of a Line Organization
Simple to work
Economical and effective. It also allows quick decisions and
efficient coordination.
Conforms to the scalar principle of organization. Further, it
promotes the unity of command.
In a line organization, the responsibility for the performance of
tasks is fixed upon definite individuals. Therefore, there is
accountability of delegated tasks.
There is excellent discipline in a line organization due to unified
control and undivided loyalties.
The overall cost of running the organization is low due to the non-
involvement of staff personnel.
It is a stable form of organization.
Disadvantages of a Line Organization
A line organization can suffer from a lack of specialization. This is
because each department manager is concerned only with the
activities of his own department. Therefore, employees are skilled in
tasks pertaining to their departments alone.

These organizations can overburden a keyman or a few key-men to

the extent of their breaking point. Also, in the absence of a staff aid,
if a strong man seizes the organization, he can run it arbitrarily.
Such arbitrary power can lead to a considerable damage to the
organization.

Such organizations usually suffer from a lack of expert advice. If the

line manager has trouble making a decision, there is no expert staff
that he can turn to.
A line organization is usually rigid and inflexible. In fact, such
organizations maintain discipline so rigorously that they can
rarely change.

These organizations are based on the autocratic system of

management.

The division of work is not based on any scientific plan but on

the whims of the manager.

It might stop progress and prevent the unit to work effectively.

Such organizations might also encourage nepotism or

favoritism based on relationship or friendship.
Line Organization structure is useful in
the following scenarios:
The scale of business is small and the number of
subordinates and superiors are few.
In continuous process industries
Organizations where work is primarily routine in
nature
Highly automated environments where the skills of
the foreman are not important
Labor management problems are easy to solve
 Functional Organizational Structure
Every company needs an organizational structure, it basically
defines the hierarchy of the company. In simple words, it
defines who works for whom and who reports to whom.

Without this structure, there would be chaos and

inefficiency. Now one of the most common forms of formal
organization is the functional organizational structure.

In a functional organization structure, the entire

organization is divided into smaller groups or departments
based on specialized functions.
So for example in such an arrangement there will be a
finance department, an IT department, marketing
department etc. This allows for greater cohesiveness
and efficiency in the work of the employees.
 
Since the work is divided into smaller sectors, so is the
management. The management is also sub-divided
according to the type of work being done.
 
So every department has their own head or executive.
And the reporting structure can also differ from
department to department.
Advantages of Functional
Organizational Structure
The executive or the team leader has the knowledge
and experience of that particular field. For example,
the person heading the IT department will have the
education and skill necessary to shoulder this
responsibility and successfully run his team.

Because the employee has expertise in that particular

field, the work is more efficient and precise. There are
fewer mistakes. This also helps with the motivation of
the employees of the company.
Since all team members come from similar backgrounds
it allows them to share ideas and come up with
solutions. There is a sharing of knowledge, which is
always beneficial.

The employees also having a clear idea of the hierarchy

of the firm. They need not report or answer to
several managers.

Also, the employees feel secure in their work. They see

that their work and efforts is not going unnoticed. This
sense of security helps them perform better.
Disadvantages of Functional
Organizational Structure
The work can be quite one dimensional. After a while, the
employees may start feeling monotony or boredom. The lack of
new challenges can make them unenthusiastic for the job at
hand.

In this structure, the manager must take care of the appraisal
system. If the correct approach is not taken then conflicts may
arise between the employees regarding promotions or appraisals.

Also, this form of organization requires a high degree of

specialization which is difficult to establish
If there is a necessary change of personnel it can disrupt
the whole system and its balance. Also, it is quite a rigid
structure, not leaving a lot of scope for adaptation.

In Functional Organizational Structure, the employees

never gain any knowledge or skills outside their own
department. This can cause difficulties in inter-
departmental communication.

Functional Organizational Structure is perfect for a small

organization. If there is only one product or service then the
performance is maximized by co-operation and supervision. In a
larger organization managing becomes difficult due to the size of
the departments.
 Line and Staff Organization
In a line and staff organization structure, both the line managers and
the staff have their own important roles to play. In this structure, the
authority flows from the top down. The line manager is the one in
charge. He is the one with the authority to make all the important
decisions of the company. And he is also responsible for these
decisions and the performance of his employees.
The staff is the experts in this scenario. They have the knowledge and
expertise of their field and are there to assist their line managers. They
have an advisory role in the firm.
But since they do not have authority over the line managers, the line
managers can choose to take their advice or ignore it. So the main
objective of the staff is to come up with solutions to problems. They
help the line manager in attaining the company’s objectives and goals.
Merits of Line and Staff Organization
One of the main advantages is that the line executives receive expert advice
from the staff. The staff has expertise on the matter, and the line executives
can greatly benefit from this advice. So they can leave the planning and
research to the staff and concentrate on the execution of the plan.

There is the benefit of specialization in this system. The whole organization

is planned in such a way that the work is divided according to specialization.

This concentration of authority also helps with better and more efficient
decision making. They have the tools to take a more balanced decision. This
results in better coordination in the organization.

There is also a lot of scope for growth of employees in a line and staff
organization. It gives each individual the freedom to grow in flourish in their
own specialty.
Demerits of Line and Staff Organization
There is a dual authority in a line and staff organization. So this may
confuse the employees when it comes to following instructions and
reporting. It can create certain communication issues in the firm.

There are sometimes conflicts between the line executives and the
staff managers. They could have a difference of opinions. This can prevent
the harmonious relations between the two and cause an imbalance in
the company.

Sometimes the expert advice given by the staff is misunderstood or

misinterpreted by the line executives.

The staff and line system are costlier than a simple line or functional
organization. The staffing specialist has a high remuneration cost
generally.
In a staff and line organization, the power of the
command remains with The Line authority is the one
with the command, the staff only has an advisory
function.
Development in Organization
Types of Business Organization

Presenters:
Erica Raiza Gonzaga
Mary Joy Jaron