Designing the

Organizational
Structure.
LESSON 2 HRM001
The three elements of structure pertain to both vertical and horizontal aspects of

organizing. The first two elements are structural framework reflected in the

vertical hierarchy in the organization chart. The third element pertains to the

horizontal interactions to provide information and effective coordination across

departments.
Components of Organization
Structure.

1. Organization structure designates formal reporting relationship..

2. Organization structure identifies the grouping together of individuals according

to functions into departments.

3. Organization structure includes the design of communication linkages

Types of Organizational Structure.
1. Line Organization - The vertical line of authority emanates from the top of
the organization down the chain of command. Line managers have clearly
defined roles to play. This requires understanding of the nature of line
authority and the line relationships.
Features of Line Organization.
1. The Line Authority - Managers identified in the line are getting direct command from the
top of the line.

2. The Line as the Chain of Command - The command relationship exists between each
superior and subordinates.

3. The Chain of Communication - The members of the organization are connected thru a line
of communication.

4. The Line as Carrier of Accountability - The line element is the means of establishing the
manager's functions of accountability for results. He is accountable for the results of his
operating decisions.
Advantages of Line Organization.
1. Organizational problems are solved quickly as top management is in control of decision-making.

The red tape is at minimum level as there is centralization of authority.

2. Responsibility is well-defined. The simple line of communication is present. Single accountability

can be maintained and better organizational control is achieved.

3. Less overhead expenses on additional staff as line managers also provide functional activities to the

top executives.
Disadvantages of Line
Organization.
1. There will be an increase in the load of line managers. They will be overburden with the conceptual and
technical activities. It will result in the loss of effectiveness unless they are highly talented and dedicated.
2. The chain of command becomes longer as instruction has to pass through channels. The layer of
supervision and actions create red tape.
3. There will be the existence of the inadequacy of managerial specialization. The company's expansion
program maybe at stake.
4. Over centralization of decision and authority tends to develop dependent managers and supervisors. This
will hamper the development of managerial creativity and initiative.
Organizational Change.
As the company starts to grow from infancy to more advance stage, it begins to find changes
necessary in its structure. Organizational change has to adapt to the changing conditions brought
about by business expansion or economic development in the internal and external environments.

Organizational innovation is the adoption of an idea or new pattern of behavior in the industrial
market. The changes in market conditions and the continuing growth of the company must be
sustained to make complete the change process. The following elements must be present:
1. Need - The need occurs when managers or top management become dissatisfied with the
present performance.

2. Idea Generation – A new idea is generated due to felt need for change. It is encouraged by
open communication from the top management level up to operating departments.

3. Adoption of the Idea - After considering the proposed idea, the top management has to adapt
new policy guidelines to implement the proposed change.

4. Idea Implementation - When top management makes a go signal and managers are ready to
assume responsibility, the implementation stage begins.

5. Availability of Human Resources- A new idea implementation would require new breed of
employees.
 Growth of Line and Staff
Organization.
The maturing organization has to adapt to change. The above discussions would point out that change is
not easy to implement. Nevertheless, the organization has to grow and prosper. Management would not
allow itself to be stagnant in their operation or be left out in their corporate advancement.

As the organization moves forward in the corporate arena, top management would like to free themselves
of menial jobs that could possibly be assigned to staff assistants. Managers in the line department need
also new breed of staff that could handle research projects or make formal studies for the improvement of
its products and services. The need for more people becomes apparent as new demand becomes imminent.
Features of Line and Staff.
1. The line managers are still directly responsible to the top executives or those above the line in the
organizational structure.
2. The specialist positions are created and given recommendatory functions.
3. The influence of the staff executive is mainly one of ideas and recommendation.
4. The recommendation of staff executive should have the prior approval of the line managers above
him before implementation.
5. The staff executive has to coordinate closely with his line managers in carrying out plans, programs
and other activities inherent to the department.
Advantages of Line and Staff
Organization.
1. The accountability for objectives and the end results could still be carried from the heads of the
departments.
2. The internal lines could be traced in each of the staff departments with the functions of study,
research and advisory in nature.
3. The line continues through functional groupings which represent the primordial activities of the
department.
4. The line executives will be free of study and research activities which he could delegate to staff
executives, thus, improve performance on basic department functions.
5. The line and staff organization has the best features of the line and functional type as to
effectiveness of control, operating efficiency and economy
Functional Structure.
Company grows rapidly with good management. New opportunities are open for either vertical
or horizontal integration. Vertical integration could be defined as the operation of another line of
product or services which is different or similar to the present organization. The expansion
program would need new sets of specialists.

Horizontal integration, on the other hand, could be backward or forward movement of the
company. This is to effectively control the supply of materials in its present operation or the
processing of new products and marketing the same. Executive innovations would demand the
shift to functional structure. Under this set-up the mother company still maintains control of the
new divisions through its Board of Directors and Stockholders.
Features of Functional Structure.
1. Creation of a new Division to produce and market new products or services.
2. Assignment of Staff Specialists from the ranks of staff program executives who
are assets in the company's expansion
3. Functional structure could be the results of decentralization and specialization to
facilitate the ease of establishing control.
4. Create profit centers and delegate authority and responsibilities to where the action
takes place.
5. The Central - Management makes overall decisions in planning, organizing,
directing and controlling to proceed towards uniformity and effective coordination.
Advantages of Functional
Structure.
1. Functional structure unburdens top executives of the minute details of product diversification
2. It encourages the development of managerial talents and provides motivation to excel.
3. It provides products and markets' emphasis creating more sales volume through systematized
marketing system.
4. It gets more action at the right place and time
5. It stimulates the formation of small cohesive group of managers that plans operational details.
6. Managerial talents are developed. Team effort is the center of the game.
7. It demands a high degree of group efforts to communicate effectively with subordinates.
Disadvantages of Functional
Structure.
1. Over simplification may create loss of control of the operating units.
2. Assignments of favored personnel staff may create feeling of jealousy among executives.
3. Accounting and auditing system must be effectively implemented to assure operational
viability and profitability.
4. Over staffing is not economical in functional set up.