Organizational Systems

Part 1
Different Types of Organizational Structures
O r d e r & Te a m w o r k
Organizing

A process that initiates implementation of plans by

clarifying jobs, working relationships and
effectively deploying resources for attainment of
identified and desired results (goals). – Kheerti, n.d.
It is the process of establishing orderly uses for all
resources within the management system of the
organization. – Satyendra, 2015
Organizing
Identification and classification of
required activities in line with the
objectives
Grouping of the activities identified
Assignment of activities to the manager
Provision of authority to the manager
Coordination with other groups
Advantages of organizing

The internal environment is made clear

It determines who should do identified activities in the organization

It identifies who are responsible for the results

It removes obtacle

Smooth decision-making

Presence of communication network

Organization structure

Structure
– is the pattern of relationships along positions in
the organization and among members of the
organization.
Purpose:
Division of work among members
Coordination of activities
Defines:
Tasks and responsibilities
Work roles and relationships
Channels of communication
3 requirements of an organization structure

Organized for business performance

Least possible number of management levels

Make possible training and testing of future top

management
Objectives of
organizational
structure

Efficiency Activity Accountability

monitoring

Coordination Flexibility Social

satisfaction
Types of organization
structures Vertical structures (functional and
Organizational structures have evolved divisional)
from rigid, vertically integrated,
hierarchical, autocratic structures to
relatively boundary-less, empowered,
networked organizations designed to Matrix organizational structures
respond quickly to customer needs
with customized products and
services. – “Understanding
organizational structures,” n.d. Open boundary structures (hollow,
modular virtual and learning)
Types of organization Advantages Disadvantages
structures
People are in
Vertical structure: Functional The organization
specialized "silos" and
often fail to
develops experts in its
coordinate or
respective areas.
• Divides work and employees by communicate with
other departments.
specialization.
• It is a hierarchical, usually vertically Individuals perform
only tasks in which
Cross-functional
activity is more
integrated, structure. they are most
proficient.
difficult to promote.

• It emphasizes standardization in
organization and processes for This form is logical
The structure tends to
specialized employees in relatively and easy to
understand.
be resistant to change.

narrow jobs.
Types of organization structures Advantages Disadvantages
Vertical structure: Divisional
• Divides work and employees by output, although a divisional It provides more focus
It can result in a loss of
efficiency and a
structure could be divided by another variable such as market and flexibility on each
division's core
duplication of effort
because each division
or region. competency. needs to acquire the
same resources.
• For example, a business that sells men's, women's and Each division often has
It allows the divisions
children's clothing through retail, e-commerce and catalog to focus on producing
its own research and
development,
specialized products
sales in the Northeast, Southeast and Southwest could be while also using
marketing, and other
units that could
using a divisional structure in one of three ways: knowledge gained
from related divisions.
otherwise be helping
each other.
• Product—men's wear, women's wear and children's clothing.
• Market—retail store, e-commerce and catalog. It allows for more Employees with similar
coordination than the technical career paths
• Region—Northeast, Southeast and Southwest. functional structure. have less interaction.

Decision-making
authority pushed to
Divisions may be
lower levels of the
competing for the
organization enables
same customers.
faster, customized
decisions.

Each division often

buys similar supplies in
smaller quantities and
may pay more per item.
Types of organization structures
The Matrix Organizational Structure
A matrix structure combines the functional and divisional structures to create a dual-command situation.
In a matrix structure, an employee reports to two managers who are jointly responsible for the employee's
performance.
Typically, one manager works in an administrative function, such as finance, HR, information technology, sales
or marketing, and the other works in a business unit related to a product, service, customer or geography.

Types of organization
structures
The Matrix Organizational Structure
• This type of structure is helpful when
the product base expands in quantity
or complexity.
• But when competition among
divisions becomes significant, the
organization is not adapting quickly
enough, or when economies of scale
are lacking, the organization may
require a more sophisticated matrix
structure.
Advantages
• It creates a functional and divisional partnership and focuses
on the work more than on the people.
• It minimizes costs by sharing key people.
• It creates a better balance between time of completion and
cost.
• It provides a better overview of a product that is manufactured
in several areas or sold by various subsidiaries in different
markets.
Disadvantages
• Responsibilities may be unclear, thus complicating governance
and control.
• Reporting to more than one manager at a time can be
confusing for the employee and supervisors.
• The dual chain of command requires cooperation between two
direct supervisors to determine an employee's work priorities,
work assignments and performance standards.
• When the function leader and the product leader make
conflicting demands on the employee, the employee's stress
level increases, and performance may decrease.
• Employees spend more time in meetings and coordinating
with other employees.
Types of organization structures
OPEN BOUNDARY STRUCTURES
Advantages
• Typical internal and external barriers and
organizational boxes are eliminated, and • Ability to leverage all employees' talents.
all organizational units are effectively and • Faster response to market changes.
flexibly connected. • Enhanced cooperation and information sharing
• Teams replace departments, and the among functions, divisions and staff.
organization and suppliers work as
closely together as parts of one company. Disadvantages
• The hierarchy is flat; status and rank are
minimal.
• Difficulty in overcoming silos inside the organization.
• Lack of strong leadership and common vision.
• Everyone—including top management,
managers and employees—participates
• Time-consuming processes.
in the decision-making process. • The possibility of employees being adversely affected
by efficiency efforts.
• The use of 360-degree feedback • The possibility of organizations abandoning change if
performance appraisals is common as
restructuring does not improve effectiveness quickly.
well.
Types of organization
structures Advantages Disadvantages

OPEN BOUNDARY STRUCTURES: Hollow • Minimizing • Loss of control over

• Hollow structures divide work and
overhead. functions that affect
employees by core and noncore • Enabling the employees regularly.
competencies. organization to • Restriction by
• Hollow structures are an outsourcing model focus on its core certain industries
in which the organization maintains its core product and (e.g., health care) on
processes internally but outsources noncore
processes.
eliminating the need the extent of
to develop expertise outsourcing.
Hollow structures are most effective when
•
the industry is price competitive and
in noncore • Lack of competitive
choices for outsourcing exist. functions. outsourcing options.
• An example of a hollow structure is a sports
organization that has its HR functions (e.g.,
payroll and benefits) handled by outside
organizations.
Types of organization structures
OPEN BOUNDARY STRUCTURES: Modular
• Modular structures may keep a core part of the Advantages
product in-house and outsource noncore
portions of the product. • Minimizing the specialization and specialists needed.
• Networks are added or subtracted as needs • Minimizing overhead.
change. • Enabling the company to outsource parts supply and
• For a modular structure to be an option, the coordinate the assembly of quality products.
product must be able to be broken into chunks.
• For example, computer manufacturer Dell buys Disadvantages
parts from various suppliers and assembles them
at one central location. • Suppliers, or subcontractors, must have access to—
• Suppliers at one end and customers at the other and safeguard—most, if not all, of the core
become part of the organization; the company's data and trade secrets.
organization shares information and innovations • Suppliers could suddenly raise prices on or cease
with all. production of key parts.
• Customization of products and services results • Knowing where one organization ends, and another
from flexibility, creativity, teamwork and begins may become difficult.
responsiveness.
• Business decisions are made at corporate,
divisional, project and individual team member
levels.
Types of organization
structures Advantages Disadvantages
• Contributions from each • Potential lack of trust
OPEN BOUNDARY STRUCTURES: Virtual
part of the unit. between organizations.
• A virtual organization (sometimes called a • Elimination of physical • Potential lack of
network structure) is cooperation among boundaries. organizational
companies, institutions or individuals • Responsiveness to a rapidly identification among
delivering a product or service under a changing environment. employees.
common business understanding. • Lower or nonexistent • Need for increased
• Organizations form partnerships with organizational overhead. communication.
others—often competitors—that • Allows companies to be • Can quickly become overly
complement each other. more flexible and agile. complex when dealing with
• Give more power to all lots of offsite processes.
• The collaborating units present themselves • Can make it more difficult
employees to collaborate,
as a unified organization. for employees to know
take initiative, and make
• Virtual structures are collaborative and decisions. who has final say.
created to respond to an exceptional and • Helps employees and
often temporary marketing opportunity. stakeholders understand
• An example of a virtual structure is an workflows and processes.
environmental conservancy in which
multiple organizations supply a virtual
organization with employees to save, for
example, a historic site, possibly with the
intent of economic gain for the partners.
Types of organization
structures
OPEN BOUNDARY STRUCTURES:
Virtual
Types of organization
structures
OPEN BOUNDARY STRUCTURES: Learning
• A learning organization is one whose
design actively seeks to acquire
knowledge and change behavior as a
result of the newly acquired knowledge.
• In learning organizations, experimenting,
learning new things, and reflecting on
new knowledge are the norms.
• At the same time, there are many
procedures and systems in place that
facilitate learning at all organization
levels.
Advantages
Open communication and information sharing.
•
• Innovativeness
• Ability to adapt to rapid change.
• Strong organizational performance.
• Competitive advantage.
Disadvantages
• Power difference is ignored.
• Process of implementing will be complicated and
take longer.
• Fear of employee participation in organizational
decisions.
• Breaking of existing organizational rules.
Types of organization
structures
OPEN BOUNDARY STRUCTURES:
Learning
References

Kheerti, D. (n.d.). What is organizing in management.

https://www.economicsdiscussion.net/management/organizing/what-is-organizing-in-management/32438
Satyendra. (2015, August 7). Organizing: a management function.
https://www.ispatguru.com/organizing-a-management-function/
Understanding organizational structures. (n.d.).
https://www.shrm.org/resourcesandtools/tools-and-samples/toolkits/pages/understandingorganizationalstructu
res.aspx