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Lecture 2

Unit 3 Organizations and Behaviour

Organizational Structure 1. Functional Structure

Why Study Organizational Structure

Good organizational structure leads to efficiency, and less conflicts

Bad organization leads to inefficiency and conflicts

There are 2 types of conflicts !

Due to personality

Due to organizational structure

An Example of Structural Conflict

Private School CEO



How to solve this problem ? We apply OB !

Organizational Structures
1. 2. 3. 4. 5. Simple Structure Team Structure Functional Structure Matrix Structure Divisional Structure (Federal Decentralization) 6. Simulated Decentralization 6. Other Structure System/Network

Others Topics we will cover

7. Issues in Organization structure 7.1 Formal and Informal 7.2 Centralized and Decentralized 7.3 Tall and flat 7.4. Span of control

Simple Structure
Simple structure is no structure Doing everything, help each other Most businesses start in this structure family like But it cannot grow!

Team Structure
Humans have used team for hundreds of thousands of years. In hunting ! What differential team structure from simple structure are roles.

Functional Structure
Functional structure organizes employees around specific skills or resources Organizations usually have some forms of functional structure at some level

CEO Chevrolet


Human Resources



Sales and Marketing

Example of a Functional Structure

Functional Structure
Human beings have used functional structure for thousands of years.

But modern discussion of Functional structure is by Henri Fayol, a French mining engineer, and later director of a mine.

Henri Fayol
French Mining Engineer And later director of a mine
His book

"Administration Industrielle et Gnrale",


The Theoretical Basis of Functional Structure

Adam Smith The Wealth of Nations, 1776 Productivity gain through Division of Labour Pins manufacturing. 10 persons, 10,000 pins..

The Wealth of Nations, Adam Smith, 1776

It contains 2 major ideas I. Laissez fair - free market , free trade
Adam Smith

II. Division of Labour

Division of Labour
The Wealth of Nations, 1776 The greatest important in the productive powers of labor, and the greatest part of skills, dexterity and judgment with which is any where directed or applied, seem to have been the effect of division of labour

Mine of Henri Fayol

Directeur General






Simple enough for functional structure to work well

A Possible Structure of a automotive company

Information Technology CEO Human Resources


Incoming Inspection


Quality Control


Assembly 1 Assembly 2

Assembly 3

Functional Structure
A manufacturing factory is usually organized by function Purchasing Incoming Inspection Process 1 Process 2 Out going inspection Storage Delivery Finance Human Resources

Others Functional Structure

Functional structure is used in - a school - an university - a hospital

Function = Department
e.g. Marketing Department is a function. It performs the function of marketing

Advantages of Functional Structure

1. Clarity everyone has a home. 2. Least Psychological Demands Functional structure makes the least psychological demands on people. They are highly secure in their work and their relationship. 3. It functions - if the tasks are simple and routine.

Disadvantages of Functional Structure

1. Poor Decision Making It is difficult for anyone, up to and including the top functional people, to understand the task of the whole. People do not know what other function is doing. They think their Department is the most important As soon as its approaches a degree of size or complexity friction build up. And if this happens, it requires a lot of coordination: meetings, committees, trouble shooters (Symptoms of dysfunctioning) Silos 2.0 Slow Communication Slow in communication

Disadvantages of Functional Structure

3. 0 Poor Management Development Functional structure also does poorly in developing, preparing, and testing men. Functional structure tends to make a man unfit for management - emphasis is on functional skills rather than on results and performance.

Poor Management Development

My personal experience: When a person has been doing the same function for a long time, he/she becomes very rigid, narrow minded, and stubborn. He/she is very nervous if he/she is asked to do a job outside their functions. The problem becomes more profound with old age.

Function and Dysfunction

Functional structure functions if the tasks are simple, routine and repetitive, or the organization is too big. Functional structure dysfunctions if the Tasks are complex, non-routine, or Changing, or the organization is too big

How to overcome the limitations

We will discuss in the next lecture 1. add a team structure 2. add a divisional structure