Organization

Theories for
Effective
Business
Management

BY. DIVINA GRACE R. LIBREA

What I need to Know
After going through the module, you are expected to:
1. analyze the nature of organizations and types of
organization structures; and
2. apply organization theories for effective business
management.
Review
1. What is the difference between organization and
organizational structure?
2. Explain the major characteristics of organization.
3. Differentiate the 3 types of organizational structure.
2 Broader Organizational Structure
1. Formal Organization - usually represented
with organized charts and with position
descriptions.
2. Informal Organization - a set of evolving
relationships and patterns of human
interaction within an organization that do exist
but are not officially prescribed.
What is Organizational Design?
•It is the process of aligning an organization’s
structure based on its vision and mission.
•It is a careful study at the complex relationship
between tasks, workflows, responsibilities and
authorities, and making sure these all support the
objectives of the organizational strategy and
mandate.
2 Main Classifications of Theories
(by: Robbins and Coulter 2009)

1.Traditional - pertains to the usual

or old-fashioned ways
2.Modern - refers to contemporary
or new design theories.
Traditional Organizational Design
1. Simple Organizational Structure
2. Line Organizational Structure
3. Line & Staff Organization
4. Functional Organization
5. Divisional organization
1) Simple Organizational Structure
 Has few departments
 wide spans of control
 big number of subordinates directly reporting to a manager
 has a centralized authority figure
 has very little formalization of work
 usually used by companies that start out as entrepreneurial ventures
 2) Line Organizational Structure
simplest form of organizational structure
commonly adopted by small companies
has well-defined authority levels in the
hierarchical structure
Power flows from the top down to different
operational levels or workers.
hierarchical structure clearly defines authority,
responsibility, and accountability at each level.
3) Line & Staff
- this structure is more common in present-day, and most of
the larger enterprises adopt this type of set up. The staff
consists of two categories;
1. General Staff - consists of the ordinary employees that assist the
top management. These staff aren’t experts.

2. Specialized Staff - consists of experts that offer services to the

organization. Their roles can be advisory, control (as in quality
control), or service (such as maintenance).
4) Functional
Organization

This
organizational
design groups
together similar
or related
specialties.
5) Divisional Organization
This organizational design is made up of separate business divisions
or units, where the parent corporation acts as overseer to coordinate
and control the different divisions and provide financial and legal
support services.
This type of organization is suitable for companies that
- Operate in different geographical locations,
- Have chain stores with subsidiaries, and
- Banking and insurance business
Modern Organizational Design
1. Team Design - the entire organization is made up of work groups or
teams (problem solving)
2. Matrix – Project Design - refers to an organization design where
specialists from different departments work on projects that are
supervised by a project manager.
3. Boundary – Less Design - the design is not defined or limited by
vertical, horizontal and external boundaries. There are no
hierarchical levels that separate employees, no
departmentalization, and no boundaries that separate the
organization from customers, suppliers and other stakeholders.