Chapter 11

Structure and Controls with

Organizations
Objectives
• Understand and evaluate the relationship between the
organization’s strategy and its structure
• Develop an understanding about the types of organizational
structure and the factors influencing the structure.
• Analyze the need for developing organizational designs for
exploring new opportunities
• Discuss the functional structures used to develop and implement
business level strategies.
• Define various strategic networks, used to describe organizational
structures.
• Describe the Traditional and Contemporary Organizational Designs
 Organizational Structure

Organization structure refers to the roles and responsibility

assigned to different employees in an organization along with
their pre-defined interaction patterns. It helps in facilitating the
flow of information within the organization both vertically and
horizontally.

• Dimensions of Organizational Designs include- formalization,

specialization, and hierarchy of authority, centralization,
professionalism and personal ratios
Meaning and Importance of
Organizational Structure
• Formal distribution of work roles and functions within an
organization

• Represents a coordinated set of subsystems

• Helps organization to achieve its goals and mission.

• Works with Organization to create Understandability of events

• It also helps in Predicting and Controlling the events in the

organization.
Types of Organizational Structure

Organizational Structures

Macro Structures New Structures Micro Structures

• Simple • Horizontal/ Flat • Teams
• Functional • Network Organization • Informal Networks
• Divisional • Virtual Organization
• Matrix
• International
Organizational Designs

• It is the Foundation stone of any organization.

• Refers to Designing, Defining, Restructuring Organizational

Structure.

• Demonstrates different roles .

• How to deal with environmental factors in global market to which

organization does not have any experience.
 Simple Organization
Features
•Have simple and straight
structure

•Generally characterized by a
low degree of differentiation of
tasks divided among members.

Design of Simple Structure

•The leader in this structure has
great control
 Functional Organizational
Structure
• The entire organization is divided into smaller
groups or departments based their
specialization.

• The structure allows greater cohesiveness and

efficiency among the employees.

• Every department have their heads with a

difference in the reporting structure.
Divisional Organizational Structure

• In this types of structure the

organization has different
CEO
departments based on:
VP VP
Product
Geographic Territory Div. A GM Div. B GM Div. C GM

Project dDivision
HRM HRM
A HRM
dDivision A dDivision A
Combination Approach
FINANCE FINANCE FINANCE
dDivision A dDivision A
SALES&MRT SALES&MRT SALES&MRT
• Each organizational function has its
own division which corresponds to
products or geographies.
Matrix Structure

In a Matrix organizational structure, the relationships of reporting

managers are based on grid or matrix. It is a type of structure
wherein the people with similar skills are brought together for
certain set of assignments, which can result to having multiple
reporting officers.
International Structure

• The International Structure looks after

the operations and functioning of the
Organization and coordinates and
monitors all foreign activities.

• One person is designated as the Head of

the International Division and the
subsidiaries are made to report to him.

• The International structure ensures to

develop a holistic and unified approach
to international operations and
convinces the, management for the
growth and smooth functioning of the
division.
New Structures
• Horizontal or Flat Structure

Horizontal organizational structure is mostly adopted by smaller firms and mainly implemented
by start-up companies at their budding stage.

• Network Organizational Structure

This type of organizational structure are less hierarchical in nature, decentralized and more flexible.

• Virtual Organizational Structure

This structure works as virtual office comprising of a small group of full time employees and some
specialists, hired on a temporary basis to work on the opportunities that arise in the
organization.
 Micro Structures

Teams

Team-based organizational structures are made up of teams working towards a common goal
or set objective and it is less hierarchical and more flexible.

Informal Networks

Such structures are less rigid and they don’t have strong ties or imposed contracts on the
members. It allows the members to move freely in any direction, skip authorities and is
more socially structured
Organization Designs
• Organizational Structure and Design acts as a foundation stone demonstrating
different roles, hierarchy and levels, terms and conditions, ethical values in an
organization.

• It also refers to the restructuring and destructuring roles, hierarchy levels, terms and
conditions as per the organizational needs.

• The basic purpose of Organization Design is to find out any type of defective or
dysfunctional elements related to an organizational systems, structure, process and
work culture.
Mechanistic vs Organic Organization
Mechanistic Organic

 Rigid Hierarchical Relationships Collaboration at all levels

 Fixed Duties Adaptable duties
 Many Rules Few Rules
 Formal Communication Channels Informal Communication
Channels
 Centralized Decision Authority Decentralized Decision
Authority
 Taller Structures Flatter Structures
Contingency factors influencing
structural decisions

ORGANIZATION
STRATEGY

USE OF CONTINGENCY SIZE OF

TECHNOLOGY FACTORS ORGANIZATION

DEGREE OF
ENVIRONMENTAL
UNCERTAINITY
Overall Strategy of Organization

• An organizational strategy is the sum of the actions; a company intends to take to

achieve company’s goals. These plans are collectively termed as Company’s strategic
plans

• Organization Strategy can be categorized into

Grand strategy- including growth, diversification, integration, retrenching and
stabilization
Corporate and Business Strategy- including a set of strategies implemented
by business units of the organization.
Size of the organization

Size of the organization is determined by the number of people working there. The
large organization differs from the smaller ones in terms of labour, rules and
regulations, performance appraisal and budgeting procedures.

Use of technology by organization

Technology used by any organization refers to the knowledge, machinery, work

procedures and materials that can convert inputs into outputs.

Degree of environmental uncertainty

Macro- environment uncertainties including political, regulatory, statutory and

economic condition, apart from the environmental factors.
Common Organization Designs

Complexities and uncertainties in the business environment

make it necessary to design the organizational structure

and management system as such ways that the benefits

earned from operating in numerous countries are higher

than the cost incurred.

 Traditional Designs
Simple Structures- It is defined as a design with less departmentalization and a wide
span of control, centralized authority and less formalization. Such type of designs are
common with smaller firms and startup businesses

Functional Structure
In a Functional Structure, all the groups sharing common specialties come together.
The functional approach of departmentalization is applied to the whole organization

Divisional Structure
A divisional structure is comprised of distinct, separate and semi-autonomous divisions
Strength and Weaknesses of
Traditional Designs
STRUCTURE STRENGTHS WEAKNESSES

SIMPLE Fat, flexible, inexpensive to Not appropriate for the

maintain, clear bigger organizations,
accountability reliance on one person can be
risky

FUNCTIONAL Cost- saving, employees are Functional specialists

grouped with others having become insulated, and they
similar tasks have little understanding of
what other units are doing

DIVISIONAL Focuses on results, division Due to duplicate of activities

managers are accountable to and resources, it can incur
their products and services cost to management.
Contemporary Designs
• Team Structure
Team based Structure is a design in which the organization is made up of
teams and each team works towards achieving common goals.

Matrix Structure
Matrix structure assigns specialists from different departments to work on
one or more projects

Project Structure
In a Project Structure, the employees work continuously on the projects.
Each team is comprised of certain members from different departments
and they all work together to complete the assigned work.
Autonomous Internal Units
These are decentralized business units and they have their own products, clients,
competitors and profit goals. They are responsible and answerable for their own work.

Boundary less Organization

it is an unstructured design. These are highly flexible in nature as they have no chain
of command, departmentalization or organizational hierarchy

Learning Organization

type of organization have a strong organizational culture, where all the employees
have a common goal and they are willing to work together through sharing knowledge
and information. A learning organization has a well -defined team designed and
effective leadership
Strengths and Weaknesses of
Contemporary Designs
STRUCTURE STRENGTHS WEAKNESSES

TEAMS STRUCTURE  Employees are more  No clear chain of

involved and empowered. command
 Reduced barriers among  Pressure on teams to
functional areas perform.

MATRIX  Fluid and flexible design  Complexity of

STRUCTURE responding to assigning people to
environmental changes projects.

 Faster decision making  Tasks and

personality can
conflict

BOUNDARYLESS  Highly flexible and  Lack of control

STRUCTURE responsive
 Communication
 Draws on talent wherever difficulties
found

VIRTUAL  One can connect to a

large number of people at
the same time.

 Cost-effective as the
company does not have to
spend on buildings or
structures of the
organization

LEARNING  Highly adaptive

ORGANIZATION
 Flexible in nature