ORGANIZATIONAL

STRUCTURE & DESIGN

A social unit of people, systematically
structured and managed to meet a need
or to pursue collective goals on a
continuing basis.
 Organisation Design
Organization Design refers to the process of
creating hierarchy in the organization structure
and determining the flow of responsibility and
authority within the structure in an organization.
All Organizations have a management
structure that determines the
relationships b/w functions and
positions and subdivides
and delegates roles,
responsibilities and
authority to carry
out defined tasks.
It is a framework within which an
Organization arranges its lines of
authorities and communications and
allocates rights and duties.
The importance of the Organizational
Structure
□ The Organisational Structure is important
because it ensures that there is an efficient
operation of a business and it clearly
defines its workers and their functions.
The organisational structure also helps define
□

the hierarchy and the chain of command.

The Concept of Organisation Structure
❑ Structure helps influence behaviour
and relationships of jobs and functions
Structure defines recurring activities and
❑

processes.
Structure provides a purposeful and goal-
❑

oriented behaviour.
 Determinants of Organisation Structure:
1.Objectives and Strategy:
• Design of structure begins with the identification
of organisational objectives.
•There is no way of devising what the main
structure of an organisation should be, without an
understating of what the organisation is for and what
it is trying to achieve.
•Since an organisation is a goal-oriented system,
it is quite legitimate that its goals have decisive
role in designing its structure.
•The goals determine its tasks and strategies. If
management makes a significant change in its
strategy, the structure will need to be modified to
accommodate and support such change.
2.Environment:
•Organisation is a system and every system has
its boundaries.
•Beyond the boundaries, there exists external
environment which affects not only the
formation and functioning of the organisation but
also its structure.
•To cope with changing environment, among
other things, organisational process, goals and
structure are changed and made in line with
changes.
• Added to it, organisation being a sub-system of
environment interacts with the environment on
regular basis for getting inputs and supplying output.
•Environment includes all those economic, social,
cultural, political, legal and technological factors
which directly or indirectly affect the functioning of
the organisation.
• Therefore, the structure of the organisation is to be
designed in view of changes likely to take place in
environment.
3. Technology:
•The organisation structure of an enterprise
depends upon the type and nature of
technological process adopted for the production.
• Therefore, technology is a factor for
consideration in determining the structure of an
organisation.
4. People:
•Organisations are formed by and operated
through people.
•Large number of people are employed for both
managerial and non-managerial jobs and various
activities are assigned to them and finally they
are put in authority relationships.
•These people carry some goals, values,
perceptions, beliefs and attitudes which have
direct reflection on the structure of organisation.
•Therefore, these factors must be taken care of at
the time of designing the organisational
structure.
•Indeed, the tasks, activities, goals and
technology will gain more meaning if they are
built around the people.
5. Size:
•There are several criteria to determine size of an
organisation such as number of persons
employed, amount of capital invested, volume of
turnover, and physical capacity.
•However, ‘size’ has generally been used to refer
to the number of employees or members of an
organisation.
•Thus organisations could be small or large
depending upon the number of their employees.
•As an organisation grows in size, its structure
naturally becomes more complex or complicated.
• Jobs that could once be handled by a single
person are split and split again; new layers of
supervision are inserted between the top
executive and the rank and file.
•An organisation is forced, it its size increases, to
realign duties and responsibilities and more often
than not, to add new integrating units.
6. Social Needs:
•The social needs of an individual such as—
status, recognition, sense of belonging,
opportunity for development of abilities or the
satisfaction of ego need—require that they
should be given due weight for their fulfilment
within the organisation.
•The structure of an organisation cannot ignore
these social needs.
The effects of structure on individual
and group
The structure of any organisation will affect the
following:-
1. Behaviour of how people act and work

2. Motivation of workers

3. Performance

4. Teamwork and cooperation

5. Intergroup and interdepartmental

relationships
 TYPES OF STRUCTURES
Functional structure – this kind of
organisational structure classifies people
according to the function they perform in
the organization. The organisation chart for
a functional based organisation consists of:
Vice President, Sales department, Customer
Service Department, Engineering or
production department, Accounting
department and Administrative department.
Functional Structure Cont.

□ Product structure – a product structure is

based on organizing employees and work on
the basis of the different types of products. If
the company produces three different types of
products, they will have three different
divisions for these products.
 Line Structure:
•This has a very specific line of command. The
approvals and orders in this kind of structure
come from top to bottom in a line.
•Hence the name line structure. This kind of
structure is suitable for smaller organizations.
•This is the sort of structure allows for easy
decision making, and is very informal in nature.
 Line and Staff Structure
• Line and structure combines the line
structure where information and approvals
come from top to bottom, with staff
departments for support and specialization.
Line and staff organizational structures are
more centralized.
• In the line and staff organisation, line executives
and staff (specialists) are combined together.
The line executives are ‘doers’ whereas staff
refers to experts and act as ‘thinkers’.
Line & Staff Structure
□ •Managers of line and staff have authority
over their subordinates, but staff managers
have no authority over line managers and
their subordinates.
•The decision making process becomes
slower in this type of organizational
structure because of the layers and
guidelines that are typical to it, and the
formality involved.
 Market Structure
• □Marketing organization structures distribute and
oversee(run) marketing operations, procedures and
strategies within a business.
• These structures define and organize employee job
roles, including who they report to, and outline the
processes a business can use to achieve success.
• An effective marketing organization structure can
support business objectives and give employees a
clear understanding of the objectives they are
working to achieve.
 Geographic Structure
□ Geographic structure – large organizations
have offices at different place, for example
there could be a north zone, south zone, west
and east zone. The organizational structure
would then follow a zonal region structure.
 Matrix Structures
•A matrix organisation, also referred to as the
“multiple command system” has two chains of
command.
•One chain of command is functional in which
the flow of authority is vertical.
•The second chain is horizontal depicted by a
project team, which is led by the project, or
group manager who is an expert in his team’s
assigned area of specialization.
 Matrix Structure

•The organisation is divided into different functions,

e.g. Purchase, Production, R&D, etc. Each function
has a Functional (Departmental) Manager, e.g.
Purchase Manager, Production Manager, etc.
• The organisation is also divided on the basis of
projects e.g. Project A, Project B, etc. Each Project
has a Project Manager e.g. Project A Manager, Project
B Manager.
•In this structure, employees usually have dual
reporting relationships - generally to their
functional manager as well as the project
manager.
•Typically, one reporting line will take priority
over the other (eg staff may have to report to
their functional manager before reporting to the
project manager).
•It can be applicable where there is a pressure for
dual focus, pressure for high information
processing and pressure for shred resources.
•This structure is widely used both by companies
that are constantly launching new products and 
marketing campaigns, for example, and by
companies that have project-based structures, but
also believe that functional supervision is
necessary and important.
•Manufacturing activities- aerospace, chemicals,
electronics, heavy equipment, industrial product
and pharmaceuticals;
•Service activities- banking, brokerage,
construction, insurance and retailing
•Professional activities-accounting, advertising,
consulting and law
•Non-profit organisations- Govt. agencies, hospital,
United Nations and universities.
Project Structure
•Highly dynamic and creative companies – such as
software developers, architecture firms, special industrial
equipment installation projects and event organization
companies – typically use this structure.
•It’s characterized by a series of specialized employees,
ready to compose a work team as needed.
•In each project, these collaborators report to a different 
leader.
•Once they complete the project, a manager assigns
them a new project and leader.
 Virtual Structure
•A virtual organization is an operation where all
members of the company work in different geographic
locations while appearing as a single unit.
• It uses computers, software, phones and other
technology to work together and converse in real-time,
despite any physical distance.
•It's important for virtual organizations to establish
detailed procedures that ensure consistency in
employee performance and provide employees with the
ample resources and support they need to conduct their
responsibilities in a remote work environment.
• Virtual organization can be thought of as a way in
which an organization uses information and
communication technologies to replace or
augment (enhance) some aspect of the
organization.
• People who are virtually organized
primarily interact by electronic means.
• For example, many customer help desks
link customers and consultants together
via telephone or the Internet and
problems may be solved without ever
bringing people together face-to-face.