#3 Organization Structure

Sonakshi Gupta

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• https://www.youtube.com/watch?v=TIQ5hrfermg

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 Organization structure is defined as the
formal system of task and authority
relationship that controls how people
are to cooperate and use resources to
Organization achieve the organizational goal .
structure
The complexity of an organization's
structure is often proportional to its
size and its geographic spread.
 Sample of Org. Structure
TATA Motors: to be passionate in anticipating and
providing the best vehicles and experiences that excite
our global customers.

Tiago, Nexon,
Heavy vehicles
Harrier, Altronz

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Ford’s Assembly Line and Just in Time
• https://www.youtube.com/watch?v=Fgks7cAobsU (JIT)

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 It defines how task are to be allocated,
who reports to whom and the formal
coordination mechanisms and
interaction patterns that will be
followed.

Organization structure has three

Dimensions components:
1. Centralization: locus of
of Structure decision - making
2. Formalization: relies on rules
and procedures to direct the
behavior
3. Complexity : extent of
differentiation
 Elements/Dimensions of Org. Design
• Centralization
• Formalization
• Complexity/Differentiation
• Horizontal
• Work Specialization
• Departmentalization
• Vertical
• Span of control
• Spatial

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 Centralization
Centralization refers to the degree to which decision making is
concentrated at a single point in the organization.

• High concentration High Centralization

• Low concentration Low Centralization/Decentralization.

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 Manager closer to action & who have detailed knowledge
about problem than top manager takes the decision.

Organizations which have decentralized structure are more

Reasons for flexible while responding to any change in the environment.
Decentralization
? Provide motivation to employees by allowing them to
participate in the decision-making process.

Decentralization facilitates speedy action because it avoids

the need to process the information through the vertical
hierarchy

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 Sample of Org. Structure
TATA Motors: to be passionate in anticipating and
providing the best vehicles and experiences that excite
our global customers.

Tiago, Nexon,
Heavy vehicles
Harrier, Altronz

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 Formalization

Formalization refers to the degree to which jobs within the organization are standardized.

If a job is highly formalized, the job incumbent has a minimum amount of discretion over what
is to be done, when it is to be done, and how he or she should do it

Degree of formalization varies widely within and among organizations.

Organization use formalization because of the benefits that accrue from regulating employees'
behavior (Less Discretion) and reduces the variability of employee’s behavior

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Features of high & low Formalization

High Formalization  Low Discretion , Low Formalization  High Discretion

When Formalization is high When Formalization is low

Discretion is less, High Discretion for employees
Uniform output, Output is not as uniform comparatively
Many Organizational Rules Less Organizational Rules

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 1. Selection: An effective selection process will be
designed to determine if job candidates “fit”
into the organization. “Fit” includes
personality, work habits, and attitudes align
with what the organization desires.

2. Role Requirements. Individuals in organizations

fulfill roles. Every job carries with its
expectations on how the employee is
supposed to behave

Formalization 3. Rules, Procedures and Policies.

Techniques • Rules are explicit statements that tell an
employee what he or she ought or ought not
to do.
• Procedures are established to ensure
standardization of work processes. The same
input is processed in the same way, and the
output is the same each day
• Policies provide greater freedom than rules
do. Rather than specifying a particular
behavior, policies allow employees to use
discretion but within limited boundaries
 4. Training. Many organizations provide
training to employees. This includes the on-
the-job variety where understudy
assignments, coaching, and apprenticeship
methods are used to teach employees
Formalization preferred job skills, knowledge, and
attitudes. It also includes off -the-job
Techniques training such as classroom lectures, films,
demonstrations, simulation exercises, and
programmed instruction
 Complexity
Complexity refers to the degree of differentiation
that exist in the organization

Differentiation

a)Horizontal b) Vertical c) Spatial

Increase in a), b) or c) increases the

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Horizontal Differentiation refers to the degree of
differentiation between units based on the orientation of
members, the nature of the task they perform and their
education/training
The most visible
evidence of
Work Specialization
Horizontal
differentiation in Departmentalization
organizations can
be observed in

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 • Work-Specialization refers to the degree to which activities in
organization are subdivided into separate jobs.
• Jobs are divided in a number of steps, each completed by a
separate individual.
• Individuals specialize in doing part of an activity rather than
the entirety.
• Used more in Manufacturing jobs, Since employees don't have
Work- the same skills eg. Assembly line
• Outcomes
Specialization • Easy to assign jobs
• Less costly (to find and train workers)
• High efficiency & Productivity
• efficient use of employee’s skills (Improving it by
repetition)
• https://www.youtube.com/watch?v=qFbsDArAWj
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 Departmentalization
• Departmentalization is the basis by which similar jobs in an organization are
grouped together. (Manner in which divided tasks are combined and given to work
groups)
• Advantage- Increased accountability for performance because all activities related to
a specific product or service are under the direction of a single manager.
• Tasks can be combined on basis of :

Internal Operations External Operations

-Function - Product
-Processes – Similar to - Customers
Function but the focus is - Geographic
on processes : drilling,
cutting, painting, etc
Product Departmentalization
Horizontal Differentiation refers to the degree of
differentiation between units based on the orientation of
members, the nature of the task they perform and their
education/training
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 Vertical differentiation
Vertical differentiation refers to the depth in the structure.

More levels results in

• Communication distortion,
• Difficult to coordinate management decisions
• Difficult for Top Management to oversee the actions of operatives

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Span of Control : How
many subordinates can a
manager efficiently and
effectively direct?

It determines the number of

levels and managers in the
organization.

An organization would be
more effective with wider
span of control.

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Vertical differentiation: Span of Control

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Difference b/w Wider and Narrow Span of Control
Narrow Span of Control Wider Span of Control
Can keep Close control (tight Empowers employees
supervision)
Expensive Cheaper
Slower DM Faster DM
Flexibility & employee’s autonomy is less Flexibility and autonomy is more
Can isolate top management Top Management is not isolated
Vertical Communication becomes Vertical Communication is simple
complex

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Spatial Differentiation is the degree to which the
location of the Organizational offices, plants,
and personnel are dispersed geographically
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