Nature of Organizations and

the Types of Organization

Structures

Marivic P. Ramon
Subject Teacher
Organizing

 the process of arranging and allocating work,

authority, and resources among an organization’s
members so that they can achieve organizational
goal.
Stoner, Freeman and Gilbert
Nature of Organization:
 Differentiation in organization involves division of labor and
specialization (Bateman and Snell, 2008)

 Division of Labor=assigning different tasks to different people in the

organization’s different work units

 Specialization= the process in which different individuals and units

perform different tasks

 Integration=another process in the organization’s internal environment

which involves the collaboration and coordination of its different work
units or work divisions
 Anorganization’s overall work is complex and would be
too much for any individual hence the bigger the
organization, the more work units or work divisions and
specializations are to be expected.

 Themore highly differentiated an organization is, the

greater the need for integration.
ORGANIZATIONAL ARCHITECTURE/STRUCTURE

=made up of tasks to be accomplished, work movements from one

work level to other work levels in the system, reporting relationships
and communication passageways that unite the work of different
individual persons and groups
1. Vertical differentiation
 Tall versus Flat Structure

2. Horizontal differentiation
 Functional Structure
 Multidivisional Structure
 Geographic Structure
 Matrix Structure
3. Network Structure
A. VERTICAL STRUCTURE
=clears out issues related to authority rights,
responsibilities and reporting relationships
AUTHORITY RIGHTS
=the legitimate rights of individuals, appointed in positions like
presidents, vice presidents, managers and the like, to give orders to
subordinates, who in turn, report to them what they have done.
ORGANIZATIONAL ARCHITECTURE -
VERTICAL INTEGRATION
 Tall Organization:
This type of organizational architecture has many layers and narrow
span of control.
 Flat organization:
This type of organizational architecture has few layers and wide span
of control.
 ESTABLISHING REPORTING RELATIONSHIPS:
TALL VERSUS FLAT ORGANIZATIONS
 Tall Organizations
more expensive because of the number of managers involved.
Foster more communication problems because of the number of people through whom
information must pass.
 Flat Organizations
Lead to higher levels of employee morale and productivity.
Create more administrative responsibility for the relatively few managers.
Create more supervisory responsibility for managers due to wider spans of control.
B. HORIZONTAL STRUCTURE
=refers to the departmentalization of an organization into smaller work units
as tasks become increasingly varied and numerous
Types of Department:
1. Line Departments
=deals directly with the firm’s primary goods and services; responsible for
manufacturing, selling and providing services to clients
2. Staff Departments
=support the activities of the line departments by doing research, attending
to legal matters, performing public relations duties, etc.
Approaches of Departmentalization
 Divisional or M-form (Multidivisional) Design

=departments are formed based on management of their products, customers or

geographic areas covered
= Activities are decentralized down to the divisional level; others are centralized
at the corporate level.
=The largest advantages of the M-form design are the opportunities for
coordination and sharing of resources.
 MATRIX STRUCTURE:
Advantages:
 Enhances organizational flexibility.
 Team members have the opportunity to learn new skills.
 Provides an efficient way for the organization to use its human resources.
 Team members serve as bridges to their departments for the team.

 Disadvantages:
 Employees are uncertain about reporting relationships.
 The dynamics of group behavior may lead to slower decision making, one-person domination,
compromise decisions, or a loss of focus.
 More time may be required for coordinating task-related activities.
 C. NETWORKING STRUCTURE

=Collection of independent, single function organizations or companies that

work together in order to produce a product or service
=each organization is capable of doing its own work activities independently
like reducing, distributing, designing etc. but also capable of working
effectively at the same time with other network members

=communication is by electronic means where sharing of information is speedy

Seatwork: Group Performance Activity
1 sheet pad paper
Construct an organizational chart of your own business
using the functional approach of the horizontal organization
structure.