ORGANIZATIONAL

STRUCTURE & DESIGN

What is an Organisational Structure
 The organisational structure defines the
organisation’s hierarchy of people and
departments as well as how information flows
within the organization.
 The organisational structure determines how
and when information is distributed as well as
who makes what decisions based on the
information available.
 How job tasks are formally divided, grouped
and coordinated.
 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.
 The Designing the Process cont…
1. Develop a clear mission statement for the
organization. Focus the organisation structure
around the mission statement.
2. The mission statement should include the
inter-relationship between workers at every
level as well as inspiring innovation and
ensuring efficiency.
 The Designing the Process cont…
3. Decide whether the organisation structure will
be centralized and formal or decentralized
and informal. For centralized and formal
organisations, the organisation structure takes
more of a top-down approach with strictly
defined work roles.
For decentralized and informal organizations,
there is more of a cooperative approach with
workers often performing a wide range of
functions.
 The Designing Process cont…
4. The organisation structure can be department
based or based on a particular project or process.
Department -based organization structure is
often divided into line functions (such as
manufacturing) and staff functions (such as
human resources).
 The Designing Process cont…
5. Design the overall chain of command for the
organisation. If there is a single overall
director or leader, determine the title for that
role. If there are dual or multiple leaders,
divide the overall company function between
the various roles in a way that there is a clear
unity of command.
 The Designing Process cont…
7. Add subordinate roles to the chain of
command. Determine the process of reporting
from subordinate to supervisor and make
allowances for special circumstances (such as
an emergency). Indicate if and how
interactions across departments or projects
will take place.
 Designing the Process
8. Determine the authority and responsibility to
be assigned to each position in the
organization structure. Attempt to achieve a
minimum of overlapping functions. Also,
attempt to minimize any possible confusion
by subordinates concerning which supervisors
to consult with on specific issues.
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
I. 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.
 TYPES OF ORGNAZATIONAL
STRUCTURES cont…
II. 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.
They have fewer departments, which makes the
entire organization a very decentralized one.
 Types cont..
III. 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.
Managers of line and staff have authority over
their subordinates, but staff managers have no
authority over line managers and their
subordinates.
 LINE & STAFF STRUCTURE cont.
 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.
 IV MARKET STRUCTURE
 Market Structure – market structure is used to
group employees on the basis of specific
market the company sells in a company could
have three different markets they use and
according to this structure, each would be a
separate division in the structure.
 V 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.
 VI. MATRIX STRUCTURES
 Matrix Structures
This is a structure, which has a combination
of function and product structures. This
combines both the best of both worlds to
make an efficient organizational structure.
This structure is the most complex
organizational structure.
 Components of Organizational
Structure
Organizational Design
Management decisions and actions that result in a
specific organization structure and work
specification including:-
1. Work Specification: Specify to what degree the
tasks are subdivided into separate jobs
2. Departmentalization: The basis in which jobs will
be grouped together
3. Chain of Command: To whom do individuals and
groups report to.
Organizational Structure cont..
4. Span of Control: The number of people that
a can a manager efficiently and effectively
direct.
5. Centralization and Decentralization:
Where is the decision making authority?
6. Formalization: To what degree will there be
rules and regulations to direct employees and
managers?
 Division of Labour/specialization
This is a process of identifying the specific
jobs that need to be done and designing the
people who will perform them. Job
specialization can occur in 3 different ways:
1. Personal Specialties: occupational and
professional specialties e.g. accountants,
engineers, scientists.
Division of Labour cont..
2. Horizontal Specialties: work is divided by
the natural sequence order e.g.
manufacturing plants divide work into
fabricating and assembly.
3. Vertical Specialties: Work is divided along
the vertical plane of an organization from the
lowest level manager to the highest level
manager.
Delegation of Authority
Process of distributing authority downward in an
organisation. Whether an organisation chooses to
centralize or decentralize will be guided by:
1. How routine and straightforward are the job’s
required decisions?
2. Are individuals competent to make decisions?
3. Are individuals motivated to make the decisions?
Delegation of Authority cont..
Reasons to Decentralize Authority:-
 It encourages the development of professional
managers.
 Managers are able to exercise more autonomy
but it can lead to a competitive climate.
Delegation of Authority cont…
Reasons to Centralize Authority:-
1. When the managers are not skilled enough
and would need further training which can be
expensive.
2. When there are new administrative costs
because new divisions need to be formed.
3. Decentralization can mean duplication of
functions.
Departmental Bases
 The process of grouping jobs into logical
units.
 The process in which an organization is
structurally divided by combining jobs in
departments according to some shared
characteristics.
1. Functional Departmentalization
2. Geographical
3. Product
Multiple Forms of Departmentalization
President

Functional Departmentalization

Vice President Vice President Vice President Vice President

Marketing Production Finance Training

Geographical Departmentalization

Nairobi Plant Mombasa Plant Johannesburg Plant Bulawayo Plant

Manager Manager Manager Manager

Product Departmentalization

Consumer Products Industrial Products Marketing Products Training Products

SPAN OF CONTROL
This is the number of individuals who report
to a specific manager.
Three factors are important in determining
optimum span of control:-
 Required Contact
 Degree of Specialization
 Ability to communicate