ORGANIZATIONAL

STRUCTURE
 Learning Outcome

At the end of this lecture, the student should be able to understand:

1. The definition of organizational structure

2. Formal and informal organizational structures

3. Types of organizational chart

 What is Organisation?
 “Organisation is refers to a social groups designed to achieve
certain goals. Organisation involves creating a structure of
relationship among people working for the desired results”.
CONCEPT OF ORGANISATION
Organisation refers to the institution
Organising is one of the functions of management
 Organizational structure refers to the way in which a group is

formed, its lines of communication and its means for channeling

authority and making decisions.
 It clarifies the formal relationships of individuals in the various

positions within the organization.

Why do we need an Organizational
Structure ?
 PURPOSE

 Divides work to be done in specific jobs & dept.

 Assigns tasks and responsibilities associated with individual jobs.

 Coordinates diverse organizational tasks.

 Establishes relationship b/w individuals, groups and departments.

 Establishes formal lines of authority.

 Allocates organizational resources.

IMPORTANCE OF ORGANIZATIONAL STRUCTURE

 It enables members to know what their responsibilities.

 It freeze the manager and the individual workers to concentrate

on their respective roles and responsibilities.

 It coordinates all organization activities so there is minimal

duplication of effort or conflict.

 Avoids overlapping of function because it pinpoints
responsibilities.
 Shows to whom and for whom they are responsible.
 ORGANIZATIONAL RELATIONSHIP

1. FORMAL RELATIONS
2. INFORMAL RELATIONS
 ORGANIZATIONAL
RELATIONSHIP

1. FORMAL RELATIONS:
 Formal structure, through departmentalization and work

division, provides a framework for defining managerial

authority, responsibility and accountability.
 Formal Structure

Should Well
not be defined
flexible jobs

Formal
Channeled Definite
Organization
individual and authority /
group efforts responsibility
 ORGANIZATIONAL RELATIONSHIP
2. INFORMAL RELATIONS

 Informal structure is generally social, with blurred or shifting lines of authority

and accountability.

 It also has its own channels of communication, which may distribute

information more broadly and rapidly than the formal communication system.
 Informal Structure
A network of personal / social
relationships, not established, required
by FORMAL organization but arising
spontaneously

Loosely Structure (membership),

organized communication networks
Informal (“grapevine”), and
organization relationships behaviors and
norms do not necessarily follow
Flexible those of the formal
organization.

Ill defined

Spontaneous
Spontaneous
 Difference b/w formal and informal
organization
Basis for Comparison Formal Organization Informal Organization

An organization type in An organization formed

which the job of each within the formal
member is clearly defined, organization as a network of
Meaning whose authority, interpersonal relationship,
responsibility and when people interact with
accountability are fixed is each other, is known as
formal organization. informal communication.

Deliberately by top
Creation Spontaneously by members.
management.

To fulfill, the ultimate

To satisfy their social and
Purpose objective of the
psychological needs.
organization.

Communication Official communication Grapevine

Focus on Work performance Interpersonal relationship
Members are bound by
Authority All members are equal.
hierarchical structure.
 DEPARTMENTATION

The process of grouping the activities is commonly known as

“Departmentation”

Departmentation is useful for specialisation and fixation of

responsibility.

Departmentation concept is arise based on the organisation

functions.
 DEPARTMENTATION

Patterns used in Departmentation:

Departmentation By Function

Departmentation by Product or services

Departmentation by location or Territories

Matrix organization

Network organization
 DEPARTMENTATION
Patterns used in Departmentation:
Departmentation By Function
FUNCTIONAL ORGANISATION STRUCTURE

Functional structure is created by grouping the

activities on the basis of functional required for the
achievement of organisational objectives
For this purpose all the functions required are
classified into basic, secondary and supporting
functions

Features:
The whole activities of an organisation are divided
into various functions
Each functional area is put under the charge of one
executive
For any decision, one has to consult the functional
specialist
Limited span of control is there.
 FUNCTIONAL ORGANISATION
STRUCTURE
Merits:
Demerits:
High Specialisation
Calls for more coordination
Clarity in functioning
Clear line of authority
No duplication
Slow decision making
Satisfactions
Control and Coordinate
Suitability:
The establishment of functional organisation structure becomes
necessary as a small organisation grows and business activity
becomes more and more complete.
DEPARTMENTATION
Patterns used in Departmentation
Departmentation by Product or services
DEPARTMENTATION
Patterns used in Departmentation
Departmentation by location or Territories
 A company may have separate departments to serve the southern region,

northern region etc. It has the advantage of the intimate knowledge of local
conditions.
 Merits

 It motivates each regional head to achieve high performance.

 Provides each regional head an opportunity to adapt to his local situation and

customer need with speed and accuracy.

 It affords valuable top management training and experience to middle level

executives, enables the organization to take advantage of location factors, such

as availability of raw materials, labor, market, etc.
 Enables the Organization to compare regional performances and invest more

resources in profitable regions and withdraw resources from unprofitable ones.

Demerits

May give rise to duplication of various activities. Many routine

and service functions performed by all the regional units can be

performed centrally be the head office very economically.
Various regional units may become so engrossed in short run

competition among themselves that they may forget the overall

interest of the total organization.
 MATRIX ORGANISATION
STRUCTURE
Matrix organisation structure is essentially a violation of unity of
command
Matrix structure is the realisation of two-dimensional structure
which emanates directly from two dimensions of authority.
In matrix organization structure, a project manager is appointed to
co-ordinate the activities of the project.
Personnel are drawn from their respective functional departments.
Each functional staff has two bosses his administrative head and
his project manager.
 DESIGN OF
MATRIX ORGANISATION STRUCTURE
 MATRIX ORGANISATION
STRUCTURE
Merits:-
It offers operational freedom & flexibility
It focuses on end results.
It maintenance professional Identity.
It holds an employee responsible for management of resources
Demerits:-
It calls for greater degree of coordination,
It violates unity of command.
Difficult to define authority & responsibility.
Employee may be de motivated.
Suitability
It can be applicable where there is a pressure for dual focus, pressure
for high information processing, and pressure for shred resources.
Ex:- Aerospace, chemicals, Banking, Brokerage, Advertising etc.
 Network Structure
 An organization can be structured in various ways that

determine how it operates and performs.

 The network structure is a newer type of organizational

structure often viewed as less hierarchical (i.e., more flat),

more decentralized, and more flexible than other structures.

 In this structure, managers coordinate and control relations that

are both internal and external to the firm.

 For e.g.: T-shirt design company. Because the company leaders

are mainly interested in design, they may not want to get too
heavily involved in either manufacturing or retail; however,
both aspects of the business are necessary to complete their
operations. To maintain control of their product, they may rent
retail space through their network and purchase production
capabilities from a variety of partner organizations that have
their own manufacturing facilities. While the core company
focuses mainly on designing products and tracking finances,
this network of partnerships enables it to be much more than
just a design operation.
 Advantages:

 Flexible

 Cost effective

 Efficiency

 Disadvantages:

 Co-ordination Problem

 Loss of control

 Political pressure
Thank You