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Fundamentals of Organizational Structure

The document discusses different types of organizational structures including functional, divisional, geographic, matrix, horizontal, virtual networks, and hybrid structures. It describes the key components, strengths and weaknesses of each structure type.

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Israr Raja
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773 views

Fundamentals of Organizational Structure

The document discusses different types of organizational structures including functional, divisional, geographic, matrix, horizontal, virtual networks, and hybrid structures. It describes the key components, strengths and weaknesses of each structure type.

Uploaded by

Israr Raja
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
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Fundamentals of Organization

Structure
Organization Theory

Organizational Structure
How jobs/tasks are Formally Divided, Grouped, and
Coordinated.
Work Specialization
Departmentalization
Hierarchy Levels
Chain of Command
Span of control
Decision Making (Centralization and Decentralization)
Formalization
are components which determine organizational
structure.

Organization Structure
Formal Reporting Relationships
Number of levels
Span of control

Grouping of Individuals
Creation of departments/Divisions

Design of Systems
Communication, coordination, and integration of
efforts

A Sample Organization Chart

Information-Sharing Perspective
on Structure
Vertical and horizontal information flow
Traditional organization designed for efficiency?
Centralized authority focused on top level decisionmaking

Learning organization which emphasizes


communication and collaboration
Decentralized authority focused on shared tasks and
decisions

Efficiency versus
Learning Outcomes

Vertical Information Sharing


Vertical linkages coordinate activities
between the top and the bottom of the
organization
Hierarchical referral are the vertical lines
which identify the chain of command
Rules and Plans create vertical links
Reports, computer systems, and written
information are vertical information systems
7

Horizontal Information Sharing


Horizontal linkage coordinates activities across
organizational departments - not traditionally
drawn on the organizational chart
Information Systems-Cross Functional Info
system
Liaison (l-zn) Roles/Direct Contact
Task Forces/ Temporary Committee
Full-Time Integrator/Project/Product Manger
Teams :- Strongest Horizontal Linkage for
large/New product
8

Horizontal Information Sharing

Ladder of Mechanisms for


Horizontal Linkages-Project Manager

10

Teams and Horizontal Coordination

Relational Coordination
High level of horizontal coordination
Frequent, timely, problem-solving
communication
Relationships of shared goals, shared
knowledge, and mutual respect

12

Organization Design Alternatives


Required Work Activities/Strategically Important

Reporting Relationships/chain of command

Departmental Grouping Options

13

Departmental Grouping Options

Functional
Grouping

Divisional
Grouping

Horizontal
Grouping

Multifocused
Grouping

Virtual Network
Grouping

14

Functional Structure
Activities grouped by common function
All specific skills and knowledge are
consolidated
Promotes economies of scale
Slow response to environmental changes
A common approach but few companies can
respond in todays environment without
horizontal linkages
15

Functional: Strengths & Weaknesses

16

Divisional Structure
Product structure or strategic business units

Divisions organized according to products, services,


product groups
Good for achieving coordination across functional
departments
Suited for fast change
Loses economies of scale
Lacks technical specialization
17

Reorganization from Functional


to Divisional

18

Divisional: Strengths & Weaknesses

19

Geographic Structure
Organizing to meet needs of users/customers
by geography
Many multinational corporations are
organized by country
Focuses managers and employees on specific
geographic regions
Strengths and weaknesses similar to divisional
organization
20
.

Sample Geographic Structure

21
t.

Matrix Structure/Multi-focused
Both Product division and functional structure
(Horizontal and vertical) are implemented
simultaneously.
Multi-focused with strong horizontal linkage
Conditions for Matrix:
1. Share resources across the organization
2. Two or more critical outputs required: products innovation and
technical knowledge
3. Environment is complex and uncertain

Allows organization to meet dual demands


Largest weakness is that employees have two bosses
and conflicting demands
22

Sample Matrix Organization

Matrix: Strengths & Weaknesses

24

Horizontal Structure
Organization around core processes
Processes refers to tasks and activities

Shift towards horizontal structure during


reengineering
Eliminates vertical hierarchy and
departmental boundaries

25

Sample Horizontal Structure

Characteristics of
Horizontal Structure
Structure is created around cross-functional processes
Self-directed teams, not individuals, are dominant players
Process owners are responsible for entire process

People on the team are given authority for decisions


Can increase organizations flexibility
Customers drive the organization, measured by customer
satisfaction, employee satisfaction, and financial contribution
Culture is one of openness, trust, and collaboration; focus on
continuous improvement
27

Horizontal: Strengths & Weaknesses

Virtual Networks and Outsourcing


Extend horizontal coordination beyond the
boundaries of the organization
Most common strategy is outsourcing
Contract out certain tasks/functions

Virtual or modular structures subcontract


most of its major functions to separate
companies (In the modular structure, an organization focuses on

).
The virtual network organization serves as a
central hub with contracted experts
developing specialized and relatively autonomous strategic business units

29

Virtual Network Example

30

Virtual Network Strengths


and Weaknesses

31

Hybrid Structure
Combination of various structure approaches
Tailored to specific needs

Often used in rapidly changing environments


Greater flexibility

32

Hybrid Structure
Functional And Divisional :- Keep common
functional departments ( HRM, Law, Finance)
with headquarter and rest given to
Geographic /Product Division.
Functional and Horizontal Structure:Functional Structure at headquarter and
Horizontal structure at Division.

Two Hybrid Structures

Application of Structural Design


Each structure meets different needs and is a tool
that can help managers be more effective
Structural alignment aligns structure with
organizational goals

35

Structural Alignment
The most important decision that managers
make about Structural Design is to find the
right balance between Vertical Control
and Horizontal coordination.

Structure to Organizations Need for


Efficiency vs. Learning

37

Symptoms of
Structural Deficiency
Decision making is delayed or lacking in
quality
The organization does not respond
innovatively to a changing environment
Employees Performance Declines and Goals
are not being met
Too much conflict is evident

Design Essentials
Structure must provide a framework, linking
organization into whole
Provide vertical and horizontal linkages
Variety of alternatives for grouping
Virtual network extends horizontal coordination
Matrix structure attempts to achieve balance

Managers must find right balance


The purpose of the organization chart is to encourage
and direct activities
39

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