Determinants Of Organizational Structure 2l6j25

Determinants of Organizational Structure

Determinants of Organizational Structure Environmen t

Size

Technology

Environment

Internal Factors

External Factors

Organizational structure depends upon the environment, specially External Environment/Factors.

Customer

i.e. whether the external environment is stable or dynamic

International Environment

Culture Economic

Technology

Organizational structure depends upon technology as well If technology is simple then Technology is Mechanistic simple structure will be good

If technology is advanced then organic Or or complicated/Advanced advanced organizational structure will be needed.

Size If organization is big & lots of people are working then It requires HIGH DEGREE OF DISCIPLINE & COMMAND a formally structured chain of command

Types of Organizational Structure

Types of organization structures Line organization Line & staff organization Functional organization

Project organisation

Matrix organisation Divisional organization

Line Organization Line organization is the most oldest and simplest method of istrative organization. According to this type of organization, the authority flows from top to bottom in a concern. The line of command is carried out from top to bottom. 

Features – of Line Organization 1. It is the most simplest form of organization. 2. Line of authority flows from top to bottom. 3. Specialized and ive services do not take place in these organization. 4. line officers independently take decisions in their areas and spheres. 5. This kind of organization always helps in bringing efficiency in communication and bringing stability to a concern.

Merit s Simplest- It is the most simple and oldest method of istration. Unity of Command- In these organizations, superiorsubordinate relationship is maintained and scalar chain of command flows from top to bottom.

Better discipline-

control is unified & concentrates on one person and therefore, he can independently make decisions of his own.  The

Unified control ensures better discipline.

Flexibility-  There is a- co-ordination between the top most authority and bottom line authority. Since the authority relationships are clear, line officials are independent and can flexibly take the decision. This flexibility gives satisfaction of line executives.

Prompt decision- Due to the factors of fixed responsibility and unity of command, the officials can take prompt decision.

Fixed responsibility In

this type of organization,

every line executive has got fixed authority, power and fixed responsibility attached to every authority.

Scalar chain

Scalar Chain (line of authority) . Formal chain of command running from top to bottom of the organization, Scalar Chain is the number of different levels of authority through which decisions are ed in the organization.

Were we can see Scalar chain ?

like

military

Over reliance The line executive’s decisions are implemented to the bottom. This results in over-relying on the line officials. Lack of specialization-  A line organization flows in a scalar chain from top to bottom and there is no scope

for specialized

functions.

For example, expert advices whatever decisions are taken by line managers are implemented in the same way.

Demeritsline organization structure

Demerits

Inadequate communication- The policies & strategies which are framed by the top authority are carried out in the same way. This leaves no scope for communication from the other end. The complaints and suggestions of lower authority are not communicated back to the top authority. So there is one way communication. Lack of Co-ordination- Whatever decisions are taken by the line officials, in certain situations wrong decisions, are carried down and implemented in the same way. .’. , the degree of effective coordination is less. Authority leadership- The line officials have tendency to misuse their authority positions.?

2-Line & Staff OrganizationIn types of organization structure

Line and staff organization is a modification of line organization it is more complex than line organization. According to this istrative organization, specialized and ive activities are attached to the line of command by appointing staff supervisors & staff specialists are attached with the line authority.

President Line

Legal councilSTAFF

Public relations advisor- staff vice President- line

Engineering staff

Personnel staff Plant manager-

Supervisor – machine shop Workers

Supervisorassembly level Workers

Line authority Line authority or function is a Direct or main function of an individual or department. It involves Direct and Legitimate Authority over subordinates. It decides what to do, and when to do it. eg., Production for a Manufacturing company.

Staff Authority on the other hand is an assistant function as it guides line managers or functions into performing a specific activity. They are more specialized and therefore provide advice to Line authority. eg., Human Resource (HR) for a Manufacturing

Features -of Line & Staff Organization 1. Line and Staff Organization is a compromise of line organization. It is more complex than line concern. 2. Division of work and specialization takes place in line and staff organization. 3. The whole organization is divided into different functional areas to which staff specialists are attached. 4. Efficiency can be achieved through the features of specialization. 5. There are two lines of authority which flow at one time in a concern : Line Authority Staff Authority 6. Power of command remains with the line executive and staff serves only as counsellors.

Merits of Line & Staff Organization

Relief to line of executives- here

advice and counselling provided to the line executives it divides the work between the two. The line executive can concentrate on the execution of plans -----so they get relieved of dividing their attention to many areas.

Expert advice- it

facilitates expert advice to the line executive at the time of need. The planning and investigation related to different matters can be done by the staff specialist and further line officers can concentrate on execution of plans.

Benefit of Specialization

-here

division of whole concern done in 2 types of authority divides the enterprise into parts and functional areas. This way every officer or official can concentrate in its own area.

Better co-ordinationit deals to provide better decision making & concentration remains in few hands. This feature helps in bringing coordination in work as every official is concentrating in their own area.

Benefits of Research and Development-?  Through the advice of specialized staff, is dr so the line executives get time to execute plans by taking productive decisions which are helpful for a concern. This gives a wide scope to the line

executive to bring innovations and go for research work in those areas. This is possible due to the presence of staff specialists.

Training-  Due to the presence of staff specialists & dr expert advice it serves as

ground for training 2 da line officials.

Demerits of Line & Staff Organization Lack of understandingIn line & staff dr r 2 types of authority flowing at one time. This results in the confusion between the two. As a result, the workers are not

able to understand as to who is their commanding authority. Hence the problem of understanding can be a hurdle in effective running. Lack of sound advice-  The line official – get used to the expertise advice of the staff. At times the staff specialist also provide wrong decisions which the line executive have to consider. This can affect the efficient

Contd… Line and staff conflictsLine and staff are two authorities which are flowing at the same time. The factors of designations, status influence sentiments which are related to their relation, can pose a distress on the minds of the employees. This leads to minimizing of coordination which hampers a concern’s working. Costly- In line and staff concern, the concerns have to maintain the high remuneration of staff specialist. This proves to be costly for a concern with limited finance.

Functional Organization

Functional organisation

Suggested by

F.W. Taylor

Functional Organizatio n

This is an organization in which we can define As its a system in which functional department are created to deal with the problems of business at various levels.

Features Entire organizational activities divided into specific functions such as operations, finance, marketing and personal relations. 2. Three authorities exist- Line, staff and function. 3. Each functional area is put under the charge of functional specialists and he has got the authority 2 give all decisions regarding the function whenever the function is performed throughout the enterprise. 4. Principle of unity of command does not apply to such organization as it is present in line organization.

Merits 1. Specialization- Better division of labour takes place which results in specialization of function and it’s consequent benefit. 2. Effective Control- Management control is simplified as the mental functions are separated from manual functions. Checks and balances keep the authority within certain limits. Specialists may be asked to judge the performance of various sections. 3. Efficiency- Greater efficiency is achieved because of every function performing a limited number of functions. 4. Economy- Specialization compiled with standardization facilitates maximum production and economical costs. 5. Expansion- Expert knowledge of functional manager facilitates better control and supervision.

Demerits 1. Confusion- The functional system is quite complicated to put into operation, especially when it is carried out at low levels. Therefore, co- ordination becomes difficult. 2. Lack of Co- ordination- Disciplinary control becomes weak as a worker is commanded not by one person but a large number of people. Thus, there is no unity of command. 3. Difficulty in fixing responsibility- Because of multiple authority, it is difficult to fix responsibility. 4. Conflicts- There may be conflicts among the supervisory staff of equal ranks. They may not agree on certain issues. 5. Costly- Maintenance of specialist’s staff of the highest order is expensive for a concern.

Divisional Structure

Divisional Structure OF McDonald's

DIVISIONAL STRUCTURE-

or departmental organisation involving grouping of people or activity , With similar characteristics into da single department or units,

self cantered structures & these departments operate well if these were small organisations, Organisational goals are prescribed by organisational policies n plans , Here decisions are generally decentralized N decisions guide their own activities

The divisional organizational structure organizes the activities of a business around geographical, market, or product and service groups. Every division would handle its own –

ing, sales and marketing, engineering, production, and so forth. The divisional structure is useful when a company has many REGIONS, MARKETS, OR PRODUCTS. OVERALL , it can cause

higher total cost

Advantage of Divisional Structure ability. This approach makes it much easier to assign responsibility for actions and results.

Competition. The divisional structure works well in markets where there is a great deal of competition, where local managers can quickly shift the direction of their businesses.

Culture.You can use this structure to create a culture at the divisional level that most closely meets the needs of the local market.

Contd…

Multiple offerings. When a company has a large number of product offerings, or different markets that it services, and they are not similar, it makes more sense to adopt the divisional structure. Speed. This tends to faster responses to local market conditions. Bz many people r engaged

Disadvantage of Divisional Structure Cost. When you set up a complete set of functions within each division, there are likely to be more employees in total than would be the case if the business had instead been organized under a purely functional structure. Also, there must still be a corporate organization, which adds more overhead cost to the business.

Inefficiencies. When there are a number of functional areas spread among many divisions,

no one functional area will be as efficient as would have been the case if there had instead been one central organization for each function.

Contd…

Rivalries. The various divisions may have no incentive to work together, and may even work at cross-purposes,

Strategic

focus.-

Each division will tend to have its own strategic direction, which may differ from the strategic direction of the company as a whole.

Divisional organisation types Departmentation by product Departmentation by customers Departmentation by area Departmentation by time

Departmentation by Product

In product or service departmentation, every major product is organised as a separate department each department looks after the production, sales and finance of one product. Product departmentation is useful when product expansion and diversification, General motors has 6 divisions- which are decentralized , Ex- Pontiac, chevrolet ….

Departmentation by Area

Area departmentation is very useful to a large-scale enterprise whose activities are geo-graphically spread over a wide area.  Under territorial or geographical departmentation, activities are divided into zones, divisions and branches. Overall- such divisions are specially useful for large org, dat r geographically spread out Banks, insurance companies, transport companies, distribution agencies are examples of such enterprises.

Departmentization by area - dr will be a separate vice president of marketing who s responsible for – promotion of the product In EASTERN REGION, NORTH WESTERN REGION, SOUTHERN & SO ON…..

Departmentati on by Customer

Departmentation by Customer Under this basis of departmentation, activities are grouped according to DIFFERENT type of customers. This type of departmentation is useful for banks, departmental stores, etc., which sell a product or service to a number of distinct and clearly defined customer groups. Each department specialises in serving a class of customers.

particular

For example, a large readymade garment store may have a separate department each for women, children and men. A bank may have separate loan departments for large-scale and small-scale businessmen.

Departmentation by Time Under this basis activities are grouped on the basis of the time of their performance.

For example,a factory operating twenty-four hours may have three departments, one each for morning, day and night shifts. The idea is to obtain the advantages of people specialised to work in a particular shift. HOSPITALS & OTHER PUBLIC UTILITY COMPANY such astelephone…. Were telephone companies hv day n evening shift n night 1v….

Project Organization

These are temporary organizational structures formed for specific projects for a specific period of time & once the goal is achieved, these are DISMANTLED

What basically happen here is that for any special or specific project various specialist from various department (Viz. Production, Engineering, Quality control, Marketing etc) are brought together. Once the work is completed they go back to their respective departments.

Features of Project Organization 1. When project is clearly defined on what to do & what to achieve basis. 2. The project is separate & unique & it can’t be done as a part of daily work. 3. Different activities requires different types of skills & specialization. 4. The project must be temporary in nature.

MATRIX ORGANIZATION

An organizational structure that facilitates the horizontal flow of skills and information. It is used mainly in the management of large projects or product development processes,  drawing employees from different functional  disciplines for assignment to a team without removing them from their respective positions.

Employees in a matrix organization report on day-today performance to the project or product manager whose authority flows sideways (horizontally) across departmental boundaries. They also continue to report on their overall performance to the head of their department whose authority flows downwards (vertically) within his or her department.