Determinants of Organizational Structure

8/17/2019 Determinants of Organizational Structure

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Determinants of

OrganizationalStructure


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Determinants ofOrganizational Structure

Environmen

t

Size

Technology


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Environment

InternalFactors

ExternalFactors

Customer

Culture

Economic

InternationalEnvironment

Organizational structuredepends upon the

environment, speciallyExternal

Environment/Factors.

i.e. hether the externalenvironment is sta!le or

dynamic


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Technology

Organizational structure dependsupon technology as ell

Technology issimple

Orcomplicated/"dvanced

I# technology issimple then

$echanisticstructure ill !e

good

I# technology isadvanced then

organic oradvanced

organizationalstructure will be

needed.


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Size

I# organization is !ig % lots o# people are or&ing then

It re'uires

HIGH DEGREE

OF DISCI!I"E

%CO$$"()

a #ormally structured chain o# command


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Types o#Organizational Structure


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Types o# organizationstructures

!ine # sta$organization

*ine organization

ro%ectorganisation

&atri'

organisation

Divisional

organization

Functional

organization


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!ineOrganization

!ine organization is the most oldestand simplest method o# administrative

organization.

"ccording to this type o# organization,the authority os #rom top to !ottom

in a concern.

The line o# command is carried out #romtop to !ottom.


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Features -o# *ine Organization

. It is the most simplest #orm o# organization.

. *ine o# authority os #rom top to !ottom.

0. Specialized and supportive services do not ta&eplace in these organization.

1. line o2cers independently ta&e decisions in theirareas and spheres.

3. This &ind o# organization alays helps in !ringinge2ciency in communication and !ringing sta!ility to aconcern.


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&erits

Sim(lest) It is t*e mostsim(le and oldest met*od ofadministration.

+nit, of Command) In t*eseorganizations su(erior)subordinate relations*i( ismaintained and scalar c*ain

of command /ows from to( tobottom.


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0etter disci(line)

The control is uni4ed %concentrates on oneperson and there#ore,he can independently

ma&e decisions o# hison.

5ni4ed control ensures!etter discipline.


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Fle'ibilit,)

1*ere is a) co)ordination between t*e to( mostaut*orit, and bottom line aut*orit,.

Since t*e aut*orit, relations*i(s are clear lineo2cials are inde(endent and can /e'ibl, ta3et*e decision. 1*is /e'ibilit, gives satisfaction ofline e'ecutives.

rom(t decision) Due to t*e factors of 4'edres(onsibilit, and unit, of command t*e o2cialscan ta3e (rom(t decision.


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Fixed responsi!ility6

In this type o# organization,

every line executive has got 4xed authority,poer and 4xed responsi!ility

attached to every authority.


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Scalar C*ain 5line of aut*orit,6

. Formal chain o# command running #rom top to !ottom o# the

organization,

Scalar C*ainis the num!er o# di7erent levels o#authority through hich decisions arepassed in the organization.

Scalar c*ain

7ere we can seeScalar c*ain

8

li&e military


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Over reliance)

The line executive8s decisions areimplemented to the !ottom. This results in over6relying on the line

o2cials.

!ac3 of s(ecialization)

" line organization os in a scalar chain #rom top to !ottom andthere is no scope #or specialized #unctions.

For example, expert advices hatever decisions are ta&en !y linemanagers are implemented in the same ay.

Demerits) line organization

structure


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)emerits

# strategies w*ic* are framed b, t*eto( aut*orit, are carried out in t*esame wa,.1*is leaves no sco(e for communication

from t*e ot*er end.1*e com(laints and suggestions oflower aut*orit, are not communicatedbac3 to t*e to( aut*orit,. So t*ere isone wa, communication.

!ac3 of Co)ordination) 7*ateverdecisions are ta3en b, t*e line o2cialsin certain situations wrong decisionsare carried down and im(lemented int*e same wa,.

.:. t*e degree of e$ective co)ordination is less.

;ut*orit, leaders*i() 1*e line o2cials

*ave tendenc, to misuse t*eir aut*orit,(ositions.8


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9resident*ine

Engineeringsta7

9lant manager6

:or&ers

Supervisor6assem!ly

level

Supervisor -machine shop

:or&ers

9ersonnelsta7

*egal council6ST"FF

vice9resident6 line

9u!lic relations advisor6 sta7

*i th it


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*ine authority

*ine authority or#unction is a )irect ormain #unction o# anindividual or

department. It involves)irect and *egitimate"uthority oversu!ordinates.

It decides w*at todo and w*en to do it.eg., 9roduction #or a$anu#acturing company.

Sta7 "uthority on th

other hand is aassistant #unction as iguides line managers o#unctions int

per#orming a speci4activity.1*e, are mors(ecialized an

t*erefore (rovidadvice to !inaut*orit,.eg., ;uman


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Features 6o# *ine % Sta7Organization

. *ine and Sta7 Organization is a compromise o# line organization.It is more complex than line concern.

. )ivision o# or& and specialization ta&es place in line and sta7organization.

0. The hole organization is divided into di7erent #unctional areas tohich sta7 specialists are attached.

1. E2ciency can !e achieved through the #eatures o# specialization.

3. There are to lines o# authority hich o at one time in a

concern ?*ine "uthoritySta7 "uthority

@. 9oer o# command remains ith the line executive and sta7serves only as counsellors.


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&erits o# *ine % Sta7 OrganizationRelief to line of e'ecutives) here advice and counsellingprovided to the line executives it divides the work between the two.

The line executive can concentrate on the execution of plans -----so they getrelieved of dividing their attention to many areas.

E'(ert advice) it #acilitates expert advice tothe line executive at the time o# need.

The planning and investigation related to di7erentmatters can !e done !y the sta$ s(ecialist and#urther line o2cers can concentrate on executiono# plans.

0ene4t of S(ecialization )here divisiono# hole concern done in types o# authoritydivides the enterprise into parts and #unctionalareas. This ay every o2cer or o2cial canconcentrate in its on area.


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0etter co)ordination)it deals to provide !etter decision ma&ing % concentration

remains in #e hands. This #eature helps in !ringing co6

ordination in or& as every o2cial is concentrating in theiron area.

0ene4ts of Researc* andDevelo(ment)8

Through the advice o# specialized sta7, is dr so the line executivesget time to execute plans !y ta&ing productive decisions hich are

help#ul #or a concern. 1*is gives a wide sco(e to t*e linee'ecutive to bring innovations and go for researc*wor3 in t*ose areas. 1*is is (ossible due to t*e(resence of sta$ s(ecialists.


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1raining)

)ue to thepresence o#sta7specialists %

dr expertadvice itserves as

ground #or training da line

o2cials.


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)emerits o# *ine % Sta7Organization

!ac3 of understanding)In line % sta7 dr r types o# authority oing atone time. This results in the con#usion !eteen the

to. ;s a result t*e wor3ers are notable to understand as to w*o is t*eir

commanding aut*orit,. Hence t*e(roblem of understanding can be a*urdle in e$ective running.

!ac3 of sound advice)

The line o2cial -get used to the expertise advice o# the sta7. "t times the sta7

specialist also provide wrong decisions hich the lineexecutive have to consider. This can a7ect the e2cient


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ContdA

Line and staff conflicts-

Line 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 onthe minds of the employees. This leads to minimizing of co-ordination which hampers a concern’s working.

Costly- In line and staff concern, the concerns have tomaintain the high remuneration of staff specialist. This proves

to be costly for a concern with limited finance.


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FunctionalOrganization


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Functionalorganisation


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Features

Entire organizational activities divided into

s(eci4c functions suc* as o(erations 4nancemar3eting and (ersonal relations.


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$erits

?. S(ecialization) Better division o# la!our ta&es place hich results inspecialization o# #unction and it8s conse'uent !ene4t.

. Econom,) Specialization compiled ith standardization #acilitatesmaximum production and economical costs.

@. E'(ansion) Expert &noledge o# #unctional manager #acilitates !ettercontrol and supervision.


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)emerits

?. Confusion) The #unctional system is 'uite complicated to putinto operation, especially hen it is carried out at lo levels. There#ore, co6 ordination !ecomes di2cult.


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)ivisional Structure


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Divisional StructureOF &cDonaldAs

sel# cantered


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)IISIO("* ST


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The divisional organizational structure organizes theactivities o# a business around geogra(*ical, mar&et, orproduct and service groups.

Every division ould handle its on -

accounting, sales and mar&eting, engineering,production, and so #orth.

The divisional structure is use#ul hen a company has many

REGIO"S &;RBE1S OR ROD+C1S.

OE


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"dvantage o# )ivisional Structure

Accountability . This approach ma&es it mucheasier to assign responsi!ility #or actions andresults.

Competition. The divisional structure or&s ell inmar&ets here there is a great deal o# competition, herelocal managers can 'uic&ly shi#t the direction o# their!usinesses.

Culture.6 ou can use this structure to create a culture atthe divisional level that most closely meets theneeds o# the local mar&et.


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ContdA

Multiple oferings. :hen a company has alarge num!er o# product o7erings, or di7erentmar&ets that it services, and they are notsimilar, it ma&es more sense to adopt thedivisional structure.

Speed. This tends to #aster responses to localmar&et conditions.

Bz many people r engaged


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)isadvantage o# )ivisional Structure

Cost . :hen you set up a complete set o# #unctions ithin eachdivision, there are li&ely to !e more employees in total than ould !ethe case i# the !usiness had instead !een organized under a purely#unctional structure. "lso, there must still !e a corporateorganization, hich adds more overhead cost to the !usiness.

Ineciencies. :hen there are a num!er o# #unctionalareas spread among many divisions,

no one functional area ill !e as e2cient as ould have !een thecase i# there had instead !een one central organization #or each#unction.


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ContdA

Rivalries. The various divisions may have no incentive to or&together, and may even or& at cross6purposes,

Strategic ocus.6 Each division ill tend to have its on strategic direction, hich

may di7er #rom the strategic direction o# the company as a hole.

)i i i l i i


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)ivisional organisationtypes

)epartmentation !yproduct

)epartmentation !y

customers

)epartmentation !y

area

)epartmentation !ytime


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)epartmentation !y 9roduct

In product or service departmentation, every maorproduct is organised as a separate department eachdepartment loo&s a#ter the production, sales and 4nance

o# one product.

9roduct departmentation is use#ul hen producte'(ansion and diversi4cation,

Deneral motors has @ divisions6 hich are decentralized ,Ex6 9ontiac, chevrolet A.


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)epartmentation !y "rea

"rea departmentation is very use#ul to a large6scaleenterprise hose activities are geo6graphically spreadover a ide area.

5nder territorial or geographical departmentation,activities are divided into zones, divisions and !ranches.

Overall6 such divisions are specially use#ul #or large org,

dat r geographically spread out Ban&s, insurancecompanies, transport companies, distri!ution agencies areexamples o# such enterprises.


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)epartmentization !y area 6 dr ill !e a separate vicepresident o# mar&eting ho s responsi!le #or - promotiono# the product

In E"STE


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)epartmentation !y Customer

5nder this !asis o# departmentation, activities are grouped according to )IFFE


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)epartmentation !y Time

5nder this !asis activities are grouped on the !asis o# thetime o# their per#ormance.

For e'am(le)

a #actory operating tenty6#our hours may havethree departments, one each #or morning, day and nightshi#ts. The idea is to o!tain the advantages o# peoplespecialised to or& in a particular shi#t.

;OS9IT"*S % OT;E< 95B*IC 5TI*IT CO$9"( such as6telephoneA.:ere telephone companies hv day n evening shi#t n nightvA.

9roect


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9roectOrganization

These are temporary organizational

structures #ormed #or speci4cproects #or a speci4c period o#

time % once the goal is achieved,

these are )IS$"(T*E)


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:hat !asically happen here is that

#or any special or speci4c proectvarious specialist #rom variousdepartment

=iz. 9roduction, Engineering,

Guality control, $ar&eting etc> are!rought together.

Once the or& is completed they go!ac& to their respective

departments.

Features o# 9roect


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Features o# 9roectOrganization

. :hen proect is clearly de4ned on hat to do% hat to achieve !asis.

. The proect is separate % uni'ue % it can8t !edone as a part o# daily or&.

0. )i7erent activities re'uires di7erent types o#

s&ills % specialization.

1. The proect must !e temporary in nature.


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$"T


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"n organizational structure that #acilitates thehorizontal o o# s&ills and in#ormation.

It is used mainly in the management o#

large proects or productdevelopment processes,draing employees #rom di7erent #unctionaldisciplines #or assignment to a team ithout

removing them #rom their respective positions.


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Employees ina matrix organization report on day6to6day per#ormance to the proect or productmanager hose authority os sideays=horizontally> across departmental !oundaries.

They also continue to report on their overallper#ormance to the head o#their department hose authority os

donards =vertically> ithin his or herdepartment.


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Determinants of Organizational Structure