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ORGANIZATIONAL STRUCTURE
Presented By :Neeraj Bhandari
WHAT IS ORGANIZATIONAL STRUCTURE ?• Organizational structure is a system used to define a
hierarchy within an organization. • It identifies each job, its function and where it reports to
within the organization. • This structure is developed to establish how an
organization operates and assists an organization in obtaining its goals to allow for future growth.
• The structure is illustrated using an organizational chart.
WHY DO WE NEED ORGANIZATIONAL STRUCTURE ?
• Evaluating Employee Performance• Achieving Goals• Function• Communication• Prevention/Solution
WHAT ARE THE DIMENSIONS OF ORGANIZATIONAL STRUCTURE?
Organizational structure has three dimensions 1. Vertical differentiation - the location of decision-
making responsibilities within a structure 2. Horizontal differentiation - the formal division of the
organization into sub-units 3. Integrating mechanisms - the mechanisms for
coordinating sub-units
WHY IS VERTICAL DIFFERENTIATION IMPORTANT?• Vertical differentiation determines where decision-making
power is concentratedCentralized decision-making• facilitates coordination• ensures decisions are consistent with the organization’s
objectives• gives managers the means to bring about organizational
change• avoids duplication of activities
WHY IS VERTICAL DIFFERENTIATION IMPORTANT?
Decentralized decision-making• relieves the burden of centralized decision-
making• has been shown to motivate individuals• permits greater flexibility• can result in better decisions• can increase control
WHY IS HORIZONTAL DIFFERENTIATION IMPORTANT?
• Horizontal differentiation refers to how the firm divides into sub-units• usually based on function, type of business, or geographical area
• Most firms begin with no formal structure, but as they grow, split into functions reflecting the firm’s value creation activities - functional structure • functions are coordinated and controlled by top management• decision-making is centralized • product line diversification requires further horizontal
differentiation
TYPES OF ORGANIZATIONAL STRUCTURE
Functional StructureA structure in which positions are grouped according to their main functional (or specialized) area.
CEO
MANAGERSMANAGERS MANAGERS
FUNCTIONAL STRUCTURE
ADVANTAGE• In-depth expertise development• Clear career path within function• Efficient use of resources• Possible economies of scale• Ease of coordination within function• Potential technical advantage over competitors
FUNCTIONAL STRUCTURE
Disadvantages• Slow response to multifunction problems• Decision backlog at top of hierarchy• Bottlenecks due to sequential tasks• Inexact measures of performance• Narrow training of future managers
DIVISIONAL STRUCTURE• A structure in which positions are grouped according to
similarity of products, services or markets.
DIVISIONAL STRUCTUREAdvantages:• Fast response to environmental change• Simplified coordination across functions• Simultaneous emphasis on organisational goals• Strong customer orientation• Accurate measurement of performance• Broad training in management skills
DIVISIONAL STRUCTUREDisadvantages:• Resource duplication in each division• Reduction of in-depth expertise• Competition amongst divisions• Limited sharing of expertise between divisions• Innovation restricted to each division• Neglect of overall goals
HYBRID STRUCTURE• A structure adopting both functional and divisional
structures at the same management levels.
HYBRID STRUCTURE
Advantages:• Alignment of corporate and divisional
goals• Functional expertise and/or efficiency• Adaptability and flexibility in divisions
HYBRID STRUCTURE
Disadvantages:• Conflicts between corporate departments
and divisions• Excessive administration overhead• Slow response to exceptional situations
MATRIX STRUCTURE• A matrix organization structure is usually defined
as one where there are multiple reporting lines – that is, people have more than one formal boss.
• In other words, employees have dual reporting relationships - generally to both a functional manager and a product manager.
MATRIX STRUCTURE
MATRIX STRUCTURE
Advantages• Resources can be used efficiently, since experts and
equipment can be shared across projects.• Products and projects are formally coordinated across
functional departments.• Information flows both across and up through the
organization.• Employees are in contact with many people, which helps with
sharing of information and can speed the decision process
MATRIX STRUCTURE
DISADVANTAGES• Violation of unity of command• Costly structure• Problem of overspecialization• Feeling of insecurity• Lack of commitment
THANK YOU !!