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8/16/2019 Eight Types of Orgtional Structures
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EIGHT (8) TYPES OF ORGANISATIONAL
STRUCTURES: THEIR ADVANTAGES
AND DISADVANTAGESAll managers must bear that there are two organisations they
must deal with - one is formal and the other is informal.
The formal organisation is usually delineated by an
organisational chart and job descriptions. The official reporting
relationships are clearly known to every manager.
Alongside the formal organisation exists an informalorganisation which is a set of evolving relationships and
patterns of human interaction within an organisation that are
not officially prescribed.
Formal organia!ional !r"#!"r$ ar$ #a!$gori$% a:
1. Line organisational structure.
. !taff or functional authority organisational structure.
". Line and staff organisational structure.
#. $ommittee organisational structure.
%. &ivisional organisational structure.
'. (roject organisational structure.). *atrix organisational structure.
+. ,ybrid organisational structure.
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T&$$ organi'a!ional !r"#!"r$ ar$ ri$l* %$#ri$% in !&$
+aragra+& $lo,:
-. LINE ORGANISATIONAL STRUCTURE
A line organisation has only direct vertical relationships
between different levels in the firm. There are only line
departments - departments directly involved in accomplishing
the primary goal of the organisation. or example in a typical
firm line departments include production and marketing. /n a
line organi0ation authority follows the chain of command.
xhibit 12." illustrates a single line organisational structure.
F$a!"r$:
/t has only direct vertical relationships between different levels
in the firm.
A%/an!ag$:
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1. Tends to simplify and clarify authority responsibility and
accountability relationships.
. (romotes fast decision-making.
". !imple to understand.
Dia%/an!ag$:
1. 3eglects specialists in planning.
. 4verloads key persons.
Some of the advantages of a pure line organisation are:
1. A line structure tends to simplify and clarify responsibility
authority and accountability relationships. The levels of
responsibility and authority are likely to be precise and
understandable.
. A line structure promotes fast decision making and
flexibility.". 5ecause line organisations are usually small managements
and employees have greater closeness.
However, there are some disadvantages also. They are:
1. As the firm grows larger line organisation becomes more
ineffective.
. /mproved speed and flexibility may not offset the lack ofspeciali0ed knowledge.
". *anagers may have to become experts in too many fields.
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#. There is a tendency to become overly dependent on the few
key people who perform numerous jobs.
0. STAFF OR FUNCTIONAL AUTHORITY
ORGANISATIONAL STRUCTURE
The jobs or positions in an organisation can be categori0ed as6
(i) Lin$ +oi!ion:
A position in the direct chain of command that is responsible
for the achievement of an organisation7s goals.
(ii) S!a +oi!ion:
A position intended to provide expertise, advice and support for
the line positions.
The line officers or managers have the direct authority 8known
as line authority9 to be exercised by them to achieve the
organisational goals. The staff officers or managers have staffauthority 8i.e. authority to advice the line9 over the line. This is
also known as functional authority.
An organisation where staff departments have authority over
line personnel in narrow areas of speciali0ation is known as
functional authority organisation. xhibit 12.# illustrates a
staff or functional authority organisational structure.
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/n the line organisation the line managers cannot be experts in
all the functions they are re:uired to perform. 5ut in the
functional authority organisation staff personnel who are
specialists in some fields are given functional authority - Theright of staff specialists to issue orders in their own names in
designated areas.
The principle of unity of command is violated when functional
authority exists alongside line authority. The following
illustration clarifies the point6 A worker or a group of workers
may have to receive instructions or orders from the line
supervisor as well as the staff specialist which may result in
confusion and the conflicting orders from multiple sources may
lead to increased frustration and ineffectiveness. !ome staff
specialists may exert direct authority over the line personnel
rather than exert advice authority. or example :uality control
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inspector may direct the worker as well as advise on matters
related to :uality.
;hile this type of organisational structure overcomes the
disadvantages of a pure line organisational structure it has somemajor disadvantages6
1. There could be potential conflicts resulting from violation
of the principle of unity of command.
. There is the tendency to keep authority centrali0ed at
higher levels in the organisation.
1. LINE AND STAFF ORGANISATIONAL STRUCTURE
*ost large organisations belong to this type of organisational
structure. These organisations have direct vertical relationships
between different levels and also specialists responsible for
advising and assisting line managers. !uch organisations have
both line and staff departments. !taff departments provide line
people with advice and assistance in speciali0ed areas< forexample :uality control advising production department.
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xhibit 12.% illustrates the line and staff organisational chart.
The line functions are production and marketing whereas the
staff functions include personnel :uality control research and
development finance accounting etc. The staff authority of
functional authority organisational structure is replaced by staffresponsibility so that the principle of unity of command is not
violated.
Three types of specialized staffs can be identified6
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1. Advising
. !ervice
". $ontrol.
!ome staffs perform only one of these functions but some may
perform two or all the three functions. The primary advantage
is the use of expertise of staff specialists by the line personnel .
The span of control of line managers can be increased because
they are relieved of many functions which the staff people
perform to assist the line.
!ome disadvantages of this type of organi0ational structure are6
1. ven though a line and staff structure allows higher
flexibility and speciali0ation it may create conflict between
line and staff personnel.
. Line managers may not like staff personnel telling them
what to do and how to do it even though they recogni0e the
specialists7 knowledge and expertise.". !ome staff people have difficulty adjusting to the role
especially when line managers are reluctant to accept
advice.
#. !taff people may resent their lack of authority and this may
cause line and staff conflict.
F$a!"r$:
1. Line and staff have direct vertical relationship between
different levels.
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. !taff specialists are responsible for advising and assisting
line managers or officers in speciali0ed areas.
These types of specialized staff are Service, Advisory, ontrol.
SERVICE
*aintenance (urchase !tores inance and *arketing etc.
ADVISORY
*anagement /nformation !ystems 4peration =esearch and
>uantitative Techni:ues /ndustrial ngineering (lanning etcCONTROL
>uality control $ost control Auditing etc.
A%/an!ag$ o "ing S!a +$ronn$l:
1. ?se of expertise of staff specialists.
. !pan of control of line managers can be increased.
". =elieves line authorities of routine and speciali0ed
decisions.
#. 3o need for all round 8line9 executives.
Dia%/an!ag$:
1. $onflict between line and staff may still arise.. !taff officers may resent their lack of authority.
". $o-ordination between line and staff may become difficult.
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4. DIVISIONAL ORGANISATIONAL STRUCTURE
/n this type of structure the organisation can have different
bases on which departments are formed. They are6
1. unction.
. (roduct
". @eographic territory.
#. (roject.
%. $ombination approach.
xhibit 12.' illustrates organisational structures formed based
on the above bases of departmentalisation.
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F$a!"r$:
Temporary organisation designed to achieve specific results by
using teams of specialists from different functional areas in the
organisation.
Im+or!an#$ o Pro7$#! Organia!ional S!r"#!"r$:
(roject organisational structure is most valuable when -
1. ;ork is defined by a specific goal and target dates for
commencement and completion.
. ;ork is uni:ue and unfamiliar to the organisation.
". ;ork is complex have independent activities and so
speciali0ed skills are necessary for accomplishment.
#. ;ork is critical in terms of possible gains or losses.
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%. ;ork is not repetitive in nature.
C&ara#!$ri!i# o +ro7$#! organia!ion:
1. (ersonnel are assigned to a project from the existing
permanent organisation and are under the direction and
control of the project manager.
. The project manager specifies what effort is needed and
when wor! will be performed whereas the concerned
department manager executes the work using his resources.
". The project manager gets the needed support from
production :uality control engineering etc. for completion
of the project.
#. The authority over the pro"ect team members is shared by
project manager and the respective functional managers in
the permanent organisation.
%. The services of the specialists 8project team members9 are
temporarily loaned to the project manager till the
completion of the project.
'. There may be conflict between the project manager and the
departmental manager on the issue of exercising authority
over team members.
). !ince authority relationships are overlapping with
possibilities of conflicts informal relationships between
project manager and departmental managers 8functional
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managers9 become more important than formal
prescriptions of authority.
+. ull and free communication is essential among those
working on the project.
. 3ATRI9 ORGANISATIONAL STRUCTURE
/t is a permanent organisation designed to achieve specific
results by using teams of specialists from different functional
areas in the organisation. The matrix organisation is illustrated inxhibit 12.+.
F$a!"r$:
!uperimposes a horizontal set of divisions and reporting
relationships onto a hierarchical functional structure.
A%/an!ag$:
1. &ecentralised decision-making.
. !trong product or project co-ordination.
". /mproved environmental monitoring.
#. ast response to change.
%. lexible use of resources.
'. fficient use of support systems.
xhibit 12.+ illustrates a matrix organisational structure.
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Dia%/an!ag$:
1. ,igh administration cost.
. (otential confusion over authority and responsibility.
". ,igh prospects of conflict.
#. 4veremphasis on group decision-making.
%. xcessive focus on internal relations.
This type of organisation is often used when the firm has to be
highly responsive to a rapidly changing external environment.
/n matrix structures there are functional managers and product
8or project or business group9 managers. unctional manager are
in charge of specialized resources such as production, $uality
control, inventories, scheduling and mar!eting. (roduct or
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business group managers are in charge of one or more products
and are authori0ed to prepare product strategies or business
group strategies and call on the various functional managers for
the necessary resources.The problem with this structure is the negative effects of dual
authorit, similar to that of project organisation. The functional
managers may lose some of their authority because product
managers are given the budgets to purchase internal resources.
%n a matrix organisation, the product or business group
managers and functional managers have somewhat e$ual
power. There is possibility of conflict and frustration but theopportunity for prompt and efficient accomplishment is :uite
high.
8. HYRID ORGANISATIONAL STRUCTURE
xhibit 12.B 8a9 illustrates the hybrid organisational structure.
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E;&ii! -
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. unctional expertise and efficiency.
". Adaptability and flexibility in divisions.
Dia%/an!ag$:
1. $onflicts between corporate departments and units.
. xcessive administration overhead.
". !low response to exceptional situations.
U$:
?sed in organisations that face considerable environmentaluncertainty that can only be met through a divisional structure
and which also re:uires functional expertise or efficiency.
This type of structure is used by multinational companies
operating in the global environment< for example /nternational
5usiness *achines ?!A.
This kind of structure depends on factors such as degree ofinternational orientation and commitment. *ultinational
corporations may have their corporate offices in the country of
origin and their international divisions established in various
countries reporting to the $4 or (resident at the head:uarters.
The international divisions or foreign subsidiaries may be
grouped into regions such as 3orth America Asia urope etc.
and again each region may be subdivided into countries withineach region.
;hile the focus is on international geographic structures
companies may also choose functional or process or product
departmentalisation in addition to geographic pattern while at
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the head:uarters the departmentalisation may be based on
function.
THE INFOR3AL ORGANISATION
An informal organisation is the set of evolving relationships
and patterns of human interaction within an organisation
which are not officially prescribed. Alongside the formal
organisation an informal organisation structure exists which
consists of informal relationships created not by officially
designated managers but by organisational members at every
level. !ince managers cannot avoid these informal relationshipsthey must be trained to cope with it
The informal organisation has the following characteristics -
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1. /ts members are joined together to satisfy their personal
needs 8needs for affiliation friendship etc.9.
. /t is continuously changing.
The informal organisation is dynamic.
". /t involves members from various organisational levels.
#. /t is affected by relationship outside the firm.
%. /t has a pecking order6 certain people are assigned greater
importance than others by the informal group.
ven though an informal organisational structure does not haveits own formal organisational chart it has its own chain of
command.
$n$i! o Inormal Organia!ion:
1. Assists in accomplishing the work faster.
. ,elps to remove weaknesses in the formal structure.
". Lengthens the effective span of control.
#. $ompensation for violations of formal organisational
principles.
%. (rovides an additional channel of communication.
'. (rovides emotional support for employees.
). ncourages better management.
Dia%/an!ag$ o inormal organia!ion:
1. *ay work against the purpose of formal organisation.
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. =educes the degree of predictability and control.
". =educes the number of practical alternatives.
#. /ncreases the time re:uired to complete activities.