Theory of Organization Structures: nature and

consequences

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Facilitator and Course Coordinator:

Vinayshil Gautam PhD, FRAS(London)(Founder Director IIM K; Leader Consulting Team IIM S)

A Al_Sager Chair Professor and First Head,

Management Department, IIT D

Chairman, DKIF

Objectivesidentify key elements

describe various structures and their characteristics

understand vertical and horizontal specialization and control

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Objectives

identify and understand factors favouring different structures

examine organizational structure

identify an integrated view of organizational structure

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Need of a structure

Enhances performance through proper resource utilization Monitors activitiesProvides a system to promote accountability and co-ordinationAllows flexibility to respond to various environmental influences Brings the social satisfaction of its members

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Nature and origin of structure

Emerges just after the inception of an organization

Not static and may change several times

The changes may be in whole or part

It defines job responsibilities for each personnel

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Some basic structural consideration

Three level of hierarchy

Institutional level

Administrative level

Technical level

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Features of different levels

Institutional level

Development of organizational goal, output

Maintain the structure of organization

Establishment of an appropriate administration climate for subordinate managers

Formulation of policies, rules and regulations

Administrative level

They are middle level managers

Here policies, rules and regulations are interpreted

Stress is given on planning, organizing and controlling

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Features of different levels

Technical levelLower level managers

Rules and regulations are implemented

Products are produced

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Organizational process

Communication

Coordination

Control

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Communication

Communication is the vehicle through which decisions taken at various levels are transmitted to other levels

It involves information flow across a structure

It has a specific direction and it involves time

Communication is successful when the fullest understanding amongst the persons communicating with each other is achieved

It is also the flow of attitudes, ideas and opinions

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Coordination:

Coordination refers to the measurement of inter-dependencies in work situations

In small organizations, coordination is handled by its manager(s)

Coordination need not necessarily be the role of one single individual at a higher level in the organization

Large organizations need:

Personal methods of coordination

Impersonal methods of coordination

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Personal methods of coordination

Dialogue, discussion, innovation, creativity, and learning, both within and across units

Direct contact between and among organizational members

Assignment to committees to improve coordination across departments

Use of task forces

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Control: Control refers to the ability of influencing the behaviour of other organizational members

A set of mechanisms to keep actions or outputs within the specified limits

Setting standards

Measuring results against standards

Taking corrective action

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Vertical Specialization:

A hierarchical division of labour

Distribution of formal authority

Creation of a hierarchy of authority

Work positions arranged in order of increasing authority

This depends on the organization’s:

Environment

Size

Technology

Goals

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Horizontal specialization

A division of labour that establishes specific work units or groupsAlso referred to as experimentationSpecialization leads to departmentalisationPure forms of departmentations are:

By functionBy divisionBy matrixBy Legal

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Different forms of Organization

Functional

Division of labor by function (marketing, production, finance etc.)

Division of labor on the basis of specialization knowledge

All the worker have specific skills and action

Widely used in organization

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Divisional

It is designed around

Product

Clients

Territories

In complex organization it is a typical pattern

There may be divisions at the top of the hierarchy (marketing division may be divided into industrial sales, governmental sales and consumer sales divisions)

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Matrix combination of functional and product departmentalization

occurs frequently in construction (e.g., building a bridge), in aerospace (e.g., designing and launching a weather satellite), in marketing (e.g., an advertising campaign for a major new product)

this may be made more effective through:Defining objectives of the project or taskClarifying the roles, authority, responsibilities of the managers and team membersSelection of appropriate manager for leadershipUndertaking organization and team development

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Matrix Structure (contd...)

Advantages:

Orientation towards end results

Maintenance of professional identification and efficient allocation of specialists

Pinpointing product-profit responsibility

Disadvantages:

Conflict in organizational authority (due to power struggles)

Possibility of disunity of command ( due to dual chain of command)

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Matrix Structure (in a college of Business Admn.)

Progm

Depts.

UG PG PhD Research Exec. Devt.

Comny. Service

Accounting

Admn. Studies

Finance

IT

Mktg.

O.B.

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LegalThe last pure form of specialization is by legal entity

It is not new, but it has recently received considerably more attention

As organizational analysis has spread to Governmental units, legal entity has been recognizable as a pure form

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Key elements in a proper structure

Work specialization

Chain of command

Span of control

Centralization and decentralization

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Work specialization:

It is the division of labour

ensures efficient utilization of skills of workers

early 20th Century, Henry Ford utilized this concept in Ford company

Training is more efficient, easy and less costly

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Chain of Command:

an unbroken line of authority extends from the top to the lowest level

clarifies who reports to whom

ensures authority, responsibility and unity of command

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Span of Control:

determines the number of levels and managers

no. of managers to total operative level employees

wider spans reduce effectiveness due to lack of leadership and support

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Span of Control:

Small spans ensures a close control but:

They are not cost effective

Vertical communication in the organization becomes complex

Tight supervision discourages employee autonomy

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Span of ControlSpan of Control

1

4

16

64

256

1024

4096

1

8

64

512

4096

Members at each levelSpan of 4

Span of 8

Operatives= 4096

Managers (level 1 to 6) = 1365

Operatives= 4096

Managers level 1 to 4 = 58528

Centralisation:

A degree to which decision making is concentrated at a single point in the organization

Top management makes key decisions

Lower level managers merely carry out top management directives

Decision making responsibility is moved upward in the hierarchy

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Decentralization

Lower level personnel can provide inputs and can act closely with the top management

advantages

Effective communication

Participatory decision making

Higher employee productivity

Higher subordinate satisfaction

Quicker response to a series of unrelated problems

Assists the subordinates for higher level positions

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Integrated view of Organizational Structure

Mechanistic structureMechanistic structure

Organic structureOrganic structure

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Mechanistic Structure

A structure characterized by

Extensive departmentalization

High formalization

Limited Information Network

High centralization

Little participation by low level members in decision making

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Features of Mechanistic Structure

Rigid hierarchical relationship

Fixed duties

High consistency

Specific communication channel

Centralized decision authority

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AdvantagesAdvantages

Emphasizes on vertical specialization and controlWell documented rules, procedures, and policiesHas well-documented control systemsStrong middle management supported by a centralized staffSpecifies techniques for decision making.Brings in efficiency

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Limitations

Employees dislike rigid designs, which makes work motivation problematic

Unions may further solidify rigid designs

Key employees may leave

Low organization’s capacity to adjust with environmental changes or emerging of new technologies i.e. lower flexibility

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Organic structureOrganic structure

It looks a lot like boundary less organization

It is a flat type of organizationLow formalizationIncrease in coordinationPossess a comprehensive information

networkHigh participation in decision making

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Advantages

Low hierarchical differentiationCollaboration (both vertical and horizontal)Adaptable dutiesProcedures are minimal, and those that do exist are not highly formalizedDecentralized decision authorityGood for problem solving and serving individual customer needsGood at detecting external changes and adjusting to new technologies

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Limitations

Lower level of rules and regulations

Sacrifices ability to respond to central management direction

No fixed duties

Less control of higher authority to the lower authority

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Conclusion

An organization’s internal structure:

Exercises control and ensures co-ordination

Explains and predicts employee behaviour

linked to overall productivity and profit

Reduces ambiguity and clarifies relationships

Shapes employees’ attitude and facilitates and motivates the workers

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Conclusion (contd…)

An appropriate or integrated structure may have:

limited specialization

wide span of control

provide employees greater freedom

Ensures team spirit and coordination amongst employees

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References:

Gautam V & S.K. Batra, Organisational Development Systems, V. P. House, 1993Gautam V., Background paper on Organisation Management, IITDStephen P. Robbins, Essentials of Organizational Behaviour, EEE, 8th Edition, Prentice Hall India Publicationhttp://www.cba.uri.edu/scholl/Notes/Organizational_Structure.htm dated 11.09.2005 Time 11:00 amhttp://www.exsci.rutgers.edu/courses/330/330OrgStruc.S05.htm dated 11.09.2005 Time 11:10 am

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THANK YOUTHANK YOU

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