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Forms of Organization Structure

Manmeet Kaur

80909107029

CSE-A

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Organization

An organization is social unit which is deliberately constructed

and reconstructed to seek specific goals.

-Talcott Parsons

An organization is a system of consciously coordinated activities

of two or more persons. There are four characteristics of

organization:- i) communication, ii) cooperative efforts, iii) rules

and regulations, iv) common objectives.

- Chester Barnard

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Organization Structure

The organizational structure, control systems, culture, and humanresource management systems that together determine how

efficiently and effectively organizational resources are used.

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Why have an Organization Structure?

All organizations have to organize what they do

A clear structure makes it easier to see which part of theorganization does what

There are many ways to structure an organization

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Factors Affecting Organization Structure

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The Organizational Environment

The quicker the environment changes, the more problems face

managers.

Structure must be more flexible (i.e., decentralized authority)

when environmental change is rapid.

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Strategy

Different strategies require the use of different structures.

A differentiation strategy needs a flexible structure, low cost

may need a more formal structure.

Increased vertical integration or diversification also requires a

more flexible structure.

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Technology

The combination of skills, knowledge, tools, equipment,

computers and machines used in the organization.

More complex technology makes it harder for managers to

regulate the organization.

Technology can be measured by:

Task variety: the number of new problems a managerencounters.

Task analyzability: the availability of programmed solutions toa manager to solve problems.

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Human Resources

Highly skilled workers whose jobs require working in teams

usually need a more flexible structure.

Higher skilled workers (e.g., CPAs and doctors) often have

internalized professional norms and values.

Managers must take into account all four factors (environment,

strategy, technology and human resources) when designing the

structure of the organization.

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Forms of Organization Structure

Ways to Forms of Organization Structure

ByFunction ByProductOr

Activity

ByArea ByCustomer ByProcess

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Functional Structure

The functional design is also known as U-form organization ( Ustands for Unity)

This groups positions into departments according to their mainfunctional areas

Some of the main functions of most organizations are those ofproduction, marketing, finance, human resources, legal, research

and development and so on

The chain of command in each function leads to a functional headwho in turns reports to the top manager

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Functional Structure

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Advantages of Functional Structure

Functional Design enhances operational efficiency as well asimprovement in the quality of the product because of specialists

being involved in each functional area

Resources are allocated by the function

Functional Design facilitates ease in communication and

coordination within the departments, since the activities are all

related, in one way or another, to the same specialized areas

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Disadvantages of Functional Structure

Functional Design encourages narrow specialization rather thangeneral management skills so that functional managers are not

well prepared for top executive position

Functional Units may be so concerned with their own areas thatthey may be less responsive to overall organizational needs

Coordination across functions is more difficult to achieve and it

may seriously delay responses to the dynamic of environmentaffecting the entire organization because such responses must gothrough the chain of command

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Product Structure

In this type of structure, the units are formed according to the type of

product

More useful in multi-line corporations, where product expansion and

diversification and manufacturing and marketing characteristics of the

production are of primary concern

While the general policies are decided upon by the top management within

the philosophical guidelines of the organization, each division is

autonomous and strive to improve and expand its own product line

Each Divisional General Manager is responsible for its costs, profits,

failures and successes

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Product Structure

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Advantages of Product Structure

In this type of organizational structure, the responsibility as well as

accountability is traceable thus making the division heads

sensitive to product improvements in response to changing

customer taste

Product structure facilitates the measurement of managerial as

well as operative results and the contribution of each product line

to the total profit of the organization can be evaluated

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Disadvantages of Product Structure

This type of structure is that it promotes fierce internal competition

which may or may not be healthy

Furthermore, there may be lack of cooperation among different

divisions and this tendency can be detrimental to the broader

goals of the organization

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Global Geographic (Area) Structure

A structure under which global operations are organized on ageographic basis

International operations are put on the same level as domesticoperations

Global division managers are responsible for all business

operations in their designated geographic area Often used by firms in mature businesses with narrow product

lines

By manufacturing in a region, the firm is able to reduce cost perunit and price competitively

Difficult to reconcile a product emphasis with a geographicorientation

New R&D efforts often ignored because divisions are selling inmature market

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Global Geographic (Area) Structure

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Advantages of Global Geographic (Area)

Structure

Serve local needs better

Positive competition

More effective communication between firm and local

customers

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Disadvantages of Global Geographic (Area)

Structure

Conflict between local and central management

Duplication of resources and functions

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Customer Structure

Structure where different customer groups have different needs

Organizations with several separate and distinct marketsaccounting for major portions of their sales often organize based

on these markets or customers.

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Customer Structure

Vice president

Manager

Priority customer

Manager

Regular customer

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Process Structure

This type of organization in large companies is based on the

firms product.

The entire company may be organized by product, with separatesales, advertising, marketing, and so on, along with staffs for

each, or some functional units may remain centralized.

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Process Structure

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