Essay on Some Important Organisation Structure Designs

Essay on Some Important Organisation Structure Designs!

Organizational structure according to George and Jones, “is the formal system of task and reporting relationships that controls, coordinates, and motivates employees so that they cooperate and work together to achieve an organization’s goals”.

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Such a system is primarily influenced by certain contingency factors such as technology used or the organization’s size, as discussed earlier. Depending upon the type of the organization and the philosophy of operations, managers can select any one of the various structured designs available. Some of these designs are explained as follows:

1) The Line Structure:

The line structure is the simplest form of organization and is most common among small companies. The authority is embedded in the hierarchical structure and it flows in a direct line from the top of the managerial hierarchy down to different levels of managers and subordinates and further down to the operative level of workers. It clearly identifies authority, responsibility and accountability at each level.

These relationships in the hierarchy connect the position and tasks at each level with those above and below it. There is clear unity of command so that the person at each level is reasonably independent of any other person at the same level and is responsible only to the person above him. All line personnel are directly involved in achieving the objectives of the company. A typical line structure is illustrated as follows:

Because of the small size of the company the line structure is simple and the authority and responsibility are clear-cut, easily assignable and traceable. It is easy to develop a sense of belonging to the organization, communication is fast and easy and feedback from the employees can be acted upon faster. The discipline among employees can be maintained easily and effective control can be easily exercised. If the president of the company and other superiors are benevolent in nature, then the employees tend to consider the organization as a family and tend to be closer to each other and respect each other which is highly beneficial to the organization.

On the other hand, if it is a rigid form of the organization and there is a tendency for the line authority to become dictatorial, it may be resented by the employees. Furthermore, there is no provision for specialists and specialization which is essential for growth and optimization and hence for rowing companies, pure line type of structure becomes ineffective.

2) Line and Staff Structure:

In this type of organization, the functional specialists are added to the line, thus giving the line advantages of specialists. This type of organizational structure is most common in our business economy and especially among large enterprises. Staff is basically advisory in nature and usually does not possess and command authority over line managers. There are two types of staff.

a) General staff:

This group has general background which is usually similar to the background of executives and serves as assistants to top management in one capacity or another. They are not specialists and generally have no direct authority or responsibility of their own. They may be known as special assistants, assistant managers or in a college setting as deputy chairpersons.

b) Special Staff:

Unlike the general staff who generally assists only one line executive, the specialized staff provides expert advice and service to all on a company wide basis. This group has a specialized background in some functional area and it could serve in any of the following capacities.

i. Advisory capacity.

The primary purpose of this group is to render specialized advice and assistance to management when needed. Some typical areas covered by advisory staff are legal, public relations and economic development.

ii. Service capacity.

This groups provides a service which is useful to the organization as a whole and not to any specific division or function. An example would be the personal department serving the organization by procuring the needed personnel for all departments. Other areas of service include research and development, purchasing, statistical analysis, insurance problems and so on.

iii. Control capacity.

This group includes quality control staff who may have the authority to control the quality and enforce standards.

The line and staff type of organization uses the expertise of specialists without diluting the unity of command. With the advice of these specialists, the line managers also become more scientific and tend to develop a sense of objective analysis of business problems.

A “simple line and staff structure is shown as follows:

The line and staff type of organization is widely used and is advantageous to the extent that the specialized advice improves the quality of the decisions resulting in operational economies.

Also, since line managers are generally occupied with their day-to-day current operations, they do not have the time or the background for future planning and policy formulation. Staff specialists are conceptually oriented towards looking ahead and have the time and training to assist in strategic planning and analyze the possible effects of expected future events.

Its main disadvantages are the confusion and conflict that arise between line and staff, the high cost that is associated with it and the tendency of staff personnel to build their own image and worth, which is sometimes at the cost of undermining the authority and responsibility of line executives.

Some of the reasons for the existence of conflict between line and staff are:

i. Since the staff generally advises and the line decides and acts, the staff often feels powerless.

ii. Staff employees may be resented because of their specialized knowledge and expertise.

iii. Occasionally, staff employees are impatient with the conservative and slow manner in which the line managers put the staff ideas to work. Also, line managers may resist an idea because they did not think of it in the first place and this hurts their ego.

iv. Staff has generally easier access to top management, which may be resented by line management.

v. There is a conflict about the degree of importance between line and staff as far as the contribution towards the growth of the company is concerned.

vi. The line usually complains that if things go right then the staff takes the credit and if things go wrong, then the line gets the blame for it.

For an organization to operate and progress, it is essential that the line and staff work in harmony. They should both be accountable for decisions and results. Their efforts must be coordinated and both must make extra efforts to accommodate each other.

3) The Functional Structure:

The functional design is also known as U-form organization (U stands for unity) and it groups positions into departments according to their main functional areas. Some of the main functions of most organizations are those of production, marketing, finance, human resources, legal, research and development and so on.

The type and the number of functions would depend upon the type of organization. For example, a service organization will have some of the functions different than a manufacturing organization. The chain of command in each function leads to a functional head who in turn reports to the top manager. A typical chart for functional organization for a college may be as follows:

The functional design enhances operational efficiency as well as improvement in the quality of the product because of specialists being involved in each functional area and also because resources are allocated by function rather than being duplicated or diffused throughout the organization.

Another advantage of functional design is that it facilitates ease in communication and coordination within the departments, since the activities are all related, in one way or another, to the same specialized area.

One of the main disadvantages of the functional design is that it encourages narrow specialization rather than general management skills so that the functional managers are not well prepared for top executive positions. Also, functional units may be so concerned with their own areas that they may be less responsive to overall organizational needs.

Another disadvantage of functional design is that coordination across functions is more difficult to achieve and it may seriously delay responses to the dynamics of environment affecting the entire organization because such responses must go through the chain of command.

4) Divisional Structure:

An alternative to the functional structure is the divisional structure which allows an organization to coordinate intergroup relationships more effectively. It involves grouping of people or activities with similar characteristics into a single department or unit.

Also known as self-contained structures, organizations operate as if they were small organizations under a large organizational umbrella. The decisions are generally decentralized so that the departments guide their ‘ own activities.

This facilitates communications, coordination and control, thus contributing to the organizational success. Also, because the units are independent and semi-autonomous, it provides satisfaction to the managers and this in turn improves efficiency and effectiveness.

There are basically three major forms of divisional structures that companies can choose from. These are: product, customer and geography.

Product Structure:

In this type of structure, the units are formed according to the type of product and are more useful in multi-line corporations where product expansion and diversification and manufacturing and marketing characteristics of the production are of primary concern. For example, Pepsico owns and controls three product units, namely, Kentucky Fried Chicken (KFC), Taco Bell and Pepsi.

Each of these products has special production and marketing demands. Similarly, General Motors has six divisions which are autonomous and decentralized. These are: Buick, Pontiac, Oldsmobile, Cadillac, Chevrolet and GMC Trucks.

While the general policies are decided upon by the top management within the philosophical guidelines of the organization, each division is autonomous and strives to improve and expand its own product line and each divisional general manager is responsible for its costs, profits, failures and successes. The product structure in the case of General Motors is shown as follows:

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 tastes.

Furthermore, 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.

The major disadvantage of 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.

Customer Structure:

This type of structure is used by those organizations which deal differently with different types of customers. Thus the customers are the key to the way the activities are grouped. Many banks have priority service for customers who deposit and maintain a prescribed amount of money with the bank for a given period of time.

Similarly, business customers get better attention in the banks than other individuals. First class passengers get better service from the airlines than economy class passengers. An organization may be divided into industrial product buyers and consumer product buyers and so on.

A structure, based upon the priority customers and regular customers in a bank is shown below:

Geographic Structure:

If an organization serves different geographical areas, the divisional structure may be based upon geographical basis. Such divisional structures are especially useful for large scale enterprises which are geographically spread out such as banks, insurance companies, chain department stores and so on.

Such a structure groups the activities of the organization along geographic lines. For example, there may be separate vice-presidents of marketing who are responsible for promotion of the product in Eastern Region, in North-Western Region, in Southern Region and so on.

In the case of multinational organizations, the geographic division may be European Division, Middle-East Division, and Far-East Division and so on, with central control office in the home country such as United States. This type of structure for a multi-national organization is shown as follows:

In these cases, the local population is served by the divisional personnel while the general policies are formulated at the headquarters. The local management is in close contact with the people in the area taking advantage of such local factors as customs, culture, styles and social preferences.

The main problem may be some difficulty in communication with the head office which can delay important decisions and create problems with coordination of inter-related activities. This problem is especially acute for multinational companies with operations in such underdeveloped countries where telecommunication networks are not sufficiently developed.

5) Project Structure:

These are temporary organizational structures formed for specific projects for a specific period of time and once the goal is achieved these are dismantled. For example, the goal of an automobile manufacturing company may be to develop a new car. For this project, the specialists from different functional departments are drawn to work together.

These functional areas are production, engineering, quality control, market research and so on. When the project is completed, the specialists go back to their respective departments. These specialists are basically selected on the basis of task related skills and technical expertise rather than decision making experience or planning ability.

These structures are very useful when:

i. The project is clearly defined in terms of objectives to be achieved and the target date for the completion of the project is set. An example would be the project of building a new airport.

ii. The project is separate and unique and not a part of the daily work routine of the organization.

iii. There are different types of activities which require skills and specialization and these activities must be closely coordinated to achieve the desired goal.

iv. The project is temporary in nature and does not extend into other related projects.

6) A Matrix Structure:

A matrix structure in a sense is a combination and interaction of project and functional structures and is generally suggested to overcome some of the problems associated with project and functional structures individually. The key feature of a matrix structure is that the functional and project lines of authority are superimposed with each other and are shared by both functional as well as project managers.

The project managers are generally responsible for overall direction and integration of activities and resources related to the project. They are responsible for accomplishing work on schedule and within the prescribed budget.

They are also responsible for integrating the efforts of all functional managers towards the accomplishment of the project and for directing and evaluating project activity. The functional managers are primarily concerned with the operational aspects of the project. The functional structure is primarily responsible for:

i. Providing technical guidance for the project.

ii. Providing functional staff which is highly skilled and specialized.

iii. Completing the project within prescribed technical specification.

Greiner sees matrix organization, in which cross-functional teams are used, as a response to growing complexity associated with the organizational growth. These complexities, both internal (size, technology) as well as external (markets, competitors), create problems of information processing and communication that are best dealt by matrix type of organizational structure.

Matrix organizational design is most useful when there is pressure for shared resources. For example, a company may need eight product groups, yet have the resources only to hire four marketing specialists. In such a situation, a matrix structure provides a convenient way for the eight groups to share the skills of the four specialists.

Each matrix structure contains three unique sets of role relationships: (1) the top manager or the Chief Executive Officer (CEO) who heads up and balances the dual chains of command, (2) the managers of functional and project (or product) departments who share subordinates, and (3) the specialists who report to both the respective functional managers and the project managers.

An important aspect of the matrix structure is that each person working on the project has two supervisors, namely the project manager and the functional manager.

Since the matrix structure integrates the efforts of functional and project authority, the vertical and horizontal lines of authority are combined and the authority flows both down and across.

The vertical pattern is brought about by the typical line structure where the authority flows down from superior to subordinates. The project authority flows across because the authority is really assigned for coordinating efforts, which is a horizontal function rather than giving orders and directions which is a vertical function.

A simple form of matrix design is illustrated as follows:

Stephen P. Robbins. has emphasized that most Schools of Businesses in colleges and universities are organized along matrix structure where they superimpose product or programme structures such as undergraduate programmes, graduate programmes, executive development programmes and so forth, over functional departments of management, marketing, accounting, finance and so on. Directors of programmes units utilize faculty from the functional departments in order to achieve their goals. A typical matrix structure for a School of Business in shown as follows:

It can be seen in the illustration above, that the directors of various programmes staff their courses from the faculty of the various departments and the same faculty serves various programmes. The matrix provides clear lines of responsibility for each programme.

For example, the responsibility for the success or failure of executive development programme lies directly with the programme director. The matrix structure provides for coordination of faculty among the various course offerings of the various programmes. Without the matrix, such coordination would be very difficult.

By its very nature, a matrix type of organization is more democratic, interactory and participative with emphasis on interdependence of departments and increased collaboration and cooperation among a wider range of people. The structure has a number of advantages. Some of the strengths of matrix structures are:

a) Increased coordination and control:

The project manager is in a position to coordinate the many inter-related aspects of a particular project since there is both vertical as well as horizontal communication.

This coordination leads to greater and more effective control over operations.

b) Full use of all available resources:

Since the matrix organization, at any given time is handling a number of projects, the specialized staff and their expertise can be utilized through many projects and no duplication of personnel is necessary. If a specialist is no longer needed on a given project, he can always be utilized for another project.

c) Response to dynamic environment:

Due to functional inter­dependence and quicker feedback of information, the organization responds quickly to a changing and uncertain environment so that the decisions can be made more rapidly. This reduces the adverse effects of any sudden changes in any factors affecting he organization.

d) Excellence in inter-disciplinary specialization:

Since the expertise of specialists is fully utilized in inter-disciplinary areas and the organization itself demands high quality solutions of complex problems, these opportunities provide a sound basis for expanding the technical excellence into many interdisciplinary activities.

e) Top management has more time for strategic planning and policy formulation:

Since most of the authority is delegated to project managers, it leaves the central management comparatively free to get involved in long range planning rather than operational activities.

f) Improving motivation and personal development:

It is well known that people working together on a project with a team spirit operate in a more participative manner. This improves coordination and harmony, which in turn increases commitment to the organizational goals due to high motivation.

Also, due to participative nature of decision making process, the team members are constantly accepting challenges which broaden their outlook and provide grounds for personal as well as professional development.

Some of the weaknesses of matrix structure are as follows:

a) Violation of unity of command principle:

Since there is more than one supervisor for each worker, it causes confusion and conflict and reduces effective control.

b) Administrative costs:

There is continuous communication, both vertically as well as horizontally and this increases paper work and thus costs. Unlike the simpler authority structure, there are more meetings and more discussions at the cost of actual productivity thus further increasing the administrative costs.

c) Pressures of work:

The individuals have too many demands placed upon them, because in addition to their regular responsibilities, they are involved in additional meetings and paper work which may put further additional demands upon them. Also, due to excessive interdependence and inter-communications, there is a role conflict as well as role ambiguity.

Role conflict is difficult to avoid since all persons are specialists and they have to report to more than one superior and these different superiors may have different and possibly conflicting demands and expectations.

Role ambiguity exists because expectations are unclear. The decisions made by junior personnel can be over-ruled by superiors so that the authority and accountability remains unclear. These difficulties can have adverse effect on motivation.

d) Balance:

It is difficult to achieve a balance between the project’s technical and administrative aspects. It is difficult to get highly specialized technical engineers and scientists to accept the administrative cost constraints. Also, a balance has to be achieved between the authority of the project heads and functional managers, which may be difficult.

Some of these difficulties in a matrix organization can be avoided and the structure can be fully utilized by carefully defining the individual roles of functional and project heads and setting up training programs in building team spirit and adoption of appropriate conflict resolution practices.

7) Network Organizations:

Network organizational structure primarily involves subcontracting some or all of its operating functions to other companies who are required to coordinate their activities in consultation with the personnel at the headquarters of the network organization.

The traditional functional areas of manufacturing, quality control, marketing and so on are handled by different companies who are in constant touch with headquarters via computers.

The information exchange is instant and on-line internet computer communications facilitate the management at headquarters to be continuously involved in the progress as well as problems with these subcontractors.

According to Hellriegel and Slocum, this capability of instant, communication permits managers to:

i. Search globally for opportunities and resources.

ii. Maximize use of all resources for a business, whether owned by the organization or not.

iii. Perform only those functions for which the organization has or can develop expertise

iv. Outsource those activities that can be performed more quickly and at a lower cost by others.

There are certain advantages associated with network structures. First the overhead expenses are low because the administrative structure is very lean. Since most of the work is subcontracted there are very few employees at the headquarters thus increasing flexibility in control.

Second, there is a choice of subcontractors so that the most efficient subcontractors can be selected for economic and quality of product reasons. These subcontractors can be located anywhere in the world where electronic telecommunication systems can be set up and maintained.

This unusual organizational design also has some disadvantages. First of all, the direct control over operations is limited. Second, not all subcontractors are sufficiently reliable so that coordination of various activities and synchronization becomes very difficult. Third, as subcontractors change, new relationships need to be developed which may create difficulties for the network organizations.

Finally, the employees of the organization may not be highly motivated because they do not have direct control over the performance of subcontractors and hence may be frustrated by such poor performance.