Organizational structure

introduction Organizational structure is the way in which the interrelated groups of an organization are constructed. Organization structure identifies the grouping together of individuals onto departments and grouping of departments into the organization Organization structure designates formal reporting relationships, including the number of levels in the hierarchy and the span of control of managers and supervisors Organizational structure should be designed to clarify who is to do what tasks and who is responsible for what results, to remove obstacles to performance caused by confusion and uncertainty of assignment.

main concerns are ensuring effective communication and coordination. Organization structure includes the design of systems to ensure effective communication, coordination, and integration of efforts across departments. Advantage – Employer - best use of specialist whilst at the same time allowing greater coordination Employee- better career structure where opportunities for promotion can be seen clearly. Disadvantage – Heads of departments may promote individual interests

Organization levels exists because there is a limit to the number of persons a manager can supervise effectively, even though this limit varies depending on situations. The number of levels depends upon the size of the organization, the nature and complexity of production and the style of management.

Levels are expensive – as they increase, more and more efforts and money are devoted in managing, because of additional managers, the staffs to assist them, and the necessity of coordinating departmental activities plus the costs of facilities for the personnel. Complicated communication – difficulty in communicating objectives, plans and policies downward. Omissions and misinterpretations occur as information passes down the line Complicated planning and control -

Types of organizational structure Two types Formal organizational structure, which represents the relationships between resources as designed by the management, and is normally, conveyed in the organizational chart Informal organizational structure, which represents the social relationships based on friendships or interests shared among various members of an organizations The informal organizational structure is evidenced in the patterns of communication commonly called the “grapevine”

Bases for fragmentation of organization Division by function – results due to specialization such as production, sales and finance. They are economically efficient, but lack flexibility. Communication between functional areas can be difficult.

Division by location – administration and actual production activities take place in widely dispersed locations. e.g companies which do mining activities The functional heads will normally be based at headquarters so that their geographically dispersed subordinates will still report on a direct line basis for direction and guidance

Division by project –In this, a worker may be assigned to two or more supervisors in an effort to make sure multiple dimensions of the business are integrated. Would report to both, and both would be responsible in some measure for his performance. For example a market staff can report to production manager and still report to his marketing manager. this occurs in organizations which also runs projects.

Organizational Structures - summary Simple Functional Engineering, Marketing, Design, etc Geographical/Divisional Matrix Functional and Project based Project Project A, Project B Income from projects PM has P&L responsibility

Simple organizational structure A simple organizational structure has only two levels, the owner-manager and the employees Small firms with one product or only a few related ones usually exhibit this structure

Divisional Division may be formed on the basis of product lines (automotive, aircraft), markets (consumer, industrial buyers), geographic areas (north, south, international) or channel of distribution (retail store, catalog sales Each division not only has its own line and staff functions to manage but also formulates and implements strategies on its own with the approval of the CEO The overall organization has staff positions such as (vice presidents of administration) and operations to assist in coordinating activities and allocating resources

Functional Organization Cons create longer decisions cycles Conflicts across functional areas Project leaders have little power Pros Clear definition of authority Eliminates duplication Encourages specialization Clear career paths

Matrix Organization Pros Cons Project integration across functional lines Efficient use of resources Retains functional teams Cons Two bosses for personnel Complexity Resource & priority conflicts

Project Organization Pros Cons Unity of command Effective inter-project communication Cons Duplication of facilities Career path Examples: defense avionics, construction

Forms of organisation structures: Organization charts Organization structure is reflected in the organization chart Vertical organization charts -Members of hierarchical organizational structures chiefly communicate with their immediate superior and with their immediate subordinates. Structuring organizations in this way is useful partly because it can reduce the communication overhead by limiting information flow; this is also its major limitation.

The organization will have many levels and have narrow spans of control In this type of organization, authority flows from the person in charge through various levels of supervision (called "chain of command" by the military). Conversely, information and requests for guidance and decisions travel upward through the same channels. Middle managers do the primary information processing and communication function, telling lower subordinates what to do and telling senior management the outcome of what was done

Horizontal organization charts – everyone does whatever needs to be done in order to complete business. Entrepreneurial organizations are often like these. The underlying concept of the flat organization is that trained workers with assigned goals, and with the authority to achieve the goals in their own way, will work individually or in groups and will be more productive than workers who are closely supervised by managers.

The flat organization model promotes employee involvement through a decentralized decision making process. By elevating the level of responsibility of baseline employees, and by eliminating layers of middle management, comments and feedback reach all personnel involved in decisions more quickly. Expected response to customer feedback can thus become more rapid. Since the interaction between workers is more frequent, this organizational structure generally depends upon a much more personal relationship between workers and managers. Hence the structure can be more time-consuming to build than a traditional bureaucratic/hierarchical model.

Working relationships Line relationship – between superior and subordinate Represented by vertical lines in an organizational chart Lateral relationship – two people on the same level who have to co-operate and work together In the organization chart, the lines drawn to represent this relationship will be horizontal Staff relationship – between managing director or other manager with his personal assistant or secretary. The relationship will be indicated by a dotted line along to the manager concerned. Functional relationship – cross departmental relationship e.g between personnel and all other departments, marketing/research and software engineering departments Lines drawn to indicate this relationship will be diagonal