Organizational Structure

Submitted to:

Prof C.P.Shrimali

By:

Sachin Singh

PGHR-42

ORGANIZATIONAL STRUCTURE

The organizational structure plays an important role in day-to-day functioning of the organization. Delegation of authority and employee reporting framework are some of the factors that determine the organizational structure. An efficient structure facilitates decision making by smoothening the span of control or the scope of the manager.  

The objective here is to understand why organizations have the structure that they do. By "structure" its meant things like degree and type of horizontal differentiation, vertical differentiation, mechanisms of coordination and control, formalization, and centralization of powerAccording to Taylor, Fayol, Weber and other classical theorists, there is a single best way for organization to be structured. Yet organizations vary considerably on structural attributes. The objective of much research has been to understand what determines these variations.

This raises two issues:

Is it random or systematic?

Are some organizations simply less perfect than others, or are different designs better for different situations?

 It can be said that whereas strategic choice and organizational design are immensely complex there is an underlying logic based on the concept of 'fit':

Certain strategies and organizational designs do fit one another and the environment, and thus produce good performance, and others do not. Moreover, there are frequently recognizable, understandable, and predictable relations among the environmental features and the choice variables of strategy and organization that determine which constellations of choices will do well and which are less likely to do so. These relations arise for both technological and behavioral reasons. Recognizing these relations and understanding their implications can guide the design problem." The factors that what structure is to be chosen depends on the shape, specialization, distribution of power and departmentalization .Shape is determined by the number of people working in each control level, while specialization includes different  specialties  that shall be performed in the organization.

Distribution of power refers to vertical and horizontal distribution of power .Horizontal distribution signifies more and more power of decision making to sub units. Vertical distribution is of centralize and decentralize type.

Determinants of Structure

The environment:  The quicker the environment changes, the more problems face managers. Structure must be more flexible when environmental change is rapid. Usually need to decentralize authority.

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.

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 (new problems a manager encounters) and task analyzability (programmed solutions available to a manager to solve problems). High task variety and low analyzability present many unique problems to managers. Flexible structure works best in these conditions. Low task variety and high analyzability allow managers to rely on established procedures.

Small Batch Technology: produces small quantities of one-of-a-kind products.Based on the skills of the workers who need a flexible structure.

Mass Production Technology: automated machines make high volumes of standard products. Workers perform repetitive tasks so a formal structure works well.

Continuous Process Technology: totally mechanized systems of automatic machines.Workers must watch for unexpected problems and react quickly. A flexible structure is needed here.

Human Resources: Its final factor affecting organizational structure. Higher skilled workers who need to work in teams usually need a more flexible structure. Higher skilled workers often have professional norms (CPA’s, physicians).

Organization Forms

        Mechanistic

  • Tasks are broken down into specialized, separate parts.
  • Tasks are rigidly defined.
  • There is a strict hierarchy of authority and control, and there are many rules.
  • Knowledge and control of tasks are centralized at the top of the organization.
  • Communication is vertical.

Organic:

  • Employees contribute to the common task of the department.
  • Tasks are adjusted and redefined through teamwork.
  • There is less hierarchy of authority and control, and there are few rules.
  • Knowledge and control of tasks are located anywhere in the organization.
  • Communication is horizontal.

Different structures of organizations:

FUNCTIONAL STRUCTURE (A design that groups people together on the basis of their common expertise and experience or because they use the same resource)

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Strengths

  1. Economies of scale within functions
  2. Internal efficiency, in-depth skill development, specialization, high quality
  3. Best for small organizations with only one or a few products

Weaknesses

  1. Slow response time to environmental changes
  • Decisions may pile-up on top; hierarchy overload
  • Poor inter-unit coordination
  1. Less innovation
  2. Restricted view of organization goals.

DIVISIONAL STRUCTURE (A structure in which functions are governed together according to the specific demands of product, markets or customers)

(Divisions based on product, service, geography, customer)

Strengths

  1. Is suited to rapid change in unstable environment
  • Decentralizes decision making (Fast ...

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