Organizational Structure
Organizational Structure
Organizational Structure
An organizational structure is the formal
framework by which job tasks are divided,
grouped, and coordinated.
What Is An Organizational Structure?
An organizational structure is a framework
that demonstrates how decisions are made,
how work flows between teams and team
members, and what the hierarchy of
leadership looks like within a group or
company.
Why is organizational structure important?
Organizational structures are important
because they improve efficiency, reduce
confusion and miscommunication, and help
employees gain clarity on their roles and
responsibilities.
Organizational charts
is a diagram that visually displays your
company’s structure.
it provides different important information
regarding:
who reports to whom,
chain of command.
Span of control
Cont…
Channels of formal communication
Activities in each position
The hierarchy of decision making
authority relationships
Limitation of Organizational Chart
Does not indicate informal communication
channel
Does not indicate Informal relationship among
workers
Does not indicate Degree of authority hold by
individuals
Example of Organizational chart
Figure 8
ORGANIZATIONAL DESIGN( OD)
• OD is the process of improving organization
by increasing organizational and /or employee
effectiveness
• Developing or changing an organizational
structure is called engaging in organizational
design.
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Elements Of An Organizational
Structure
To determine which organizational structure is
best for your business, you’ll want to consider
the following key elements:
1. Work Specialization
2. Departmentalization
3. Chain of Command
4. Span of Control
5. Centralization/Decentralization
6. Formalization
1. Work Specialization
• Work specialization to describe the degree to which tasks in
an organization are divided into separate jobs.
• An entire job is not done by one individual but instead is
broken down into steps, and each step is completed by a
different person.
• Individual employees specialize in doing part of an activity
rather than the entire activity.
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2. Departmentalization
is the process of grouping activities into departments. Every
Organization has its own way of classifying and grouping
work activities.
• It aims at achieving unity of direction, effective
communication, coordination and control.
• There are five common types of departmentalization(BASES)
– Functional departmentalization
– • Product departmentalization
– Customer departmentalization
– Geographic departmentalization
– Process departmentalization
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3. Chain of Command
• The chain of command is the continuous line of authority
that extends from upper organizational levels to the lowest
levels and clarifies, who reports to whom.
• It can also be defined as : A system in which authority passes
down from the top through a series of executive positions or
ranks in which each is accountable to the direct superior.
• It helps employees answer questions such as "Who do I go to
if I have a problem?" or "To whom am I responsible?"
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4. Span of management (span of control)
• means the number of subordinates a manager has control
over.
• Span of control also tells the number of levels and managers
of an organization.
• No fixed number of subordinates is there to be supervised by
a single manger,
• the number depends on different action which include the
following.
– Complexity and variety of subordinates job
– Ability and competence of mangers
– managers willing near to delegate authority
– The geographic location of organizational departments.
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5. Centralization and Decentralization
• Centralization The degree to which decision-making is
concentrated at a single point in the organizations.
• Organizations in which top managers make all the
decisions and lower-level employees simply carry out
those orders.
• Decentralization in which decision-making is pushed
down to the managers who are closest to the activities.
• It is considered that decentralization provides
opportunity for employee empowerment.
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6. Formalization
• The degree to which jobs within the organization are
standardized and the extent to which employee behavior is
guided by rules and procedures.
• Highly formalized jobs offer little power over what is to be
done.
• Low formalization means fewer restriction on how employees
do their work.
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Types of OS
1, Hierarchy Organization structure
2, Functional Organization structure
3, Flat Organization structure
4, Divisional Organization structure
5, Team-based Organization structure
6, Matrix Organization structure
7, Network Organization structure
Hierarchy Organization structure
A hierarchal organization structure Contains a
direct chain of command goes from the top of
organization to the bottom .
i,e the CEO or manager down low-level
employees, and each employee has a
supervisor.
Advantage
Clearly defined authority and responsibility.
Shows who each person reports to or who to
talk to about specific projects.
Motivates employees with clear career paths
and chances for promotion.
Gives each employee a specialty
Disadvantage
Can slow down innovation or important
changes due to increased bureaucracy.
Can cause employees to act in interest of the
department instead of the company as a
whole.
Poor Communication
Slow decision-making
Functional Structure
A functional organizational structure is a
business structure that groups employees by
specialty , skill , educational background or
related roles.
The functional organizational structure works
best for larger companies that employ multiple
people with similar roles.
Advantages
Allows employees to focus on their role
Increased productivity
Skill development
Clarity
Minimized cost of operation.
Is easily scalable in any sized company
Encourages specialization
Disadvantage
Competition between departments
Narrow scope
Flat Organization structure
An organizational model with relatively few or
no levels of middle mgt between the excutives
and the frontline employees.
A horizontal or flat organizational structure fits
companies with few levels between upper
management and staff-level employees.
Popular in the tech and many start-up
businesses.
Advantage
Lower operating cost
Improve communication
Increase employees motivation and
Satisfaction.
Disadvantage
Difficult for large organizations.
Create power struggles
3. Divisional Organization structure
A divisional structure is one in which the
company is organized into many smaller
functional structures.
For example, each division within a divisional
structure might have its own IT department,
marketing, sales, etc.
Types of Divisional OS
Market-based divisional structure-Divisions are
separated by market, industry, or customer type.
Product-based divisional structure-Divisions are
separated by product line
Geographic-base divisional structure-Divisions
are separated by region, territories, or districts,
offering more effective localization and logistics.
Advantage
Helps large companies stay flexible
Allows for a quicker response to industry
changes or customer needs
Promotes independence, autonomy, and a
customized approach
Disadvantage
Can easily lead to duplicate resources
insufficient communication between the
headquarters and its divisions
Can result in a company competing with itself
Costs more to operate
Matrix Structure
A matrix organization is company structure
where teams report to multiple leaders.
The characteristics of matrix organization
include multiple chain of command , a
collaboration between different departments,
and sharing of skilled resources.
Advantage Disadvantage
Learn new skill Lack of clarity
Improve Internal Higher organizational
communication complexity
Better resource Managerial Conflict
management Managerial cost
