The larger the company, therefore, the more detailed its organizational structure will be.To meet organizational needs, different companies embrace different structures as explained below; A functional organizational structure is a structure that consists of activities such as coordination, supervision and task allocation. A business owner is typically at the top of … An organizational structure is a system that outlines how certain activities are directed in order to achieve the goals of an organization. 4. An example would be the personnel department serving the enterprise by procuring the needed personnel for all departments. provides open learning resources for your academics, careers, intellectual development, and other wisdom related purposes. A vertical organization is truly structured. The departmental head has full authority to manage and control of that department.3. In this case, the units are formed according to the type of product and it is more useful in multi-line corporations where product expansion and diversification, and manufacturing and marketing characteristics of the product are of primary concern. We will briefly examine each below, one after the other. Literature Review . The ideal thing is to implement a structure which is most suitable to the organizationâs goals. There must be different types of activities that require skills and specialization and these must be coordinated to achieve the desired goal. The organization chart: a. shows the characteristics of the organization's vertical structure. A typical organizational chart outlines, in part, the structure of an organization (see Figure below). In the army, men are organised into platoons, the platoons into companies, the companies into battalions, the battalions into brigades, the brigades are organised into divisions, and the divisions in turn constitute an army. The matrix structure permits a dual hierarchy. 1. 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 organization. This essay illustrates about the organizational structure and the types of organizational structure. 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. The organizational structure determines how the organization performs or operates. Some good examples of specialists who have been given functional authority in some organizations are in the areas of quality control, safety and labor relations. 2.1. Also, there is no provision for specialists and specialization that is essential for growth and optimization and hence for growing companies, pure line type of structure becomes ineffective. The line organization can be a pure line type or departmental line type. Improved employee retention – The creativity of a highly-skilled workforce is limited in the vertical hierarchy, whereas, in a flat organizational structure, it is encouraged. It is also why vertical structures are all about accountability. These are temporary organizational structures formed for specific projects for a specific period of time and once the goal is achieved, these are dismantled. Such divisions are specially useful for large scale enterprises that are geographically spread out such as banking, insurance, chain department stores or a product that is nationally distributed. These include mission statement of the or- ganization and organizational instruments. Additionally, a line manager cannot be a specialist in all areas. In this business analysis case, Netflix’s structural framework provides the necessary form and composition to ensure that the business responds well to changes in consumer preferences. If the president 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 that is highly beneficial to the organization. For this project, the specialists from different functional departments will be drawn to work together. Organization structure includes the design of systems to ensure effective communication, coordination and integration of efforts across departments. After a time, if all goes well then the company will grow. This essay also examines about the need of organization structure which is essential for every organization. When the project is completed, these specialists go back to their respective duties. It creates, for example, both product divisions and functional divisions, with the product managers (horizontal hierarchy) and functional managers (vertical hierarchy) having equal authority within the organization, and employees report to both of them in a balanced fashion. Let’s examine the pros and cons of each type of organizational structure to help you understand why you would want to pick one over the other. Forward integration 2. They may be known as special assistants, assistant managers or in a college setting as deputy chairpersons. Structure can be regarded as the backbone of the organization and its effectiveness depending on how strong the skeleton or weak the skeleton is. Specialized Staff: Unlike the general staff who generally assist only one line executive, the specialized staff provides expert staff advice and service to all employees on a company wide basis. One of the disadvantages of the line organization is that the line executives lack specialization. Discipline 3. They are responsible for accomplishing work on schedule and within the prescribed budget. The chain of command in each function leads to a functional head who in turn reports to the top manager. Through this characteristic of the organizational structure, the business satisfies current and future market demand and consumer preferences regarding information technology and consumer electronics products, such as Search, mobile apps, and mobile devices. There are a few models that are derived from this model. Line organization has direct vertical relationship.2. All person at the same level of organization are independent of each other Advantages 1. This ability helps fulfill Google’s corporate vision and mission statements. According to Soltonstoff, a staff member may serve as a coach, diagnostician, policy planner, coordinator, trainer, strategist, and so on. Basically, organizational structure defines the manner in which the tasks of an organization are broken down and allocated to employees or role holders, the reporting relationships among these role holders, and which processes, policies and systems will be applied. Departmentalization by Area. Lines of authority & instruction are vertical 2. Each matrix contains three unique sets of role relationships: (1) the top manager or Chief Executive Officer who is the head 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 manager and project manager. When the company is growing, it’s easy to increase personnel and add management. Also known as self-contained structures, these departments operate as if these were small organizations under a large organizational umbrella, meeting divisional goals as prescribed by organizational policies and plans. Instead of management driving them, the employees themselves take the reins, working in teams that assume responsibility for projects and programs. Organizational structure defines the manner in which the tasks of an organization are broken down and allocated to employees or role holders; as well as the reporting relationships among these role holders. Staff is basically advisory in nature and usually does not possess and command authority over line mangers. Departments know their role and their scope, and any veering beyond those lines will need approval, if not from the direct management then from someone else in some other department. Hospitals and other public utility companies such as telephone company that work around the clock are generally departmentalized on the basis of time shifts. The fourth, network structure, has emerged more recently as an approach to meeting the challenges of modern day business environment. The third component is concerned with the pattern of interactions among organizational employees. The matrix provides a convenient way for the eight groups to share the skills of the four specialists . The functional managers are concerned with the operational aspects of the project. Prompt decision 4. Orderly communication 5. An organizational structure defines how jobs and tasks are formally divided, grouped and coordinated. Functional departmentalization is the basis for grouping together jobs that relate to a single organizational function or specialized skill such as marketing, finance, production, and so on. Departmentalization by Customers. Employees and management recognize the chain of … When the employees get a chance to show their creative skills , it brings forth a sense of accomplishment. Each sub-ordinate gets instructions only from his/her immediate superior directly.6. Many firms use vertical integration as a way to reduce cost and increase efficiency, which results in increased competitiveness. 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. A matrix structure is, in a sense, a combination and interaction of project and functional structures and is suggested to overcome the problems associated with project and functional structures individually. The line and staff type of organization uses the expertise of specialists without diluting the unity of command. When a company starts off, the only employees may be just the founder and a part-time assistant. An ideal structure encourages employees to provide horizontal information and coordination where and when it is required. This is the most traditional of the organizational structures that businesses use. Organizational structure is a mechanism for linking and coordinating people and groups together within the framework of their roles, authority and power. The person with the top rank appears at the top of the structure, which is often visualized as a pyramid, with direct reports then coming in descending order as the various company teams are included. A typical organizational chart outlines, in part, the structure of an organization. The design principles of organizational structure, as the diagram illustrates, is typically characterized by four dimensions (Galbraith, 2002), as follows: There is no perfect or optimal organizational structure which ideally combines those areas. This change has involved a shift in perspective from the commonly adopted vertical organizational structure to flat type of organizational structure. A firm’s organizational structure is the practical manifestation of organizational design elements that influence how various components of the business function and work together. For example, a company may need eight product groups, yet have the resources only to hire four marketing specialists. 2. The hierarchical model is the most popular organizational chart type. A vertical organizational structure is a strict hierarchy that creates layers of officials within an organization. This is key to keeping the company consistent and productive. Many banks have priority services for customers who deposit a given amount of money with the bank for a given period of time. New and existing employees will need to know their responsibilities and who they report to. This is one of the most common reasons why a company will use a horizontal organizational structure. This characteristic of the organizational structure involves centralization of overall strategic planning, as well as vertical lines of command and authority that relay strategic directions from the headquarters to the daily operations in the Consumer Electronics, Device Solutions, and IT & Mobile Communications divisions. Tall and flat organizational structures refer to the structures of an organization’s levels of management. Also, functional units may be so concerned with their own areas that they may be less responsive to overall organizational needs. With a vertical organizational structure, the emphasis is on the hierarchy. Each unit is placed under a commander and his word is final as far as his subordinates are concerned. Below are few of those factors 1. The type of organizational structure would depend upon the type of organization itself and its philosophy of operations. On the other hand, it is a rigid form of organization and there is a tendency for line authority to become dictatorial that may be resented by the employees. The staff consists of two types: General Staff: This group has a general background that is usually similar to executives and serves as assistants to top management. Vertical structures are the more common management systems in business, yet horizontal structure is often used within development teams. This group has a specialized background in some functional area and it could serve in any of the following capacities: (a) Advisory Capacity: The primary purpose of this group is to render specialized advice and assistance to management when needed. http://smallbusiness.chron.com/different-types-organizational-structure-723.html, https://www.boundless.com/finance/introduction-to-the-field-and-goals-of-financial-management/business-organization-types/overview-of-organizational-structure/. Thus, the customers are the key to the way the activities are grouped. Functional Organizational Structure is discussed more specifically in its. In this type of organization, the functional specialists are added to the line, thus giving the line the advantages of specialists. If an organization serves different geographical areas, the division may be based upon geographical basis. Thus, we look at the types of organizational structure. The functional structure is primarily responsible for: 1. Other areas of service include research and development, purchasing, statistical analysis, insurance problems and so on. There are three key components in the definition of organization structure: These three components of structure refer to both vertical and horizontal aspects of organizing. There’s an executive at the top of the heap, people responsible for each area (the director tier is for bigger businesses), and teams of people who do the work in each department.The advantage of this type of organizational structure lies in its simplicity. 2. Structure of an Empowered Organization. the context of a fundamental change in organizational structure which is currently taking place in the way companies view their organizations and the inherent requirements and results. I hold a degree in MBA from well known management college in India. For example, the first two components are the structural framework, which include the vertical hierarchy. These specialists are basically selected on the basis of task related skills and technical expertise rather than decision-making experience or planning ability. It creates a vertical structure where every person within the organization, except one, is a subordinate to another single individual or entity. Also, because the units are independent and semi-autonomous, it provides satisfaction to the managers that in turn improves efficiency and effectiveness. The reason for this is its suitability for generating free-flowing thinking and creativity. The Concept of Organizational Structure . Each associate or organization of the network focuses on its core competency and performs some portion of the activities necessary to deliver the products and services of the network as a whole. Organization structure designates formal reporting relationships, including the number of levels in the hierarchy and the span of control of managers and supervisors. The organizational culture can help people interact better with each other. 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 levels of workers. 2. 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