ORGANIZATIONAL

STRUCTURE

Compiled by:
Ar.Enp. Carlo Fundador B. Marudo
ORGANIZATIONAL STRUCTURES
• An Organizations Structure is a system used
to define a hierarchy within an organization.
• It identifies each job, its function and where it
reports to within the organization.
• This structure is developed to establish how
an organization operates and assists an
organization in obtaining its goals to allow for
future growth.
DIFFERENT FORMS OF ORGANIZATION
Choosing the organization structure right for you
Different factors to consider:
• Goals
• Personality A business can be
• Financial aspects organized in one of
• Age several ways, and the
• Firm size form its owners
• Practice mix choose will affect the
• Geographic location company's and
owners' legal liability
and income tax
treatment.
DIFFERENT FORMS OF ORGANIZATION
Three basic legal forms:
1. Proprietorship
owned by one person who has complete undiluted control over
its decisions and destiny and personally has a legal and financial
responsibility for all of the firm’s actions

2. Partnership
partners share both the ownership of the firm and
liability for its acts. Each partner is liable for the
business actions and obligations of all of the
partners.
DIFFERENT FORMS OF ORGANIZATION
Three basic legal forms:

3. Corporation
the principals who form the corporation become its employees
as such are eligible for employee benefit programs, which are
usually the greatest advantage to be derived from
incorporation.
Three basic legal forms:
 DIFFERENT FORMS OF ORGANIZATION
Comparisons of Forms
Criteria 1 Proprietorship Partnership Corp.

Ownership Owner is the General partnership Ownership is reflected

individual who starts owners and limited by ownership of shares
the business partnership owners of stock.
Liability Individual is liable for Liable for all aspects of Owners liable only for
business liabilities. the business. the amount of their
Amount of personal investment.
liability is shared
equally.
Costs of starting a Filing for a business or Partnership agreement, Created by statute,
business trade name. legal costs, trade name articles of incorporation,
filing fees. filing fees, taxes, fees for
states in which
corporation registers to
do business.
DIFFERENT FORMS OF ORGANIZATION
Comparisons of Forms
Criteria 2 Proprietorship Partnership Corp.

Continuity of Death of owner Death or withdrawal Death or withdrawal has no

business results in the of one of the partners impact on continuation of
termination of the results in partnership business.
business. termination, unless
stipulated otherwise.
Transferability of Entrepreneur has Cannot sell their Shareholders may transfer
interests the right to sell or interest without first their shares at any time
transfer any assets refusal from the without consent from the
in the business. remaining general other shareholders.
partners. Disadvantage: It can affect
the ownership control
Capital From loans or by Loans can be obtained Stock may be sold as either
requirements additional personal from banks but may voting or nonvoting.
contributions by require change in
partnership agreement.
the entrepreneur.
DIFFERENT FORMS OF ORGANIZATION
Comparisons of Forms
Criteria 3 Proprietorship Partnership Business Corp.

Usual Firm Size Generally small Small to large Medium to large

Personal involvement of Maximum Varies Varies

principal
Extent of personal liability Maximum Shared Minimum
(business)
Extent of personal liability Maximum Maximum but Slightly reduced
(professional) subject to
contribution
Potential personal tax Minimum Minimum Maximum
advantage for principals
Potential benefits for Usually minimum Varies Maximum
employees
DIFFERENT FORMS OF ORGANIZATION
Comparisons of Forms
Partnership or corporation?
• Financial advantages to the principals
• Perpetuating the firm
• Professional concerns
• Potential disadvantages of incorporating

Other organizational structures?

• Associated professional firms
• Mergers and acquisitions
• Team endeavors
DIFFERENT FORMS OF ORGANIZATION
New Forms of Business Formations
1. Limited liability company/partnership (LLC/LLP).
A corporate structure whereby the members of the company
cannot be held personally liable for the company's debts or
liabilities. Limited liability companies are essentially hybrid
entities that combine the characteristics of a corporation and a
partnership or sole proprietorship.
2. S corporation
An S corporation, for United States federal income tax purposes,
is a closely held corporation (or, in some cases, a limited liability
company or a partnership) that makes a valid election to be taxed
under Subchapter S of Chapter 1 of the Internal Revenue Code.
DIFFERENT FORMS OF ORGANIZATION
Types of Internal Organization

1. Departmental Organization
separates the various functions which must be performed in the
development of a project

2. Non-departmental Organization
team created to develop the project with the team leader
choosing the people with varied skills to accomplish the job.

3. Modified Team Organization

uses a form of team system with assigned leaders from different
departments. centers.
DIFFERENT FORMS OF ORGANIZATION
Types of Internal Organization

4. Modified Departmental Organization

uses branch offices to accomplish the different aspects of the
work.

5. Modular Organization
usually applied in large firms, each job module is run by one or
several principals serving as separate profit centers.
DIFFERENT FORMS OF ORGANIZATION
Example of Line Organization
The traditional line
structure is organized
in such a way that a
president or CEO
(Chief Executive
Officer) is at the top.
Then there are the
directors or VPs (Vice-
Presidents) of specific
areas, followed by
managers, and so on,
until the operational
personnel.
DIFFERENT FORMS OF ORGANIZATION
Example of Functional Organization
The functional
organizational structure
derives from the line
structure; the difference
is that employees in an
area need to report to
all the directors.
 FUNCTIONAL Organizational Structure

One of the most common types of

organizational structures, the
functional structure
departmentalizes an organization
based on common job functions.

An organization with a functional

structure would group all of the
marketers together in one
department, group all of the
salespeople together in a separate
department, and group all of the
customer service people together in
a third department.
 DIVISIONAL (Product Based) Organizational Structure
A Divisional organizational structure as
a structure that’s comprised of multiple,
smaller functional structures (i.e. each
division within a divisional structure can
have its own marketing team, its own
sales team, and so on). In this case -- a
product-based divisional structure --
each division within the organization is
dedicated to a particular product line.

This type of structure is ideal for

organizations with multiple products and can
help shorten product development cycles.

The downsides: It can be difficult to scale,

and the organization may end up with
duplicate resources as different divisions
strive for autonomy.
DIVISIONAL (Market Based) Organizational Structure
Another variety of the Divisional organizational
structure is the Market-based structure, wherein
the divisions of an organization are based
around markets, industries, or customer types.

The market-based structure is ideal for an

organization that has products or services that
are unique to specific market segments, and is
particularly effective if that organization has
advanced knowledge of those segments.

The downsides: Too much autonomy can lead to

divisions developing systems that are
incompatible with one another, and divisions may
also end up inadvertently duplicating activities
that other divisions are already handling.
DIVISIONAL (Geography Based) Organizational Structure
The geographical organizational structure
establishes its divisions based geography. More
specifically, the divisions of a geographical
structure can include territories, regions, or
districts.
This type of structure is best-suited to organizations
that need to be near sources of supply and/or
customers (e.g. for deliveries or for on-site support).

The main downside of a geographical org structure:

It can be easy for decision- making to become
decentralized, as geographic divisions (which can be
hundreds, if not thousands of miles away from
corporate headquarters) often have a great deal of
autonomy.
 DIVISIONAL (Process Based) Organizational Structure
Process-based organizational
structures are designed around the
end-to-end flow of different processes,
Unlike a strictly functional structure, a
process-based structure considers not
only the activities employees perform,
but also how those different activities
interact with one another.

The customer acquisition process can’t

start until you have a fully developed
product to sell. And likewise, the order
fulfillment process can’t start until
customers have been acquired and
there are product orders to fill.
 DIVISIONAL (Process Based) Organizational Structure

This structure is ideal for improving

speed and efficiency, and is best-suited
to rapidly changing business
environments, as it is easily adaptable.

The main downside: Barriers between

the different process groups can lead
to problems communicating and
handing off work.
DIVISIONAL (Geography Based) Organizational Structure
A Matrix organizational structure doesn’t
follow the traditional, hierarchical model.
Instead, all employees (represented by the
green boxes) have dual reporting
relationships. Typically, there is a functional
reporting line (shown in blue) as well as a
product- based reporting line (shown in
yellow).

When looking at a matrix structure org chart,

solid lines represent strong, direct-reporting
relationships, whereas dotted lines indicate
that the relationship is secondary, or not as
strong. In our example below, it’s clear that
functional reporting takes precedence over
product-based reporting.
 MATRIX Organizational Structure
The main appeal of the matrix
structure is that it can provide
both flexibility and more
balanced decision-making (as
there are two chains of
command instead of just one).

Its primary pitfall:

complexity, which can lead to
confused employees.
 PROJECT Organizational Structure
As a project manager, you have the
Sometimes these team responsibility to take authority, rather than
members are permanent, and waiting for someone to give you the
sometimes they are hired as authority.
temporary workers to help with
the project until its completion.
If the organization takes on a
large project, it will have all the
necessary resources available to
sustain the project and will act
as a small, self-contained
company.
The project manager works
with complete autonomy
(central authority, power) over
the project, team is on the
project full time and report to
the project manager.
 PROJECT Organizational Structure
Advantages to the project based Another disadvantage is that the organization has to
structure include the project manager's essentially clone the same resources for each project (project
opportunity for career progression. In manager, work area, administrator).
addition, because good communication
exists within the project work, the team
members tend to be more committed to,
and excel in, their responsibilities.

The disadvantage of a project

based structure is that, because
the team breaks up and
disperses after the completion
of the project, there are no long-
term goals or sense of job
security for the rest of the
workers
INFLUENCE OF STRUCTURE TO PROJECT DELIVERY
BUILDING A SUCCESFUL ORGANIZATION
A management team must be able to accomplish three functions:
• Execute the business plan.
• Identify fundamental changes in the business as they occur.
• Make adjustments to the plan based on changes in the
environment and market that will maintain profitability.
A business plan is a written document that describes in detail how
a business, usually a new one, is going to achieve its goals. A
business plan lays out a written plan from a marketing, financial
and operational viewpoint. Sometimes, a business plan is
prepared for an established business that is moving in a new
direction.
BUILDING A ORGANIZATIONAL STRUCTURE
Factors to establish an effective team, and in turn a successful
organization culture:
• Desired culture must match business strategy outlined in the
business plan.
• The workplace must encourage communication from the
bottom up.
• Entrepreneur should be flexible enough to try different things.
• Entrepreneur needs to spend extra time in the hiring process.
• Core values and appropriate tools must be provided for
employees to effectively complete their jobs.
DESIGNING THE ORGANIZATION
Formal and explicit indication to the members of the
organization as to what is expected of them:

• Organization structure
• Planning, measurement, and evaluation schemes
• Rewards
• Selection criteria
• Training
END OF PRESENTATION

Compiled by: Ar.Enp. Carlo Fundador B. Marudo