Senior High School

Organization and
Management
Quarter 2–Module 8:
The Significance of Organization Structures for
Effective Business Management

Writer:
GIENAH LYN M. MALLARI
TII – Justino Sevilla High School
Editors:
JANE P. VALENCIA, EdD – Math/ABM Supervisor CHAIRMAN
JONER G. MAGLALANG – MT- I
 What I Need to Know

This module will assist you to learn about the significance of organization
structures for business management. Before a plan can be implemented, managers
must organize the assets of the business to execute the plan efficiently and effectively.
Understanding specialization and the division of work is key to this effort, since many of
the “assets” are employees. Recall what Henri Fayol wrote about the division of work:
“The specialization of the workforce according to the skills of a person, creating specific
personal and professional development within the labour force and therefore increasing
productivity, leads to specialization which increases the efficiency of labour. By
separating a small part of work, the workers speed and accuracy in its performance
increases. This principle is applicable to both technical as well as managerial work.”
Where workers are specialists, managers can group those employees into departments
so their work is appropriately directed and coordinated. In short, work should be divided,
and the right people should be given the right jobs to reduce redundancy and
inefficiency.
At the end of this module, you are expected to:

1. Analyze the nature of organizations and types of organization structures.

2. Apply organization theories for effective business management
Lesson
Organizational Structure and It’s Nature
1
Once a plan has been created, a manager can begin to organize. Organizing
involves assigning tasks, grouping tasks into departments, delegating authority, and
allocating resources across the organization. During the organizing process, managers
coordinate employees, resources, policies, and procedures to facilitate the goals
identified in the plan. Organizing is highly complex and often involves a systematic
review of human resources, finances, and priorities.
z

Notes to the Teacher

What’s In The teacher must take into considerations the essential skills
needed in the development of this competency including the
background knowledge which may reinforce learning. This module
will help the learners

After planning, organizing follows. The goals and objectives established during
planning will all go to waste without effective organizing, through the development of a
designed structure of roles for effective performance.
In business, one must understand the three different types of organization that
can make significant impacts in the intended business. Learning the different company
structure allows the entrepreneur with advantages and disadvantages that can be
considered as the business grow and develop for sustainability. Organizing is the
process of blending human and material resources through formal structure of tasks
and authority.

Short Case for Discussion

Let us assume now that Mr. Chua’s grocery business has grown by leaps and
bounds. He’s planning to open up a branch in a more strategic place near busy Cubao.
This will be handled by his own whom he has already trained in running his grocery
business.

Mr. Chua has reached the crossroad of his business. Like any entrepreneur who
started small but suddenly saw the growth of his business, he began to wonder how he
should get organized to face the challenges of the future. Shall he remain as a single
proprietor-owner or dilute his ownership by asking some of his trusted relatives and
friends to be part owners and contribute more money for his expansion plan?
To put up a branch, Mr. Chua needs more capital to buy a commercial lot and to
construct a building for his second grocery. He has to improve his credit standing by
buying grocery goods payable in 6o days or more. To get a loan from a bank, his
present assets are not enough to serve a guaranty. So, he needs associates in his
expanding business. He consulted a lawyer-friends and he was given three options.
First option is to remain as single proprietor. In this form, Mr. Chua as a single
person holds the entire operation as his personal property, managing it on a day-to-day
basis

Second option: Partnership, since this is a type of business that requires more than
one person in the decision-making process, it’s important that potential business
partners discuss a wide variety of issues up front and develop a legal partnership
agreement.
Third option: Corporation, this is especially true if a business owner, like Mr. Chua,
needs more money to fund his business expansion. He may decide to look for investors.

Activity
Question: If you are Mr. Chua, What’s the best approach in organizing u will used and
what are the advantages?
 What’s New

Organization is a mechanism or structure which helps the activities to be

performed effectively. It is established for the purpose of achieving the business
objectives. It can be compared to a human body. The human body consists of hands,
feet, eyes, ears, nose, fingers, mouth etc. These parts perform their work independently
and at the same time, one part cannot be a substitute to another. The same principles
can be identified in the organisation also. The organization consists of different
departments. Each department performs its work independently and cannot be a
substitute to another.

Activity
1) On your journal construct an organization chart of your school.
2) Get a copy of a business organization’s chart through the internet or other source
and compare it with your school. Copy this Venn Diagram on your journal and
write keywords or phrases to describe and contrast the similarities and/or
differences that you observed.

VENN DIAGRAM

Big business
Organizational organization’s
chart of your organizational
school Similarities
chart
 What is It

Nature of Organizations

Differentiation in organization involves division of labor and specialization

according to Bateman and Snell (2008). These necessarily result from the
organization’s composition – many different work units with different kinds of tasks,
using different skills and work activities coordinating with one another for a common
end.

Division of labor involves assigning different task to different people in the

organizations different work units. Related to it is specialization, the process in which
different individuals and units perform different task. An organization’s overall work is
complex and would be too much for any individual, therefore, the bigger the
organization, the more work units or work divisions and specializations are to be
expected.
Integration is another process in the organization’s internal environment which
involves the collaboration and coordination of its different work units or work divisions.
Coordination refers to the procedures that connect the work activities of the different
work divisions/units of the firm in order to achieve its overall goal. Structural
mechanisms may be devised in order to increase collaboration and coordination. The
more highly differentiated one’s organization is, the greater the need for integration
among the different units.

MAJOR CHARACTERISTICS OF ORGANIZATION

PEOPLE STRUCTURE GOAL

The organizing process should result in a well-defined structure so that

employees will know what to expect from their jobs, to whom they need to report, and
how their work contributes to the company’s effort to meet its goal.
Types of Organizational Structure

An organization structure is a system made up of tasks to be accomplished, work

movements from one work level to another work levels in the system, reporting
relationships, and communication passage ways that unite the work of different
individual persons and groups. The types of organizational structures include:

1) Vertical Structure – According to Bateman and Snell (2008), a vertical structure

clears issues related to authority rights, responsibilities, and reporting
relationships.
2) Horizontal Structure – It refers to the departmentalization of an organization into
smaller work units as tasks become increasingly varied and numerous.
3) Network Structure – it is a collection of independent, usually single function
organizations/companies that work together in order to produce a product or
service.

Discussion Activity 1
Observe the given structure. On your journal, write at least 5 key words or phrase that
best describes advantages and disadvantages of each organizational structure below.

1. Vertical Structure

Description:
(Advantages/Disadvantages)
1. _
2. _
3. _
4. _
5. _

Source: https://heroictechwriting.com/2014/09/21/vertical-horizontal-and-matrixed-organizations-and-why-you-should-care/

2. Horizontal Structure

Description:
(Advantages/Disadvantages)
1. _
2. _
3. _
4. _
5. _

Source: https://heroictechwriting.com/2014/09/21/vertical-horizontal-and-matrixed-organizations-and-why-you-should-care/
 3. Network Structure

Description:
(Advantages/Disadvantages)
1.
2. _
3. _
4. _
5. _

Source: https://en.ppt-online.org/75156

Discussion Activity 2
Most of the time, communication is by electronic, means, the sharing of information is
speedy. This results to their ability to respond at once to their customers’ demands.
Organizational Structures are needed to keep employees needed, to build a learning
organization and to manage global structural problems.

One of the organizational structures is the horizontal. What are the different types of
Horizontal structure?

Arrange the letters to identify the correct type of horizontal structure that is
being described. Write your answers in your journal.

1. E A N D S L M E P I T N R E T → It deals directly with the firm’s primary goods

and services; responsible for manufacturing, selling and providing services
to clients.

2. S M E S N P A T A T R T F F D → It support the activities of the line departments

by doing research, attending to legal matters, performing public relations
duties, etc.

3. A P N A L F P R O T U A C H I N O C → It is where the subdivisions are formed

based on specialized activities such as marketing, production, financial
management and human resource management.

4. D A P P I V R I S O A I O C N H A L → It is where departments are formed based

on management of their products, customers or geographic areas
covered.

5. A P P M A R O A X C T H R I → It is a hybrid form of departmentalization where

managers and staff personnel report to the superiors, the functional
manager and divisional manager.
Businesses of all shapes and sizes use organizational structures heavily. They
define a specific hierarchy within an organization.

What’s More

Businesses of all shapes and sizes use organizational structures heavily.

They define a specific hierarchy within an organization. A successful
organizational structure defines each employee's job and how it fits within the
overall system. Put simply, the organizational structure lays out who does what
so the company can meet its objectives.

Independent Activity 1
Complete the crossword puzzle using the different clues given below. Write the
answer on your journal.

1 9
4 10

8
2 3

Across
2 - The course of tasks assigned to, and completed by, a group of workers in order to
increase efficiency.
4 – People, Structure & goal
5 – It violates the unity of command principle because of the dual reporting
relationships, it provides flexibility and malleability.
6 – A system that outlines how certain activities are directed in order to achieve the
goals of an organization
7 – Top to bottom line in an organization
Down
1 – The process of dividing work into sections and departments.
3 - The process in the organization’s internal environment which involves the
collaboration and coordination.
8 – Groups of people from different functional areas working together to achieve a
common goal
9 – English department setup for university branches located in different provinces or
regions.
10 - The hospitality industry in a given tourism destination.

Independent Activity 2

Summarize how authority operates in the different types of organizational structure.

1. Vertical Structure
2. Horizontal Structure
3. Network Structure

What I Have Learned

Questions:

1. Why is it important to have a structure within organization?

2. Who have greater responsibilities in an organization, the upper department or
lower department? Explain your answer.

What I Can Do

Question: How will you apply the importance of structure in an organization in terms of role,
authority, responsibility and accountability in your situation at home & school?

_
_
_
_
_
References
(n.d.). Retrieved May 2020, from Introduction to Business:
https://courses.lumenlearning.com/wmopen-introbusiness/chapter/organizing/#return-
footnote-9117-1

Business Management. (2017). Retrieved May 2020, from

https://businessmgtblog.wordpress.com/2017/08/13/242/

Helena Ma. F. Cabrera, P., Anthony DC Altarejos, Ph.D, & Riaz Benjamin. (n.d.). Organization and
Management.

Leahy, B. (2014, September). Vertical, Horizontal, and Matrixed Organizations (And Why You Should
Care). Retrieved May 2020, from https://heroictechwriting.com/2014/09/21/vertical-horizontal-
and-matrixed-organizations-and-why-you-should-care/

Nishadha. (2019, June 12). Types of Organizational Charts (Organizational Structure Types) for Different
Scenarios. Retrieved May 2020, from https://creately.com/blog/diagrams/types-of-
organizational-charts/

Payos, R. P. (n.d.).

Ranulfo P. Payos, E. G. (2016). Organization and Management. Rex Book Store, Inc.

Universal Training Solutions Private Limited. (2013). Principles of Management. Retrieved May 2020,
from
http://14.139.242.244/extra/library/library/_14022020061808PrinciplesofManagement.pdf