ORGANIZATION AND

MANAGEMENT (ME 601)

Chapter 1.5 Organizational
Structure
Er. Rajesh Bhattarai
Pashchimanchal Campus
Class: BME /BAME III/I
2078/02/17 Monday
 1.5 Organizational Structure – Course outline
1.5.1Line Organization
– Advantages and
disadvantages
1.5.2 Functional Organization
– Advantages and
disadvantages
1.5.3 Line and Staff Organization
– Advantages and
disadvantages
1.5.4Committee Organization
– Advantages and
disadvantages

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 1.5 Organizational Structure
The organization structure is a skeleton or a framework
that divides the total activities into related groups,
develops superior and subordinate relationship among the
persons by prescribing the authorities.

Thus, it indicates the hierarchy (persons arranged according

to rank), authority structure and reporting relationships
(who should report to whom).

The organizational structure differs from industry to

industry. It usually depends upon:
i. Size of the organization.
ii. Nature of the product being manufactured.
iii. Complexity of the problems being faced.

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Process
• Activities defined
• Identification of major functions
• Grouping & Subgrouping of activities on the basis of
similarity
• Establishing relationships among individual and department i)
responsibility ii) Authority III) Accountability
• Network follow between employees
• Whom/With what (Formal relation)

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 1.5.1 Line Organization
This is the simplest and earliest type of organization. It
is also called as Military or Scalar organization.

In this type of organization, the line of authority flows

directly from top to bottom and the line of
responsibility from bottom to top in opposite direction.

In line organization, the business activities are divided

into three groups:
i. Finance or accounts
ii. Production
iii. Sales (distribution)

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1.5.1 Line Organization
Each of these departments is subdivided into
certain self-contained departments or sections.

Each departmental head has complete control

over his section and he is fully authorized to
select his labor, staff, purchases of raw
materials, stores and to set the standards of
output etc.

The responsibility of each departmental head is

clearly defined. Each department works as a
self-supporting unit.

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 1.5.1 Line Organization
• .

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 1.5.1 Line Organization
Advantages Disadvantages
1. Unity of Command 1. Lack of specialization
2. Quick decisions. 2. Low quality of decision
3. Less Conflict making
4. Strong in discipline. 3. Autocratic leadership
5. Clear cut authority and 4. Scope of favourism.
responsibility. 5. Overloading for TLM
6. Direct Communication. 6. Unsuitable for large
7. Simplicity/Low concerns.
Operating Cost 7. Wastage of materials and
8. Co-ordination. man hours.
9. Suitable for small org.

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1.5.2 Functional Organization
F.W. Taylor suggested functional organization, because it was
difficult to find all-round persons qualified to work at middle
management levels in the line organization.

Functional organization divides managerial activities, so that each

head from the works manager down has few functions to perform
as possible and is able to become specialist in these. Authority
from top to down is delegated according to the function.

In this type of organization specialists like production engineer,

design engineer, maintenance engineer, purchase officer etc. are
employed.
Suitable for Specialization work, repetitive nature, medium types
product oriented business

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1.5.2 Functional Organization
Each specialist is supposed to give his functional
advice to all other foreman and workers.

Taylor divided the responsibility of shop

supervision among several foreman, each
specially qualified and in charge of certain aspect
of work.

Each specialist is authorized to give orders to

workers, but only in regard of his field of
specialization.

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1.5.2 Functional Organization

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 1.5.2 Functional Organization
Advantages Disadvantages
1. Separation of work. 1. Delay in decision making
2. Specialization. 2. Indiscipline (Lack of
3. Narrow range with high Unity of command)
depth. 3. Shifting of responsibility.
4. Ease in selection and
4. Kills the initiative of
training.
workers.
5. Standardized operations.
5. Lack of co-ordination
6. Reduction in prime cost.
between functions.
7. Scope for growth and
development of business. 6. Increase in cost.

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1.5.3 Line and Staff Organization
Line and staff organization is that in which the
line heads are assisted by specialist staff.

If the firm is too large, managers cannot give

careful attention to every aspect of management.
They are busy with ordinary task of production
and selling.

Hence staff is deputed to do the work of

investigation, research, recording and advising to
managers. Thus the staff brings specialization by
assisting the line officers.

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1.5.3 Line and Staff Organization
The line maintains discipline and stability, staff
provided experts information and helps to improve
overall efficiency. Thus the staff are thinkers while the
line are doers.

Usually the staff has no administrative authority. They

serve only in advisory capacity in their field of
specialization.

Suitable for Government and private concerns

involving complicated processes and operations i.e. big
steel plants, heavy electrical electricity boards, large
manufacturing plants etc.

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1.5.3 Line and Staff Organizationn

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 1.5.3 Line and Staff Organization
Advantages Disadvantages
1. Planned specialization. 1. Chances of mis-
2. Well defined authority interpretation.
and responsibility. 2. Chances of friction.
3. Availability of 3. Ineffective staff in the
specialized knowledge. absence of authority.
4. Adaptability to 4. Expensive
progressive business. 5. Loss of initiative by
5. Less wastage. line executive
6. Improved quality.

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1.5.4 Committee Organization
Committees have come to be recognized as a
formal part of organization structure and they are
found at all levels of management hierarchy in all
large companies. Thus committees are not
separate type organizations.

A committee is a formally organized group of

individuals formed for the purpose of giving
advice on certain important problems, which
cannot usually be solved by an individual.

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 1.5.4 Committee Organization
The committee members meet repeatedly, discuss,
decide and recommend solution to certain problems of
the organization.

The committees may be of different types as follows:

1. Ad-hoc committee: formed temporarily for some
specific temporary function only.

2. Permanent committee: formed when the nature of

work is of repetitive type. E.g. research committee,
purchase committee, advisory committee etc.

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Research Committee

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 1.5.4 Committee Organization
Advantages Disadvantages
1. Problem is looked from 1. Delay in decision making.
more than one point of 2. Compromise
view. 3. Non-uniformity in final
2. Co-ordination. decision.
3. Helps to adopt new ideas, 4. Dominate by aggressive
innovations. member
4. Promotes united actions. 5. Costly structure.
5. Democratic and
participative management.

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 Home Assignment for chapter 1.5
1. Discuss the merits and demerits of Line and Line and staff
organization.
2. Name the various types of organization structure and
explain any one of them with its merits and demerits.
3. Differentiate between line organization and functional
organization
4. What are the merits and demerits of Committee
organization?
5. Which organization structure is best suited for large
manufacturing concerns give reasons for your answer.
6. Suppose you are chief executive officer (CEO) of a
repetitive product oriented company. Which type of
ownership would you prefer? And Why? Suggest suitable
organizational structure for it with figure.

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