Organizational

Structure
What is an Organization?
An organization is a group of individuals who work together to achieve
common goals. It could be a private or public entity, such as a company,
school, charity, government agency, etc., with a specific mission. Founders
establish the organization, handle registration and record-keeping, and
select a leader to guide the group towards achieving their objectives.
What is an organizational structure?

An organizational structure outlines how responsibilities and roles are

assigned and grouped throughout an organization.

It outlines the hierarchy, reporting relationships, and communication

channels within the organisation. By clarifying roles and responsibilities,
the structure helps to establish clear lines of authority and decision-
making, promoting efficient coordination and control.

A well-defined organizational structure enhances efficiency, clarifies

reporting lines, and ensures that each part of the organization
understands its function within the broader framework. It can be
represented visually through an organizational chart.
Basic Elements of Organizational Structure
Basic Elements of Organizational Structure

Specialization Chain of Command Formalization

Dividing tasks to increase efficiency, but Line of authority from top to bottom, Standardizing jobs with rules and
balancing variety and autonomy. clarifying reporting relationships. procedures to ensure consistency.
Example: Dividing work in a software Example: A manager reports to a senior Example: Implementing a standard
company into front-end, back-end, and manager who then reports to a director. operating procedure (SOP) for handling
database teams. customer complaints.
Centralization and Decentralization
Centralization and decentralization are two fundamental approaches to distributing decision-making authority within an
organization. Centralization concentrates decision-making power at the top levels of management, while decentralization
distributes power across different levels, giving subordinates more autonomy.

Centralization Decentralization

This approach concentrates decision-making authority at the In this approach, decision-making authority is distributed
top levels of management. Decisions are made by a select across different levels of the organization. Lower-level
few, typically the CEO or senior executives. This structure managers and employees have more autonomy to make
emphasizes control and consistency, but it can slow down decisions related to their specific tasks and areas of
decision-making and limit the flexibility of lower-level expertise. This structure encourages innovation and
employees. responsiveness, but it can also lead to inconsistencies and a
lack of coordination.
Departmentation
‘Departmentation’ or ‘Departmentalisation’ is the process of grouping the
activities of an enterprise into several units for the purpose of
administration at all levels.

It is derived from the word ‘department’, which signifies an organization’s

distinct area or division responsible for specific tasks or functions.
Departmentation involves organizing and dividing the organization’s
workload into smaller, manageable units, allowing employees to focus on
their specific areas of expertise.

The administrative units so created may be designated as departments,

divisions, units, branches, sections, etc.
Types of Departmentation

Functional Departmentation Product Departmentation

Groups employees based on their expertise and functions, Organizes employees around specific products or product
such as marketing, finance, human resources, and lines. This structure enhances focus on individual product
production. This structure promotes specialization but can needs but can result in duplication of resources and
lead to a lack of cross-functional coordination. efforts.

Geographic Departmentation Customer Departmentation

Divides employees based on geographical locations, such Organizes employees around specific customer segments
as different regions or countries. This structure allows for or markets. This structure prioritizes customer satisfaction
localization and responsiveness to regional needs but can but may require specialized expertise and resources for
increase communication challenges and complexity. each segment.
Types of Departmentation

Process or Equipment Time Departmentation Combined Departmentation

Departmentation
Time departmentation is an Combined departmentation is an
Process or equipment departmentation organizational structure in which organizational structure that
is a type of organizational structure that employees are grouped based on the incorporates two or more types of
groups employees based on the time of day or week that they work. departmentation. It allows companies to
equipment or technology they use or the leverage the benefits of different
For example, a manufacturing company
specific processes they perform. departmentation methods to improve
may organize its operations into
For example, a manufacturing company their operational efficiency and
departments based on different shifts,
may organize its operations into effectiveness.
such as day shift, night shift or weekend
departments based on the types of shift.
equipment, such as milling machines,
lathes, or welding machines.
Span of Management
The span of management, also known as span of control, refers to the number of subordinates that a manager can effectively supervise.

An organisation needs to maintain a balance between the number of employees within a team and the number of employees that a manager
is responsible for taking care of. The span of control of a manager thus depends upon their subordinates, which can range from a few to a
hundred.

Complexity of Tasks Experience of Technology and Balance of Support and

Subordinates Communication Autonomy
For complex and highly
specialized tasks, a narrower Experienced subordinates often Advanced technology and The goal is to find the right
span of management is often require less direct supervision, communication tools can balance between providing
more appropriate to provide allowing managers to oversee a facilitate effective management sufficient support and allowing
adequate guidance and larger number of individuals. of a larger span of control by subordinates to operate
supervision. enhancing communication and autonomously to optimize
collaboration. productivity and employee
satisfaction.
Types of Organisation Structure
1. Line Organization

Line organisation, also known as a scalar or military organisation, is the simplest and oldest form of organisational structure. It is
characterised by a clear and direct chain of command, where authority flows vertically from top to bottom.

Direct Chain of Command

Communication and authority flow in a clear, direct path from top management to lower levels, ensuring a streamlined
decision-making process.

Efficiency and Accountability

The simple structure promotes efficiency by minimizing unnecessary layers and streamlining decision-making. It also
enhances accountability by clearly defining roles and responsibilities.

Focus on Core Activities

Line organizations are primarily concerned with the organization's core activities, focusing on production, sales, and
distribution, and minimizing non-essential functions.
2. Functional Organization
Functional organisation is a common structure where departments are
organised based on specialised functions or tasks.

For example, there might be separate departments for marketing, finance,

operations, human resources, and so on. Each department is headed by a
functional manager who has expertise in that particular area
3. Line and Staff Organization
A line and staff organization combines the direct authority of a line organization with the advisory expertise of a staff function. Line
managers have direct authority over their subordinates, while staff specialists provide advice, support, and specialized knowledge to
both line managers and employees. This structure aims to balance efficiency with expertise, providing support without interfering
with the chain of command.

1 Direct Line of Authority 2 Staff Expertise 3 Balance of Efficiency and

Expertise
Line managers retain direct Staff specialists, such as HR
responsibility for their professionals, financial analysts, or This structure aims to balance the
subordinates and the legal experts, provide advisory and efficiency of a line organization
organization's core activities, support services to line managers with the specialized knowledge of
ensuring a clear chain of and employees. a staff function, ensuring that line
command. managers have access to expert
advice without losing direct
control.
4. Project Organisation
A project organisation is a temporary structure formed specifically for a particular project or
initiative.

Temporary Structure Dedicated Team

Formed for a specific project or initiative. Assembled to achieve specific goals
within a defined timeframe.

Project Manager Focused Approach

Leads the team with authority over Effective coordination, communication,
members and resources. and collaboration.

Team Disbanded
Once the project is completed.

For instance, a construction company might establish a project organization to oversee the
building of a new skyscraper, bringing together architects, engineers, and construction workers
under a project manager until the building is completed.
5. Matrix Organisation
A matrix organisation is a unique way of structuring an organisation
where employees have dual reporting lines. It combines functional
departments, like marketing or engineering, with project teams.

For example, Consider a software company where developers report to

both their department head and a project manager for a specific app. This
allows for specialized expertise and focused project execution.

Dual Reporting Knowledge Complexity

Sharing
Employees report to Can be complex to
both functional and Promotes effective manage due to
project managers, sharing of expertise multiple reporting
creating a grid-like across projects and lines and competing
structure. functional areas. priorities.
6. Committee Organisation
A committee organisation refers to a structure where committees are established to assist decision-making and problem-solving
processes within an organisation.

1 Collective Decision-Making 2 Specific Focus Areas

Distributes decision-making across committees, Committees address specific areas or functions within
ensuring diverse perspectives and expertise. the organization.

3 Collaboration and Participation 4 Diverse Viewpoints

Promotes collaboration and participation in decision- Secures viewpoints and consultations from various
making processes. persons in the organization.

For example, a university might form a committee comprising faculty members, administrators, and students to review and
update the curriculum. This ensures that diverse perspectives are considered, leading to a more comprehensive and effective
curriculum.
Conclusion
In conclusion, organizational structure is a critical framework that defines
how activities are directed within an organization. By understanding the
basic elements such as centralization, departmentation, and span of
management, organizations can implement structures like line, functional,
or matrix to optimize operations.

The right organizational structure aligns with the organization's goals,

enhances communication, and promotes efficient decision-making.