Outline of Types of Organizational Structures
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There are several types of organizational structures that companies can adopt. A simple structure has an owner-manager who makes all decisions with informal relationships and communication. A line organization has a direct vertical flow of authority from top to bottom. A line and staff organization combines this direct authority with staff who are experts in specific areas. A functional structure groups employees into departments like marketing, production, and finance. A multi-divisional structure manages diversified products and markets across multiple business units. A matrix structure combines functional and project-based command with dual lines of authority. A network structure uses project groups and collaborations both within and outside the organization to operate in a flexible, non-hierarchical way.
Outline of Types of Organizational Structures
- 1. TYPES OF ORGANIZATIONAL STRUCTURES SIMPLE STRUCTURE: • The simple structure is a structure in which the owner – manager makes all major decisions and monitors all activities while the staff serves as an extension of the manager’s supervisory authority. • The owner manager actively works in the business on a daily basis, informal relationships, few rules, limited task specialization and unsophisticated formation systems characterize the simple structure. • The simple structure is matched with focus strategies and business level strategies, as these firms commonly compete by offering a single product line in a single geographic market. • Simple, frequent and informal communication among employees - makes it easy to coordinate the work that is to be done.
- 2. LINE ORGANIZATION: •The line organization represents the structure in a direct vertical relationship through which authority flows. •It is the simplest form of organization structure and is also known as scalar or military organization. •The authority flows from top to bottom throughout the organization. Example: small businesses in which the top manager, often the owner, is positioned at the top of the organizational structure and has clear "lines" of distinction between him and his subordinates.
- 3. LINE AND STAFF ORGANIZATION STRUCTURE: • In line and staff organization the line authority remains the same as it is in the line organization. • Authority flows from top to bottom. Staff are attached as experts on important matters. •A widely accepted perspective of line and staff functions is that line functions are those which directly influence the accomplishment of organizational objectives. •Staff functions are those which facilitate the work of the line personnel towards the achievement of organizational objectives.
- 4. FUNCTIONAL ORGANIZATIONAL STRUCTURE: • The functional organization consists of a chief executive officer and a limited corporate staff, with functional line managers in dominant organizational areas such as production, accounting, marketing, R&D, engineering and human resources. •The structure allows for functional specialization, thereby facilitating active sharing of knowledge within each functional area.
- 5. MULTI – DIVISIONAL STRUCTURE: •With continuing growth and success firms often consider greater levels of diversification. •However, successful diversification requires analysis of substantially greater amounts of data and information when the firm offers the same products in different markets or offers different products in several markets. •In addition, trying to manage high levels of diversification through functional structures creates serious coordination and control problems.
- 6. SBU STRUCTURE: •A single Chief executive cannot control a number of decentralized units of a broadly diversified company. •The business can be effectively controlled, if the related businesses are grouped into strategic units and the effective and senior executive is delegated with the authority and responsibility for its management. •A strategic business unit is a grouping of business subsidiaries based on some important strategic elements common to each.
- 7. MATRIX ORGANIZATION STRUCTURE: • A matrix organisation, also referred to as the “multiple command system” has two chains of command. •One chain of command is functional in which the flow of authority is vertical. •The second chain is horizontal depicted by a project team, which is led by the project, or group manager who is an expert in his team’s assigned area of specialisation. •Since the matrix structure integrates the efforts of functional and project authority, the vertical and horizontal lines of authority are combination of the authority flows both down and across.
- 8. NETWORK ORGANIZATION STRUCTURE OR VIRTUAL ORGANIZATIONS: •The increasing volatility of the environment, coupled with the emergence of knowledge based industries, has led to the creation of a network structure. • This structure is composed of a series of project groups or collaborations linked by constantly changing non – hierarchical cobweb like networks. • In a this structure, managers coordinate and control relationships that are both internal and external to the firm.
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