ORGANIZATIONAL STRUCTURE
An organizational structure defines how activities such as task allocation, coordination and
supervision are • directed toward the achievement of organizational aims (Lim arifliths and
Sambrook, 2010). Organizations need be to efficient. flexible, innovative and caring in order
to achieve a sustainable competitive advantage. Organizational structure can also be
considered as the viewing glass or perspective through which individuals see their
organization and its environment. Organizations are a variant of clustered entities.
An organization can be structured in many different ways, depending on its objectives. The
structure of an organization will determine the modes in which it operates and performs.
Organizational structure allows the expressed allocation of responsibilities for different
functions and processes to different entities such as the branch, department, workgroup,
and individual.
Organizational structure according to Stoner (1978) is a framework that holds various
departments, individual positions and their relationship together, for order and logical
arrangement. This organizational structure is often expressed in a chart form. This chart
portrays the organizational structure in a diagrammatical form. Organizational structure
affects organizational action in two ways:
● It provides the foundation on which standard operating procedures and routines rest.
● It determines which individuals get to participate in which decision-making
processes, and thus to what extent their views shape the organization's actions.
The managers have to ask themselves a number of basic questions before designing an
appropriate structure.
•What is the best basis for dividing up the work? By specialist function, product, geography
etc.
● How much specialization should be encouraged?
● How closely should individual tasks be defined in relation to other tasks?
● How much standardization of procedures should be encouraged? How closely should
individual tasks be defined in relation to other tasks?
● How much discretion (freedom to act) should be permitted to individuals?
● What is the best way to achieve coordination and integration across the specialisms?
(Cole, 2002)
There is no simple answers to these questions. Managers have to exercise their judgment as
to the best configuration for their particular situation. This is because the organization
structure, which operates successfully in a medium-sized organization in one building in a
town, is unlikely to be successful in a group of companies with branches located in various
places around the country. One thing is certain, there is no one ideal organization structure.
A good manager should know what is implied by good organization, and ho should always
seek to evolve the best, that is, the one mos suited to the world of his office. His task is to
develop an organization structure that will facilitate the flow of work which will give the best
possible administrative support to the organization as a whole; and thus make the most
effective contribution possible to the fulfillment of corporate
Objectives.
IMPORTANCE OF ORGANIZATIONAL STRUCTURE
Small companies usually use one of two types of oranizational structure: Functional and
product. Functional weis such as marketing and engineering report to the president or Chief
Executive Officer (CEO) in a functional arganizational structure. Product structures are used
when a company sells numerous products or brands. It is important fur companies to find the
organizational structure that best fits Their needs.
COMMUNICATION
The importance of organizational structure is particularly crucial for communication.
Organizational structure enables the distribution of authority. When a person starts a job, he
knows from day one to whom he will report. Most companies linnel their communication
through department leaders. For example marketing employees will discuss various issues
with their director. The director, in turn, will discuss these issues with the vice president or
upper management.
EVALUATING EMPLOYEE PERFORMANCE
Organizational structure is important for evaluating employee performance. The linear
structure of functional and product organizational structures allow supervisors to better
evaluate the work of their subordinates. Supervisors can evaluate the skills employees
demonstrate, how they get along with other workers, and the timeliness in which they
complete their work. Consequently, supervisors can more readily complete semiannual or
annual performance appraisals, which arc usually mandatory in most companies.
ACHIEVING GOALS
Organizational structure is particularly important in achieving goals and results.
Organizational structure allows for the chain of command. Department leaders are in charge
of delegating tasks and projects to subordinates so the department can meet project
deadlines. In essence, organizational structure fosters teamwork, where everyone in the
department works towards a common goal.
PREVENTION/SOLUTION
Organizational structure enables companies to better manage change in the marketplace,
including consumer needs, goverment regulation and new technology. Department heads
and managers can meet, outline various problem areas, and come up with a solution as a
group. Change can be expected in any industry. Company leaders should strive to find the
best organizational structure to meet those changes.
TYPES OF BUSINESS ORGANIZATIONAL STRUCTURE
In any type of organization that involves more than one or two people, an organizational
structure is necessary for defining employee roles and responsibilities as well as establishing
reporting channels between employees and management. An organizational chart usually
depicts these roles and reporting channels graphically. There are several types of
organizational structures, each of which work best for certain sizes or types of business.
Determining the best structure is done by answering the questions:
● What are the functional groupings of work processes?
● Are there natural groupings of teams, work groups or units?
senior leadership looks at all functions and determines how they would like work activities to
be organized and carried out. This process also identifies natural reporting relationships and
chain-of-command. Reporting relationships can be both vertical as well as horizontal.
Business organizational structures are as follows:
FLAT ORGANIZATIONAL STRUCTURE
Flat organizational structure, sometimes referred to as horizontal structure, is a simple
structure that works best for small businesses and entrepreneurs. On a flat organizational
chart, there are no branches; employees communicate directly with the owner or senior
manager without having to go through middle management. Everyone pitches into every
aspect of running the business, and there are no specialized tasks or departments. One
advantage of this type of structure is speed, with the top management positioned to respond
quickly and directly to employees and customers. However, as the company grows, there will
likely come a need to transition to a more formal and bureaucratic type of organizational
structure.
FUNCTIONAL ORGANIZATIONAL STRUCTURE
A functional organizational structure is a structure that consists of activities such as
coordination, supervision and task allocation. This organizational structure determines how
the organization performs or operates. The term organizational structure refers to how the
people in an organization are grouped and to whom they report. One traditional way of
organizing people is by function. Some common functions within an organization include
production, marketing, human resources, and accounting.
This organizing of specialization leads to operational efficiency where employees become
specialists within their own realm of expertise. The most typical problem with a functional
organizational structure is however that communication within the company can be rather
rigid, making the organization slow and inflexible. Therefore, lateral communication between
functions become very important, so that infermation is disseminated, not only vertically, but
also horizontally within the organization.
Communication in organizations with functional organizational structures can be rigid
because of the standardized ways of operation and the high degree of formalization.
As a whole, a functional organization is best suited as a producer of standardized goods and
services at large volume and low cost. Coordination and specialization of tasks are utralized
in a functional structure, which makes producing a miled amount of products or services
efficient and predictable. Moreover, efficiency can further be realized as functional
organizations integrate their activities vertically so that products are sold and distributed
quickly and at low cost.
For instance, a small business could make components used in production of its products
instead of buying them.
Even though functional units often perform with a high level ol efficiency, their level of
cooperation with each other is sometimes compromised. Such groups may have difficulty
working well with each other as they may be territorial and unwilling to cooperate. The
occurrence of infighting among units may cause delays, reduced commitment due to
competing interests, and waste time, making projects fall behind schedule. This ultimately
can bring down production levels overall, and the company-wide employee commitment
toward meeting organizational goals.
DIAGRAMS
Headquarter
Top manager
Department:
Operations
Department:
Marketing
Department:
R& D
Department
Sales