PART-III: ORGANIZING
Chapter 5: Organizational Structure
5.1 Concepts Of Organizational Structure
5.2 Formal And Informal Organizations
5.3 Need For Formal Organization Structure
5.4 Departmentalization
5.5 Span Of Management
5.6 Factors Determining Span of Management
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5.1. Concepts Of Organizational Structure
What Is the Meaning of Organizational Structure?
It identifies each job, its function and where it reports to
within the organization.
The structure is illustrated using an organizational chart.
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Types of formal organization structure
The type of organization chart you need will reflect on the
type of organization you have and what information you want
to focus on conveying.
There are four types of organizational structures:
1. Functional Top-Down
2. Divisional Structure
3. Matrix Organizational Chart
4. Flat Organizational Chart
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[Link] Structure
In this structure each portion of the organization is
grouped according to its purpose.
for example,
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[Link] Structure…
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2. Divisional Structure
Divisionalstructure typically is used
in larger companies that operate in
a wide geographic area or that have
separate smaller organizations
within the umbrella group to cover
different types of products or
market areas.
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2. Divisional Structure…
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3. Matrix Structure
, the matrix structure allows for the benefits
of functional and divisional structures to exist in one
organization.
This can create power struggles because most areas of the
company will have a dual management a functional manager
and a product or divisional manager working at the same
level and covering some of the same managerial territory.
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3. Matrix Structure…
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4. Flat Organizational Chart
A flat organization structure shows few or
no levels of management between
executives and all other employees.
This type of structure empowers self-
management and greater decision
making ability for every employee.
It's most often employed by smaller
businesses, but it's not unheard of it even at
larger companies.
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4. Flat Organizational Chart…
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5.2 . Key Differences Between
Formal and Informal Organization
BASIS FOR
FORMAL ORGANIZATION INFORMAL ORGANIZATION
COMPARISON
Meaning An organization type in which the job An organization formed within
of each member is clearly defined, the formal organization as a
whose authority, responsibility and network of interpersonal
accountability are fixed is formal relationship, when people
organization. interact with each other, is
known as informal
communication.
Creation Deliberately by top management. Spontaneously by members.
Purpose To fulfill, the ultimate objective of the To satisfy their social and
organization. psychological needs.
Nature Stable, it continues for a long time. Not stable
Communication Official communication Grapevine
Control mechanism Rules and Regulations Norms, values and beliefs
Focus on Work performance Interpersonal relationship
Authority Members are bound by hierarchical All members are equal.
structure.
Size Large Small
5.3 Need For Formal Organization
Structure
An organizational chart has five principal uses:
1. To Show Management Structure
It shows the management structure of the organization at a glance. It can also show other
organizational structures, such as relationships between companies with common or
affiliated
ownership.
2. To Show Other Organizational Structure
Other hierarchies, such as business ownership
structures, can be shown using org charts.
3. As a Planning Tool
Org charts are used to visualize and plan company reorganizations.
4. An Employee Reference
It provides a reference for employees to help them understand their role in the
organization, who they report to, and who reports to them.
5. An Employee Directory
Adding other information, such as headshots, telephone numbers and email addresses
allows the org chart to also function as an employee directory.
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5.4 Departmentalization
Departmentalization is a
process wherein jobs/teams are
combined together into functional
units called as departments on the
basis of their area of specialization,
to achieve the goals of the
organization.
So, in this way, the entire organization is divided
into parts, i.e. departments which comprise of a
group of employees, who carry out activities of
similar nature.
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Objectives of Departmentalization
To specialize activities.
To simplify the process and
operations of the organization
To maintain control
Departmentalization of activities results in the
increase in efficiency of the management and
ultimately the enterprise.
It is helpful in fixing responsibilities and
accountability.
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Methods of Departmentalization(6)
1. Departmentalization by
Function:
◦ When the creation of department is on the basis
of specified functions, such as production,
marketing, purchase, finance etc.
◦ In this method, all the activities related to a
function or which are of similar nature are
combined in a single unit, to give proper
directions to the entire group in one go.
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Methods of Departmentalization(6)
1. Departmentalization by Function
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Methods of Departmentalization(6)
2. Departmentalization by Process:
◦ In departmentalization by the process, the
activities are grouped as per the production
processes.
◦ These departments require manpower and
material so as to carryout operations.
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Methods of Departmentalization(6)
2. Departmentalization by Process
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Methods of Departmentalization(6)
3. Departmentalization by Product:
◦ When the activities related to product
development and delivery are combined into
a particular division, it is called as
product departmentalization.
◦ It is appropriate for large-scale multi-product
enterprises..
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Methods of Departmentalization(6)
3. Departmentalization by Product
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Methods of Departmentalization(6)
4. Departmentalization by
Customer:
◦ The grouping of the organization according
to the different classes of customer
or clients.
◦ It focuses on special customer needs.
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Methods of Departmentalization(6)
4. Departmentalization by Customer
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Methods of Departmentalization(6)
5. Departmentalization by Territory:
◦ When the division is based on the
geographical area, it is called as
territorial departmentalization.
◦ This is suitable for the organizations, that have
widespread operations at different locations.
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Methods of Departmentalization(6)
5. Departmentalization by Territory
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Methods of Departmentalization(6)
6. Departmentalization by Project :
◦ In project departmentalization, the
organizational activities are
classified by differentiated or
special ventures or activities.
◦ The choice of departmentalization basis is
influenced by the factors such as the degree of
specialization, coordination, control, cost
consideration, adequate attention to key areas,
etc.
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Methods of Departmentalization(6)
6. Departmentalization by Project
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5.5 Span Of Management
The Span of Management refers
to the number of subordinates
who can be managed efficiently
by a superior.
Simply, the manager having the group of
subordinates who report him directly is
called as the span of management.
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5.5 Span Of Management
The Span of Management has two implications:
[Link] the complexities of the individual
manager’s job
[Link] the shape or configuration of the
Organization
The span of management is related to the horizontal
levels of the organization structure. There is a wide
and a narrow span of management.
The span of management is also called as
the Span Of Supervision or Span Of Control,
which influences the complexity of the individual manager’s
job and determine the shape or configuration of the
organization.
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5.5 Span Of Management….
With the Wider Span, there will be less hierarchical
levels, and thus, the organizational structure would be
flatter.
Whereas, with the Narrow Span, the hierarchical
levels increases, hence the organizational structure would
be tall..
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5.6 Factors Determining Span of
Management
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5.6 Factors Determining Span of Management…
Capacity of Superior: Here the capacity means the ability of a superior to comprehend the problems quickly and gel up with the
staff such that he gets respect from all. Also, the communication skills, decision-making ability, controlling power, leadership skills are
important determinants of supervisory capacity. Thus, a superior possessing such capacity can manage more subordinates as compared
to an individual who lack these abilities.
Capacity of Subordinate: If the subordinate is trained and efficient in discharging his functions without much help from the superior,
the organization can have a wide span. This means a superior can manage a large number of subordinates as he will be required just to
give the broad guidelines and devote less time on each.
Nature of Work: If the subordinates are required to do a routine job, with which they are well versed, then the manager can have a
wider span. But, if the work is complex and the manager is required to give directions, then the span has to be narrower. Also, the change
in the policies affects the span of management. If the policies change frequently, then the manager needs to devote more time and hence
the span would be narrow whereas if the policies remain stable, then a manager can focus on a large number of subordinates. Likewise,
policies technology also plays a crucial role in determining the span.
Degree of Decentralization: If the manager delegates authority to the subordinates then he is required to give less attention to
them. Thus, higher the degree of decentralization, the wider is the span of management. But in case, subordinates do not have enough
authority, then the manager is frequently consulted for the clarifications, and as a result superior spends a lot of time in this.
Planning: If the subordinates are well informed about their job roles, then they will do their work without consulting the manager again
and again. This is possible only because of the standing plans that they follow in their repetitive decisions. Through a proper plan, the
burden of a manager reduces manifold and can have a wider span of management.
Staff Assistance: The use of staff assistance can help the manager in reducing his workload by performing certain managerial tasks such
as collecting information, processing communications and issuing orders, on his behalf. By doing so, the managers can save their time and
the degree of span can be increased
Supervision from Others: The classical approach to the span of management, i.e., each person should have a single supervisor is
changing these days. Now the subordinates are being supervised by other managers in the organization such as staff personnel. This has
helped the manager to have a large number of subordinates under him.
Communication Techniques: The mode of communication also determines the span of management. If in the manager is required to
do a face to face communication with each subordinate, then more time will be consumed. As a result, the manager cannot have a wider
span. But in case, the communication is in writing and is collected through a staff personnel; the manager can save a lot of time and can
have many subordinates under him.
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