UNIT-III

Organizational design is a formal process of integrating people,

information and technology. Organizational structure is the formal authority,
power and roles in an organization.
These relationships can be classified as:
 Relationship between senior and subordinates and vice-versa
 Relationship between line positions and specialists
 Staff relations
 Lateral relations.
Chain of Command (Reporting Relationship)
The scalar chain refers to the growth of chain of command, delegation of
authority, unity of command and obligation to report.
It provides a scale /grading of duties according to the degree of authority and
responsibility and generates superior-subordinate relationship in the Orgn.
It refers to a company's hierarchy of reporting relationships from the
bottom to the top of an organization, who must answer to whom. The chain of
command not only establishes accountability, it lays out a company's lines of
authority and decision-making power
Chain of Command is an official hierarchy of authority that dictates who is
in charge of whom and of whom permission must be asked.
Example: when an employee reports to a manager who reports to a senior
manager who reports to the vice president who reports to the CEO

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Span of Control (Span of Management) (Reporting Relationship)
Span of control is the number of subordinates who report directly to a manager or
leader.
Span of Control means how many subordinates can be supervised by a supervisor. The
number of subordinates should be such that the supervisor should be able to control their
work effectively.

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 Delegation of authority merely means the granting authority to
subordinates to operate within prescribed limits.
Nature of Delegation of Authority
1. Sharing of authority
2. Part of the authority
3. Delegation to subordinates
4. Authority must vest in superiors
5. Responsibility
6. Accountability
7. Prescribed limits
8. Specific/general.
Need & Importance of Delegation
1. Healthy relationship
2. Reduction in work-load
3. Motivation to subordinates
4. Developing future managers
5. Growth& expansion
6. Prompt decision making
7. Facilitates for co-ordination
Process of Delegation
1. To size up work load
2. Assignment of duties
3. Granting authority
4. Creation of accountability.

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 Principles of Delegation
1. Authority should be co-extensive with responsibility
2. Assignment of duties in terms result expected
3. Responsibility cannot be delegated
4. Unity of command
5. Duties should not overlap
6. Organizational gaps should be avoided.
7. Definiteness of authority and responsibility
8. Authority to be delegated
9. Establishment of objectives with intelligent planning
10. Free flow of information
11. Exception principle
Elements of Delegations of Authority
1. Assignment of responsibility
2. Grant of authority
3. Creation of accountability
Methods/Practical Guidelines to Make Delegation Effective
1. Determine goals
2. Clarify responsibility and authority
3. Motivating to subordinates
4. Providing training programme
5. Establish adequate control
6. Requiring completed work
7. Two-way communication
8. Adherence to the principle of delegation.
ORGANISATION STRUCTURE- It is a systematic combination of people;
functions and physical facilities with define authority and clear responsibility.
CENTRALISATION- It is the systematic and consistent reservation of
authority at centre points within an Orgn.

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  If top manager make the decisions of the organization with little or no
input from subordinates, then the organization is centralized.
 The degree to which decision making is concentrated at a single point
in the organization.
Everything that goes to increase the importance of subordinates’ role is
DECENTRALIZATION, Everything goes to reduce it is CENTRALIZATION-
Henry Fayol.
Factors determining the Centralization of Authority
1. Achieving uniformity
2. Facilitating integration
3. Promoting personal leadership
4. Handling emergency
Advantage of Centralization
1. Facilitating personal leadership
2. Less skilled subordinates
3. Handling emergencies
4. Integration of total operation
5. Uniformity of action
6. Economies
7. Suitable for small scale organization
Disadvantages of Centralization
1. Increasing the burden on top mgt.
2. Affecting the growth & development of subordinates
3. Leads towards slow up the operations
4. Reduction the scope of specialization
5. Suitable not for large scale organization
6, distance from customers
DECENTRALISATION – it is simply a matter of dividing up the managerial
work and assigning specific duties to the various executive skills.

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Measurement of degree of decentralization
1. No. of decisions-
2. Importance of decisions
3. Effect of decisions
4. Checking of decisions
Advantage of Decentralization
1. Reduction the burden on top mgt.
2. Quick decisions
3. Facilitates diversification
4. Motivation to subordinates
5. Sense of competition
6. Providing the Better products and market emphasis
7. Division of risk
8. Effective control and supervisor
Disadvantages of Decentralization
1. Not possible to follow uniform policies & standardized procedures
2. Creating problems of co-ordination
3. Requiring the employment of trained personnel to accept authority
4. Creating problems of controlling
5. Becoming useless without qualified and competent personnel
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 Mechanistic Organization

A mechanistic structure is an organizational structure that is designed so

that individuals and functions behave in predictable ways and can be held
accountable for their actions.
An organic structure is an organizational structure that is designed so that
individuals and functions can behave flexibility and respond quickly to frequently
changing and unusual satiations.
It is an organizational structure with centralized authority, divisions
between departments and specialized roles that work independently of each
other.
 It is typical for each person to be assigned one task that i
 It relatively stable and easy to control. ...
 Examples healthcare, universities, and governmental organizations.

Mechanistic Organization
1. Decentralization
2. Flexible, broadly defined jobs
3. Interdependence among employees and units
4. Multi-directional communication
5. Employee initiative
6. Relatively few and broadly defined rules, regulations, procedures, and
processes

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 Organic Structure (Tom Burns & G.M. Stalker in the late 1950s)
An organic structure is an organizational structure that is designed so
that individuals and functions can behave flexibility and respond quickly to
frequently changing and unusual satiations.
 It's also known as the “bureaucratic structure.”
 Examples bigger insurance companies, health care companies, or even
universities and governmental facilities.
 It is characterized by a relatively low degree of work specialization, loose
departmentalization, few levels of management, wide spans of control,
decentralized decision-making, and a short chain of command.
 This combination of elements results in a flat organizational structure.
 For employees, the responsibilities are clear as well as their career path.

Mechanistic Organic
Individual specialization: Joint Specialization:
Employees work separately Employees work together and
and specialize in one task coordinate tasks
Complex integrating mechanisms:
Simple integrating mechanisms:
task forces and teams are primary
Hierarchy of authority well-defined
integrating mechanisms
Centralization: Decentralization:
Decision-making kept as high as possible. Authority to control tasks is delegated.
Most communication is vertical. Most communication lateral
Standardization: Mutual Adjustment:
Extensive use made of rules & Standard Face-to-face contact for coordination.
Operating Procedures Work process tends to be unpredictable
Much written communication Much verbal communication
Informal status in org based on size of Informal status based on perceived
empire brilliance

Organization is a network of positions, Organization is network of persons or

corresponding to tasks. Typically each teams. People work in different capacities
person corresponds to one task simultaneously and over time

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FUNCTIONAL ORGN STRUCTURE – It is based on principle of specialization
and tries to bring [Link] balances.
Example: Purchase Department, Production Department, HR Department, IT
Department, Marketing Department, Finance Department and Legal
Department.
 Division the organization into departments based on their functions.
 Each is headed by a functional manager and employees are grouped
according to their roles.
 Functional managers typically have experience in the roles they supervise,
ensuring that employees are using their skills effectively.
 maximization department expertise helps companies achieve their
business objectives
 Communication in functional organizations is formal and mostly from top to
bottom.
 The top management makes decisions and informs the lower-level
employees.
 They often change procedures and modify the work environment without
taking the input from employees on the ground.

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Advantages of Functional Orgn Structure
1. Employees are grouped by their knowledge and skills to achieve high
performance.
2. Roles and responsibilities are fixed, facilitating easy accountability
3. The hierarchy is clear and transparent to reduce the number of
communication channels.
4. Better Communication within the department.
5. No duplication of work , as all departments have defined responsibilities.
6. Employees feel secure; they perform well without fear or uncertainty.
7. Because of job security, employees tend to be loyal to the organization.
8. Employees have a clear career growth path.
9. Cooperation is excellent within the department.
.Disadvantages of Functional Orgn Structure
1. Employees may feel bored because of repetitive work.
2. Conflicts may arise if the performance appraisal system is not properly
managed.
3. A highly skilled employee costs more.
4. Functional managers pay more attention to their own departments and
ignore others’ interests.
5. Communication is weak among the departments.
6. A lack of teamwork among different departments
7. Employees may have little concern or curiosity about events outside their
group.
8. The rigid functional structure makes adapting to changes difficult and slow.
9. Decision-making is sluggish due to the bureaucratic hierarchy.
10. Functional managers can make decisions without consulting team
members.
11. Personal bias may affect employee morale. .
12. Functional departments may be more committed to departmental goals
rather than organizational goals.
13. Employees do not learn any new skills, and their roles don’t change often,
causing stagnation

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F.W. Taylors’ Functional Foremanship Organization Structure

Workshop Manager

Planning Manager Production Manager

Route Instruction Speed Inspector

clerk card clerk boss

Discipl Repair Gang

Time&cost inarian boss boss
clerk

Worker

BOD/MD

VP Production VP Marketing VP Finance VP HR

Product A Product B Product C

LINE ORGN STRUCTURE

It is natured by direct lines of authority flowing from the top to bottom of the
organizational hierarchy and lines of responsibility flowing in an opposite but
equally direct manner.
 It is one of the simplest types of organizational structures.
 Authority flows from top to bottom.
 Specialized and supportive services do not take place in these
organizations. The chain of command and each Department Head has
control over their departments.

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Types of Line orgn. Structure
1. Simple/Pure and
[Link] Line Orgn.
Simple/ Pure Line Orgn.
The activities of every executive are some for the similar type of work and
divisions primarily exist for the purpose of control and direction.
 All persons at a given level perform the same type of work.
 The divisions are solely for the purpose of control and direction.

GM( Production manager

Foreman I Foreman II Foreman III

Workers Workers
Workers Workers Workers Workers

Departmental Line Orgn.- An orgn. is divided into various depts. headed by

different departmental heads.
 divided the enterprise into different departments
 convenient for control purposes.
 There is a unity of control
 Line of authority flows from top to the bottom.
 The whole organisation putting under the overall control of Chief Executive
i.e. General Manager.
 Different departments are put under the control of Departmental Managers.
 Departmental managers get orders directly from the General Manager.
 There may be deputy managers, supervisors, workers in every department.
 The deputy managers get orders from the departmental manager and in
turn pass them on to the supervisors.
 The orders ultimately reach the workers who actually execute them.
 Any communication between them is routed through their immediate boss.

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 GM

Finance Works Production Purchase HR Mgr. Marketing

Mgr. Mgr. Mgr. Mgr. Mgr.

[Link].-A Pdn. Supt-B Pdn. Supt-C

Foreman Foreman Foreman

Worker

(Structure of Line Orgn Structure)

Advantages of Line Orgn Structure Disadvantages of Line Orgn Structure

1. Simplicity 1. [Link]
2. Fixed responsibility 2. Lack of specialization
3. Discipline 3. Scope for favourism
4. Flexibility 4. Lack of inititiveness
5. Co-ordination 5. Lack of communication from
6. Direct communication lower rank.
7. Unity of command 6. Instability
8. Economical
9. Quick decisions
10. Executive development.

LINE-STAFF ORGANIZATION STRUCTURE

A line-staff organization is a structure that distributes work responsibilities from upper
management to lower-level employees.
 The managers establish standards and deadlines for employees to finish their
tasks
 The employees fulfill line positions make direct contributions to the mission of
the company.
 The line manager design objectives to improve the quality of the work and
create milestones for the department or the organization as a whole.

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  Staff employees assist the line professionals to organizational goals.
 There are also managerial and lower-level employees
 The staff managers are experts to provide recommendations to line managers
Types of staff a) Personal b) Specialists c) General

-Line Unit , - Staff Unit

LINE & STAFF ORGN. STRUCTURE

BOD/MD

Pdn. Mgr Cost or

Finance Mgt.
Chartered Marketing HR
Mgr. Accountant
Accountant Mgr. Mgr.

Deputy FM

Assistant FM

Supervisor

Advantage of Line Disadvanges of Line & Staff Orgn.

& Staff Orgn. Structure Structure

1. Specialization 1. Conflict between line and staff units

2. Better decisions 2. Problem of line and staff authority
3. Lesser burden on line officers 3. Lack of responsibility
4. Advancement of R&D. 4. Expensive
5. Training for line managers 5. More reliance on staff.

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Matrix--Project Organization Structure
It is a combination of functional and product/project methods of departmentation.
A matrix organization is a work structure where team members report to
multiple leaders.
Matrix--Project Orgn Structure = Functional Structure+ Project Structure.
Nature of Matrix--Project Organization Structure
1. Dual authority
2. Particular project only
3. Functional areas and project/product specialists
4. Conflict
5. Less co-ordination.
6. Ouick decision
7. High expensive.

Project Mgr.

Product A Product B Product C

BB
Finance

Production

Marketing

HR

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Merits of Matrix--Project Demerits of Matrix--Project
Organization Structure Organization Structure
1. Better use of resources 1. Violation of unity of command
2. To cope with fast changing envt. 2. Less co-ordination
3. Co-ordination across functional 3. Expensive
depts. 4. Dual reporting
4. Better specialization 5. Problem among various project units
5. Improvement of communication 6. Gap of authority.
6. High degree of flexibility. 7. Complex & Complicated Structure.
7. Quick decision
Organizational Design
It is the process of aligning the structure of an organization with its
objectives, with the ultimate aim of improving efficiency and effectiveness.
 It is a process for shaping the way your organization operates, to help to
pursue strategies and meet the goals.
 It involves setting up structures and systems, as well as helping people to
adapt to new ways of working.
 To improving efficiency and effectiveness.
 To improve service delivery or specific business processes
 Grouping people and assigning activities so that job tasks and the mission
of a business can be properly carried out
Main Organizational Structures
1. Hierarchical Organizational Structure.
2. Functional Organizational Structure.
3. Horizontal or Flat Organizational Structure.
4. Divisional Organizational Structures.
5. Matrix Organizational Structure.
6. Team-Based Organizational Structure.
7. Network Organizational Structure.
8. Virtual organization structure

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Elements of Organizational Design/Structure
 Departmentalization,
 Chain of command- it is an organizational structure that documents how
each member of a company reports to one another
 Span of control (span of management) refers to the number of people or
subordinates that a manager supervises.
 Centralization or decentralization,
 Work specialization and
 The degree of formalization- it is the extent that roles are independent of
specific personal attributes of individuals occupying the roles.
(McDonald's has a famously bureaucratic structure where employee
jobs are highly formalized, with clear lines of communication and
specific job descriptions)
 What is my job?
 How am I doing?
 Does anyone care?
 How are we doing?
 What are our vision, mission, and values?
 How can I help?

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Network Organization Structure

A network structure is the one in which more than one organization

combine to produce a good or provide a service.
It is a temporary or permanent arrangement of otherwise independent
organizations or associates, forming an alliance to produce a product or
service by sharing costs and core competencies.
The core company distributes its functions to different companies
which, in this case, are present in different countries: product Development
Company in Australia, Call center company in New Zealand, the Accounting
Company in Australia, Distribution Company in Singapore and
Manufacturing Company in Malaysia.
 created around a central organisation (hub organisation)
 Creating the relationship and arrangement with some other organisations,
 To perform functions like designing, manufacturing, marketing etc. for the
central organisation, on a contractual basis.
 Now it is becoming an increasingly popular business structure as a means
of addressing critical resource, personnel, and logistical issues.

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Benefits of Network Organization Structure
1. Clear Focus
2. Lower Costs
3. Flexibility
4. More market share
5. Utilization of best capabilities
6. High technology
Drawbacks of Network Organization Structure
1. Control and Reliability
2. Lack of secrecy
3. Loss of control
4. Sacrificing of profit
5. Huge investment
6. lack of communication
7. Increased Work Stress
Virtual Organisation Structure (Digital Orgn/ Network
Orgn/Modular Orgn Structure) emerged in 1990
It is a network of cooperation made possible by which is called ICT which
is also flexible and comes to meet the dynamics of market.
It is a new kind of technology enabled orgn formed for the
internationalization of business operations. In virtual places, the employess
operate at a remoter distance from one another and also from the managers.
A flexible network of independent entries linked by IT to share skills.
Knowledge and access to others’ expertise in non-traditional ways.
 A VO is a business without walls
 A temporary network of independent companies,suppliers, customers
linked by IT to share skills ,cost and access to one another’s’ market.
 Objective is to deliver higher quality product at the lowest cost in a timely
manner
 Members are geographically apart usually working via networked
computer applications
Features of Virtual Organisation Structure
1. No boundary
2. Pooling the recourses
3. Geographical dispersion
4. Changing participants
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 5. Flat organisation :( horizontal organization or flat hierarchy) has
an organizational structure with few or no levels of
middle management between staff and executives.
6. Flexible and dynamic
7. Multi-disciplinary team
8. Customer orientation
Need for Virtual Organisation Structure
1. A need for process innovation
2. Sharing the core competencies
3. Globalisation
4. Mobile workers
5. Cost reduction
6. Changing of employees values and attitude towards work
7. Costs and problems of travelling

Approaches /Methods Implanting the Virtual Organization Structure

1. Telecommunicating- Maintaining the contract between the telecommuter
and home office.
2. Telecentres- satellites office will be provided for employees
3. Mobile working- mobile workers who require tools such as cell phones, e-
mail wireless devices, pagers and laptops
4. Hot desking- this arrangement for offices in which staff members spend a
significant amount of time on customer premises. The employees can
access their documents, files, applications and e-mail
5. Virtual teams- employees collaborate from remote locations by using ICT.
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 MODES OF COMMUNICAATION
1. Video Conferencing
2. Audio conferencing
3. Emails
4. Voice mails
5. Remote desktop sharing
6. Face to face
7. Fax: A copy of a letter, etc. that you can send by telephone lines using
a special machine
Advantages of the Virtual Disadvantages of the Virtual
Organization Structure Organization Structure
1. Greater flexibility 1. Cost of technology
2. Saves time and costs 2. Lack of physical
3. Eliminates the lack of access interaction
to exports 3. Conflicts
4. Increasing the communication 4. Difficult to control
and learning across orgn. 5. Lack of control &
5. Encourages appreciation of collaboration
delivery 6. Problem with external
6. Dynamic team members partner can occur

Traditional Organization vs Virtual Organization

Basis Traditional Organization Virtual Organization
Meaning - -
Absence of There is face to face There is electronic
paraverbal communication
Non-verbal clues Communication in There is absence of paraverbal
traditional orgn. cues
Social contract Easy accessibility social There is limited social contacts
contact
Ability to overcome Lack of proper utilization Highly technology in nature
time and space of technology
constraints
Technology Manual work and less Less manual work and more
technology technology
No scope for Skilled and unskilled Only requirement of technical
technically workers are and skilled workers
accommodated
Investment less More
Cost savings Little More
Paraverbal communication refers to the messages that we transmit
through the tone, pitch, and pacing of our voices

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 Differentiation - it is the process by which an orgn allocates people
and measures to [Link] tasks and establishes the tasks and authority
relationships that allow the orgn. to achieve its goals.
Integration-it is the process of one company acquiring another
company and merging the operations.
It can be through acquisition, merger or takeover. Integration can
happen in several different industries to companies of different sizes with various
products and services.
Standardization means producing maximum variety of products
from the minimum variety of materials, parts, tools and processes.
It is the process of establishing standards or units of measure by
which extent, quality, quantity, value, performance etc., may be compared and
measured
Strategic standardization is how business leaders leverage standards to build
and sustain a competitive advantage.

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