Organization structure
• Organization structure is the systematic
arrangement of human resources in an
organization so as to achieve common business
objectives
• Organization structure is the framework for
identifying & organizing tasks to be performed
within an organization.
• Structures can be illustrated by means of an
organization chart.
Basic Characteristics of
Organizational Structure
• Division of labor: dividing up the many
tasks of the organization into specialized
jobs
• Hierarchy of authority: Who manages
whom.
• Span of control: Who manages whom.
• Line vs staff positions
• Decentralization
Hierarchy of Authority
• Tall vs flat hierarchies
• Autonomy and control
• Communication
• Size
Span of Control
• A wide span of control: a large number of
employees reporting,
• A narrow span of control: a small
number employees reporting
• The appropriate span of control depends
on the experience, knowledge and skills
of the employees and the nature of the
task.
Line vs Staff Positions
• Line vs Staff:
– Line positions are those in which
people are involved in producing the
main goods or service or make
decisions relating to the production of
the main business.
– Staff positions These are positions in
which people make recommendations
to others but are not directly involved in
the production of the good or service
Decentralization
• The extent to which decision making
is concentrated in a few people or
dispersed through out the
organization
• Advantage: benefits associated with
greater participation and moving the
decision closest towards
implementation
• Disadvantage: Lack of perspective
and information, lack of consensus
Functional Structure
CEO
Manufacturing Sales R&D Accounting &
Finance
Advantage: efficiency, skill development, clarity,
communication, minimized operations cost.
Disadvantage: Hindered Decision making, Completion
b/w different departments, Narrow Scope.
Divisional Structure
Product Structure
CEO
Soup Nuts
Division Division
Manufaacturing Sales Manufacturing Sales
Advantages: Product focus, flexibility
Disadvantage: Duplication of effort
Market Structure
CEO
Corporate Individual
Customers Customers
Sales Customer Sales Customer
Service Service
Wallmart, Costco, Target
Geographic Structure
CEO
West East
Sales Customer Sales Customer
Service Service
Matrix Structure
R&D Engineering Manufact’ing
Product A
Product B
Product C
Network Structure
Integration
• Hierarchy of authority
• Liaison roles
• Teams, committees, task forces
• Standardization & formalization
Mechanistic & Organic
Designs
• Mechanistic: tallness in hierarchy,
specialization, centralization in
authority, formalization. Work best
under stable conditions
• Organic: flatness, generalization,
decentralization flexibility Best fit
dynamic conditions and complex
technology
Designs and Dimensions
Dimension Organic Mechanistic
Control span Wide Narrow
Authority Few Many
Formalizat’n Low High
Centralizat’n Low High
Position Power Low High
Expert Power High Low
Effectiveness Criteria
• Output approach
• Internal process approach
• Systems resource approach
• Stakeholder approach
The Chart Displays
• Who has overall responsibility for decision
making.
• Individual workers / employee can identify
their position
• Chain of Command
• Span of control
• The identity of the supervisor to whom each
worker should report to is made clear
How to Design Your
Organization’s Structure
1. Create a charter
2. Build your strategy
3. Assess your internal processes & systems
4. Design your structure
5. Create a transition plan
6. Implement your new structure
7. Monitor the impact
8. Gather feedback & improve
