“0TPR” Session 3 : Organization Structure

COORDINATOR & FACILITATOR

Prof. Manoj Ghadge

In this session…

1. What is structure?

2. Why to understand structure ?

3. Types of structure

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Why have a structure?

All business need to organize what they do

A clear structure makes it easier to see which part of

the business do what

To divide the activities and allocate them among

employees

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Key Components

Structure: A formal system

of task and authority

relationship that control

how people coordinate

their action and use

resources to achieve

organizational goal.

Formal reporting

relationship

Grouping together of

individuals

Design of system to ensure

effective communication,

coordination and

integration of efforts

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Elements of Structure

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Element Concern

Work Specialization Division of work task

Hierarchy/Chain of Command Levels in the organization/Reporting

relationships

Span-of-control Supervision of workers

Departmentalization Grouping of jobs

Formalization Extent of rules

Centralization Location of decision-making

Information sharing perspective on Structure

Vertical and horizontal

Vertical linkages are for control

Specialized task, strict hierarchy, vertical communication and

reporting systems, few teams, task forces, integrators,

centralized decision making

Horizontal linkages are for coordination and collaboration

Shared task, relaxed hierarchy, horizontal communication, many

teams, decentralized decision making

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Ways to structure an organization

By function: arranging the business by what each

department does

By products: organising according to the different

products made

By area: geographical or regional structure

By process: employees are organized around a core

process

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Approaches to Structural Design“Functional Structure”

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Functional Structure

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Strengths Weaknesses

Economies of scale Slow response time to environmental

change

Enable in-depth knowledge and skill

development

May cause decision to pile on top

Enable to accomplish functional goal Poor horizontal coordination

Best with only one or a few products Results in less innovation

Involves restricted view of

organizational goal

Approaches to Structural Design“Divisional Structure”

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Divisional Structure

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Strengths Weaknesses

Suited to fast changes in unstableenvironment

Eliminates economies of scale in functional department

Leads to customer satisfaction Leads to poor coordination across product lines

Involves high coordination across function

Eliminate in-depth competence and technical specialization

Allows unit to adapt to difference in products, regions etc…

Makes standardization and integration across product line difficult

Best in large organization withseveral products

Decentralize decision making

Approaches to Structural Design“Geographic Structure”

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Approaches to Structural Design“Matrix Structure”

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Matrix Structure

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Strengths Weaknesses

Achieve coordination necessary to meet dual demands from customers

Causes participants to experience dual authority, which can be frustrating and confusing

Flexible sharing of human resources Participants need good interpersonal skill and extensive training

Suited to complex decision and frequent changes

Time consuming: involves frequent meeting and conflict resolution sessions

Provide opportunity for both functional and product skill development

Will not work unless participants understand it and adopt collegial rather than vertical type relationship

Best in medium-sized organization with multiple products

Requires great efforts to maintain power balance

Approaches to Structural Design“Horizontal Structure”

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Horizontal Structure

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Strengths Weaknesses

Promote flexibility and rapid responses to changes in customer needs

Determining core processes is difficult and time consuming

Direct the attention of everyone towards the production and delivery of value to customer

Require changes in culture, job design, management philosophy and information and reward system

Each employee has a broader view of organizational goal

Traditional manager may balk when they have to give up power and authority

Promote a focus on teamwork and collaboration

Requires significant training of employees to work effectively in horizontal team environment

Improve quality of life for employees by offering them the opportunity to share responsibility, make decision and be accountable

Can limit in-depth skill development

Approaches to Structural Design“Hybrid Structure”

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Organization Design [Efficiency Vs. Learning]

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Mechanistic (designed for efficiency) Organic (designed for learning)

Mechanistic Structures – People are induced to behave in predictable, accountable ways.

1. Simple structure

2. Low differentiation

3. Low integration

4. Centralized decision making

5. Standardization

Organic structures – Promote flexibility, so people initiate change and can adapt quickly to changing conditions.

1. Complex structure

2. High differentiation

3. High integration

4. Decentralized decision making

5. Mutual adjustment

Structural deficiency

Delayed decision making

The organization does not respond innovatively

to a changing environment

Employee performance decline and goals are

not being met

Too much conflict is evident

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