Organisation Structure and types

Organisational Structure

Meaning of Organisational Structure:

Organisational structure means a developed enterprise being operated to achieve the given goals. It involves the structure of relationships among positions and jobs with the object of accomplishment of enterprise objectives.

It is a systematic combination of people, functions and facilities. It may take the form of line staff and line and staff. As a function it refers to establishing relationship between activities and authority pertaining to an enterprise.

An organizational structure is a system that outlines how certain activities are directed in order to achieve the goals of an organization. These activities can include rules, roles and responsibilities. The organizational structure also determines how information flows from level to level within the company.

The following are the importance of organisational structure:

1. Clear definition of authority, responsibility relationship facilities better understanding of the objectives and the policies of the enterprise.

2. Organisational structure lays down both channels and the patterns of communication. It facilitates proper administration.

3. It helps to coordinate activities of the component parts in order to facilitate the realisation of the goals of the organisation.

Main Types of Organisation Structure

The types are:

·         Line Organization

·         Line and Staff Organization 

·         Functional Organization 

·         Project Organization 

·         Matrix Organization

1. Line Organisation:

Line organisation is the simplest and oldest form of organisation structure. It is called as military or departmental or scalar type of organization. Under this system, authority flows directly and vertically from the top of the managerial hierarchy ‘down to different levels of managers and subordinates and down to the operative level of workers.

Line organisation clearly identifies authority, responsibility and accountability at each level. The personnel in Line organization are directly involved in achieving the objectives of the organization.

The line organisation structure is given below:

Advantages of Line Organization:

a. The line organization structure is very simple to understand and simple to operate.

b. Communication is fast and easy and feedback can be acted upon faster.

c. Responsibility is fixed and unified at each level and authority and accountability are clear-cut, hence each individual knows to whom he is responsible and who is or in truth responsible to him.

d. Since it is especially useful when the company is small in size, it provides for greater control and discipline in the organization.

e. It makes rapid decisions and effective coordination possible. So it is economic and effective.

f. The people in line type of organization get to know each other better and tend to feel close to each other.

g. The system is capable of adjusting itself to changing conditions for the simple reason that each executive has sole responsibility in his own sphere.

Disadvantages of Line Organization:

a. It is a rigid and inflexible form of organization.

b. There is a tendency for line authority to become dictatorial.

c. It overloads the executive with pressing activities so that long-range planning and policy formulation are often neglected.,

d. There is no provision for specialists and specialization, which is essential for growth and optimisation.

e. Different departments may be much interested in their self-interests, rather than overall organizational interests and welfare.

f. It is likely to encourage nepotism.

g. It does not provide any means by which a good worker may be rewarded and a bad one punished.

2. Line and Staff Organization:

This type of organization structure is in large enterprises. The functional specialists are added to the line in line and staff organization. Mere, staff is basically advisory in nature and usually does not possess any command authority over line managers. Allen has defined line and staff organization as follows.

“Line functions are those which have direct responsibility for accomplishing the objectives of the enterprises and staff refers to those elements of the organization that help the line to work most effectively in accomplishing the primary objectives of the enterprises.”

In the line and staff organisation, staffs assist the line managers in their duties in order to achieve the high performance. So, in an organization which has the production of textiles, the production manager, marketing manager and the finance manager may be treated as line executives, and the department headed by them may be called line departments

On the other hand, the personnel manager who deal with the recruitment, training and placement of workers, the quality control manager who ensure the quality of products and the public relations manager are the executives who perform staff functions.

Here, it is better to see the type of staff, which may be in an organization.

Type of Staff:

The staff organizations mentioned above all has in common the fact that they are auxiliary to the main functions of the business. There are, however, different types of staff.

The three main divisions may be listed as:

1. Personal Staff.

2. Specialized Staff.

3. General Staff.

1. Personal Staff:

Personal staff consists of a personal assistant or adviser attached to the line executive at any level. His main function is to aid and advise the line executive as also to perform any other work assigned to him.

In business, the personal staffs is typified by the private secretary, who may keep the executive’s personal check book, buy his Christmas presents and arrange his appointments. General or business executives are given personal staff assistants on the same theory. Their time is too valuable to be spent in handling the details of daily living.

2. Specialised Staff:

The specialised staff have expert knowledge in the specific fields. The specialised staff are those that handle the specialised functions. For example, accounting, personnel, engineering and research. It is now impossible for one man to familiarise himself with all the various specialities needed in the modern large business.

Hence the general or the company president, and perhaps the department head, is provided with experts in each Field to counsel him on the various specialise staff could serve in any of the following capacities:

a. Advisory Capacity.

b. Service Capacity.

c. Control Capacity.

a. Advisory Capacity:

Its purpose is to render specialised advice and assistance to management while needed. Some typical areas covered by advisory staff is legal, public relations and economic development areas.

b. Service Capacity:

This group provides a service, which is useful to the organisation as a whole and not to any specific division or function. An example would be the personnel department serving the enterprises by procuring and training the needed personnel for all departments. Other areas of service include research and development, purchasing, statistical analysis, insurance problems etc.

c. Control Capacity:

This includes quality control staff that may have the authority to control the quality and enforce standards.

3. General Staff:

Any decision that cuts across departmental lines must be made by the Chief Executive. It cannot be delegated to the head of a specialised staff group or to a line department head, since other department heads will naturally resent interference in their department heads will naturally resent interference in their department by someone who is in no way their superior.

A typical case would be a change in the organisation structure of the company as a whole: the combination of two departments under a single head, for example or the organisation of a new top-level department.

It is with these functional that cannot be delegated that the general staff personnel can provide assistance and save the time of the top man. True, the chief cannot delegate any one of these functions to a general staff person, but he can often delegate parts of each of them.

The title of the general staff person is most often “assistance to” the company president, or other executive.

A staff member may serve as a coach, diagnostician, policy planner, coordinator, trainer, strategist etc.

A line and staff organisation chart is given below:

Advantages of Line and Staff Organisation:

a. Line officers can concentrate mainly on the doing function as the work of planning and investigation is performed by the staff. Specialisation provides for experts advice and efficiency in management.

b. Since the organisation comprises line and staff functions, decisions can be taken easily.

c. The staff officers supply complete factual data to the line officers covering activity within and without their own units. This will help to greater co-ordination.

d. It provides an adequate opportunity for the advancement of workers.

e. The staff services provides a training ground for the different positions.

f. Adequate organisation a balance among the various activities can be attained easily.

g. The system is flexible for new activities may be undertaken by the staff without forcing early adjustments of line arrangements.

h. Staff specialists are conceptually oriented towards looking ahead and have the time to do programme and strategic planning and analyse the possible effects of expected future events.

Disadvantages of Line and Staff Organisation:

a. Confusion and conflict may arise between line and staff. Because the allocation of authority and responsibility is not clear and members of the lower levels may be confused by various line orders and staff advices.

b. Staff generally advise to the lines, but line decides and acts. Therefore the staffs often feel powerless.

c. Too much reliance on staff officers may not be beneficial to the business because line officials may lose much of their judgment and imitative.

d. Normally, staff employees have specialised knowledge and expert. Line makes the final decisions, even though staff give their suggestions. Staff officers, therefore, may be resented.

e. Staff officers are much educated so their ideas may be more theoretical and academic rather than practical.

f. Although expert advice is available it reaches the workers through the managers. Here it is liable to create a greater deal of misunderstanding and misinterpretation.

g. Since staff specialists demand higher payments, it is expensive.

h. The staff are unable to carry out its plan or recommendations because of lack of authority. So they become ineffective sometimes, it will make them careless and indifferent towards their jobs.

i. Since the line are performed, with the advise provided by the staff, if things go right then the staff takes the credit and if things go wrong then the line get the blame for it.

3. Functional Organisation:

The functional organisation was evolved by F.W. Taylor while he was working as a foreman. He suggested eight foremen, four in factory and four in planning division as under.

Factory Division:

(i) The gang boss,

(ii) The speed boss,

(iii) The inspector, and 

(iv) The maintenance or repair boss.

Planning Division:

(i) Route Clerk,

(ii) Instruction card clerk,  

(iii) Time and cost clerk, and

(iv)  The shop disciplinarian.

He evolved his functional organisation system, which consists in “so dividing the work of management that each man, from the assistant superintendent down, shall have as few functions as possible to perform.”

According to Terry, “Functional organisation refers to the organisation which is divided into a number of functions such as finance, production, sales, personnel, office and research and development and each of functions are performed by an expert”. Line authority, staff authority and functional authority as a third type of authority are in this type of organisation.

Features of Functional Organisation:

a. Each worker receives instructions not only from one superior, but also from a group of specialists.

b. Three types of authority relationships are in the functional organisation such as line authority, staff authority and functional authority.

c. Staff specialists are given the authority to decide and do things in a limited way.

d. The scope of the work is kept limited but the area of authority is left unlimited.

e. There is a grouping of activities of the enterprise into certain major functional departments.

Advantages of Functional Organisation:

a. Each manager is an expert in his field. He has to perform a limited number of functions. So complete specialisation will be in functional organisation.

b. The greater degree of specialisation leads the improvement in the quality of product.

c. Since the job requirements are definite and tangible, organisation can achieve the intensive utilisation of the principle of specialisation of labour at the managerial level.

d. Specialisation will lead for mass production and standardisation.

e. Since experts get sufficient time for creative thinking, planning and supervision are made efficient.

f. It increases the work satisfaction for specialists who presumably do what they like to do.

Disadvantages of Functional Organisation:

a. Since there is no direct boss or controller of the workers, co-ordination is hard to achieve.

b. Since workers are under different bosses, discipline is hard to achieve. As results there will be low morale on the part of the workers.

c. The non-supervisory employees are uncertain as to whom they should turn for advice and aid when problem call for analysis.

d. Due to that control is divided, action cannot be taken immediately.

e. Since there will be many foreman of equal rank in the same department, the conflicts of leadership may arise.

f. It reduces the opportunities for the training of all-round executives to assume further leadership in the firm.

4. Project Organisation:

This organisational structure are temporarily formed for specific projects for a specific period of time, for the project of achieving the goal of developing new product, the specialists from different functional departments such as production, engineering, quality control, marketing research etc., will be drawn to work together. These specialists go back to their respective duties as soon as the project is completed.

Really, the project organisation is set-up with the object of overcoming the major weakness of the functional organisation, such as absence of unity of command, delay in decision-making, and lack of coordination.

The project organization chart may be shown as follows:

Advantages of Project Organisation:

a. It is a remarkable illustration of relationship between environment, strategy and structure.

b. The grouping of activities on the basis of each project results in introduction of new authority patterns.

c. Since the specialists from different departments is drawn to work together under the project organisation it helps to coordination.

d. It makes for meaningful control and fixation of individual responsibility.

Disadvantages of Project Organisation:

a. The uncertainty may be attributed to the diverse backgrounds of the professional who are deputed to the project.

b. The project manager finds it difficult to motivate and control the staff in a traditional way in the absence of well-defined areas of responsibility lines of communication and criteria to judge performance.

c. Delay in completion of the project may occur.

d. Effective project management may also be hindered by the top management who may not be wholly are of the problems at the project centre.

 5. Matrix Organisation:

According to Stanley Davis and Paul Lawrence matrix organisation is “any organisation that employs a multiple command system that includes not only the multiple command structure, but also related support mechanism and an associated organisational culture and behaviour pattern.”

A matrix organisation, also referred to as the “multiple command system” has two chains of command. One chain of command is functional in which the flow of authority is vertical.

The second chain is horizontal depicted by a project team, which is led by the project, or group manager who is an expert in his team’s assigned area of specialisation.

Since the matrix structure integrates the efforts of functional and project authority, the vertical and horizontal lines of authority are combination of the authority flows both down and across. The matrix form of organisation is given below.

Advantages of Matrix Organisation:

1. Since there is both vertical and horizontal communication it increases the coordination and this coordination leads to greater and more effective control over operations.

2. Since the matrix organisation is handling a number of projects, available resources will be used fully.

3. It focuses the organisational resources on the specified projects, thus enabling better planning and control.

4. It is highly flexible as regards adherence to rules, procedures etc. Here experience is the best guide to establishing rules and procedures.

5. As any department or division has to harness its effort towards accomplishment of a single project, employees are effectively motivated.

Disadvantages of Matrix Organisation:

1. Since, there is more than one supervisor for each worker, it causes confusion and conflicts and reduce effective control.

2. There is continuous communication both vertically as well horizontally, which increases paper work and costs.

3. It is difficult to achieve a balance below on the projects technical and administrative aspects.