A presentation which discusses the basics of organizational structure. Created as a teaching resource for Organizational Behaviour unit of Pearson HND Business Management Program.

1. ORGANIZATIONAL
STRUCTURE
L. Zumri Mohammed (MBA)
University of Wolverhampton - UK

2. Definition of Organization
• An organization is a collection of people working together
in a coordinated and structured fashion to achieve one or
more goals.
• A social unit of people that is structured and managed to
meet a need or to pursue collective goals. All
organizations have a management structure that
determines relationships between the different activities
and the members, and subdivides and assigns roles,
responsibilities, and authority to carry out different tasks.
Organizations are open systems--they affect and are
affected by their environment.

3. Types of Organization
• Sole Proprietorships
• Partnerships
• Corporations
• Non - Profit Organisations

4. Organizational Structure
• Organization structure is a setup or a framework which
determines the hierarchy of people, its function, workflow,
and the reporting system in an organization.
• The hierarchical arrangement of lines of authority,
communications, rights and duties of an organization.
Organizational structure determines how the roles, power
and responsibilities are assigned, controlled, and
coordinated, and how information flows between the
different levels of management.

5. Types of Organizational Structures
• Functional
• Product based
• Geographical
• Multifunctional and Multidivisional
• Matrix

6. Functional Structure
• Classified as per functions within the organization
• People are grouped as per area of specialization
• Functions will be departmentalized with its own structure
• The departments are referred as “Silos” – vertically
disconnected
• Ideal for organizations offering same services or products
continuously

7. Pros
• Productivity due to
specialization
• Fixed responsibilities &
accountability
• Reduced & non-
complicated
communication channels
• Non-Duplication of work
• Job security leading to
loyalty
• Career path clarity
Cons
• Boredom & monotonous
• Cost of skilled labour
• Disconnected
departments
• Employees unaware of
the whole process
• Less adaptive to change
• Managers tend to make
autocratic decisions
• Focus on functional goals
than organizational goals

8. Product Based Structure
• Structured according to the products or services offered
• Structure could also be based on type of customers
• Is suitable for larger companies with two or more product
line

9. Pros
• Focus on market
segments to meet
customer needs.
• Encourage competition
between departments
Cons
• Duplication of functions
• Lack of central control

10. Geographical Structure
• Structure based on geographical location
• Regional, National, International
• Ideal to serve specific culture, rules, languages &
customer preferences and
• Under logistical constraints

11. Pros
• Quick response as all
functions are in one place
• Easy coordination
• Workers’ focus specific to
the division
• Leadership exposure for
management
Cons
• Duplication of activities
and infrastructure
• Compromise on
economies of scale
• Internal competition for
resources from parent
company.

12. Multi Divisional Structure
• Organizations are structured on broad divisions
• The broader divisions are further subdivided
• These divisions are referred as Strategic Business Units (SBU)
• SBU is an autonomous division or organizational unit, small enough to
be flexible and large enough to exercise control over most of the
factors affecting its long-term performance.
Because strategic business units are more agile (and usually have
independent missions and objectives), they allow the
owning conglomerate to respond quickly to changing economic
or market situations.

13. Pros
• Increased coordination
due to divisional goals
• Easy to diagnose when
things go wrong
• Under-performing
divisions could be sold or
wound easily
• Next generation
leadership could be
trained by managing
SBUs
Cons
• Duplication of resources
and personals
• Inter-divisional rivalry
• Difficulties to
communicate, corporate
and coordinate.

14. Matrix Structure
• Structure with multiple reporting lines – more than one
superordinate

15. Pros
• Resources can be shared
• Coordination among
functional departments
• Wide information flow,
horizontal and vertical.
• Employees get to be in
contact with a wider circle
• Self management and
autonomous working skills
when competing between
two bosses.
Cons
• Generally considered the
toughest to work in
• Conflicting pull of
resources
• Difficult to determine
accountability
• Confusion and conflicting
orders from multiple
bosses.
• More managers are
required to maintain the
structure

16. Organizational Charts
• An organizational chart visually depicts the internal
structure of an organization or company. The employees
are represented by boxes, and elbowed lines link the
levels together.
• Internal structure & hierarchies
• Flow of authority and information
• Organize roles & positions
• Increases efficiency & avoids confusion

17. Hierarchical Organizational Charts
• A hierarchy is where one group or person is at the top,
while those with less power are beneath them, in the
shape of a pyramid
• Members typically communicate with the person they
report to and anyone who reports directly to them.
• There is flow of information yet less effect for change

18. Matrix Organizational Charts
• Seen when individuals have more than one manager
• This structure can lead to increased communication and
cooperation between departments, but it can also lead to
conflicts of interest.

19. Flat Organizational Charts
• Sometimes referred to as a horizontal org chart, has little
or no levels of middle management and typically consists
of two levels
• workers have more responsibility and are more directly
involved in decision-making.

20. Purpose of Organizational Charts
• Organizational and supervisory communication
• Restructuring
• Workforce planning
• Departmental or team planning
• Resource planning
• Managing changes
• Job planning and analysis

21. Flexible Working
describes a type of working arrangement which gives a
degree of flexibility on how long, where, when and at what
times employees work.

22. Flexible Working Practices
• Part-time working – less than general working hours
• Term-time working – Contracted for specific number of
weeks per year (non working is by annual & unpaid leave)
• Job-sharing – Part-time, job responsibility shared by two
or more
• Flexitime – Option to choose start & end time within limits
• Compressed hours – general hours allocated to fewer
and longer working weeks
• Working from home on a regular basis
• Mobile working/Tele-working
• Career breaks – Extended unpaid leave, Max 5 Years
• Commissioned Outcome – Tied to output not hours
• Zero hours contract – called & paid as per requirement

23. Network Structure
• A newer structure which is less hierarchical (flat) and
decentralized
• Managers coordinate & control internal and external
relationship of firm
• Underlying concept – social network, open
communication and reliability
• Decentralized, wider span of control and bottom up
decision making.
• Leads to complex relationship in organization

24. Pros
• More agile (quick & easy)
• Communication less
“Siloed”
• Few layers & wide span of
control
• Bottom – Up decision
making – flow of
information
Cons
• Complex set of
relationships
• Less clarity on
accountability
• High reliance on external
vendors
• Reduced control over
firm’s operational
success.

25. Centralization & Decentralization
Centralized
• In a centralised
organisation head office
(or a few senior
managers) will retain the
major responsibilities and
powers (authority).
Decentralized
• Conversely decentralised
organisations will spread
responsibility for specific
decisions across various
outlets and lower level
managers,

26. • Centralised and Decentralised Combined
• Organisations may also decide that a combination of
centralisation and decentralisation is more effective
• Vertical Decentralisation
• vertical decentralisation which means delegating the
power to make certain decisions, down the hierarchy of
the organisation
• increases the input, people at the bottom of the
organisation chart have in decision making.
• Horizontal Decentralisation
• spreads responsibility across the organisation

27. Pros - Centralized
• Greater control for senior
management
• Standardised procedures
- cost saving
• Decisions made
considering the whole
organization
• Experienced senior
managers making
decisions
• At times of uncertainty
effective
Pros - Decentralized
• Senior management can
focus on growth and
development than on
decision making
• Empowerment and
motivation of employees
through decision making
• Greater understanding
and skillfulness of lower
lever employees
• Fast responsiveness for
change

28. Span of Control
• Number of subordinates that can be managed
efficiently and effectively by a superior
• It suggests how the relations are designed between a
superior and a subordinate
• Inverse relationship between span of control and
number of levels in hierarchy
• There are two types
• Narrow span of control – single manager overseeing few
subordinates, tall organizational structure
• Wide span of control - single manager overseeing large
number of subordinates, flat organizational structure

29. Narrow Span
• More expensive
• Communication problems
between levels of
management
• More opportunities for
career growth
• Suitable with inefficient
employees
Wide Span
• Suitable for geographically
scattered workforce
• Empowerment and
motivation of employees
through decision making
• Greater understanding and
skillfulness of lower lever
employees
• Fast responsiveness for
change
• Ideal for well experience
managers
• For standardized work
Manager
Employee Employee
Employee Employee Employee Employee Employee
Employee Employee Employee Employee
Manager
Employee Employee
Employee Employee
Employee

30. An Ideal Span of Control
• An ideal span of control according to modern
authors is around 15 to 20 subordinates per
manager
• According to the traditional authors the ideal
number is around 6
• span of control depends upon various factors
• Nature of an organization
• Nature of job
• Skills and competencies of manager
• Employees skills and abilities
• The kind of interaction