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Summary Organizational structure defines how job tasks are formally divided, grouped, and coordinated. Work specialization, departmentalization, chain of command, span of control, centralization and decentralization, and formalization are components which determine organizational structure. Work specialization or division of labour is the degree to which activities in the organization are subdivided into separate jobs. Work specialization creates efficiency and productivity, but can also result in boredom, fatigue, stress, low productivity, poor quality, increased absenteeism, and high turnover. The trend towards specialization has been altered by the realization that productivity may be increased by enlarging the scope of job activities. Departmentalization is the basis by which jobs are grouped together. Organizations may be departmentalized by function, product, geography, process, or customer. Functional departmentalization groups activities by the functions performed, such as engineering, accounting, or personnel. Organizations using product departmentalization have separate departments or divisions devoted to a product or product line. Many sales and retail operations are departmentalized by geography or territory. In process departmentalization, each department specializes in a specific phase of the production process. Finally, customer departmentalization organizes along customer markets. Many large organizations use all of the forms of departmentalization. The chain of command is an unbroken line of authority that extends from the top of the organization to the lowest level and clarifies who reports to whom. The concept of chain of command is related to the concepts of authority and unity-of-command. Authority refers to the right of a manager to give orders and expect them to be obeyed. The unity-of-command principle states that a person should have only one supervisor to whom he or she is directly responsible. Span of control refers to the number of employees that can be directed by one manager. Narrow spans of control allow for close control, while wider spans of control reduce costs, speed up decision making, increase flexibility, and empower employees. The ideal span of control will depend upon the situation. Centralization is the degree to which decision making is concentrated at a single point in the organization. In a centralized organization, top management makes the key decisions with little or no input from lower-level personnel. In contrast, decentralized organizations allow lower-level personnel or provide input or actually make decisions. The recent trend has been towards decentralization. Finally, formalization refers to the degree to which jobs within the organization are standardized. If a job is highly formalized, individual employees have a minimum amount of discretion over what is to be done, when it is to be done, or how it is to be done. The degree of formalization can vary widely between organizations and within organizations.
Advantage: The low cost can be achieved by such companies due to the efficiencies within functional groups.
. In that sense, each division can be considered as a micro-company with the main organization
Proponents argue that the network structure is more agile than other structures. Because it is decentralized, a network organization has fewer tiers, a wider span of control, and a bottom-up flow of decision making and ideas.
A special form of boundary less organization is virtual. Hedberg, Dahlgren, Hansson, and Olve (1999) consider the virtual organization as not physically existing as such, but enabled by software to exist.
Organization structure & IT
Organization Structure & IT
The organizational structure of an organization
tells you the character of an organization and the
values it believes in.
Organizational structure is a pattern or
arrangement of jobs and groups of jobs within
A social unit of people, systematically structured
and managed to meet a need or to pursue
collective goals on a continuing basis.
Six key elements
• Work specialization
• Chain of command
• Span of control
• Centralization and decentralization
Types of Organizational Structure
• The organization is divided into
segments based on the functions
• Advantage: Successful in large
organization that produces high
volumes of products at low costs.
• Disadvantage: Communication
between the functional groups is
not effective then, organization
may find it difficult to achieve
some organizational objectives at
• Organizations divide the functional
areas of the organization to
divisions. Each division is equipped
with its own resources in order to
• Divisions can be defined based on
the geographical basis,
products/services basis, or any
• Example: General Electrics. It can
have microwave division, turbine
division, etc., and these divisions
have their own marketing teams,
finance teams, etc.
• When it comes to matrix structure,
the organization places the
employees based on the function
and the product.
• The matrix structure gives the best
of the both worlds of functional and
• The company uses teams to
• The teams are formed based on the
functions they belong to and
product they are involved in
• The network structure is a newer
type of organizational structure
viewed as less hierarchical (i.e.,
more "flat"), more decentralized,
and more flexible than other
• In a network structure, managers
coordinate and control relationships
that are both internal and external
to the firm.
• The concept underlying the network
structure is the social network—a
social structure of interactions.
Open communication and reliable
partners (both internally and
externally) are key components of
• Disadvantage: More fluid structure
can lead to more complex relations
in the organization.
• Newest organizational structures
developed in the 20th century
is team and the related concept of
team development or team building.
• In small businesses, the team
structure can define the entire
organization. Teams can be both
horizontal and vertical.
• While an organization is constituted
as a set of people who synergize
individual competencies to achieve
newer dimensions, the quality of
organizational structure revolves
around the competencies of teams in
• Used by:- Xerox, Motorola, and
• Virtual organization is defined as being closely coupled
upstream with its suppliers and downstream with its
customers such that where one begins and the other ends
means little to those who manage the business processes
within the entire organization.
• The virtual organization exists within a network of alliances,
using the Internet. This means while the core of the
organization can be small but still the company can operate
globally be a market leader in its niche.
• According to Anderson, because of the unlimited shelf space
of the Web, the cost of reaching niche goods is falling
dramatically. Although none sell in huge numbers, there are
so many niche products that collectively they make a
significant profit, and that is what made highly innovative
Amazon.com so successful
• Bureaucratic structures maintain strict hierarchies when it comes to people
management. There are three types of bureaucratic structures:
• 1 - Pre-bureaucratic structures This type of organizations lacks the
standards. Usually this type of structure can be observed in small scale,
start-up companies. Usually the structure is centralized and there is only
one key decision maker.
• The communication is done in one-on-one conversations. This type of
structures is quite helpful for small organizations due to the fact that the
founder has the full control over all the decisions and operations.
• 2 - Bureaucratic structures These structures have a certain degree of
standardization. When the organizations grow complex and large,
bureaucratic structures are required for management. These structures are
quite suitable for tall organizations.
• 3 - Post-bureaucratic Structures The organizations that follow post-
bureaucratic structures still inherit the strict hierarchies, but open to more
modern ideas and methodologies. They follow techniques such as total
quality management (TQM), culture management, etc.