Theory of Organization
Structures: nature and
consequences
Facilitator and Course Coordinator:
Vinayshil Gautam PhD, FRAS(London)
(Founder Director IIM K; Leader Consulting Team IIM S)
A Al_Sager Chair Professor and First Head,
Management Department, IIT D
Chairman, DKIF
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Objectives
identify key elements
describe various structures and their
characteristics
understand vertical and horizontal
specialization and control
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Objectives
identify and understand factors favouring
different structures
examine organizational structure
identify an integrated view of
organizational structure
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Need of a structure
Enhances performance through proper
resource utilization
Monitors activities
Provides a system to promote
accountability and co-ordination
Allows flexibility to respond to various
environmental influences
Brings the social satisfaction of its
members
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Nature and origin of structure
Emerges just after the inception of an
organization
Not static and may change several times
The changes may be in whole or part
It defines job responsibilities for each personnel
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Some basic structural
consideration
Three level of hierarchy
Institutional level
Administrative level
Technical level
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Features of different levels
Institutional level
Development of organizational goal, output
Maintain the structure of organization
Establishment of an appropriate administration
climate for subordinate managers
Formulation of policies, rules and regulations
Administrative level
They are middle level managers
Here policies, rules and regulations are
interpreted
Stress is given on planning, organizing and
controlling
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Features of different levels
Technical level
Lower level managers
Rules and regulations are implemented
Products are produced
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Organizational process
Communication
Coordination
Control
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Communication
Communication is the vehicle through which
decisions taken at various levels are transmitted to
other levels
It involves information flow across a structure
It has a specific direction and it involves time
Communication is successful when the fullest
understanding amongst the persons communicating with
each other is achieved
It is also the flow of attitudes, ideas and opinions
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Coordination:
Coordination refers to the measurement of interdependencies in work situations
In small organizations, coordination is handled by its
manager(s)
Coordination need not necessarily be the role of one single
individual at a higher level in the organization
Large organizations need:
Personal methods of coordination
Impersonal methods of coordination
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Personal methods of coordination
Dialogue, discussion, innovation, creativity, and
learning, both within and across units
Direct contact between and among
organizational members
Assignment to committees to improve
coordination across departments
Use of task forces
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Control:
Control refers to the ability of influencing the
behaviour of other organizational members
A set of mechanisms to keep actions or
outputs within the specified limits
Setting standards
Measuring results against standards
Taking corrective action
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Vertical Specialization:
A hierarchical division of labour
Distribution of formal authority
Creation of a hierarchy of authority
Work positions arranged in order of increasing authority
This depends on the organization’s:
Environment
Size
Technology
Goals
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Horizontal specialization
A division of labour that establishes specific
work units or groups
Also referred to as experimentation
Specialization leads to departmentalisation
Pure forms of departmentations are:
By function
By division
By matrix
By Legal
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Different forms of Organization
Functional
Division of labor by function (marketing,
production, finance etc.)
Division of labor on the basis of specialization
knowledge
All the worker have specific skills and action
Widely used in organization
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Divisional
It is designed around
Product
Clients
Territories
In complex organization it is a typical pattern
There may be divisions at the top of the hierarchy (marketing
division may be divided into industrial sales, governmental
sales and consumer sales divisions)
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Matrix
combination of functional and product departmentalization
occurs frequently in construction (e.g., building a bridge),
in aerospace (e.g., designing and launching a weather
satellite), in marketing (e.g., an advertising campaign for a
major new product)
this may be made more effective through:
Defining objectives of the project or task
Clarifying the roles, authority, responsibilities of the
managers and team members
Selection of appropriate manager for leadership
Undertaking organization and team development
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Matrix Structure (contd...)
Advantages:
Orientation towards end results
Maintenance of professional identification and
efficient allocation of specialists
Pinpointing product-profit responsibility
Disadvantages:
Conflict in organizational authority (due to power
struggles)
Possibility of disunity of command ( due to dual
chain of command)
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Matrix Structure
(in a college of Business Admn.)
Progm
Depts.
UG
PG
PhD
Research
Exec.
Devt.
Comny.
Service
Accounting
Admn. Studies
Finance
IT
Mktg.
O.B.
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Legal
The last pure form of specialization is by legal
entity
It is not new, but it has recently received
considerably more attention
As organizational analysis has spread to
Governmental units, legal entity has been
recognizable as a pure form
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Key elements in a proper structure
Work specialization
Chain of command
Span of control
Centralization and decentralization
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Work specialization:
It is the division of labour
ensures efficient utilization of skills of workers
early 20th Century, Henry Ford utilized this
concept in Ford company
Training is more efficient, easy and less
costly
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Chain of Command:
an unbroken line of authority extends from the
top to the lowest level
clarifies who reports to whom
ensures authority, responsibility and unity of
command
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Span of Control:
determines the number of levels and
managers
no. of managers to total operative level
employees
wider spans reduce effectiveness due to
lack of leadership and support
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Span of Control:
Small spans ensures a close control but:
They are not cost effective
Vertical communication in the
organization becomes complex
Tight supervision discourages
employee autonomy
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Span of Control
Members at each level
Span of 4
1
4
Span of 8
1
8
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64
256
1024
4096
64
512
4096
Operatives= 4096
Operatives= 4096
Managers (level 1 to 6) = 1365
Managers level 1 to 4 = 585
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Centralisation:
A degree to which decision making is concentrated
at a single point in the organization
Top management makes key decisions
Lower level managers merely carry out top
management directives
Decision making responsibility is moved upward in
the hierarchy
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Decentralization
Lower level personnel can provide inputs and can act
closely with the top management
advantages
Effective communication
Participatory decision making
Higher employee productivity
Higher subordinate satisfaction
Quicker response to a series of unrelated problems
Assists the subordinates for higher level positions
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Integrated view of Organizational
Structure
Mechanistic structure
Organic structure
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Mechanistic Structure
A structure characterized by
Extensive departmentalization
High formalization
Limited Information Network
High centralization
Little participation by low level members in
decision making
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Features of Mechanistic
Structure
Rigid hierarchical relationship
Fixed duties
High consistency
Specific communication channel
Centralized decision authority
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Advantages
Emphasizes on vertical specialization and
control
Well documented rules, procedures, and
policies
Has well-documented control systems
Strong middle management supported by
a centralized staff
Specifies techniques for decision making.
Brings in efficiency
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Limitations
Employees dislike rigid designs, which
makes work motivation problematic
Unions may further solidify rigid designs
Key employees may leave
Low organization’s capacity to adjust with
environmental changes or emerging of new
technologies i.e. lower flexibility
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Organic structure
It looks a lot like boundary less
organization
 It is a flat type of organization
 Low formalization
 Increase in coordination
 Possess a comprehensive information
network
 High participation in decision making

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Advantages
Low hierarchical differentiation
Collaboration (both vertical and horizontal)
Adaptable duties
Procedures are minimal, and those that do
exist are not highly formalized
Decentralized decision authority
Good for problem solving and serving
individual customer needs
Good at detecting external changes and
adjusting to new technologies
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Limitations
Lower level of rules and regulations
Sacrifices ability to respond to central
management direction
No fixed duties
Less control of higher authority to the lower
authority
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Conclusion
An organization’s internal structure:
Exercises control and ensures co-ordination
Explains and predicts employee behaviour
linked to overall productivity and profit
Reduces ambiguity and clarifies relationships
Shapes employees’ attitude and facilitates and
motivates the workers
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Conclusion (contd…)
An appropriate or integrated structure may have:
limited specialization
wide span of control
provide employees greater freedom
Ensures team spirit and coordination
amongst employees
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References:
Gautam V & S.K. Batra, Organisational
Development Systems, V. P. House, 1993
Gautam V., Background paper on Organisation
Management, IITD
Stephen P. Robbins, Essentials of Organizational
Behaviour, EEE, 8th Edition, Prentice Hall India
Publication
http://www.cba.uri.edu/scholl/Notes/Organizational
_Structure.htm dated 11.09.2005 Time 11:00 am
http://www.exsci.rutgers.edu/courses/330/330Org
Struc.S05.htm dated 11.09.2005 Time 11:10 am
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THANK YOU
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