Organizational structure and design ?
Organization
An organization is a collection of people working
together in a coordinated and structured fashion
to achieve one or more goals.
A consciously coordinated social unit, composed
of two or more people, that functions on a
relatively continuous basis to achieve a common
goal or set of goals
A social arrangement for the
performance of the collective goals
controlled
1
Organizational structure and design ?
Organization
Social
arrangements:
Organizations
are
collection of peoples and machines in a
structured way
Collective goals: Existence of organizations
depend up achievement of common goals
Controlled performance: Controlled performance
means deliberate allocated on resource between
organization members which includes:
•Resource allocation
•Control function
2
Organizational structure and design ?
Organization and people
•Organizations are strongly influenced by the
people that form part of them.
•Organizations can take in part of the personality
of the people within them and their attitudes,
perceptions and behaviors affect how an
organization will operate.
Organization’s Role in Society
•Organizations exist to allow accomplishment of
work that could not be achieved by people alone.
•As long as the goals of an organization are
appropriate, society will allow them to exist and
3
they can contribute to society
Organizational structure and design ?
Why organizations exist?
•Together they
individually
achieve
what
cannot
achieve
•Overcome environmental and biological limitations
•Increase productively due to:
•Work specialization / division of labour
•Exchange
•Synergy: Together we grow better
•Increased
knowledge
enhancement
•Transaction – cost
organization:
•Saving in time
•Reduce cost
development
economies
approach
and
to
4
Organizational structure and design ?
Images and perception of organizations
Our lives become, for better and for worse, a society of organizations.
We are born in organizations and are educated in organizations that we
can later work in organizations. At the same time, organizations supply
us and entertain us, they govern us and harass us. Finally we are buried
by organizations (Henry Mintzberg).
Images/Metaphors of 0rganizations: Gereth Morgan
1.
Organizations are machines
2.
Organizations are biological organism
3.
Organizations are human brains
4.
Organizations are cultures or subcultures
5.
Organizations are sub systems
6.
Organizations are political systems
7.
Organizations are psychic prisons
8.
Organizations are systems of change and transformation
5
9.
Organizations are instruments of domination
Organizational structure and design ?
Classification of organizations
•By ownership:
•By control:
•Activity:
•Legal structure:
•Objective:
•Accountability
•Source of finance:
•Region:
Private, private
Managers, trustees
Retailer, manufactures, hospital
Partnership, company
Commercial, non commercial
Debt, equity
National or international
6
Organizational structure and design ?
Basic Classification of organizations
•Business organizations
•Non business organizations
Business organizations
•Definition:
•Legal
•Capital
•Profit objective
•Types :
•Sole - proprietorship
•Partnership
•Company
•Activities:
•Manufacturing
•Mining
•Energy
•Retailing
•Services
•Services are intangible
•Services are inseparable
•Services are heterogeneous
7
•Intellectual production
Organizational structure and design ?
Basic Classification of organizations
Non business organization
•Public organizations
•Non profit organizations
Public organizations
•Definition:
•Run by government
•Capital
•Non-profit objective
•Diverse nature
•Characteristics
•Accountable to parliament
•Command resources
•Base on fairness
•Equality
•Resource based not price based
•Types :
•Regulatory bodies
•Health institutions
•Educational institutions
•Policy making bodies
•Etc
8
Organizational structure and design ?
Basic Classification of organizations
Non business organization
•Public organizations
•Non profit organizations
Non profit organizations
•Definition:
•Formed for purpose
•Capital
•Non-profit objective
•Public service
•Types :
•Clubs
•Trade unions
•Associations
•Charities
•Professional association
9
Types of organizational structure ?
Simple Structure
An organization that is low in specialization and formulization but high in
centralization
This Organization reflects the owner as president with all employees directly
reporting to him
10
Types of organizational structure ?
Functional Structure
An organization in which similar and related occupational specialties are grouped together
Plant Manager
Manager
Engineering
Manager
Accounting
ADVANTAGES
Manager
MIS
Manager
Human Resources
Manager
Purchasing
DISADVANTAGES
•Helps top management in coordinating and
•Creates a rigid and slow moving organization
controlling the entire organization to follow a •Leads to a loss of innovation and innovation
uniform strategic direction
thinking as employee become more process
•Clarifies the roles/responsibilities and what is
oriented (focused on following correct
expected of each employee
procedures and protocol) rather than results
oriented
•Allows each department to focus on its own
work / activities
•Does not allow for sharing of information / ideas
across departmental lines (which is viewed as
•Provides clear accountability at both the
being especially important in today’s knowledge
departmental and individual level
economy)
11
Types of organizational structure ?
Divisional Structure
An organization made up of self-contained units
President
Vice President
Fuels
Vice President
Lubricants And Waxes
Vice President
Chemicals
Marketing
Marketing
Marketing
Planning and Economics
Planning and Economics
Planning and Economics
Supply and Distribution
Supply and Distribution
Supply and Distribution
Manufacturing
Manufacturing
Manufacturing
12
Types of organizational structure ?
------------------Geographical
Structure
An organization in which activities in a given area or territory be grouped and
assigned to a manager
President
Marketing
Personnel
Western Region
Personnel
Southwest Region
Engineering
Purchasing
Central Region
Production
Finance
Southeast Region
Accounting
Eastern Region
Sales
ADVANTAGES
DISADVANTAGES
•Places responsibility at a lower level
•Places emphasis on local markets and problems
•Improves coordination in a region
•Takes advantage of economies of local operations
•Better face-to-face communication with local
interests
•Furnishes measurable training ground for general
managers
•Requires more persons with general manager abilities
•Tends to make maintenance of economical central
services difficult and may require services such as
personnel or purchasing at the regional level
•Increases problem of top management control
13
Types of organizational structure ?
Customer based / Product Structure
An organization in which activities reflect a primary interest in customers
President
Community-City
Banking
Real Estate &
Mortgage loans
ADVANTAGES
Corporate
Banking
Agricultural
Banking
Institutional
Banking
DISADVANTAGES
•Enables an organization to be more aligned •Individual departments can become too
with the needs of its customers
autonomous which makes setting and
•Promotes innovation and innovative coordinating a single strategic direction to be
thinking as the organizational culture followed difficult
becomes more focused on problem solving •It limits the sharing of information / ideas across
/ meeting customer needs than following the organization lines (which is viewed as being
processes and protocol
especially important in today’s knowledge
economy)
14
Types of organizational structure ?
Modern Organization Designs
Strategic Business Units (SBUs)
Project Structure
Matrix Structure
Virtual Structure1
15
Modern Organization Designs
Strategic Business Units (SBUs)
The SBU structure groups similar division into business units and delegates
authority and responsibility for each unit to a senior executive who reports
directly to CEO
Chief Executive Officer
Chief Strategy
Officer (CSO)
Chief Finance
Officer (CFO)
Chief Operating
Officer (COO)
Industrial Products SBU
Adhesive
Packaging
Division
Tubes /
Cores
Division
Paper
Division
Chief
Information
Officer (CIO)
VP of Human
Resources
VP of
Marketing
Consumer Products SBU
Reels
Division
Flexible
High
Packaging Density Film
Division
Division
Metal
Ends
Division
Rigid
Division
16
Modern Organization Designs
Project Structure
An organization in which activities require a great deal of planning,
research and coordination
General
Manager
Project A
Quality
Control
Engineering
R&D
Project B
Contract
Scheduling
Administration
Manufacturing
Purchasing
Quality
Control
Engineering
R&D
Contract
Scheduling
Administration
Manufacturing
Purchasing
17
Modern Organization Designs
Matrix Structure
An organization in which specialists from functional departments are assigned
to work on one or more projects led by a project manager
Head of Design
Function
Head of
Engineering
Function
Head of
Purchasing Function
Project
Manager
Project Team
Project
Manager
Project Team
Project
Manager
Project Team
Head of
Construction
Function
18
Modern Organization Designs
Virtual Structure
An organization in which a very few activities are carried out and as much as
possible work is carried out by other organizations
Design Company
Logistics Company
Core Company
Sales and Marketing Company
Manufacturing Company
Finance Company
19
Questions ?
20
Thank You
21