Forms of organization

1. DIFFERENT FORMS OF
ORGANIZATION

2. Functional Organization
Organizations may choose from a number of
common operating structures. One popular
structure is the functional organization, where
the company is divided into separate units
based on role, such as accounting, marketing,
research and development or distribution.

3. Features of Functional Organization
• The entire organizational activities are
divided into specific functions such as
operations, finance, marketing and
personal relations.
• Complex form of administrative
organization compared to the other two.
• Three authorities exist- Line, staff and
function.

4. • Each functional area is put under the charge of
functional specialists and he has got the
authority to give all decisions regarding the
function whenever the function is performed
throughout the enterprise.
• Principle of unity of command does not apply
to such organization as it is present in line
organization.

5. Merits of Functional Organization
• Specialization- Better division of labour takes
place which results in specialization of
function and it’s consequent benefit.
• Effective Control- Management control is
simplified as the mental functions are
separated from manual functions. Checks and
balances keep the authority within certain
limits. Specialists may be asked to judge the
performance of various sections.

6. • Efficiency- Greater efficiency is achieved
because of every function performing a limited
number of functions.
• Economy- Specialization compiled with
standardization facilitates maximum
production and economical costs.
• Expansion- Expert knowledge of functional
manager facilitates better control and
supervision.

7. Demerits of Functional Organization
• Confusion- The functional system is quite
complicated to put into operation, especially
when it is carried out at low levels. Therefore,
co-ordination becomes difficult.
• Lack of Co-ordination- Disciplinary control
becomes weak as a worker is commanded not
by one person but a large number of people.
Thus, there is no unity of command.

8. • Difficulty in fixing responsibility- Because of
multiple authority, it is difficult to fix
responsibility.
• Conflicts- There may be conflicts among the
supervisory staff of equal ranks. They may not
agree on certain issues.
• Costly- Maintenance of specialist’s staff of the
highest order is expensive for a concern.

9. Line Organisation:
Line organisation is the simplest and the oldest
type of organisation. It is also known as scalar
organisation or military type of organisation. In
the words of J.M. Lundy, “It is characterized by
direct lines of authority flowing from the top to
the bottom of the organizational hierarchy and
lines of responsibility flowing in an opposite but
equally direct manner.”

10. Types of line organization:
(a) Simple or Pure Line Organisation:
In the ‘Pure Line organisation’ the activities
(at any level of management) are the same
with each man performing the same type of
work and the divisions primarily exist for the
purpose of control and direction. In practice,
such type of organisation rarely exists.

11. (b) Departmental line organisation:
Under this type of organisation, an
organisation is divided into various
departments headed by different departmental
heads. All the departments operate under the
ultimate control of general manager. The
orders flow directly from the general manager
to all the departmental heads that in turn pass
on to their respective subordinates.

12. 1. Simplicity:
2. Fixed responsibility:
3. Discipline:
4. Flexibility:
5. Co-ordination:
6. Direct communication:

13. 7. Unity of command:
8. Economical:
9. Quick decisions:
10. Executive development:

14. Disadvantages of line organization:
1. Overloading:
2. Lack of specialization:
3. Scope for favouritisms:
4. Lack of co-ordination:
5. Lack of initiative:
6. Lack of communication from lower ranks:

15. Line and Staff Organisation:
The line and staff organisation is an
improvement over the above mentioned two
systems vs.: line organisation and functional
organisation. The line organisation
concentrates too much on control whereas the
functional system divides the control too
much.

16. The staff is usually of three types
(a)Personal Staff: For example, personal
assistant to general manager, secretary to
manager etc.
(b) Specialised Staff: For example, a company
may engage a lawyer for rendering legal
advice on different legal matters.

17. (c) General Staff:
This comprises of various experts in different
areas who render valuable advice to the top
management on different matters requiring
expert advice.

18. Advantages of Line and Staff Organization
1. Specialisation:
2. Better decisions:
3. Lesser Burden on line officers:
4. Advancement of research:
5. Training for line officer:

19. Disadvantages of Line and Staff
Organisation:
1. Conflict between line and staff authorities:
2. Problems of line and staff authority:
3. Lack of responsibility:
4. The system is quite expensive:
5. More reliance on staff:

20. THE COMMITTEE
Committee can be defined as a group of
organisational members who discuss and
develop solutions to problems. It can be either
line or staff and can be established on a
standing (permanent) or an adhoc basis. In
business enterprises, the board of directors
constitutes the committee at the highest
level. The purpose of such committees is to
discuss various problems and recommend
solutions to the management.

21. Merits or advantages
The committee form of organisation offers following
advantages:
(1) It is an excellent medium of discussion and
education and of communication between
management and workers.
(2) It is extremely useful in coordinating plans as well
as in facilitating their execution.

22. (3) Setting organisational objectives, and
developing and finalising plans and policies
require pooling of information, abilities and
expertise, as well as integration of conflicting
interests and view points. It is not one man's
job, and is best performed by committees.

23. (4) Sometimes problems are so complex or of
inter-departmental nature that they are best
solved by committees composed of concerned
executives.
(5) It is able to serve as a mechanism of
participative decision making. By participating in
discussions or decision, a member feels motivated
in accepting a situation or implementing a
decision. ,

24. • (6) Committee form of decision making is, of
course, a democratic process. It reduces the
tyranny of
executive authority and provides for
participative decision-making.
(7) It is extremely useful in coordinating plans
as well as in facilitating their execution.

25. Demerits or Disadvantages
The disadvantages of the committee organisation are as
follows:
(1) It is an expensive device both in terms of time and
cost.
(2) Nobody is accountable for committee decisions. A
committee decision is nobody's decision just because it
is everybody's decision.

26. • (3) Often committees result into more conflict
than problem solving.
(4) The decisions taken in committee
organisation are the result of compromise and
hence they are
generally slow in forthcoming and weak.