The document discusses organizational structure, defining it as how tasks are divided and coordinated within an organization. It identifies three core dimensions of organizational structure: complexity, formalization, and centralization. Complexity refers to the degree of differentiation, formalization to the standardization of jobs, and centralization to where decision-making power is concentrated. The document also covers functional, divisional, matrix, and project organizational structures.

2. Defining organizational
structure
 Organisational structure refers to the
way tasks are divided up, how the work
flows, how this flow is coordinated and
the forces and mechanisms that allow
this coordination to occur.
 The organizational chart cannot fully
capture the organizational structure but
gives us a place to begin when studying
it.

3. Three components as the core
dimensions of organizational
structure are:
 Complexity
 Formalization
 Centralization

4. Core Dimensions
 Complexity : refers to the degree of differentiation
that exists within the organization.
 There are three kinds of differentiation .
1) Horizontal differentiation : means separation
between units.
2) Vertical differentiation : refers to the depth of the
organizational hierarchy.
3) Spatial differentiation : it encompasses the degree to
which the location of an organization’s facilities and
personnel are dispersed geographically.
 An increase in any one of these three factors will
increase an organization's complexity.

5. Core Dimension contd.
 Formalization : refers to the degree to which
jobs within an organization are standardized.
 Formalization has been defined as the “extent
to which rules, procedures, instructions and
communications are written”.
 Formalization would be measured by
determining if the organizations has a policies
and procedures manual, assessing the number
& specificity of its regulations, reviewing job
descriptions to determine the extent of
elaborateness and detail, and looking at other
similar official documents of the organization.

6. Formalization contd.
 Organizations use formalization because of the
benefits that accrue from regulating employees’
behavior. Standardizing behavior reduces
variability.
 Formalization tends to be inversely related to level
in the organization.
 Most popular techniques :
1. Selection : Organizations do not choose
employee at random.
2. Procedure : To ensure standardization of work
process.
3. Policies : Provide greater leeway than rules do.

7. Core Dimension
 Centralization : Most problematic of the
three components.
 The term refers to the degree to which
decision making is concentrated at a
single point in the organization. A high
concentration implies high centralization,
whereas a low concentration indicates low
centralization or what may be called
decentralization.

8. Centralization contd.
 Centralization can be described more
specifically as the degree to which the formal
authority to make discretionary choices is
concentrated in an individual, unit, or
level, thus permitting employees minimum
output into their work.
 Centralization is concerned only with the
formal structure not the informal
organization.
 It looks at decision discretion.

9. Decentralization
 It reduces the probability of information
overload, facilitate rapid responses to
new information, provides more detailed
input into a decision, instills
motivation, and represents a potential
vehicle for training managers in
developing good judgement.On the
other hand, centralization adds a
comprehensive perspective to decisions
and can provide significant efficiencies.

10. Decentralization In
Organization
 A definition by Dale states that if degree
of decentralization is greater, greater is
the number of decisions made lower
down in the hierarchy, and the more
important those decisions are.

11. Decentralization contd.
 The balance between centralization and
decentralization : There are choices about
which decisions to decentralize & which to
centralize.
 Choosing decision areas to delegate is
frequently regarded as a problem of selecting
the proper balance between centralization and
decentralization.
 According to Koontz & O’Donnell such a
balance is the key to effective decentralization.

12. The most common
organizational types may be
classified as follows:
 The Functional Structure
 The Divisional Structure
 The Adaptive Structure

13. Dimensions of Organizational
Structure
 There is the Vertical Dimension, in which
the organization is considered to be
either a tall or a flat structure;
 There is the Horizontal Dimension, in
which an organization is considered to
be either wide or narrow.

14. The Vertical Dimension of
Organizational Structure
 The Vertical Dimension of the
Organizational Structure basically lays
out who is in charge of whom and who
makes the decisions inside an
organization.
 Span of Control is a very simple
concept: It refers to the number of
people who can report to a single
manager inside of the hierarchy.

16.  Because there are so many levels, managers in
a Tall Organization tend to have a Narrow Span
of Control, which means there are no more than
five or six people reporting to any individual
manager or supervisor.
 In the Flat Organizational Structure, because
there are fewer levels, managers tend to have a
Wide Span of Control, so there could be as
many as ten or twelve people reporting to any
individual manager or supervisor, depending
upon the tasks involved.
 So, essentially, as an organizational structure
flattens out, the Span of Control increases. As
the organizational structure becomes taller, the
Span of Control decreases

17. Functional Structure
 It is the organizational structure that is
based on the functions of the units and
sub-units of activities. Every
organization has specialized functions
and they constitute as separate units of
the organization. The entire activities
that are connected with such functions
are placed in the same unit.

18. Functional Structure

19.  Employees are grouped together
according to their similar tasks, skills
or activities. Functional structures are
suitable for SMEs with high level of
specialization.
The decision making is centralized at
the top of the organization.

20. Benefits of functional
organizational structure
 Efficient use of
resources;
 In-depth skill
development;
 Clear career paths;
 Strategic decisions are
made on the top of the
organization

21. Disadvantages of functional
design
 Slow decision making
 Less innovative.
 Performance responsibility is unclear;
 Limited management training.
 Poor coordination across functions.

22. The Horizontal Dimension of
Organizational Structure
 This type of structure is well suited for large
enterprise.. The division of organization takes
place into small business units that are entrusted
with business related to difficult products or
different market territories. All the divisional
managers are given authority and autonomy to
run all function relating to their respective
products or marketing segments or regional
markets. Each division contributes planned
profits to the organization but works as
independent business.

24. Forms of divisional responsible
design
 Product division. Each unit is for a single product
or a group of related products. Division by
products is created when there is specific in the
production process;
 Customer division. Organization sells products to
diverse group of customers.
 Geographic division. It is advantageous when is
necessary to locate facilities close to customers
who have differences in regional tastes or needs.

25. Strengths of divisional design:
 Adaptation to unstable environment;
 High customer satisfaction;
 High task coordination;
 Clear performance responsibility;
 General management training.

26. Weaknesses of divisional
design
 Inefficient use of resources;
 Low-in depth training. Decrease of the
number of personnel reduces the
specialization;
 Focus on division’s objectives.
 Difficult coordination between headquarter
and the division.
 Loss of control.

27. Differences between functional
and divisional design
 Functional designs  Divisional design
are based on considers output
groupings by input; such as
 Each department is product, customer or
not an independent location.
profit center;  Each division is
independent profit
center;

28. Adaptive Structure
 This type of structure is designed as to
cope with the unique nature of
undertaking and the situations in the
organization. There are two types of
adaptive structure they are:
a) Project organization
b) Matrix organization

29. Project organization
 This type of organization is suitable
when an organization undertakes
specialized work for a particular period
as one time operation. In order to deal
with such situations organizations
develops a unit which is specially
designed to accomplish such project
works without disturbing the routine jobs
of the organization.

30.  The organizations engage their existing
employees on deputation basis to deal with a
particular project and then that particular
executive resumes to his parent department after
the completion of the project.
 The advantage of such organizations is that it
does not disturb the regular work of the
organization. It enables the better control over the
project activities because the managers enjoy the
authority to function the projects effectively.
 But at times these organizations spoil the stability
of the various departments as the personnel are
shifted for the sake of the project and thus disrupt
the basic functioning of the parent department

32. Matrix Structure
 It aims to combine the advantages of
autonomous project organization and
functional specialization. In this structure
functional departments are having full time
specialized workers to accommodate and are
capable of handling more than one project at
a time.
 This is found suitable as the organization is
most of the time engaged in the project
activities and the managers are also more in
number and can accomplish the project work
effectively.

34.  Less recognizable are the entities Project
Alpha, Project Beta, and Project
Gamma, which seem to cut across the
functional structure. These
are, indeed, projects that must pass
through the functional structure of this
division; however, each project must be
allocated its own Production Support
team, its own Legal Support team, its own
Engineering Support team and its own
Accounting Support team.

35.  The manager of each project has no staff
at all. His job is to assemble his staff from
the functional areas of the organization in
order to see his project through from
conception to completion. The project
manager, in other words, must borrow his
staffing from each department.
 The challenge is that each department has
a finite staff, and the demands of each
project are not equal — so one project
may require more staffing than the others.

36. It is suitable for the following
situations:
- Environmental pressure exists for a
dual focus;
- Large amount of information needs to
be processed;
- Innovations are performed
- Organization is working on several
projects together.
- Efficiency is needed in the use of
resources.

37. Strengths of matrix design
 Provides flexibility;
 Encourages resource efficiency;
 Enhances skill development;
 Increase motivation and commitment;
 Helps top management in planning
process.

38. Weaknesses of matrix
design
 Creates dual authority confusion;
 Is time consuming;
 Generates high implementation cost;
 Requires interpersonal skill training;
 Spawns power struggle.

39. Classical vs. Neoclassical
Theories
of Organizational Structure
 There are two overriding theories of
optimal Organizational Structure that
hold forth in the business world, known
as Classical Organizational Theory and
Neoclassical Organizational Theory. As
the names suggest, the former is a
traditional approach while the latter is a
more progressive approach.

40. Classical Organization
Theory
 The Classical Organization Theory assumes
that there is a single best way to design
organizations — that managers should have
tight control over their subordinates, and that
calls for designing organizations with tall
hierarchies and a narrow Span of Control.
 Classical Theory entails a high degree of
written documentation and rules and
procedures intended to direct and control
employees.
 As such, the Classical Theory advocates a
decidedly functional type of organization.

41. Neoclassical Organization
Theory
 Neoclassical Organization Theory, which
argues that employee satisfaction, as well as
economic effectiveness, should be the ultimate
goal of an organization.
 Neoclassical Theory assumes that managers
do not tightly control their subordinates and
calls for designing organizations with flat
hierarchies and a wide Span of Control.
 Following Neoclassical Theory, the manager
relies more on the employees to make
decisions, and these organizations are less
rigid with fewer rules, regulations, and
processes.

42. Classical and Neoclassical Theories of
Organizational Structure