Organizational Structure by Neeraj Bhandari (Surkhet,Nepal)

1. ORGANIZATIONAL STRUCTURE
Presented By :
Neeraj Bhandari

2. WHAT IS ORGANIZATIONAL STRUCTURE ?
• Organizational structure is a system used to define a
hierarchy within an organization.
• It identifies each job, its function and where it reports to
within the organization.
• This structure is developed to establish how an
organization operates and assists an organization in
obtaining its goals to allow for future growth.
• The structure is illustrated using an organizational chart.

3. WHY DO WE NEED ORGANIZATIONAL STRUCTURE ?
• Evaluating Employee Performance
• Achieving Goals
• Function
• Communication
• Prevention/Solution

4. WHAT ARE THE DIMENSIONS OF ORGANIZATIONAL
STRUCTURE?
Organizational structure has three dimensions
1. Vertical differentiation - the location of decision-
making responsibilities within a structure
2. Horizontal differentiation - the formal division of the
organization into sub-units
3. Integrating mechanisms - the mechanisms for
coordinating sub-units

5. WHY IS VERTICAL
DIFFERENTIATION IMPORTANT?
• Vertical differentiation determines where decision-making
power is concentrated
Centralized decision-making
• facilitates coordination
• ensures decisions are consistent with the organization’s
objectives
• gives managers the means to bring about organizational
change
• avoids duplication of activities

6. WHY IS VERTICAL
DIFFERENTIATION IMPORTANT?
Decentralized decision-making
• relieves the burden of centralized decision-
making
• has been shown to motivate individuals
• permits greater flexibility
• can result in better decisions
• can increase control

7. WHY IS HORIZONTAL
DIFFERENTIATION IMPORTANT?
• Horizontal differentiation refers to how the firm divides
into sub-units
• usually based on function, type of business, or geographical
area
• Most firms begin with no formal structure, but as they
grow, split into functions reflecting the firm’s value
creation activities - functional structure
• functions are coordinated and controlled by top management
• decision-making is centralized
• product line diversification requires further horizontal
differentiation

8. TYPES OF ORGANIZATIONAL STRUCTURE
Functional Structure
A structure in which positions are grouped according to their
main functional (or specialized) area.
CEO
MANAGERSMANAGERS MANAGERS

9. FUNCTIONAL STRUCTURE
ADVANTAGE
• In-depth expertise development
• Clear career path within function
• Efficient use of resources
• Possible economies of scale
• Ease of coordination within function
• Potential technical advantage over competitors

10. FUNCTIONAL STRUCTURE
Disadvantages
• Slow response to multifunction problems
• Decision backlog at top of hierarchy
• Bottlenecks due to sequential tasks
• Inexact measures of performance
• Narrow training of future managers

11. DIVISIONAL STRUCTURE
• A structure in which positions are grouped according to
similarity of products, services or markets.

12. DIVISIONAL STRUCTURE
Advantages:
• Fast response to environmental change
• Simplified coordination across functions
• Simultaneous emphasis on organisational goals
• Strong customer orientation
• Accurate measurement of performance
• Broad training in management skills

13. DIVISIONAL STRUCTURE
Disadvantages:
• Resource duplication in each division
• Reduction of in-depth expertise
• Competition amongst divisions
• Limited sharing of expertise between divisions
• Innovation restricted to each division
• Neglect of overall goals

14. HYBRID STRUCTURE
• A structure adopting both functional and divisional
structures at the same management levels.

15. HYBRID STRUCTURE
Advantages:
• Alignment of corporate and divisional
goals
• Functional expertise and/or efficiency
• Adaptability and flexibility in divisions

16. HYBRID STRUCTURE
Disadvantages:
• Conflicts between corporate departments
and divisions
• Excessive administration overhead
• Slow response to exceptional situations

17. MATRIX STRUCTURE
• A matrix organization structure is usually defined
as one where there are multiple reporting lines –
that is, people have more than one formal boss.
• In other words, employees have dual reporting
relationships - generally to both a functional
manager and a product manager.

18. MATRIX STRUCTURE

19. MATRIX STRUCTURE
Advantages
• Resources can be used efficiently, since experts and equipment
can be shared across projects.
• Products and projects are formally coordinated across functional
departments.
• Information flows both across and up through the organization.
• Employees are in contact with many people, which helps with
sharing of information and can speed the decision process

20. MATRIX STRUCTURE
DISADVANTAGES
• Violation of unity of command
• Costly structure
• Problem of overspecialization
• Feeling of insecurity
• Lack of commitment