An organization is defined as two or more people working cooperatively within identifiable boundaries to accomplish a shared goal. Organizational structure refers to how an organization divides labor into tasks and coordinates them, which is represented visually in an organizational chart. The structure of an organization affects key areas like performance, coordination, and costs.

1. ORGANIZATIONALORGANIZATIONAL
DESIGNDESIGN

2. Organizations: A DefinitionOrganizations: A Definition
An organization is defined as two orAn organization is defined as two or
more people, working togethermore people, working together
cooperatively within identifiablecooperatively within identifiable
boundaries, to accomplish a commonboundaries, to accomplish a common
goal or objectivegoal or objective

3. Four Concepts Implicit inFour Concepts Implicit in
Organizational DefinitionOrganizational Definition
 Organizations are made up of peopleOrganizations are made up of people
 The necessity of the division of laborThe necessity of the division of labor
 Organizations have identifiableOrganizations have identifiable
boundariesboundaries
 Organizations are purposeful, goalOrganizations are purposeful, goal
seeking work arrangementsseeking work arrangements

4. Organizations: A RevisedOrganizations: A Revised
DefinitionDefinition
Organizations are humanOrganizations are human
systems of cooperation andsystems of cooperation and
coordination assembledcoordination assembled
within identifiablewithin identifiable
boundaries, to pursue sharedboundaries, to pursue shared
goals or objectivesgoals or objectives

6. Importance ofImportance of
OrganizationsOrganizations
Nearly every aspect of our livesNearly every aspect of our lives
is affected by organizations.is affected by organizations.
Work, family, health care,Work, family, health care,
religion, and entertainment—religion, and entertainment—
nearly every facet of life takesnearly every facet of life takes
place in, is regulated by, or is aplace in, is regulated by, or is a
result of organizations andresult of organizations and
organizational actionorganizational action..

7. Characteristics ofCharacteristics of
Effective StructuresEffective Structures
EfficiencyEfficiency: efficient pursuit of goals: efficient pursuit of goals
that ensure it does the right thingsthat ensure it does the right things
Innovation:Innovation: encourage innovationencourage innovation
by providing the pooling ofby providing the pooling of
resources and the necessaryresources and the necessary
communicationscommunications
Flexibility and adaptiveness:Flexibility and adaptiveness:
balance the needs for consistencybalance the needs for consistency
and predictability with the needs forand predictability with the needs for
flexibility and responsivenessflexibility and responsiveness

8. Characteristics ofCharacteristics of
Effective Structures (cont.)Effective Structures (cont.)
 Facilitation of Individual Performance andFacilitation of Individual Performance and
DevelopmentDevelopment:: offer people the opportunity to performoffer people the opportunity to perform
at highest level, encourage growth, and provide aat highest level, encourage growth, and provide a
clear career ladderclear career ladder
 Facilitate Coordination and CommunicationFacilitate Coordination and Communication: must: must
facilitate coordination and communication at thefacilitate coordination and communication at the
times it is needed mosttimes it is needed most
 Facilitate Strategy Formulation and ImplementationFacilitate Strategy Formulation and Implementation::
as organizations adopt new strategies, they may needas organizations adopt new strategies, they may need
to modify their designsto modify their designs

9. What is Organizational Structure?What is Organizational Structure?
TheThe structurestructure of an organization can beof an organization can be
defined simply as the sum total of thedefined simply as the sum total of the
ways in which its labor is divided intoways in which its labor is divided into
distinct tasks and then its coordinationdistinct tasks and then its coordination
is achieved among these tasks.is achieved among these tasks.

10. What is an Organizational Chart?What is an Organizational Chart?
 Boxes show how work and responsibilitiesBoxes show how work and responsibilities
are clustered into units such as divisions,are clustered into units such as divisions,
departments, sections, and teams.departments, sections, and teams.
 Lines show the management structure:Lines show the management structure:
Who reports to whom, how the boxesWho reports to whom, how the boxes
relate to each other in the hierarchy.relate to each other in the hierarchy.

11. Why Organizational StructureWhy Organizational Structure
Matters?Matters?
 Structure affects:Structure affects:
 What employees pay attention toWhat employees pay attention to
 Ease of coordinating activitiesEase of coordinating activities
 Speed of producing goods/servicesSpeed of producing goods/services
 Cost of running the businessCost of running the business
 Nature and extent of supervision requiredNature and extent of supervision required
 Whom employees interact and buildWhom employees interact and build
relationships withrelationships with

12. Organizational StructureOrganizational Structure
Organizational designOrganizational design
 Selecting the structure and controlSelecting the structure and control
systems that are most strategicallysystems that are most strategically
effective for pursuing sustainableeffective for pursuing sustainable
competitive advantage.competitive advantage.
The role of structure and controlThe role of structure and control
 To coordinate strategy implementation.To coordinate strategy implementation.
 To motivate and provide incentives for superiorTo motivate and provide incentives for superior
performance.performance.

13. The Role of OrganizationalThe Role of Organizational
StructureStructure
Building blocks of organizational structureBuilding blocks of organizational structure
 Differentiation in the allocation of people andDifferentiation in the allocation of people and
resources to create value.resources to create value.
 Vertical differentiation in theVertical differentiation in the
distribution of decision-makingdistribution of decision-making
authority.authority.
 Horizontal differentiation inHorizontal differentiation in
dividing up people and tasksdividing up people and tasks
into functions and divisions.into functions and divisions.
 IntegrationIntegration
 The means used in coordinating people andThe means used in coordinating people and
functions to accomplish organizational tasks.functions to accomplish organizational tasks.

14. How OrganizationalHow Organizational
Design IncreasesDesign Increases
ProfitabilityProfitability
Enhances a company’s