CHA

4 PT ER
STRUCTURE OF AN ORGANISATION

CONTENTS

4.1 Introduction
4.2 Concept of Organisational Structure
4.2.1 Six Box Organisational Model
4.2.2 Matrix or Mixed Model
4.2.3 Other Organisational Models
Self Assessment Questions
Activity
4.3 ETZIONI Organisational Theory
Self Assessment Questions
Activity
4.4 Factors Influencing Organisational Strueture
Self Assessment Questions
Activity
4.5 Summary
4.6 Descriptive Questions
4.7 Answers and Hints
4.8 Suggested Readings & References
70 MANAGEMENT THEORY AND PRACTICD

INTRODUCTORY CASELET
N OT ES

ORGANISATIONAL MODEL OF CITIGROUP

provider, deals in more than

Citigroup, a global financial services
100 countries and holds more than
200 million customer accounts.
corporate banking, invest
Its services include consumer banking,
management, financial analysis, and
ment banking, global wealth
organisation is also popular for
private equity. Apart from this, the
its credit cards.
2008, Vikram Pandit, the CEO of Citigroup, announced the re
In its customer base
structuring of the organisation for expandingclear accountability
and
and achieving global product excellence to achieve operational
The main goals of the organisation were
efticiency and improve decision making.
to two divisions name-
The consumer group was reorganised in
ly consumer banking and global cards.
As per Pandit, Our new
alomg the path
Organizational model marks further important step
we are pursuing to make Citi a simpler, leaner
and more efficient
businesses and
organisation that works collaboratively across the With this
throughout the world to benefit clients and shareholders.
by moving the de-
new structure, we reinforce our focus on clients
cision-making process as close to clients as possible and assigning
global
some of our strongest talent to lead the regional areas and
product roups.
The following figure shows the matrix organisational structure
used by Citgroup that accounts for the organisation's corporate
and consumer banking businesses:

******
North Mexico Europe, Latin apan Asia
America, Middle America Pacific,
Excluding East, Excluding
Mexico Africa Japan
CEO, CEO, CEO CEO, CEO, CEO,
Corporate Corporate |Corporate |Corporate|Corporateorporate
Businesses Businesses||Businesses|Businesses|Businesses| Businesses

CEO CEO, CEO CEO, CEO CEO,

Businesses Business erconsumer || Consumer
BusinessesBusinessesBusinessesBusinessesEBusinesses||Businesses
Global Consumer
. Credit Cards
Consumer Banki
Country Manager in
Spain united Arab
Enirates, Konya ete.
Global Corporate &&

Investment ban Credit Cards

Corporate Bankin8 Consumer Banking
COpitI Markuts Consurner Einanee

Global Investment
Management
Private Banking Country Manager iD
Asset Managemen China, Australia,
nternational Insurance South Korea ete.
Private Banking
Smith Barney Asset Management
Private Client Group
Global Equity Rescarch International
Insurancu

(Source: Williams, C. (2006), Effective Management. : Thomson Learning)

 INTRODUCTORY CASELET N O T ES

As shown in the figure, Citigroup

uses the geographic customer
structure. The country managers of the organisation are required
to report to their respective
regional CEOs. Further, the organi-
structures into consumer banking
sation has divided its product
investment management, private
and consumer finance, global
banking, etc.
by the combination of geographic
The matrix structure is created is different from the tradi-
and product structures. This structure
tional organisational structure as:
two bosses. Forinstance, the French
Most employees report toreport to the regional CEO in Europe,
country manager would
Middle East and Africa.
cross-functional interaction be-
The matrix structure leads to departmentation has helped
tween employees. The matrix
Citigroup to manage large tasks easily.
NO T ES

LEARNING OBJECTIVIES

After studying this chapter, you will be able to:

Discuss the concept of organisational structure
Explain the six box organisational model and matrix mode]
Elaborate on the ETZIONI organisational theory
Identify the factors influencing organisational structure

4.1 INTRODUCTION
Consider a scenario of an organisation where employees are not clear
about their roles and responsibilities. In such organisation, there
would be chaos in work processes, conflicts among employees, wastage
of resources, inefficient operations, and poor productivity. Moreover
project and administrative responsibilities would often be neglected.
These problems can be prevented by having an effective organisa
tional structure in place. An organisational structure is a framework
that divides, organises, and coordinates the different activities of an
organisation. In other words, it is a hierarchy in which tasks are al-
objectives.
located to individuals to achieve organisational goals and
responsibili-
An effective organisational structure clarifies roles and
ties, levels of authority, and supervisory or reporting lines in an organ-
resources
isation. Moreover, it enables managers to determine which employed
are available and in what quantities and how they should
be
contrary, a weak organ-
in order to produce the desired output. On the
on the collaborative
isational structure would have an adverse impact organisation.
effort of employees and the competitive position of the
components that de-
In an organisation, there are many interrelated
structure. Thus, these com
cide the effectiveness of the organisational developing its
ponents should be considered by the organisation while
structure. These components are:
Clear vision and prioritisation of organisational activities
Effective leadership and high performance values
making
Clear roles and responsibilities for decision tor
skills necessary
Strengths of the organisation and employee
success
Performance measures against organisational objectives
O Effective execution of work processes
environment
OFast response to changes in the dynamic business
stu
the concept of organisational
In this chapter, let us study about
ture and its importance.

Schonl for Continuing Education

 NO T E S

CONCEPT OF ORGANISATIONALL
4.2
STRUCTURE
An organisational structure can be defined as the logical arrangement
of tasks, duties, and roles and responsibilities with the aim to achieve
the predetermined objectives of the organisation. In the words of
Kast and Rosenzweig, structure is the established pattern of relation-
ships among the component parts of the organisation. An organisational1
structure intends to promote coordination among individuals in the
organisation by clearly defining the reporting structure (who will work
under whom). It also defines interpersonal relationships between in-
dividuals and their jobs.

An organisational structure is broadly categorised into types, name-

ly centralised structure and decentralised structure. In centralised
strueture, decisions are taken at the top level management and passed
to the lower level management. On the other hand, in a decentralised
structure, departments are given autonomy to make their own de-
cisions depending on their requirements. Generally, the centralised
structure is found in small-scale organisations where there is less hi-
erarchy, while the decentralised structure is followed by organisations
having worldwide presence and where it is impossible to make deci-
ab
sions at the central level. Figure 4.1 shows an example of organisation-
al structure:

Managing Director

Director Fleet Director Personnel

Manager Manager

Commercial Conservatory Domestic Exterior Administration

Division Division Division Maintenance Department
Division
Contracts Contracts Managers Managers
Director Managers Director

Contracts Asst. Contracts Contracts Contracts Accounts

Director Managers Managers Manger Managers

Designer

Foreman Foreman Foreman Foreman

Operatives Operatives Operatives Operatives

Figure 4.1: An Example of Organisational Structure

(Source: www.emeraldinsight.com)
NO T ES

An effective organisational structure represents the arrangement of

activities, individuals responsible for performing these activities, co-
ordination between individuals and departments, and optimal utilisa-
tion of resources. The following are some characteristics of an effec-
tive organisational structure:
an
Simple and unambiguous: The structure of organisation should
have a minimum chain of command so that unnecessary confu-
sions ad chaos can be avoided. Having more than one supervisor
can lead to communication gaps and inefficient monitoring. Thus,
the chain of command should flow from a single superior to his/
her subordinates.
Flexible and adaptable: As the business environment is dynamic,
the organisational structure should be created in a manner that
it can readily be altered as per the changing needs and demands.
Clarity of roles: Every employee should know the authority-re-
sponsibility relation whether from top to bottom or horizontal.
This would help employees to know to whom they need to report
and perform their roles and responsibilities effectively.
Involvement of top management: The participation of top man-
agement is crucial to the development of an organisational struc-
ture. This is because the most important elements, such as organ-
isational objectives, functions, and policies, are decided by the top
management.
To maintain effective structures, organisations are required to follow
certain principles. These principles are explained as follows:
aDivision of work: The structure of an organisation should be de
signed in a manner that every employee should be allotted work
as per his/her abilities, skills, and competencies. This helps em-
ployees in achieving specialisation in a particular work; thereby
increasing their efficiency.
Unity of command: An employee who is given multiple commands
causes difficulty for the employee in decision making, which, in
turn, affects his/her performance. Thus, there should be a single
line of command in an organisation.
o Principle of departmentation: Departmentation involves dividing
a large organisation into smaller units (called departments) as per
specialised functions. Departmentation helps in making the man-
agerial functions easier and brings work specialisation.
Principle of authority: The overall authority of the organisation
must be broken down into departments, divisions, or/and fune
tions. Authority helps in supervising the performance of suboral
nates, and monitoring and controlling organisational activities.
Span of management: It implies the number of subordinates su
pervised by one manager. There should be adequate number o

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 NO T ES

subordinates under a manager. The number of subordinates un-

der a manager depends on the ability of the manager and the sub
ordinates, nature of work, objectives to be achieved, etc.
o Scalar chain: It is the line of command that shows the flow of in-
formation among employees at different levels in the organisation-
al structure. This chain specifies the mode through which infor
mation should be flown from higher authority to lower authority
Effective flow of information makes employees aware of their roles
and responsibilities.
a Unity of purpose: Every organisation strives to meet its purpose.
This can be possible if the top management clearly communicates
its purpose to its employees so that they can also work towards to
accomplish that purpose.
Principle of flexibility: The change is inevitable in any organi-
sation. Thus, the structure of an organisation should be flexible
enough to adapt to the necessary changes made in the internal and
external environment of the organisation.
Principle of synergy: Synergy implies that the efforts of all indi-
viduals should result in more than the sum of individual output.
The networking of individuals in an organisational structure must
lead to synergy.
Principle of team spirit: Team spirit in an organisation makes em-
ployees understand the behaviour of each other and learn to ac-
cept each other's differences. An effective organisational structure
requires coordination of employees to serve the common purpose,
which can be possible if team spirit is inculcated among them.
Some guidelines that organisations must follow while developing their
organisational structure are given below:
Defining clear goals and objectives: An organisation should clear-
ly define its goals and objectives while developing its structure.
Clear and discrete goals help team members enable individuals too
understand their job roles and responsibilities.
Determining the appropriate type of organisational structure:
An organisation should select a suitable type of organisation-
al structure depending on the authority-responsibility structure
used by it. For example, in a centralised organisational structure,
the top to down approach is followed to assign tasks and responsi-
bilities to individuals.
Defining the scalar chain of command: The chain of command
should be properly decided in an organisational strueture. For in-
stance, if there is a single leader, the chain of command would be
unitary, which means functions and roles would be delegated by a
single person. On the other hand, if there are multiple heads, the
delegation of functions and roles of individuals would bedivided into
various heads and there would be multiple commands of authorities.
76 MANAGEMENT THEORY AND PRACTICE

NOT ES

4.2.1 SIX BOX ORGANISATIONAL MODEL

The six-box model was developed by an American analyst Marvin
Weisbord in 1976 to evaluate the functioning of organisations. It is a
framework that represents the concerns to be addressed by organisa-
tions while designing their structures. This model views organisations
from formal and informal perspectives.
In this model, Weisbord gave six broad categories of organisational
life, including purposes, structures, relationships, leadership, re
wards and helpful mechanisms. According to Weisbord, the purpose
of an organisation includes the organisation's mission and goals. On
the other hand, structure could be defined as the way of organising
the organisation; this could be on the basis of function, product, pro-
gram or project. Weisbord defined relationships as the ways in which
people and units interact with each other. Rewards could be in the
form of intrinsic and extrinsic rewards that people associate with
their work. Leadership could be defined as typical leadership tasks
that help in ereating balance among different categories of organisa-
tional life. Finally, the helping mechanisms, according to Weisbord,
are the planning, controlling, budgeting and information systems that
help in meeting organisational goals. Figure 4.2 highlights six criti
cal areas that are importat for the functioning and designing of an
organisation:

Purpose
What business
are you in?

Relationship:
Leadership: Structure:
How do we
Does someone How do you
manage conflict
among people? keep the boxes divide the
in balance? work?
With technology

Helpful Mechanisms:
Have we adequate
Rewards:
Do all needed tasks
coordinating
have incentives?
technologies?

Environment

F'igure 4.2: Six Box Model

(Source: www.emeraldinsight.com)
 NOT ES
T.et us discuss these six areas in detail.
a Purpose: This box is concerned with the overall direction of an or
ganisation. In addition, in this box, it is considered to what extent
people are clear about the organisation's vision and mission and
provide support to meet the organisation's purpose.
nStructure: The box represents that the organisation's structure
should be well fitted with the organisation's purpose.
n Relationships: As per Weisbord, there are three most important
relationships in an organisation. They are between individuals;
between different departments; and between individuals and their
iobs. He has suggested that the quality of these relationships is im-
portant for managing conflicts in the organisation. Effective com-
munication and coordination are the two main tools to improve
the quality of relationships in the organisation.
a Rewards: This box is concerned with the compensation packag
es and incentive system of the organisation. A fair reward mech-
anism acts as a motivating factor and prompts employees to work
towards organisational goals and objectives. The structure of the
organisation should be such that the performance of employees is
rewarded.
a Leadership: Weisbord considers this box central as leaders are re-
sponsible for monitoring the performance of the other five boxes
and maintaining a balance among these boxes. According to him,
leaders define purposes, embody these purposes in programs,
maintain the organisation's integrity, and manage conflicts.
oHelpful mechanisms: As per Weisbord, helpful mechanisms are
the cement that binds an organisation together to make it more than
a collection of individuals with separate needs. The mechanisms
are the processes that help employees to accomplish their jobs
and meet organisational objectives. A few examples of such mech-
anisms are planning, control, budgeting, information systems, etc.
Weisbord proposes money, people, ideas and machinery as inputs,
which are used to fulfil the organisation's mission. The outputs, on the
other hand, are products and services. However, there are two prem-
1ses which are important to understand in Weisbord's model. These
premises include:

Formal versus informal systems: Formal systems involve poli-

Cles and procedures that the organisation claims to do. Informal
systems on the other hand are the behaviours that actually occur
wthin the system. The gap between formal and informal systems
Within the organisation defines the effectiveness of the organisa-
ional structure. The lesser the gap between the two, the more ef-
fective the organisation would be.
 T
NO E S

o Fit between the organisation and the environment: It is the

second premise that focuses on the difference between the cur-
rent performance of an organisation and the way the organisation
should perform to meet external demands. Weisbord describes ex-
ternal demands as customers, government and unions.
Weisbord further presents diagnostic questions for each box of his
model. For example, he proposes that OD consultants regulate wheth-
er organisational members support the organisation's mission and
goals within the purposes bOx. This question deals with the premise
regarding the nature of the formal and informal systems within the
organisation. Let us see the sample of some questions that could be
posed:
Purposes: Do organisational members support the organisation's
mission and goals?
Structure: a
Is there fit between the purpose and the internal
structure of the organisation?
a Relationships: What type of relationship exists between individu-
als and different departments? What is the quality of relations? Is
there any interdependence?
Rewards: What is the formal rewarding system of the organisa-
tion? What do organisational members feel about the rewards and
punishments they get by the organisation?
Leadership: Do leaders define purposes and express them in their
programs?
Helpful mechanisms: Do these mechanisms help or hamper the
achievement of organisational objectives?
Thus, you can see that the Weisbord's model focuses on diagnostic
questions that relate with the internal issues within an organisation.
These questions analyse the fit between "what is there" and "what
should be there in the organisation.
Although the model provides insight to develop the structure of or-
ganisations, it suffers from certain limitations. Some of its limitations
are:
Oversimplification: This model is very simplified which is not
true in a complex organisational environment.
Insufficiency: This model is not complete. For instance, the model
does not deal with power issues nor it includes any competitive
aspects of the organisation.
O Inadequacy: The relationships between the boxes are not ex-
plained properly.
 NOT ES
4.2.2 MATRIX OR MIXED MODEL

The matrix organisational structure is one of the most complex or

ganisational structures. This structure is developed to complete a
particular project or a special task. Thus, in this structure, employ-
ees from different departments of the organisation temporarily work
together For example, the new product development project of an
organisation requires experts from different departments like fi
nance, product engineering, production, marketing, sales, research
and development, etc.
In the matrix structure, there is no particular direction of authority
and responsibility and a single individual may receive commands
from two different sources at the same time namely functional man-
ager and project manager. Functional managers are responsible for
heading departments such as engineering and marketing, while proj-
ect managers supervise employees working on specific projects in dif
ferent departments. The authority of functional manager flows down-
wards, whereas the authority of project managers flows horizontally
Thus, in the matrix structure, authority flows downwards and across.
In a nutshell, it can be said that the matrix structure links employees,
tasks, and technologies by combining two or more departments with-
n the organisation with the aim of leveraging the benefits of all the de-
partments. Citigroup is the example of the organisation that uses the
mixed model approach. Figure 4.3 and Figure 4.4 show the example of
the matrix organisational structure:

Strong Matrix
Chief
Executive

Functional Functional Functional Projects

Manager Manager Manageer Manageer
Project
Staff Staff Staff Manager

Project
Staff Staff Staff Manager

Project
Staff Staff Staff Manager
-- ---
Cross-functional project team and Project Manager

Figure 4.3: An Example of Matrix Model

(Source: http://www.metanaction.com/cms/sites/default/files/u3/Strong_matrix jpg)
80 MANAGEMENT THEORY AND PRACTICE

NO T E S

Marketin Operations Finance HRM

Marketing Operations Finance HR Manager

Manager Manager Manager

Project A Marketing Operations Finance Team HR Team (A)

(Team Leader) Team (A) Team (A) (A)

Project B Marketing Operations Finance Tearn HR Team B)

(Team Leader) Team (B) Team (B) (B)

Project C Marketingg Operations Finance Team HR Team (C)

(Team Leader) Team (C) Team (C) (C)

Project D Marketingg Operations Finance Tearn HR Team (D)

(Team Leader) Team (D) Team (D) (D)

Figure 4.4: An Example of Matrix Model

(Source: www.tutor2u.net/business/reference/matrix-structures)

The advantages of the matrix organisational structure are as follows:

Sound decisions: In the matrix organisational structure, decisions
are taken by experts. Thus, the decisions made in this structure
are always effective and valuable.
Development ofskills: The matrix organisational structure helps
in widening the skills of employees. For instance, marketing peo-
ple can learn about financing if they need to report to finance man-
agers.
Effective strategic planning: By delegating the tasks to project
managers, the top managers can easily concentrate on effective
strategic planning
Optimum utilisation of resources: The matrix organisational
structure makes optimum use of human and physical resoures
as there is no duplication of work. Thus, there is no wastage of
resources in the matrix organisation.
Team effort: In a matrix organisational structure, the employees
work as a team to accomplish a particular task or project. This fa
cilitates effective coordination among employees and motivates to
achieve the pre-defined goals.
The disadvantages of the matrix organisational structure are as follows:
Increase in workload: In a matrix organisational structure, man
agers and employees have to not oly do their regular work but
also manage other additional tasks like attending various meer
ings. This leads to high workload on managers and employees.
High operational cost: In a matrix organisational structure, costs
are incurred on paperwork, reports generation, meetings, etc. This
leads to an increase in operational costs of an organisation.
 NO T ES

O Absence of unity of command: There is no unity of command as

an employee faces multiple commands from different managers.
This may lead to chaos and ambiguity in roles and responsibilities.
a Complexity: In the matrix structure, the size of hierarchy is too
large. Thus, there are higher chances of chaos and confusion in
this structure.

4.2.3 OTHER ORGANISATIONAL MODELS

Apart from the matrix organisational structure, there are some other
types of organisational structures. However, the type of structure se-
lected by an organisation depends on its requirements, business size,
staff's strength, budget, etc. The following are some other types of or-
ganisational structures:
o Line organisational structure: In this structure, there is a single
line of command. This type of model is informal in nature and the
decision-making process is easy and simple. It is generally used
in small-scale organisations. The line organisational model is also
known as scalar, military, or vertical organisational model. Figure
4.5 shows an example of line organisational structure:

CEO

Production Marketing
Manager Manager

Foreman Foreman Sales Officer Sales Officer

(Fabrication) (Assembly) (A) (B)

Workers Workers Salespersons Salespersons

Figure 4.5: Example of Line Organisational Structure

Line and staff organisational structure: Under this structure,

the flow of information is from top to bottom in a line and staff
members support line managers. For example, a production man-
ager (line employee) is responsible for producing goods, while the
quality manager (staff member) checks and ensures the quality of
goods produced. This model is used in medium and large-scale
organisations. Figure 4.6 shows an example of line and staff organ-
isational structure:
82 MANAGEMENT THEORY AND PRACTICE

T
NO ES
Board of Director

President|

VP VP
Marketing VP Finance VP HRD-
Operations HRecruitrnent

Manager Manager Manager

Marketing Operations Finance Training

-Accounting
Market Production
Planning
tesearch Audit
Sales
Promotion Product Credit and
Development Collection
Deputy Deputy
Manager Manager
Marketing Operation

Legend: Line Authority

---- Staff Relationship

Figure 4.6: Example of Line and Staff Organisational Structure

Functional organisationalstructure: It is an organisational struc-
ture in which individuals with similar functional areas or skills
are grouped in separate units. These separate units are directly
controlled and coordinated by the top management of the organ-
isation. The functional organisational model is suitable for large-
scale organisations having a limited number of products. Figure
4.7 shows an example of functional organisational structure:

President

R&D Manager Finance Marketing Production

Manager Manager Manager

Design Accounting Sales Line

supervisors

Development Purchasing Customer Production

Service Teams

Testing Distribution

Figure 4.7: Example of Functional Organisational Structure

Divisional organisational structure: An organisational structure
in which an organisation is divided into different independent units
is called divisional organisational model. The division is made on
the basis of product, market, and geographic region of the organl
sation. For example, if the organisation has three different produet
lines, it would have separate divisions for these product lines. This
is one of the most widely used structures by organisations. Figure
4.8 shows an example of divisional organisational structure:
 NOT ES

CEO

Division Division Division

Product A Product B Product C

R&D R&D R&D

Marketing Marketing Marketing

Finance Finance Financee

Figure 4.8: Example of Divisional Organisational Structure

SELF ASSESSMENT QUESTIONSS

1.The 1logical arrangement of tasks, duties, and roles and
responsibilities with the aim to achieve the predetermined
objectives of the organisation is called:
a. Organisational matrix
b. Organisational structure
c. Functional structure
d. Divisional structure
2. involves dividing a large organisation into
smaller units (called departments) as per specialised functions.
3. The networking of individuals in an organisational structure
must lead to synergy." What is synergy?
4. Who developed the six-box model?
5. An organisational structure in which an organisation is
divided into different independent units is called

ACTIVITY
Analyse the organisational structure of any organisation in your vi-
Cinity. Make a note on its advantages and disadvantages.

4.3 E'TZIONI ORGANISATIONAL THEORY

Etzioni, an Israeli-American sociologist, developed an advanced ap-
roach to the structure of organisations that he called compliance
theory. As per this theory, organisations can be classified on the basis

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84 MANAGEMENT THEORY AND PRACTICE

NO T ES

of the degree of power exercised by organisational leaders in order to

direct employees. Etzioni, identified three types of power namely coer
cive power, utilitarian power, and normative power and related these
three power with three types of involvement which are alienative, cal.
culative, and moral. Involvement refers to the attitudes, ranks, and
roles of an organisation's employees. Table 4.1 shows three types of
organisational powers that are related to three types of involvement:

TABLE 4.1: ETZIONI ORGANISATIONAL THEORY

Types of power
Coercive Utilitarian Normative
power power power
Types of Alienative Combination
Involvement A
Calculative Combination
B
Moral Combination
C

Let us first discuss these three types of powers and involvement sep-
arately.
Coercive power: It involves the application of force and fear for
controlling the actions of lower level participants. Such type of
power is exercised at organisations such as prisons, mental asy-
lums, military training facilities, etc.
Utilitarian power: This power uses monetary or extrinsic rewards
to control the actions of lower level participants. The examples
of rewards are salary, merit pay, good working conditions, fringe
benefits, job security, etc. Various government agencies and trade
unions use this type of power
Normative power: This type of power uses intrinsic rewards to in
fluence the behaviour of individuals. Intrinsic rewards include in-
teresting work, identification of goals, and contribution to the so-
ciety. This type of power is used in organisations such as churches,
political organisations, professional associations, and universities.
All the three types of powers can help in achieving the cooperation
of participants. However, the effectiveness of such powers depends
on the involvement of participants. As per Lunenburg and Ornstein
(2012), the relative effectiveness of each power approach depends 0
the involvement of the organisation's participant. Let us discuss three
types of involvement as follows:
Alienative involvement: This involvement assigns a negative or
entation. The main goal is to adherence to the organisation's val-
 NO T ES
ues. For example, prisoners in jails, patients in mental asylums,
and personnel in military training facilities incline to be alienated
from their respective organisations.
a Calclative involvement: This involvement designates positive or
negative orientation of low intensity. Employees usually maximise
personal gain when an organisation employs calculative power
Moral involvement: It is a positive orientation of high intensity.
The employees are committed to the society when an organisation
employs moral power; for example, members of a political party.

RELATIONSHIP BETWEEN POWER AND INVOLVEMENT

As per Etzioni, when an organisation exercises coercive power, par-
ticipants often react in a hostile manner, which is alienative involve-
ment. On the other hand, utilitarian power results in calculative in-
volvement wherein participants are more interested in maximising
personal gain. Finally, normative power leads to moral involvement as
participants are committed to the socially beneficial features of their
organisations.

&SELF ASSESSMENTQUESTIONS
6. is a positive orientation of high intensity.
7. Which type of power uses intrinsic rewards to influence the
behaviour of individuals?
8. Uilitarian power involves the application of force and fear for
controlling the actions of lower level participants. (True/False)
9. refers to the attitudes, ranks, and roles of an
organisation's employees.

ACTIVITY
Perform research on coercive power exercised in prisons. Do you
think that it is an effective way of controlling inmates?

4.4
FACTORS INFLUENCING
ORGANISATIONAL STRUCTURE
Designing an organisational structure requires proper attention and
Supervision. This is because an inappropriate organisational struc-
ture may negatively affect the organisation's performance. There are
nany lactors that influence the strueture of an organisation. Some of
e important factors are shown in Figure 4.9;
NOT ES

Environment

Factors
influencing Organisational
TechnoloEy organisational Size
design

Organisation's
Strategy

Figure 4.9: Factors Influencing Organisational Structure

Let us discuss these factors in detail.
Environment: It is an aggregate of all the factors, conditions,
events, and influences that surround and affect the activities of an
organisation. The organisation should analyse the environment in
which it operates while designing its structure. This helps an or
ganisation to collect information on the latest trends and changes
in the market and develop its structure accordingly.
The environment of an organisation is divided into internal and
external environment. The internal environment includes all the
factors that are within the control of an organisation. It may be
called strengths and weaknesses of an organisation. The external
environment includes all the factors that are beyond the control
of an organisation. The external environment may either generate
opportunities or pose threats for an organisation. The four env
ronmental influences are discussed as follows:
Strengths: These are basically the internal attributes ofan
organisation that helps it to achieve its goals and objectives
Sound finances, low cost, flexibility, effective marketing, eft
cient administration, good relationships with suppliers, etc
are the strengths of an organisation.
 NOTES

Weaknesses: It is an inherent inadequacy that brings strategic

disadvantages for an organisation. Insufficient funds, late re
sponse to customer requirements, limited product range, inef-
ficient production, etc. are the weaknesses of an organisation,
Opportunities: These are external conditions that are favour
able for an organisation and may strengthen the position of the
organisation. Declining performance of competitors, access to
potential customers, leverage in political and legal standards,
development of new distribution channels are the examples of
opportunities.
Threats: These are the conditions that can cause trouble for
organisations. For instance, rise in raw material prices, high
rate of attrition, improved competitive products, etc.

REXHIBIT
SWOT Analysis
The Strengths, Weaknesses, Opportunities, and Threats (SWOT)
analysis matches organisation's strengths and weaknesses with the
opportunities and threats present in the environment. The SWOT
analysis is performed with the help of a four cell matrix, each cell
representing strengths, weaknesses, opportunities, and threats.
The following table shows the SWOT matrix of an organisation:

Strengths Weakness
list your 1i your:
advantages + disadvantages,
unique and low-cost limitations
resources +whatcould you
factors mean that you inprove
get the sale +factors lose you sales

SWOT

Opportunities Threats
list your Sist your
change to improve external troutble for the
performance busines
+Bo0d opportunities can ostacles dogou face
Ou spot what yourconpetitors
are doin

Suurce www.cantizet.c

Organisational size It is defined by a number af enplayees and

the businesses of an organisation The organisational structure is
argely iniuenced by the size of the organisation For ezample, in
88 MANAGEMENT THEORY AND PRACTICE

NOT ES
a small organisation comprising about 50 people, the line organi
sational structure is preferred. On the other hand, large-scale or-
ganisations generally prefer the matrix organisational structure.
Organisation's strategy: The strategy of the organisation should
be well fitted with the organisation's structure. For example, the
if
strategy of an organisation is to maximise overall productivity, all
the departments are required to meet the desired level of produc-
tivity. In such a case, the functional organisational structure
is fol-

lowed which divides an organisation into different departments

such as marketing, finance, and operations.
Technology: The advent of advanced technologies has automated
the different processes of organisations. This has created less
a
need for human resources. For example, ATM machines provide
banking facilities such as money deposit and withdrawal to people
struc-
without visiting banks. This has changed the organisational
tures of banks.

SELF ASSESSMENT QUESTIONS

10. Give examples of weaknesses of the organisation.
11. is defined by a number of employees and the
businesses of an organisation.
12. The advent of advanced technologies has automated the
different processes of organisations. (True/False)

ACTIVITY
Perform SWOT analysis of any organisation in your area. Make a
report on the strengths, weaknesses, opportunities, and threats ot
the organisation.

4.5 SUMMARY
O An organisational structure defines reporting relationships, em
ployees' tasks and responsibilities, communication channels in an
organisation,
oThe six box organisational model and matrix model are the two
to0
important models which are used commonly by organisations
develop their structure.
Other types of organisational models include line organisational
structure, line and staff organisational structure, functional orga
isational structure, and divisional organisational structure.
As per the Etzioni organisational theory, organisations use thre
different powers for directing employees that are coercive powe

NMIMS Global Access-School for Continuing Education

 STRUCTURE OF AN ORGANISATION 89

NOT ES

utilitarian power and normative power:. These powers are related

to three types of involvement, namely alienative, calculative, and
moral.
a The structure of an organisation is influenced by various factors
such as organisation's strategy, organisational size, technology,
and environment.

KEY WORDS
a Authority: Control over organisational processes and subordi-
nates within the span of a manager.
o Coercion: An act of making another party take involuntary
actions.
Environment: Surroundings, influences, or circumstances, un-
der which an individual/organisation exists.
Power: Legitimate and illegitimate control exerted by a person
on others to achieve personal goals.
Responsibility: The state of being answerable to a superior.
Supervision: An act of directing somebody.

4.6 DESCRIPTIVE QUESTIONS

1. Define organisational structure. Explain its characteristies and
principles.
2. Explain the matrix model along with its advantages and
disadvantages.
3. Discuss the ETZIONI organisational theory.
4. Elaborate on the factors affecting organisational strueture.

4.7 ANSWERSAND HINTS

ANSWERS FOR SELF ASSESSMENT QUESTIONS

Topic Q. No. Answers

Concept of Organisational 1 b. Organisational structure
Structure
2 Departmentation
3. Synergy implies that the ef
forts of all individuals should
result in more than the sum
of individual output.
NO T ES

Topic Q. No. Answers

4. Marvin Weisbord
5. Divisional organisational
model
Etzioni Organisational 6. Moral involvement
Theory
7. Normative power
8. True
9 Involvement
Factors Influencing 10 Insufficient funds, late
Organisational Structure response to customer re-
quirements, limited product
range, inefficient production,
etc. are the weaknesses of an
organisation.
11. Organisational size
12. True

HINTS FOR DESCRIPTIVE QUESTIONS

1. Aframework in which tasks are allocated to individuals to achieve
organisational goals and objectives is called organisational
structure. Refer to Section 4.4 Concept of Orgaisational1
Structure.
2. The matrix organisational structure is one where there are
multiple reporting lines. Refer to Section 4.4 Concept of
Organisational Structure.
3. The ETZIONI organisational theory is an advanced approach
to the structure of organisations. Refer to Section 4.5 ETZIONI
Organisational Theory.
4. Organisation's strategy, organizational size, technology, and
environment are the factors that influence an organisational
structure. Refer to Section 4.6 Factors Influencing
Organisational Structure.

4.8 SUGGESTED READINGS &REFERENCES

SUGGESTED READINGS
Baligh, H. (2014). Organization Structure & Design (lst ed.). Springer
Hannagan, T., & Bennett, R. (1995). Management (1st ed.). London:
Pitman.
McFarland, D. (1974). Management: principles and practices (1st
ed.). New York: Macmillan
 NO TES
E-REFERENCES

a Cliffsnotes.com. (2014). Factors Affecting Organizational Design.

Retrieved 0 May 2014, Irom http://www.cliffsnotes.com/more-sub-
jects/principles-of-management/organizational-design-and-struc-
ture/factors-atfecting-organizational-design
a Global lntegration,. (2014). What is a matrix organization s c-
ture? A detinition. Ketrieved 30 May 2014, from http://www.glob-
al-integration.com/matrix-management/matrix-structure/ma-
trix-organization-structure/
Reuters,. (2014). Citi Announces New Corporate Organization-
al Structure and Leadership Team. Retrieved 30 May 2014, from
http://www.reuters.com/article/2008/03/31/idUS109135+31-Mar-
2008+BW20080331