OB & HRM UNIT 9 1

Fundamentals of Organization Structure

Unit – 9
Prof. Nidhi Shukla

OB & HRM UNIT 9 2

Departmental grouping options

Multi-focused
Functional Divisional
grouping

Virtual
Horizontal
network
grouping
grouping
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 Functional Grouping
• In a functional organization structure, the entire organization is
divided into smaller groups or departments based on
specialized functions.
• An organization is organized into production, marketing,
HR,accounting
• Functional organizations contain specialized units that report
to a single authority, usually called top management.

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Functional structure
Disadvanta
Advantages
ge

Creates rigid
Creates formal
specialist communicatio
n

Coordination
Clear path to
becomes an
employees
issue

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 Divisional Structure
• A divisional structure groups employees into
units by products,service,customer,or
geographical market area.
• McDonald’s Corporation, one of the leading
fast-food chains in the world is an ideal
example of a divisional organizational
structure.

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 Disadvantag
Advantages
es

May increase cost

Coordination among
as they are doing
units
the same job

Provides clear
responsibility for all
activities related to
a product ,but with
duplication

Marketing experts
can bring new ideas
for different areas
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Geographical Organizations
Geographical organizational structure may appeal to large entities or
corporations for a variety of reasons. Large corporations may choose
a geographical organizational structure to allow them to better serve
the specific needs or desires of distinct groups. They may create
geographic decisions based on different:
• Cultures
• Customer preferences
• Languages
• Rules

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Matrix Structure
• The matrix structure combines the functional and product
structures .
• Found in advertising agencies, aerospace firms ,R&D labs,
construction companies, hospitals ,government agencies
,universities, management consulting firms .
• IBM, BMW, P&G , Zee Entertainment ,TCS

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Advantages of Matrix structure
• Equipment is shared for projects, resources are utilized to
their maximum capacity. Facilities, machinery, and human
resources are also shared between different projects.
• Experts are easily available for review because he/she is
available for several projects at one time
• The flow of information is up and across the company.
• Develops self-management skills as an employee.
• Develops economies of scale

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Challenges for Matrix organizations
• In matrix organization structure, ambiguity could come in, if
(employees) are not sure which manager to report to. This also
means that employees might be confused about their role and
responsibility.
Apart from that, in the matrix organizational structure it becomes
relatively difficult for the organization to gauge the employee’s
performance on a particular project.
• The matrix structure turns out to be a bit more expensive to the
organization than the traditional one, because it employs more
managers.
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Matrix organization

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Examples of geographical organizations

STARBUCKS
• Starbucks, one of the leading coffee chains is
another great example of matrix
organization.
• It has Functional Hierarchy
• The corporate headquarters has several
functional divisions, such as finance,
marketing and human resources.
• Geographic And Product-Based Divisions
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Virtual Networks and Outsourcing

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Virtual Networks and Outsourcing
• Nike has the challenge for reducing unit
costs. Virtual Network Structure would help
the firm reducing unit costs. This occurs when
Nike takes the advantages of the strategic
partners cheap labor costs in the developing
countries.
• This is one key area that Nike cannot achieve
in the USA as the labor costs in the developed
country are much higher than those low-cost
production facilities owned by the strategic
partners in the developing countries.
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Factors affecting organization structure
• Organization size :The larger an organization becomes, the more
complicated its structure. When an organization is small — such as
a single retail store, a two‐person consulting firm, or a restaurant
— its structure can be simple.
• Strategy determines a course of action to direct various
organizational activities. It makes plans to co-ordinate human and
physical resources to work towards a common objective.
Strategies to diversify product lines or markets require
decentralized transition as decision-making is done at wider level
and strategies for organizations working in stable environment.

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 Factors affecting organization structure
• Technology
In case of mass production technology, mechanistic organization structure is
more appropriate, while in case of continuous production or small scale
production technology, the appropriate from is organic structure.
• People
Organization structure defines work, groups it into departments and
appoints people to run those departments. People at different jobs must
possess the skill, knowledge and efficiency to accomplish the related tasks.

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Factors affecting organization structure

• Environment:
Organizations must adapt to the environment, respond to incremental
opportunities and satisfy various external parties such as customers,
suppliers, layout unions etc.
• Managerial perceptions:
Organizations where top managers perceive their subordinated as active,
dynamic and talented entrepreneurs, prefer organic form of structure, If
they hold negative opinion about their subordinates, they prefer
mechanistic organization structure.

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OB & HRM UNIT 9 28
OD : Organizational Development
Unit – 9
Prof. Nidhi Shukla

OB & HRM UNIT 9 29

OD : Organizational Development

OB & HRM UNIT 9 30

OD Interventions
• Career planning and development
• Management by Objective (MBO)
• Process consultation
• Team building
• Sensitivity training
• Managerial grid
• Job redesigning
• Organizational design

OB & HRM UNIT 9 31

Organizational Effectiveness

OB & HRM UNIT 9 32

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