Forms of Organisation

Introduction:

Functional organisation is one of the basic forms of organizational structures. An organisation

structure gets developed through the process of organizing. Organizing is one of the functions
of management which follows planning. Organizing provides structure to the organisation.
According to Chester Barnard, “Organizing is a function by which the concern is able to
define the role positions, the jobs related and the co-ordination between authority and
responsibility.

The term 'organization' can be used in two ways :

Organization as a process : Organisation as a process refers to identifying the activities to

be performed for accomplishment of objectives, Grouping similar activities, Assigning
authority and responsibility , establishing accountability, and Coordinating the efforts so as
to achieve the business objectives. .
Organization as a structure: Organisation can also be defined as the structure of formal
relationships. It is a network of authority & responsibility relationships. Organisation brings
together people, functions and physical facilities. It determines the flow of communication
and flow of authority and responsibility in the organisation.

The organisation structure establishes relationships among various job positions in the
organization, It emphasize not on the fact that who will perform the job but establishes
relationship among various posts in the organisation.

An organizational structure can be broadly classified into both formal and informal structures.
Formal organisation structure is designed deliberately by the executives so as to achieve the
organizational goals. And an informal organisation structure gets developed within the formal
structure on its own through sentiments, interactions and other interrelated attributes of the
people.

Formal organisation structure can further be classified into three basic forms:

1. Line organisation
2. Line and staff organisation
3. Functional organisation
 Objectives of Organizing
some of the objectives of organizing:

1. Effective management: Organisation structure identifies various activities to be

performed and establishes relationship among various activities. The authority and
responsibilities attached to various posts are also defined. It also determines the flow of
communication within the organisation. Thus it provides a structure or the framework for
effective management.

2. Efficiency: Organisation clearly defines the activities to be performed at each level.

This reduces confusion in the roles and responsibilities and thus brings efficiency in the
operations.
3. Sustained growth and diversification: Organization plays an important role in growth
of the enterprise by clarifying the role positions to the managers. It coordinates the activities
and establishes authority and responsibility. It is organisation structure which facilitates
division of work and thus leads to growth and diversification.
4. Well defined jobs – The role of Organising is to define the various positions in the
organisation and to establish relationship among them. It emphasise on posts rather than on
people. Organising clarifies the role of every person in the organisation.
5. Clarifies authority - Organizational structure helps in clarifying the role positions to
every manager and also the authority attached to his position so that he could perform his role
effectively. The authority is delegated keeping in view the responsibility so that a balance
between authority and responsibility is maintained. Well defined jobs and responsibilities
attached helps in bringing efficiency and thus increase productivity.
6. Co-ordination - Organization co-ordinates different departments of the enterprise. It
establishes relationships among positions and ensure mutual co-operation . Harmony of work
is brought by higher level managers exercising their authority over interconnected activities
of lower level manager.
7. Effective administration - The organization structure is helpful in defining the jobs
positions. The roles to be performed by different managers are clarified. Specialization is
achieved through division of work. This all leads to efficient and effective administration.

8. Scope for new changes - Where the roles and activities to be performed are clear and
every person gets independence in his working, this provides enough space to a manager to
develop his talents and flourish his knowledge. A manager gets ready for taking independent
decisions which can be a road or path to adoption of new techniques of production. This
scope for bringing new changes into the running of an enterprise is possible

4. PRINCIPLES OF ORGANISATION
Organisation structure provides a base to the organisation. Organizational structure varies
according to a firm’s size, mission, objectives and environment in which firm operates. For
proper designing of organization structure, the following principles should be considered:

(i) Division of work : Division of work means dividing the work into smaller tasks and
assigning each task to an employee. These tasks when repeated again and again will lead to
efficiency and leads to specialization of the worker in that job. In this way, efficient and
higher production could be achieved . It also reduces wastage and leads to decrease in costs.
Division of work is considered necessary for efficiency. An organisation structure should be
so designed so that it permits division of work.

(ii) Objectives of Organisation: An organization is established for the attainment of

certain objectives. The organizational structure varies according to the objectives that have to
be achieved. The authority, responsibility and accountability are also assigned accordingly.

(iii) Span of management : Span of management or span of control also refers to the
number of employees under the direct supervision of the superior. Organisation structure also
depends on this span of control. Span of control itself depends upon a number of factors.
e.g it depend upon the ability of the superior and nature of his work. Larger the span of
control is more difficult to supervise and coordinate. It depends upon the ability of the
 manger and the nature of his work. Span of control determines the number of levels in the
organisation. The larger the span of control, the more employees under the managers direct
supervision and less is the managerial levels and vice versa. In the figure 1 given below, the
span of control is wide. A manager here supervise seven employees under him directly and
hence one level of management hierarchy but in fig two, the span of control is narrow. There
are two employees under manager’s direct supervision who then supervise three employees
each and hence two levels of hierarchy. So span of control directly influenced organisation
structure.

Wide Span( one level of management) form flat structure

Narrow Span( two levels of management) form Tall structure

(iv) Unity of command : Unity of command means that an employee receives instructions
from only one boss. An employee cannot serve two masters effectively. There will be
confusion in his mind as to whom he should obey. Organization structure should ensure that
the principal of unity of command is never sacrificed otherwise it will lead to
mismanagement, chaos conflicts in the organisation.

(v) Flexibility : Organizational structure should be flexible enough so that necessary

changes could be incorporated as per the changes in external environment. Also it should
permit enough scope for expansion as the need arises.

(vi) Management by exception : Management by exception refers to the fact that the
managers at top level handle the exceptional matters only and not the daily chores so that
their expertise and knowledge are not wasted in the routine matters. Routine problems should
be passed on to lower levels and resolved there It leads to organizational effectiveness. The
 principle of exception is thus of significant practical utility and applies to all levels in the
organization structure.

(vii) Decentralization : Decentralization is of great significance to big organizations.

Decentralization means delegation of authority to the lowest level in the organisation. It is
giving authority to the departments to work on their own within the framework of the
objectives without frequent interruptions from the top management. Decentralization is
significantly important for big organizations since all the work cannot be handled by the top
management themselves. An important decision here is to determine how much
decentralization should be there and on what matters.

(viii) Authority and Responsibility: Authority empowers an individual to take decisions

and to command and to exercise control over his subordinates for execution of policies and
programmes. Responsibility is the duty to perform an assigned task. There should be a
balance of authority and responsibility otherwise, the subordinates cannot discharge their
responsibility properly.
(ix) Scalar chain: Scalar Chain means a stepwise chain of superior subordinate
relationship which starts from top management and ends at supervisory levels. A scalar chain
has been shown in figure below. It links all the managerial positions from top to bottom.
Authority decreases as one goes down in the chain. Scalar chain of command suggests that
there should be clearly defined and uninterrupted chain of authority from top to bottom. It not
only promotes smooth communication and gives confidence to managers for making
decisions based on their authority.
5. Forms of Organisation Structure

Organization creates structural relationship among different departments and the individuals
working there for the accomplishment of desired goals. The establishment of formal
relationships among the individuals working in the organization is very important to make
clear the lines of authority in the organization and to coordinate the efforts of different
individuals in an efficient manner. In order to organize the efforts of individuals, any of the
following types of organization structures may be set up :
(i) Line organization,
(ii)Line and staff organization (iii) Functional organization.
The main focus of this chapter is to study the functional organisation. But before discussing
the functional organisation it is important to study line and line and staff organisation as it

comprise s of line authority found in line organization and staff authority characterized
by line and staff organization and the third form of authority known as functional authority.

5.1. Line Organization

Line organisation is also known as Military Organisation. Line organization is the
simplest and the oldest form of organisation structure suitable for small organisation. It
follows a Scalar Chain of command. In this authority flows directly from top to bottom
through various managerial positions. In this type of organization, the line of command
flows on an even basis without any gaps in communication. The top management has
complete control over the subordinates through the chain of command. The line
organisation has been depicted in the diagram below. At the top most level, there is chief
executive; followed by departmental heads, after that there are managers under the
departmental heads.
 Authority flows down the line from chief executive to the last level in the organisation
Each employee can exercise his authority indendently without any interference.

Features of Line Organization

1. It is the most simple form of organization.

2. Authority flows from top to bottom in the organisation.
3. Specialized services donot exist in this form organization.
4. Line officers have complete authority to do their respective functions. They can
independently take decisions in their areas.
5. Unity of command is observed in this organisation structure.
6. Departmentalization may exist in this form of organisation depending upon the
organizational needs.

Merits of Line Organization

1. Simplest- It is the most simple and oldest form of organisation..
2. Unity of Command- Unity of command is observed in this organisation structure.
Each subordinate receives instructions from only one superior. Unity of command
helps in establishing accountability.
3. Better control- Unity of Command ensures better control. Also, line managers have
full authority to discharge their functions. So they can perform their responsibilities
efficiently.
 4. Fixed & independent authority & responsibility- In this type of organization, every
line executive has got fixed authority, and fixed responsibility attached to every
authority.
5. Prompt decision- In line organisation, prompt decisions could be taken due to factor
of unity of command.
6. No conflict: In line organistiin only form of authority exists..e line managers. All
decisions are taken by line managers independently without any interference. So there
is no conflict of authority as is the case in the line and staff organisation.

Demerits of Line Organization

1. Lack of specialization- In a line organization all decisions are taken by line managers
themselves. No specialist opinion is taken to guide the line managers.
2. Inadequate communication- Inadequate communication may arise in line
organisation since subordinates may hesitate to communicate upwards because of their
authority relationships.
3. Authority leadership- The line officials have independent authority which could be
misused by them. Line managers may become autocratic.

5.2. Line and Staff Organization

In Line and staff organization two types of authority coexist: line authority and staff
authority. Line and staff organisation is an extension of line organisation where along with
line managers staff manages also exist. Staff mangers are specialists who play an advisory
role for the line managers, but the ultimate authority vests with the line managers.
Whether they will implement the advice of the staff specialists or not is at their discretion.
The staff authority has been depicted by dotted lines. eg the assistant to chief Executive
is a staff official. Line and staff organization structure is suitable for medium and
large-sized firms.
Features of Line and Staff Organization
1. There are two types of authorities: line managers and staff managers.
2. Line and Staff Organization is more complex than line Organization.
3. Staff managers are specialists in their areas and thus efficiency can be achieved .
4. The ultimate authority remains with the line executive and staff executives only play
an advisory role.
5. Suitable for medium to large organisations.

Merits of Line and Staff Organization

1. Sharing of workload- The workload of the line executives gets shared as the advisory
service can be provided by the staff expert. Thus, a line executive can concentrate
only on the execution of plans.
2. Expert advice- The staff managers are expert in their field and can offer expert advice
to the line executive at the time of need which leads to efficiency.
3. Specialization- Line executives can concentrate on plan execution and staff
executives can play advisory role. Thus the benefits of specialization get available to
enterprise.
4. Benefits of Research and Development- Due to the presence of staff experts, the
work load of the executives gets divided. So they get more time and can hence can
concentrate on bringing innovations and go for research work in those areas.
 5. Balanced decisions- Balanced decisions in line and staff organisation are possible as
the decisions are implemented after taking the expert advice, the line managers can
deliberate upon the advice offered to them by the staff specialists which automatically
ends up in balanced decision.

Demerits of Line and Staff Organization

1. Lack of unity of command: - In a line and staff organization, the workers get
directions from both line and staff experts , thus the principle of unity of command
gets disobeyed.
2. Lack of sound advice- The ultimate authority rests with the line managers. The staff
managers are only advisors. The staff specialist may become careless and my provide
wrong suggestions which may adversely affect the enterprise.
3. Line and staff conflicts- Line and staff organisations are characterized by conflicts
among the line and the staff authority. Both try to prove themselves superior over the
other. This leads to lack of coordination and hampers a concern’s working.
4. Costly- In line and staff concern, staff managers are specialists. High remuneration
need to be paid to them. This proves to be costly for a concern.
5. Lack of motivation for staff specialists - The staff experts only play advisory role to
the line managers. They have no authority to get their decision implemented.
Sometimes, due to personality conflict among them, the line managers may not
implement their advice even if its valuable. This may demotivate the staff experts.
6. Staff managers steals the credit- In a line and staff concern, the higher returns are
considered to be a result of staff managers advice. This distresses the line officials and
affects the organisations working.

5.3. Functional Organization

The concept of Functional organization was suggested by F.W. Taylor. Functional

organizational structure is a complex organisation structure where three types of
authorities exist. Line authority, staff authority and a third form of authority known as
functional authority. This is an extension of line and staff organisation. The functional
authority of functional managers is similar to line authority of line managers but is
restricted to few specialized activities only. The functional authority has been depicted
 by the bold dotted lines. Functional organisation structure overcomes the problem of the
line and staff organisation where the staff managers were given no authority to
implement their advice or suggestions and the line managers had complete authority over
the execution of work. This led to distress in the staff specialists. In functional
organisation, staff experts are also given line authority but in a limited way. Thus, the
expertise of staff managers could be utilized to a greater extent for the benefit of the
organisation. But the biggest flaw with the functional organisation is that the unity of
command is totally disobeyed. An employee receives instructions from three authorities
which makes this structure ineffective.

Features of Functional Organization

1. Complex form of organization.
2. Three authorities exist- Line, staff and functional authority .
3. Principle of unity of command is disobeyed as employees receive instructions from
three types of authorities: line, staff and functional authority.
4. More importance is given to staff experts as along with staff authority they also enjoy
line authority though restricted to few activities only.

Merits of Functional Organization

1. Specialization- The extent of specialization is highest in functional organisation.
2. Effective Control- Management control is simplified as the mental functions are
separated from manual functions. Checks and balances keep the authority within
certain limits. Specialists may be asked to judge the performance of various sections.
3. Efficiency- In functional organizations staff expert are given authority though in a
limited way, a staff expert can utilize his expertise for efficient decision making.
Demerits of Functional Organization

1. No unity of command- Employees in functional organisation receives order and

instructions from three authorities. Thus unity of command gets disobeyed.
2. Lack of Co-ordination- Disciplinary control becomes weak as a worker is
commanded not by one person but a large number of people. Thus, there is no unity of
command and hence no coordination could be achieved.
3. Difficulty in fixing responsibility- Because of lack of unity of command, it gets
difficult to fix responsibility .of the workers and hence they can easily shirk away
from their work.
4. Conflicts- Functional organisations are characterised by conflicts among the line
authority and the line authority of the staff experts. They may think themselves
superior to each other and may indulge in leg pulling. Moreover, staff exerts get more
importance in functional organisation . This may distress line authorities.
5. Costly- Maintenance of specialist’s staff is expensive for a concern.