Nature & Structure of

organisations

Presented by V.Bonomaully
What is an organisation?
An organisation can be defined as: “A social arrangement which pursues
collective goals, which controls its own performance, and which has a boundary
separating it from its environment.”

Business organisations are organisations that focus either on making profits (like
a conventional commercial company) or on improving society (like a charity).

Presented
PresentedbybyV.Bonomaully
V.Bonomaully
Types of organisation
● Commercial organisations : profit-seeking. They can be sole traders,
partnerships, limited liability partnerships and limited companies.

● Not-for-profit organisation : charitable organisations.

● Public sector organisations : owned by the state either at a national level or at

a local level.

● Non-governmental organisations : not-for-profit organisations but with an

international brief.

Presented
PresentedbybyV.Bonomaully
V.Bonomaully
Organisation structure
Organization structure is a formal system of relationships that determines lines of
authority (who reports to whom) and the tasks assigned to individuals and units
(who does what task and with which department).

The vertical dimension of organization structure indicates who has the authority to
make decisions and who is expected to supervise which subordinates.

The horizontal dimension is the basis for dividing work into specific jobs and
tasks and assigning those jobs into units such as departments or teams.

Presented
PresentedbybyV.Bonomaully
V.Bonomaully
Vertical dimension

● Unity of command : a subordinate should have only one direct supervisor.

● Authority, Responsibility, and Accountability : Authority is the formal right of a

manager to make decisions, give orders, and expect those orders to be
carried out. Responsibility is the duty to perform assigned tasks.

● Span of Control : This is called the span of control, and it determines the
number of managers and number of levels of management in an
organization.

● Centralization and Decentralization : related to the degree of concentration of

decision authority at various levels of the organization.

Presented
PresentedbybyV.Bonomaully
V.Bonomaully
Horizontal dimension
The horizontal basis for organizing jobs into units in an organization is called

departmentalization.

● Functional Structure
● Divisional Structure
● Matrix Structure

Presented
PresentedbybyV.Bonomaully
V.Bonomaully
Functional structure
A functional structure places similar jobs into department, for ex, engineering,
production, marketing, and finance. The president integrates the activities of
these departments so that each department’s efforts are aligned with
organizational goals and objectives.

The functional approach works best in small to medium-sized companies

operating in somewhat stable business environments without a great deal of
change and uncertainty.

Presented by V.Bonomaully
Advantages and Disadvantages of Functional
structure
The functional structure has several advantages.

● Decision authority is centralized at the top of the organization hierarchy.

● Career paths foster professional identity with the business function.
● High degree of efficiency.
● Development of specialized expertise in a functional area of the business,

The disadvantages of the functional departmental structure

● communication barriers and conflicts between functional departments.
● When employees are assigned to functional departments, they tend to
identify with the functional departmental goals rather than with
organizational goals or customer needs. This could lead to departmental
conflict.
Presented by V.Bonomaully
Divisional structure
Also called the product approach, organizes employees into units based on
common products, services, or markets.

The divisional approach is used when a company produces many products or

provides services to different types of markets, such as regional, domestic, and
international markets, that require specialized knowledge.

In the divisional approach key functional

activities are present in each division and
are coordinated by a general manager
responsible for generating divisional profits.

Presented by V.Bonomaully
Geographic- Based Division
A variation of the product-based divisional structure organizes divisions by
geographic region. Geographic-based divisions allow an organization to focus on
customer needs that may vary by geographic region or market.

In this approach to organizing, the functional business activities are coordinated

by a division manager, who is responsible for products or services provided to a
specific area.

Presented by V.Bonomaully
Customer-Based Division
Another variation of the product-based divisional structure organizes divisions by
particular types of customers or clients. Customer-based divisions allow an
organization to focus on customer needs within a basic functional structure. With
customer divisions, each department contains employees who perform functional
tasks for a specific type of customer.

The division manager coordinates

the business activities for a specific
type of customer.

Presented by V.Bonomaully
Conglomerate
The conglomerate is another variation of the product-based divisional structure
and is made up of a set of unrelated businesses.

Each business is run independently from the other businesses by a general

manager who has profit and loss responsibility.

The executives in the company headquarters

oversee all the businesses and
make decisions concerning allocating
corporate resources to businesses and
decisions related to buying and
selling businesses.

Presented by V.Bonomaully
Advantages & Disadvantages of Divisional
Structure
The divisional approach has several advantages, including:

● Coordination among different business functions.

● Improved and speedier service.
● Accountability for performance.
● Development of general manager and executive skills.

The disadvantages of the divisional approach include:

● Duplication of resources by two or more departments.
● Reduced specialization in occupation skills.
● Competition among divisions.

Presented
PresentedbybyV.Bonomaully
V.Bonomaully
Matrix Structure
The matrix approach superimposes a divisional structure over a functional
structure in order to combine the efficiency of the functional approach with the
flexibility and responsiveness to change
of the divisional approach.

Each employee in a matrix unit reports to

two bosses—a functional manager and a
product or project manager. This means
that there are dual lines of authority in the
matrix organization.

Presented by V.Bonomaully
Advantages & Disadvantages of Matrix Structure
The advantages of the matrix approach include:

● Efficient utilization of scarce, expensive specialists.

● Flexibility that facilitates starting new projects and ventures quickly
● Development of cross-functional skills by employees.
● Increased employee involvement in management decisions

The disadvantages of the matrix form include:

● Employee frustration and confusion as a result of the dual chain of command.

● Conflict between product and functional managers over deadlines and
priorities
● Employees who have two bosses with different priorities may feel stressed
and powerless to please both.
● Too much time spent on coordinating decisions in meetings
Presented by V.Bonomaully
Recent trends
● Downsizing - shrinking the business - to keep costs down and, perhaps, to
gain efficiency through outsourcing.
● Delayering, - moving towards wider, flatter organisations, both to save costs
and to achieve flexibility.
● Outsourcing - getting an outside firm to perform some of your operations.
These operations will generally be the support operations
● Offshoring - moving part of the business abroad usually to make use of
cheaper labour rates found there.
● Shared services - the consolidation of business operations that are used by
several parts of the same business. For example, IT and accounting could be
located in one city and country to service the needs of an international
organisation.

Presented
PresentedbybyV.Bonomaully
V.Bonomaully
Coordinating functions and divisions
● Meetings
● Organisation-wide Reward Systems
● Task Forces and Teams
● Liaison Roles
● Integrating manager

Presented
PresentedbybyV.Bonomaully
V.Bonomaully