Fundamentals of

Organizational Structure

Dr. Koustab Ghosh

Indian Institute of Management Rohtak
(Circulation Restricted)

Dr. Koustab Ghosh, IIM Rohtak

Basic Structural Components

Unity of Command Each employee should have only
one boss with no other conflicting lines of command.

Unity of Direction - People engaged in the same kind of

activities must have the same objectives in a single plan.

Centralization / Decentralization - This is a matter of

degree involved in the process of organizational decision
making.
Dr. Koustab Ghosh, IIM Rohtak

Basic Structural Components

Scalar Chain (Line of Authority) - Scalar chain refers
to the number of levels in the hierarchy from the ultimate
authority to the lowest level in the organization.

Span of Control How many employees (subordinates)

are directly reporting to a particular boss (superior)?

Dr. Koustab Ghosh, IIM Rohtak

Structural Choices
What are the different types / forms / variations
of organizational structure?
What are the criteria based on which a particular
structure is adopted by the organization?
How can we determine that a particular type of
structure

is

not

functioning

well

organization (Structural Deficiency)?

Dr. Koustab Ghosh, IIM Rohtak

for

an

Geographic Structure
Observations
More power to regional / country based
subsidiaries
Responsive to local needs and requirements
Self-contained independent units
High cost of coordination
Loss of interdependence
Dr. Koustab Ghosh, IIM Rohtak

Product Divisional Structure

Observations
Empowered product groups / verticals
High degree of customization and specialization
Rivalry among verticals
Competition over shared facilities / resources

Dr. Koustab Ghosh, IIM Rohtak

Matrix Structure
Assumptions
Multiple product lines exist
Compulsion / pressure to share resources
across product lines
High simultaneous requirement for technical /
domain knowledge and frequent new product
development
Dr. Koustab Ghosh, IIM Rohtak

Matrix Structure
Observations
Dual authority
Balance of power
Should not be continued for long time (project
based / product based)

Dr. Koustab Ghosh, IIM Rohtak

Global Matrix Structure

Observations
Product

standardization

versus

geographic

localization
Coordination of resources and sharing of
knowledge
Products,

geographies,

and

aligned
Dr. Koustab Ghosh, IIM Rohtak

functions

are

Coordination Mechanisms
Top Management Teams (TMT) / Country
Management Teams (CMT)
Headquarters Planning
Expanded Coordination Roles

Dr. Koustab Ghosh, IIM Rohtak

How can the different units within the

organization be connected?
Sharing of best practices / knowledge about
products or markets in same or similar
geographic regions
Sharing of physical assets / resources for
economies of scale
Free flow of products / services from one unit to
another
Dr. Koustab Ghosh, IIM Rohtak