Lesson 4

ORGANIZATIONAL
STRUCTURES
 Definition
ORGANIZATIONAL STRUCTURE
Is defined as the system of how tasks are to be allocated, who
reports to whom, who has the authority, and what are the
coordinating mechanisms and interaction patterns to ensure that
work is done.

It creates order by arranging the various parts of the organization,

the workflows, the reporting relationships, and the communication
channels.

It promotes coordination of activities and performance results to

achieve the organizational strategies and goals.
 Types of Organizational Structures
1. FUNCTIONAL STRUCTURE
2. DIVISIONAL STRUCTURE
3. MATRIX STRUCTURE
4. TEAM STRUCTURE
5. NETWORK STRUCTURE
6. VIRTUAL STRUCTURE
 1. FUNCTIONAL STRUCTURE
 Members with similar skills are grouped together into
functional departments, such as production, marketing,
finance, and human resources.
 This
simple structure is commonly found in smaller business
organizations that have one or a few products or services
 Alsocommonly described as FLAT ORGANIZATION, with
everyone reporting to one senior executive who dominates
the decision-making within the organization
 There are no several layers of hierarchy of management
levels.
 1. FUNCTIONAL STRUCTURE
ADVANTAGES
 The senior executive could readily obtain information and act
rapidly when required
 It requires little cost to maintain.
 Members can readily see their contribution to the entire
organization
 Members who are working based on their expertise will be
developed further in their specialized fields.
 Promotes efficient use of resources because of the
specialization of tasks
 1. FUNCTIONAL STRUCTURE
DISADVANTAGES
 Dueto the highly specialized tasks among members, there could be
some difficulties for implementing organization-wide programs, such as
innovation and cost reduction.
 Problems in cooperation and coordination may crop up among different
functional departments.
 Employeesmay develop an extreme attachment to their own group
which may create “department attitude” or “functional silos” that
impede coordination and communication within the organization
 Abuse of power when too much power is concentrated in the central
figure of authority or senior executive lacks check and balance that can
negatively affect the organization’s effectiveness and long-term survival
 2. DIVISIONAL STRUCTURE
 Members of the organization who are grouped together work
on the same product, service, process, or serve similar
customers.
 This
is common to complex organizations that have diverse
operations covering many products, customers, processes,
and territories.
 2. DIVISIONAL STRUCTURE
Different types of divisional structures:
1. Product Structure – grouping of members and jobs is by
product or service.
2. Geographical Structure – grouping of members and jobs is
by location or activity
3. Customer Structure – grouping of members and jobs is by
customers served
4. Process Structure – grouping of members and jobs is by
related work process
 2. DIVISIONAL STRUCTURE
ADVANTAGES
 Itfacilitates diversification. The organization can expand
further into multiproduct and multimarket business centers.
 Itmay discourage the “functional silo” problem that may be
found in functional structure.
 The power of the top management is reduce since decision-
making and control is distributed among the heads of the
divisions or middle management.
 2. DIVISIONAL STRUCTURE
DISADVANTAGES
 Itmay increase costs due to the duplication of the functional
departments within each division.
 Theremay also be rivalries among the different divisions as they
compete for attention and resources from top management
A potential source of conflict between the division and the central
headquarters in terms of degree of decision-making. Division
managers, while operating as autonomous structures, may be
constrained by certain rigid guidelines or policies of the central
headquarters
 Lack of flexibility in job transfers due to wide differences in
operating systems and culture in a divisional structure.
 3. MATRIX STRUCTURE
 Combines the functional and divisional structures.
 Specialists
from specific departments are assigned to work on
one or more interdisciplinary teams.
 Workersbelong to at least two groups at the same time;
functional department and product team.
 Head of product team is a project leader while the head of
the functional department is the functional department
manager.
 Every employee has two bosses.
 3. MATRIX STRUCTURE
A strong matrix structure suggests that the authority and
power of a project leader is more powerful than divisional
manager in terms of power.
A weak matric structure suggests that the authority and
power of a divisional manager is more powerful than a project
leader.
 3. MATRIX STRUCTURE
ADVANTAGES
 Itpromotes the development of teams within projects or
programs.
 Itfacilitates coordination when the organization has several
projects and interdependent activities.
 The direct and frequent contact between the different specialists
allows better communication and greater flexibility.
 The dual lines of authority prevent the formation on functional
silo.
 It allows sharing of skills among the different project groups.
 There is no monopoly of skills committed for just one group.
 3. MATRIX STRUCTURE
DISADVANTAGES
 The two-boss system may create confusion among members.
 Itmay also foster a power struggle between a leader of the
functional department and a leader of the project team, and
also among the project leaders.
 4. TEAM STRUCTURE
 Created
to complete special projects, to solve problems, or to
accomplish daily tasks.
 May be composed of permanent or temporary teams.
 Maybe composed of multidisciplinary or multispecialist
members who use their own expertise to achieve the
objectives of the team.
 Theteam is cohesive and is focused on the timely and
effective completion of their assigned project or responsibility.
 4. TEAM STRUCTURE
ADVANTAGES
 Itpools skills from different divisions or groups within the
organization to swiftly and efficiently carry out the special
tasks assigned to them.
 Each member of the team represents a unique skill and
valuable resource such that the success of the team has a
higher probability.
 4. TEAM STRUCTURE
DISADVANTAGES
 Itis usually temporary in nature, which may cause some
members to reduce their level of commitment to the job
needed.
 The tendency for interpersonal conflict among members,
given that they possess different personalities, personal
backgrounds, mindsets, and ways of doing things.
 5. NETWORK STRUCTURE
 Is formed by having a core of full-time employees working together
with outside partners who provide support or supply services.
 It employs a minimum staff and mostly contracts out the work to
be done.
 It has three forms:
1. Task Force - a structure formed on a temporary basis to
accomplish a complex task that involves a number of
organizational subunits.
 It has well-defined performance standards that must be
accomplished in a specific time.
 The members are disbanded when the goal is accomplished.
 5. NETWORK STRUCTURE
2. Committee – composed of selected members from different
backgrounds.
 it is organized as a temporary or a permanent structure.
A preferred structure when the goal involves workload that must
be spread across members.
 It is used during period of management transition.
3. Collegial Form - composed of members from professional
backgrounds.
 Commonly found in universities and professional organizations
 Its
main characteristics is its highly democratic approach to
decision-making.
 5. NETWORK STRUCTURE
ADVANTAGES
 Highpotential for expanding membership from diverse
backgrounds in a short period
 They reduce costs since members mostly came from external
groups or institutions
 Ithas greater flexibility in dealing with changes in the
environment.
 5. NETWORK STRUCTURE
DISADVANTAGES
 Difficultyin management if the size of becomes too large for
the core staff to handle.
 Work relationships among members may also be temporary
and not sustained for a long-term period.
 6. VIRTUAL STRUCTURE
 Eliminates the boundaries among units that compose the
organization by using information technology (IT) and the
Internet to communicate with members and accomplish
specific objectives.
 Work is spontaneous and excludes lines of authority.
 Communication flows are rapid and information sharing is
continuous.
 There is little hierarchy among members.
 6. VIRTUAL STRUCTURE
ADVANTAGES
 Speedyand real-time communication and convenient
connection despite distance.
 Employees can work from home or somewhere else outside
an office building.
 Knowledge sharing as a goal empowers members and
improves their capabilities.
 6. VIRTUAL STRUCTURE
DISADVANTAGES
 Lack
of stronger bond among members since they do not
meet in person.
 Lackof face-to-face contact may be a disadvantage for
certain situations that would need careful decision-making.
 Operational only in areas where IT and Internet facilities are
efficient.