Ans. TYPES
OF ORGANISATION STRUCTURE
Different types of Organization structure can be created on the basis of arrangement of activities. Accordingly, three broad types of structural forms are :
• Functional Structure
• Adaptive Structure
Functional Structure
When units and sub-units of activities are created in organization on the basis of functions, it is known as functional structure. Thus, in any industrial organization, specialized functions like manufacturing, marketing, finance and personnel constitute as separate units of the organization. All activities connected with each such function are placed in the same unit. As the volume of activity increases, sub-units are created at lower levels in each unit and the number of persons under each manager at various levels get added. This results in the interrelated positions taking the shape of a pyramid.
The main advantage of the functional structure of organization is that there is functional specialization in each unit, which leads to operational efficiency of people engaged, and the organization as a whole derives the benefit of specialized operations. The heads of the functional units are in direct touch with the chief executive who can sort out inter-functional problems, if any, and also coordinate the interrelated functions. The chief executive is also able to be in direct touch with lower level subordinates and thereby have full knowledge of the state of affairs in the organization.
Divisional Structure
The divisional organisation structure is more suited to every large enterprise particularly those which deal in multiple products to serve more than one distinctive markets. The organisation is then divided into smaller business units which are entrusted with the business related to different products or different market territories. In other words, independent divisions (product divisions or market division), are created under the overall control of the head office. Each divisional manager is given autonomy to run all functions relating to the product or market segment or regional market. Thus, each division may have a number of supporting functions to undertake.
In a divisional structure each division contributes planned profits to the organisation, but otherwise operates as an independent business. The functional units are headed by managers while the final authority vests in the divisional manager, who coordinates and controls the activities of the various functional units in the division. The top management of the organisation, besides providing funds, determines the organisation goals and formulates policies.
The divisional structure is characterised by decentralisation of authority. Thus, it enables managers to take decisions promptly and resolve problems appropriate to the respective divisions. It also provides opportunity to the divisional managers to take initiative in matters within their jurisdiction. But such a structure involves heavy financial costs due to the duplication of supporting functional units for the divisions. Moreover, it requires adequate number of capable managers to take charge of the respective divisions and their functional units.
Adaptive Structure
Organisation structure are often designed to cope with the unique nature of undertaking and the situation. This type of structure is known as adaptive structure. There are two types in structures.
i) Project Organisation, and
ii) Matrix Organisation
i) Project Organisation : When an enterprise undertakes any specialised, time-bound work involving one-time operations for a fairly long period, the project organisation is found most suitable. In this situation the existing organisation creates a special unit so as to engage in a project work without disturbing its regular business. This becomes necessary where it is not possible to cope with the special task or project. Within the existing system, the project may consist of developing a new project, installing a plant, building an office complex, etc.. A project organisation is headed by a project manager in charge, who holds a middle management rank and reports directly to the chief executive. Other managers and personnel in the project organisation are drawn from the functional departments of the parent organisation. On completion of the project they return to their parent departments.
ii) Matrix Organisation : This is another type of adaptive structure which aims at combining the advantages of autonomous project organisation and functional specialisation. In the matrix organisation structure, there are functional departments with specialised personnel who are deputed to work full time in different projects sometimes in more than one project under the overall guidance and direction of project managers. When a project work is completed, the individuals attached to it go back to their respective functional department to be assigned again to some other project. This arrangement is found suitable where the organisation is engaged in contractual project activities and there are many project managers, as in a large construction company or engineering firm.
Different types of Organization structure can be created on the basis of arrangement of activities. Accordingly, three broad types of structural forms are :
• Functional Structure
• Adaptive Structure
Functional Structure
When units and sub-units of activities are created in organization on the basis of functions, it is known as functional structure. Thus, in any industrial organization, specialized functions like manufacturing, marketing, finance and personnel constitute as separate units of the organization. All activities connected with each such function are placed in the same unit. As the volume of activity increases, sub-units are created at lower levels in each unit and the number of persons under each manager at various levels get added. This results in the interrelated positions taking the shape of a pyramid.
The main advantage of the functional structure of organization is that there is functional specialization in each unit, which leads to operational efficiency of people engaged, and the organization as a whole derives the benefit of specialized operations. The heads of the functional units are in direct touch with the chief executive who can sort out inter-functional problems, if any, and also coordinate the interrelated functions. The chief executive is also able to be in direct touch with lower level subordinates and thereby have full knowledge of the state of affairs in the organization.
Divisional Structure
The divisional organisation structure is more suited to every large enterprise particularly those which deal in multiple products to serve more than one distinctive markets. The organisation is then divided into smaller business units which are entrusted with the business related to different products or different market territories. In other words, independent divisions (product divisions or market division), are created under the overall control of the head office. Each divisional manager is given autonomy to run all functions relating to the product or market segment or regional market. Thus, each division may have a number of supporting functions to undertake.
In a divisional structure each division contributes planned profits to the organisation, but otherwise operates as an independent business. The functional units are headed by managers while the final authority vests in the divisional manager, who coordinates and controls the activities of the various functional units in the division. The top management of the organisation, besides providing funds, determines the organisation goals and formulates policies.
The divisional structure is characterised by decentralisation of authority. Thus, it enables managers to take decisions promptly and resolve problems appropriate to the respective divisions. It also provides opportunity to the divisional managers to take initiative in matters within their jurisdiction. But such a structure involves heavy financial costs due to the duplication of supporting functional units for the divisions. Moreover, it requires adequate number of capable managers to take charge of the respective divisions and their functional units.
Adaptive Structure
Organisation structure are often designed to cope with the unique nature of undertaking and the situation. This type of structure is known as adaptive structure. There are two types in structures.
i) Project Organisation, and
ii) Matrix Organisation
i) Project Organisation : When an enterprise undertakes any specialised, time-bound work involving one-time operations for a fairly long period, the project organisation is found most suitable. In this situation the existing organisation creates a special unit so as to engage in a project work without disturbing its regular business. This becomes necessary where it is not possible to cope with the special task or project. Within the existing system, the project may consist of developing a new project, installing a plant, building an office complex, etc.. A project organisation is headed by a project manager in charge, who holds a middle management rank and reports directly to the chief executive. Other managers and personnel in the project organisation are drawn from the functional departments of the parent organisation. On completion of the project they return to their parent departments.
ii) Matrix Organisation : This is another type of adaptive structure which aims at combining the advantages of autonomous project organisation and functional specialisation. In the matrix organisation structure, there are functional departments with specialised personnel who are deputed to work full time in different projects sometimes in more than one project under the overall guidance and direction of project managers. When a project work is completed, the individuals attached to it go back to their respective functional department to be assigned again to some other project. This arrangement is found suitable where the organisation is engaged in contractual project activities and there are many project managers, as in a large construction company or engineering firm.
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