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An Organization Structure is the arrangement of task andsub tasks required to implement a strategy.

An organization structure specifies 3 key components thatare :-

It identifies the formal reporting relationships, includingthe number of levels in the hierarchy and the span of controlof managers.

It specifies the grouping of individuals into departmentsand of departments into the total organization.

It consists of design of system to ensure effectivecommunication, coordination and integration of effortsacross departments.


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The first two components constitute the structural

framework, which is the VERTICAL structure createdthrough the process of differentiation that involvesdivision of labour and specialization.

The third component refers to the pattern ofinteractions among members of the organization andis the HORIZONTAL structure, created though theprocess of integration that involves cross-functionalinformation systems and teamwork.


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Vertical structure have there characteristics: Specialized tasks

Hierarchy of authority Rules and regulations Vertical communication andformal reporting system

Centralized decision making Emphasis on efficiency

Horizontal structure have therecharacteristics: Shared task

Flexible authority Few rules and regulations Horizontal communication andsharing of information Decentralized decision making Emphasis on learning


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The entrepreneurial structure is the most elementary form of

structure and is appropriate for an organization that is owned

and managed by 1 person. A small-scale industrial unit, a

small proprietary concern or a mini service outlet may

exhibit the characteristics of organization which are based

on the entrepreneurial structure. Typically these are single-

business, -product, or service firms that serve local

markets. The owner-manager looks after all decisions,

whether they are day-to-day operational matters or of a

strategic nature.


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Entrepreneurial structure


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Advantages

Quick decision making, aspower is centralized;

Timely response toenvironmental changes;

Informal and simpleorganization systems.

Disadvantages

Excessive reliance on owner-manager and so proves to bedemanding for the owner-manager;

May divert attention ofowner-manger to day-to-dayoperational matters andignores strategic decisions;

Increasingly inadequate forfuture requirements ifvolume of business expands.


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As the volume of business expands, the entrepreneurial

structure may outlive its usefulness. The need arises for

specialized skills and delegation of authority to managers

who can look after the different functional areas and herecomes the usefulness of functional structure. The functional

structure seeks to distribute decision making and operational

authority along functional lines.


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Functional structure

Chief

ExecutiveOfficer

LegalPublic

Relation

Finance MarketingHumanResource

ManagementProduction


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Advantages

Effective distribution ofwork through specialization;

Delegation of day-to-day

operational functions;

Providing time for top

management to focus on

strategic decision.

Disadvantages

Creates difficulty incoordination among different

functional areas;

Leads to functional, line and

staff conflicts; Creates specialist which

results in narrow

specialization, often at the

cost of overall benefit of theorganization.


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Made by: Praveen Sharma & Apoorva Saxena

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