An organizational structure consists of activities such as task allocation, coordination and supervision, which are directed towards the achievement of organizational aims. It can also be considered as the viewing glass or perspective through which individuals see their organization and its environment. An organization can be structured in many different ways, depending on their objectives. Organizational structure allows the expressed allocation of responsibilities for different functions and processes to different entities such as the branch, department, workgroup and individual. Organizational structure affects organizational action in two big ways. First, it provides the foundation on which standard operating procedures and routines rest. Second, it determines which individuals get to participate in which decision-making processes, and thus to what extent their views shape the organization’s actions.
On the basis of analysis of various design variables, organizational structure can be broadly categorized into four major forms:
- Functional Structure: In a functional structure, the tasks are differentiated, on the basis of each, major function and each manager is responsible for one of these. Thus, there is functional specialization such as marketing, production, finance, personnel, R & D, etc. In such a structure, those with authority can tell others what to do in that function. Such structures have a high degree of centralized decision-making. Organizations with functional structure can benefit from the economies of scale and also improve the quality of output because the activities of a given function are centralized. One of the major questions in such organizations is whether one functional manager has staff or a functional authority in relation to other functions, e.g., can the head of marketing tell the head of production what to produce (functional) or can he play only an advisory role (staff). In such organizations, therefore, the top management must plan and co-ordinate the activities of the various functions and resolve conflicts between various functions. In such organizations, since profits are the result of joint efforts, it is difficult to identify the responsibility for profits to individual managers. Further, except for the chief executive, others do not have an overall perspective of the enterprise, and managers tend to have a functional bias.
- Divisional Structure: In case of divisional structure, the divisional manager is responsible for all or almost all the functions related to a product line or group of product lines.These are the kinds of structures that are based upon the different divisions in the organization. These structures can be further divided into:
- Product Structure – A product structure is based on organizing employees and work on the basis of the different types of products. If the company produces three different types of products, they will have three different divisions for these products.
- Market Structure – Market structure is used to group employees on the basis of specific market the company sells in. A company could have 3 different markets they use and according to this structure, each would be a separate division in the structure.
- Geographic Structure – Large organizations have offices at different place, for example there could be a north zone, south zone, west and east zone. The organizational structure would then follow a zonal structure.
- Matrix Structure: In matrix structure, task forces are created to solve a problem. There is a basic permanent organization structure super imposed on it is another structure in which the focus is a project.
- Network/Coupling Structure: The network aimed at closer inter-institutional co-ordination among a network of agencies involved in implementing a programmed or a project. The network concept permits a high degree of decentralization, which in turn is a response to the existence of extreme environmental complexity. In the case of network structures, an important aspect of control is how to achieve effective inter agency and inter-institutional co-ordination. This can be achieved by developing appropriate mechanisms for reciprocal interdependence and seeking lateral influences. In case of network organizations, the role of authority, as the primary source of power decreases, while sources of lateral influence such as the use of funds, joint planning, political support, mobilization of demand among beneficiaries, and participation of beneficiaries in programme operations, assume greater significance. The coupling structures are structures with inter-locking autonomous but mutually dependent institutions. Since mutual interdependence is of a very high order, the viability of each subsystem is dependent upon the performance of the next level. Further, assignment of profit responsibility assumes greater significance in such organizations. Coordination among various units is achieved through involvement of the chief executives in the management of next level organization through programming committees.