Organizational structure consists of the activities such as task distribution, management and coordination which are directed toward achieving the goals of the organization. It can be a mode through which organization operates and perform. Actually it is the activity in which organization deals how to manage its task, supervision and how to coordinate common task or common things which each other. How to assemble common things to bring effectiveness. What kind of decision making should take place? Organizational structure effects the organizational action by providing the foundation on which operating procedures and routine rest and it determines which individual get to participate in the decision making. There are six key elements that managers need go through when they are designing organizational structure. Following are the six elements:
If we first just look into a word ‘specialization, what first come in our mind is that some thing we can do perfectly. A general meaning of specialization can be a complete knowledge about one`s job which he is performing. So we can get a clear meaning of ‘work specialization’ that work is sub divided into separate job according to the one`s specialization. The one who can perform any one task perfectly, he will assign to do that task only. For example: The task is to stitch a T-shirt. In stitching a T-shirt, it goes under a process. This process is divided into different steps like stitching of sleeves, cutting of T-shirt, making of neck and etc. So instead of stitching one whole T-shirt by a single person, the tasks divided. Sleeves are stitched by one person; another person is cutting the T-shirt and so on. The steps are divided into different individuals. Doing one task again and again not only makes the individuals perfect in performing it but also save time. Repetition of task increases the speed of the individuals. For Example: Considering the same example of stitching a T-shirt, if one person is stitching only sleeves, his speed will be increase because of repetition of task. He will stitch sleeves quickly. So due to work specialization, speed is increases and task can be completed more rapidly. Work Specialization is beneficial for organization because training for specialization is more efficient. It is easier and less costly to trained employees for specific task rather than a whole task. For Example: Taking again the example of stitching of a T-shirt, instead of training how to stitch whole T-shirt to each and every individual, it is more easier to teach them only one step of stitching of a T-shirt. But in certain cases, organizations have to suffer from human diseconomies from specialization. Reason behind human diseconomies can be boredom, fatigue, stress, low productivity, poor quality, increased absenteeism and high turn over. Productivity can be increased by enlarging the scope of job activities rather than narrowing it. It is found that productivity can be increase when employees are given with a variety of activities to do, allowing them to perform the whole task, and putting them into teams with compatible skills. In some organization, it is preferable and in some organization it is not. Consistent use of work specialization can create problems. So after some time, we should assign another job to the individual.
When many individuals are performing common jobs in the organization, they need to coordinate with each other. So on the basis of common jobs, individuals are grouped together. Grouping of individuals are called ‘Departmentalization’. There are five traditional methods for grouping work activities:
Functional Departmentalization is grouping activities by functions performed. The function here means the nature of the business. The advantage of this type of departmentalization is obtaining efficiencies from putting similar specialties and people of common skills, knowledge and course together in common units. So when people of common skills will work together, they can generate more ideas and the work can be more efficient due to which organization can also achieve economies of scale. It can be practice in all types of organization. For Example: In XYZ organization, there are several departments like Human Resource, Accounting, Information Technology, Marketing, Finance and etc.
Departments in organization can be made according to the products they produce. Task can be grouped according to the specific products that`s mean placing all the activities related to a product under the one manager. Manager`s are specialist and responsible for everything related to the product line. Due to this it increases the accountability for product performance. For Example: In XYZ organization, they manufactured many products like detergents, shampoo, soaps, butter, ice cream and etc. These products are placed into different departments under one manager.
It is grouping the activities on the basis of territory. If an organization have its customers geographically dispersed, it can group jobs on the based on geography. For Example: In XYZ organization, the sales of its product are geographically dispersed in Pakistan. It has departments by provinces, like Sindh, Baluchistan, N.W.F.P and Punjab.
Grouping activities on the basis of product, services or customers. Process departmentalization allows homogenous activities to be categorize in which each process requires different skills. For Example: When we go to hospital for surgery, first we go to reception for admitting process, then undergo a procedure in surgery, receive operative care, and then get discharge. This process of surgery is divided into different departments.
Grouping activities on the basis of common customers or types of customer. Different departments are made to serve the common type of customers. The assumption is that the customers of each department have common problems or need which is fulfilled by the departments. These departments are under supervision of the specialist who meet the problems and needs of the customers For example: In XYZ organization, sales activities are broken down in different departments according to the customers. Departments can be retailers, wholesaler and departmental stores
Chain of command is the authority, communication and responsibility along which orders are passed in the organization. We can say that the order from top management to the lowest rank is the chain of command. This order should be followed by every employee in the organization. The orders flow downwards in the chain of command whereas accountability flows upwards. For Example: If the manager of the company gives the order that every one should come at 8:00 am sharp and the break will be at 1:00 pm to 2:00 pm. One who don`t follow the rules and regulations of the organization will have to pay fine of Rs.500. Then every one in the organization should follow it. There are two concepts in chain of command: Authority and Unity of command. Authority is that managers have right to give orders. Each manager of the organization can give orders to meet organizational goals and orders should be obeyed by the employees. They are responsible towards all the managers. But due to several superiors, employees might have to face conflicting demand. For Example: Manager A is giving orders to increase the sales 5% as compared to last year and Manager B is giving orders to reduce cost per unit. So the orders of both managers should be obeyed. Unity of command is that one and only one person has right to give orders in the organization. The orders of that person should to obey by every one in the organization. All the employees are directly responsible to him. For Example: There is only one manager in the organization who has right to give orders. According to his orders, sales should increase by 5% as compared to last year. This is the only order which should be followed by the employees. But nowadays, chain of command is rarely practiced in the organizations because of advancement in the technologies and trend towards empowering employees. Employees are given rights to take decision so that production can be more effective and efficient. Through advancement of technology, employees can communicate any where easily. Designing of new structures, there is need of many bosses in which unity of command is not possible. But still some organization found that chain of command can be productive.
Span of control is that a manager can handle how many employees in organization efficiently and effectively. Manager is how much capable enough to direct the employees. Whether employees are following his command or not. Span of control determines number of levels and manager’s organization has. Span of control can be categorized into two types; wider span and narrow span. In wider span there are less levels and less number of managers. Wider span is better because division of work become easy and organization became more efficient. Due to less number of managers, organization have less salary expense so it means it is more efficient in terms of cost but is not effective. As the span is wider, and less number of managers, it is difficult for manager to supervision them. They are not able to manage employees because the numbers of employees are greater. For Example: In XYZ organization, there are 1000 employees working in the organization where there 3 levels of manager; top manager, middle manager and lower manager but the productivity is not effective because managers are not able to handle the employees. They don`t have time to supervise them because the span is wider. In small span, there are fewer numbers of employees working under the head of one manager. But the disadvantages of small span is that it is expensive because fewer employees are working under one manager, and more the manager more will be the salary expense. Secondly, communication in organization is difficult. As manager is supervising attentive, employees are not able to communicate. And thirdly overly strict observation of manager on employees, employee get discourage that organization don’t trust them, they are keep eye on them. For Example: In a restaurant, there are 100 employees and 10 supervision which means uniformly 10 employees will be control by one supervisor.
Centralization refers that decision making in the organization can be done by only top management. It is the formal authority that top management will give decisions which will be followed by every one without any changes. When only top managers make decision without any opinion of lower level employees, the organization is centralized. In simple words, top managers has right to take decision without any view of lower level of manager is called centralization. For Example: Top management decided that the medical facility of the employees will not be provided for six month because company is suffering from loss for 2 years. It is the decision which is taken by only top management without any recommendation of lower level of employees. Decentralization refers that decision making is not only restricted to top management. Decisions are also made by lower level employees because they are more towards the action of performance. They can quickly solve the problem and more people are involved in giving decision. Decentralization make employees feel that organization is trusting on them and giving right to make decisions. For Example: The problem is that company is suffering from loss for 2 years. The employees concluded that as the factory is closed for 5 to 6 days per month in a year due to strikes in the country, productivity of the organization is low. So to achieve the productivity, employees will do over time. Today in modern world, most of the organization is following decentralization. It makes organization more flexible and responsive. Lower level employees have more knowledge as they are more close to the actions, so they can take better decision than top management.
Standardization of job within the organization is called formalization. The rules and regulations within the organization are strictly followed. It is very clear that what is to be done, when it is to done and how it is to be done. There are no changes in the job of the employees. Employees have to produce same input in exactly the same way. The work process is strictly defined with rules and regulation is called high formalization. There is disadvantage of high formalization is that the work is already define to the employees so they don`t think or try to do work with there own self. The input of employees is low. As the work is already describe so they also don`t think for alternatives. For Example: Organization had strict rules and regulation. Every one should be on their desk at 8:00 am sharp and salary will be deducted Rs 200 on every absent who ever has more than 3 absent in a month Whereas work process is not strictly defined or non programmed, they has freedom to do what ever they want to do. They can makes amendment in the work process as it is desire. When jobs are not strictly described to the employees, it is called low formalization
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