Organizational Structure and Types Quiz

Organization

• A goal-directed entity with deliberate processes and systems.
• A collection of people working together to accomplish something better than working separately.
• Social actors (influences or are influenced by the environment).

Organization Structure

• The system of task, reporting, and authority relationships within which the work of the organization is done.
• Defines how the parts of an organization fit together, as seen in the organizational chart.

Organizational Chart

• Shows internal structure of an organization.
• Helps employees identify their function.
• Helps employees understand the organization's goals and aims.
• Outlines how activities, supervision, and coordination work towards achieving organizational goals.

Types of Organizational Structures

• Hierarchical.
• Functional.
• Horizontal.
• Divisional (market-based, product-based, geographical).
• Matrix.
• Team-based.
• Network.

Hierarchical Organizational Structure

• Typical for larger businesses and organizations.
• Different levels of authority with a chain of command connecting multiple management levels.
• Decision-making is formal and flows from top to down.

Advantages

• Defines authority and responsibility.
• Shows reporting lines.
• Motivates employees with career paths and promotional opportunities.
• Creates employee specializations.
• Builds camaraderie within departments.

Disadvantages

• Slows down innovation or changes due to bureaucracy.
• Can cause employees to act in the department's interest rather than the company's interest.
• Low-level employees might feel less ownership and unable to express ideas.

Functional Organizational Structure

• Groups employees into departments based on expertise.
• Common in large companies with specialized functions.

Advantages

• Employee focus on their role.
• Encourages specialization.
• Creates self-determined teams and departments.
• Easily scalable for any company size.

Disadvantages

• Creates silos within the organization.
• Hampers interdepartmental communication.
• Obscures processes and strategies for different markets or products.

Horizontal or Flat Organizational Structure

• Few managers with many employees.
• Allows employees to make decisions without manager approval.
• Common in start-ups before they grow large enough to divide departments.

Advantages

• Gives employees more responsibility.
• Fosters open communication.
• Improves coordination and speed of new idea implementation.

Disadvantages

• Confusion about employee reporting lines.
• Can create employees with generalized skills and knowledge.
• Difficult to maintain as a company grows beyond start-up status.

Divisional Organizational Structure

• Segmentation by products, markets, or geographical variations.
• Suitable for larger companies dealing with multiple products and markets.
• Independent divisions operate autonomously under head office supervision.

Advantages

• Helps large companies remain flexible.
• Allows for quicker response to industry changes or customer needs.
• Promotes independence, autonomy, and a customized approach.

Disadvantages

• Can lead to duplicate resources.
• Can mean unclear or insufficient communication between headquarters and divisions.
• Can result in a company competing with itself.

Types of Divisional Structures

• Market-based: Divisions separated by market, industry, or customer type (e.g., supermarket).
• Product-based: Divisions separated by product line (e.g., tech company with separate cloud offerings and software divisions).
• Geographical: Divisions separated by region, territories, or districts for effective localization and logistics (e.g., companies with satellite offices worldwide).

Matrix Organizational Structure

• Combination of two or more organizational structures.
• Sets up reporting relationships as a grid or matrix.

Advantages

• Supervisors can easily select individuals based on project needs.
• Provides a dynamic view of the organization.
• Encourages employees to utilize skills in various capacities outside their original roles.

Disadvantages

• Conflict between department managers and project managers.
• More frequent changes than other organizational chart types.

Team-based Organizational Structure

• Teams working towards a common goal while completing individual tasks.
• Less hierarchical with flexible structures that reinforce problem-solving, decision-making, and teamwork.

Advantages

• Increases productivity, performance, and transparency by breaking down silo mentality.
• Promotes a growth mindset.
• Changes traditional career paths through lateral movement.
• Values experience over seniority.
• Requires minimal management.
• Fits well with agile companies using Scrum or Tiger Teams.

Disadvantages

• Goes against many companies' inclination towards purely hierarchical structures.
• May make promotional paths less clear for employees.

Network Organizational Structure

• Groups specific types of employees based on specialization.
• These specialists form partnerships with others across the organization for projects and common goals.

Advantages

• Visualizes complex relationships between onsite and offsite employees and stakeholders.
• Allows companies to be more flexible and agile.
• Empowers employees to collaborate, take initiative, and make decisions.
• Helps employees and stakeholders understand workflows and processes.

Disadvantages

• Can become overly complex with lots of offsite processes.
• Can make it difficult for employees to determine decision authority.

Elements of Organizational Structure

• Division of labor: Separating organization's work into different jobs for individuals.
• Coordinating Divided Tasks: Integrating various tasks and roles to achieve goals.
• Departmentalization: Combining and allocating divided tasks to work groups.
• Span of Control: Number of people reporting to a manager, defining the size of a work group.
• Administrative hierarchy: Different levels of authority and reporting relationships within an organization.

Division of Labor

• Also known as specialization.
• The extent to which the organization's work is separated into different jobs.

Advantages

• Efficient use of labor.
• Reduced training costs.
• Increased standardization and uniformity of output.
• Increased expertise through task repetition.

Disadvantages

• Routine and repetitive jobs.
• Reduced job satisfaction.
• Decreased worker involvement and commitment.
• Increased worker alienation.
• Possible incompatibility with computerized manufacturing technologies.

Coordinating Divided Tasks

• Integration: The process of coordinating tasks and roles to achieve goal accomplishment.

Departmentalization

• The manner in which divided tasks are combined and allocated to work groups.
• Five common groupings:
  • Business function (internal operations).
  • Process (internal).
  • Product or service (external).
  • Customer (external).
  • Geography (external).

Business Function Departmentalization

• Based on traditional business functions (e.g., marketing, manufacturing, human resource administration).
• Employees learn from each other.
• Lacks autocratic mechanisms for coordinating workflow.

Process Departmentalization

• Similar to functional structure, but focuses on specific jobs grouped according to activity.
• Encourages specialization and expertise among employees.
• Develops an internal career path.

Product or Service Departmentalization

• Employees working on a particular product or service are in the same department, regardless of function or process.
• Enhances interaction and communication among employees producing the same product or service.
• May reduce coordination problems.
• Employees might become too focused on their product or service and miss technological improvements or innovations.

Customer Departmentalization

• Also called departmentalization by market.
• Less process specialization.
• Offers best coordination of workflow tailored to customer needs.
• Isolates employees based on their expertise.

Span of Control

• Also called span of management.
• The number of people reporting to a manager.
• Determines the size of a work group.
• Small span of control = close supervision.

Mintzberg's five conditions in determining span of control:

• Complexity of work: More complex work requires a smaller span of control.
• Similarity of tasks: Similar tasks permit a larger span of control.
• Proximity of subordinates: Close proximity allows for a larger span of control.
• Frequency of problems: Frequent problems require a smaller span of control.
• managerial experience: More experienced managers can handle a larger span of control.