A Structured Organization
Any organization works in a defined framework which allows the organization to grow over time. The definite structure will provide clarity to the managers, employees and also will keep the functioning of the organization in sync. The employee’s clarity helps the manager to keep expectations and enables efficient decision-making capability. An organizational structure which outlines how the activities are directed in order to achieve the destined goals of an organization. An organizational structure determines the flow of information between the levels within the company.
A Traditional organizational structure is generally of four different types – functional, divisional, matrix and flat. Our discussion is based on the structure of the organization thus, we now proceed ahead.
Organizational Structure Meaning
An organizational structure is a system which crafts the outline about how certain activities are being directed in order to achieve the organizational goals.
For the smooth flow of information and to avoid unnecessary discrepancies, an organizational structure is of utmost importance. Like, in a centralized structure, the decisions flow from the top level to the lower level. While in a decentralised organization, the right to make decisions is shared all over the organization.
Be it an MNC or a small local business, businesses of all shapes and sizes uses organizational structures as they define a specific hierarchy form within the organization. A good organizational structure defines each employee's job role and how that sync within the overall system.
This structuring of the company provides a good visual representation of how it is shaped and how this can move forward for achieving its goals. An organizational structure outlines how certain activities are directed to achieve the goals of an organization.
Key Points of this Context -
A successful organizational structure defines the job of an employee
This also assures how the job fits within the overall organization system.
A centralized structure is also defined as a chain of command.
The decentralized organizational structure gives every employee a decision to take.
Divisional Organization Structure
Divisional Structures one of the important organizational structures, this is to be grouped into a product or regional divisions.
Key Points of this structure is as follows -
The divisional structure is a type of organizational structure which is grouped into each organizational function and further into a division. These divisions then can correspond to their related functions.
The division contains all the necessary resources and the functions that are required for support in that product line.
A multidivisional form abbreviated as M-form is a legal structure in which one parent company owns another subsidiary company, each of the company uses the parent company’s brand and name.
The divisional structure acts as shockproof. With the failure of one division, another division can function independently. It doesn’t directly threaten the working of rest divisions. In the multidivisional structure, the subsidiary companies benefit from the use of the brand and capital of the parent company.
One disadvantage of divisional structure is that it includes operational inefficiencies as it is often separated from specialized functions.
For the multidivisional structure, disadvantages can include increased accounting and taxes.
Organizations are structured in many ways and these structures are used in determining the character in which these organizations operate and perform. A divisional organization groups each organizational function into a definite division.
FAQs on Understanding Organization Structures
1. What is an organizational structure in simple terms?
An organizational structure is the formal system that outlines how a company's activities are managed to achieve its goals. It clarifies job roles, responsibilities, and the flow of communication, essentially creating a blueprint for how the business operates and who reports to whom.
2. What are the two main types of organizational structures explained in the CBSE syllabus?
The two primary organizational structures covered are:
- Functional Structure: This groups employees based on their skills and the function they perform, such as marketing, finance, or production. It's efficient for businesses with a limited product range.
- Divisional Structure: This is used by larger companies with multiple products. The organization is divided into separate divisions, each responsible for a different product or geographical area.
3. What is meant by the 'chain of command' in a business?
The chain of command refers to the line of authority that flows from the highest level of an organization down to the lowest level. It clearly defines who you should report to and who is responsible for supervising you, ensuring orderly communication and decision-making.
4. Why is it important for a company to have a clear organizational structure?
A clear structure is vital because it eliminates confusion and improves efficiency. It helps in the smooth functioning of the enterprise by defining authority and responsibility, which leads to better coordination, resource allocation, and supervision. Without it, roles can overlap, and accountability becomes difficult to establish.
5. What is the key difference between a functional and a divisional structure?
The main difference is the basis of grouping. A functional structure groups jobs by expertise (e.g., all accountants are in one department), leading to high specialization. A divisional structure groups jobs based on a specific product or market (e.g., a 'footwear division'). The divisional structure is more flexible and responsive to market changes but can be more expensive due to duplicated roles across divisions.
6. How does a company decide which organizational structure is best for it?
The choice depends on the company's size, goals, and the nature of its business. A small startup might use a simple functional structure for efficiency. A large multinational corporation with diverse products, like Unilever or P&G, would need a divisional structure to manage each product line effectively. There is no single 'best' structure; it must align with the company's strategy.
7. Can you explain 'span of management' with an example?
Span of management, or span of control, refers to the number of subordinates a manager can effectively supervise. For example, a manager with a narrow span might supervise only 2-3 people, allowing for close interaction. A manager with a wide span might oversee 10-12 employees, which is common in flatter organizations where employees are more independent.
8. Why are many modern companies moving towards more flexible organizational structures?
Traditional, rigid structures can be slow to adapt to fast-changing markets. Modern businesses prefer flexible structures because they promote faster decision-making, encourage innovation, and improve communication across departments. This agility allows them to respond quickly to customer needs and competitive threats.
