A functional organizational structure is a structure that consists of activities such as coordination, supervision and task allocation. Functional Organizational Structure is discussed more specifically in its. After a time, if all goes well then the company will grow. The divisional structure allows this type of culture to persist in a division. The below image shows a functional org chart with finance, technical, HR and ad… Organizational structure is an important concept to study because it determines the delegation of power, responsibility and authority in the organization. The project is clearly defined in terms of objectives to be achieved and the target date for the completion of the project is set. For example, a company may need eight product groups, yet have the resources only to hire four marketing specialists. Organization structure includes the design of systems to ensure effective communication, coordination and integration of efforts across departments. The decisions are generally decentralized so that the departments guide their own activities. They may be known as special assistants, assistant managers or in a college setting as deputy chairpersons. Structure of an Empowered Organization. A vertical organizational structure is a strict hierarchy that creates layers of officials within an organization. The project must be temporary in nature and not extend into other related projects. We will briefly examine each below, one after the other. Prompt decision 4. This type of departmentalization is used by those organizations that deal differently with different types of customers. 1. It creates, for example, both product divisions and functional divisions, with the product managers (horizontal hierarchy) and functional managers (vertical hierarchy) having equal authority within the organization, and employees report to both of them in a balanced fashion. Literature Review . The vertical organizational structure is a strict hierarchical structure with power emanating from the top to the bottom. Thus, the customers are the key to the way the activities are grouped. Also, because the units are independent and semi-autonomous, it provides satisfaction to the managers that in turn improves efficiency and effectiveness. It clearly identifies authority, responsibility and accountability at each level. Staff specialists are conceptually oriented towards looking ahead and have the time to do strategic planning and analyze the possible effects of expected future events. The functional managers are concerned with the operational aspects of the project. Also, since line managers are generally occupied with their day-to-day current operations, they do not have the time or the background for future planning and policy formulation. The line and staff type of organization uses the expertise of specialists without diluting the unity of command. Additionally, a line manager cannot be a specialist in all areas. One of the main disadvantages of the functional design is that it encourages narrow specialization rather than general management skills so that the functional managers are not well prepared for top executive positions. The chain of command in each function leads to a functional head who in turn reports to the top manager. Some typical areas covered by advisory staff are legal, public relations and economic development. In this business analysis case, Netflix’s structural framework provides the necessary form and composition to ensure that the business responds well to changes in consumer preferences. 2. On the other hand, it is a rigid form of organization and there is a tendency for line authority to become dictatorial that may be resented by the employees. Instead of management driving them, the employees themselves take the reins, working in teams that assume responsibility for projects and programs. It also helps create bonds between them. 3. Many banks have priority services for customers who deposit a given amount of money with the bank for a given period of time. 2021 Pricing Guide, 18 Personal Grooming Tips for Women to Look Well Groomed, 4 Stages of Training and Professional Development, 4 Ways to Engage and Connect with Your Remote Employees, What is Strategic Leadership? (b) Service Capacity: This group provides a service that is useful to the organization as a whole and not just to any specific division or function. All person at the same level of organization are independent of each other Advantages 1. Firms engage in two types of vertical integration. Similarly, business customers get better attention in the banks than other individuals. After completing my post graduation I thought to start a website where I can share management related concepts with rest of the people. Basically the structure can be mechanistic or organic in nature or a combination of thereof. An ideal structure encourages employees to provide horizontal information and coordination where and when it is required. The unity of command is maintained in straight & unbroken line 3. There is clear unity of command so that the person at each level is reasonably independent of any other person at the same level and is responsible only to the person above him. http://smallbusiness.chron.com/different-types-organizational-structure-723.html, https://www.boundless.com/finance/introduction-to-the-field-and-goals-of-financial-management/business-organization-types/overview-of-organizational-structure/. This division and concentration of related activities into integrated units is categorized on the following basis: Departmentalization by Product. According to Soltonstoff, a staff member may serve as a coach, diagnostician, policy planner, coordinator, trainer, strategist, and so on. When the project is completed, these specialists go back to their respective duties. I hold a degree in MBA from well known management college in India. The reason for this is its suitability for generating free-flowing thinking and creativity. It is easy to develop a sense of belonging to the organization, communication is fast and easy and feedback from the employees can be acted upon faster. The functional organizational concept, originated with Fredrick W. Taylor and it permits a specialist in a given area to enforce his directive within the clearly defined scope of his authority. Each layer has progressively fewer people and more power, all the way up to the top. This is key to keeping the company consistent and productive. The authority is embedded in the hierarchical structure and it flows in a direct line from the top of the managerial hierarchy down to different levels of managers and subordinates and further down to the operative levels of workers. This facilitates communication, coordination and control, thus contributing to the organizational success. Learn moreOpens in new window, Fundamentals of Organizational Communication, Decision Making Styles: Rational vs Intuitive, McClelland's Achievement Motivation Theory, Divisional Organizational Structure designated entry, Creative Commons Attribution-NonCommercial-NoDerivs 3.0 Unported License. Such divisions are specially useful for large scale enterprises that are geographically spread out such as banking, insurance, chain department stores or a product that is nationally distributed. This group has a specialized background in some functional area and it could serve in any of the following capacities: (a) Advisory Capacity: The primary purpose of this group is to render specialized advice and assistance to management when needed. Each unit is placed under a commander and his word is final as far as his subordinates are concerned. Organization structure designates formal reporting relationships, including the number of levels in the hierarchy and the span of control of managers and supervisors. An For example, the first two components are the structural framework, which include the vertical hierarchy. Matrix organizational design is most useful when there is pressure for shared resources. c. details the formal reporting relationships that exist within an organization. For this project, the specialists from different functional departments will be drawn to work together. Lines of authority & instruction are vertical 2. provides open learning resources for your academics, careers, intellectual development, and other wisdom related purposes. Countries must make this important decision about which structure of government to employ before working on the details of how this organizational structure will carry out the basic functions of governing. For example, the telephone company may have a day shift, on evening shift and a night shift, and for each shift a different department may exist, even though they are all alike in terms of objectives. Each matrix contains three unique sets of role relationships: (1) the top manager or Chief Executive Officer who is the head and balances the dual chains of command; (2) the managers of functional and project (or product) departments who share subordinates; and (3) the specialists who report to both the respective functional manager and project manager. 2. Characteristics of Line Organization structure 1. The matrix provides a convenient way for the eight groups to share the skills of the four specialists . The design principles of organizational structure, as the diagram illustrates, is typically characterized by four dimensions (Galbraith, 2002), as follows: There is no perfect or optimal organizational structure which ideally combines those areas. 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