Types of organizational structure -Divisional structure

Types of organizational structure

B. Divisional Structure
An organization which is very large in size and is producing more than one product, they need to evolve a design to cope with the complexity. The activities related to one product are grouped under one division. The organizational structure consists of separate divisions, each such division has its own manager. Within each division, functions like production, marketing, finance etc. are performed.
In other words, each division tends to adopt a functional structure. However, functions may vary across divisions in accordance to their product line.

Advantages
1. Development of personnel: All activities related to one type of product are grouped under one department only. This helps in development of varied skills in the head and prepares him for a higher post.
2. Accountability: In this type of structure, the performance of each department can be easily assessed. It also helps in fixation of responsibility for poor performance so that appropriate remedial action can be taken.
3. Fast decision making: Each division functions independently and so decisions are much faster. This also promotes flexibility and initiative.
4. Expansion and growth: New departments can be easily added without disturbing the existing departments.

Disadvantages
1. There may be a conflict among different divisions on allocation of resources. A particular division may seek to maximize profits at the cost of others.
2. Each department requires all the resources to work as an independent unit. This increases cost as there may be duplication of activities across products.
3. The divisional heads focus only on their product. They may fail to identify themselves as a part of the common organization and develop divisional conflicts, ignoring organizational interests.

Suitability
Divisional structure is suitable where:
· The number of products is more than one.
· Different manufacturing technologies and marketing methods are used.
· The size of the concern is very large or is growing.

Types of organizational structure

A. Functional Structure
When the activities or jobs are grouped keeping in mind the functions to be performed then it is called functional structure. These functions are organized in to separate departments. For example, in a manufacturing concern division of work into key functions will include production, purchase, marketing, and personnel.












Advantages
1. Specialisation: Activities are grouped according to functions to be performed. Similar tasks are placed under one department. This leads to efficiency and specialization.
2. Easy supervision: Since the tasks to be done in one department are of similar nature, it becomes easy for the supervisor to guide and supervise the employees performing the jobs.
3. Easy coordination: Similarity of tasks being performed help in promoting control and coordination within the departments
4. Increases managerial efficiency: Managers in each department are performing the jobs again and again. This makes them specialized and increases their efficiency.
5. Effective training: Training of employees become easy as focus is only on a limited range of skills.
6. Decreased cost: Minimum duplication of efforts and economies of scale results in lower cost.

Disadvantages
1. The departments become specialized in their own way and fail to see the prospects of the whole organization. Thus it becomes difficult to achieve organizational goals.
2. The departmental heads start thinking their departments to be functional empires. This leads to conflicts among various departments.
3. When the departments become large it becomes difficult to coordinate.
4. Even when the organizational goals are not achieved it becomes difficult to fix responsibility as all the departments are interrelated.
5. Employees and managers are trained for only one function i.e. the department to which they belong. This develops inflexibility in them as they have difficulty in appreciating others point of view.

Suitability
Functional structure is suitable where:
1. The size of the business unit is large.
2. Specialization is required.
3. Decentralization of authority is needed.
4. Only one product is sold.

Organising Structure

Organising Structure

Organising structure is the outcome of organizing process. Whenever an organization grows in size and complexity, an adequate structure is needed. Structure clearly defines the job positions, authority, and responsibilities of different employees.

An organizational structure is defined as ‘Network of job positions, responsibilities and authority at different levels’.

Peter Drucker clearly says, ‘An organizational structure is an indispensable means; and the wrong structure will seriously impair business performance and even destroy it.’

Benefits of a good structure

1. It allows correlation and coordination among human, physical resources and enables the business to achieve its goals.
2. It ensures a smooth flow of communication and better control over the operations.
3. It provides the framework within which an organization functions while coordinating the responsibilities of individuals and departments.

The span of management, to a large extent gives shape to organizational structure. It refers to the number of subordinates that can be effectively managed by a superior. This determines the levels of management in the structure. The span of control depends upon:

· Capacity and intelligence level of managers.

· The trust of managers in their employees.

· The employees’ intelligence level.

· Nature of job.(routine or specialized)

Importance of organizing

Importance of organizing

1. Benefits of specialization: In organizing, each work is divided into smaller jobs and one individual is assigned only one job according to his qualification. Such division of work leads to specialization.
2. Clarity in working relationships: Organising function clearly defines the authority or power enjoyed by every individual. Everyone knows very clearly to whom he can give orders and from whom he has to receive orders. This also helps in the creation of managerial hierarchy.
3. Optimum utilization of resources: Organising helps in proper usage of men, material and money. Jobs are properly assigned, so there is no confusion or duplication. This helps in minimizing the wastage of resources.
4. Adaptation to change: Organising function helps in the creation of different departments and managerial hierarchy. This structure helps in adapting and adjusting to the activities in response to the changes in the external environment.
5. Effective administration: Organizing function provides a clear description of jobs, there is no confusion and duplication. Every individual knows his role and position very clearly. Thus, management becomes easy and this brings effectiveness in administration.
6. Development of Personnel: through organizing structure, mangers reduce their workload by assigning their routine jobs to their subordinates. This allows the manager to develop new methods and ways to perform the job. This also gives them the opportunity and time to innovate and thus help in strengthening the company’s competitive position. Such delegation also develops the subordinate by giving them the ability to handle challenges and to realize their full potential.
7. Expansion and growth: With optimum utilization of resources, proper division of work and departmentation, companies can easily meet the challenges and can expand their activities in a planned manner. They can easily add more job positions, departments, and even diversify their product lines. New geographical areas can also be added to increase sales and profits.

Organising- meaning and process

Organizing

Organising means ‘identifying and grouping different activities in the organization and bringing together the physical and financial and human resources to establish the most productive relations for the achievement of organizational goals’.

Organising Process
1. Identification and division of work: The organizing function begins with division of work into smaller units. Each such unit is called a job. One individual is assigned only one job according to his capabilities and qualification. This leads to systematic working and specialization.
2. Departmentalization: Once the work is divided into smaller manageable units, related jobs are grouped together and put under one department. This grouping process is called departmentalization. The most common ways of departmentation are functional departmentation and divisional departmentation.
3. Assignment of duties: once departments are formed, each department is put under the charge of an individual. The work must be assigned to those who are best suited for it.
4. Establishing reporting relationships: After assigning the duties, all individuals must also be assigned matching authority. This assignment of authority and responsibility results in the creation of authority responsibility relationship between superior and subordinate. With this, a managerial hierarchy is created (chain of command) where every one knows who he has to take orders from and to whom he is accountable.

Limitations of Planning
1. Planning leads to rigidity: most of the times planning leads to rigidity I n functioning because it is not easy to make changes in them. When the circumstances change, following the pre-decided plan may no be in the interest of the organization.
2. Planning may not work in dynamic environment: Business environment is dynamic. The organization has to constantly adapt itself to the changes. For example, if economic policies are modified, or political conditions change, or there is a natural calamity. All these changes may not be predicted by planners and so there may be an obstacle to effective planning.
3. Planning reduces creativity: Planning is an activity done by the top management. Rests of the members just implement it. They are not permitted to deviate from the plans. So the creativity in them gets lost. For them, there is nothing new or innovative.
4. Planning involves huge cost: planning involves a lot of cost in terms of time, money and accuracy. A lot of calculations are required to be done and professional experts are to be hired in order to plan. When the cost of planning exceeds the value of benefits derived from it, it becomes uneconomical to plan.
5. Planning is time consuming: Sometimes plans to be drawn up take so much of time that there is not much time left for their implementation.
6. Planning does not guarantee success: The success of an organization depends upon properly drawn plans. Managers generally have a tendency to rely on previously tried and tested successful plan. However, it is not always true that just because a plan has worked before it will work again. It may lead to failure instead of success.


Types of plans
1. Objectives: They are the ends towards which the activities are directed. It is what you would like to achieve. An objective should be:
-Related to a single activity.
-Related to end result and not to the activity performed.
-It should be measurable in quantitative terms.
-It must have a time limit for achievement.
-It must be achievable.
2. Policies: It is an organizational own way of handling a problem. Its general response to a particular situation. They are the guides to thinking and decision making. For example:
· A school’s policy that admissions will be granted to only those applicants scoring minimum 75% marks.
· An organization’s policy of handling complaints within four hours.
3. Procedures: it is the sequence of steps to be followed by employees in different situations. It is the exact manner in which an activity is to be achieved. For example:
-Set up a file for applicants;
-Accept the forms and put them in a file;
-Ask for other certificates to verify marks of students;
-Put those documents into the file;
-Give the file to admission incharge.
4. Rules: They are the directives to do or not to do things, to behave or not to behave in a particular way. They must be strictly followed and if they are not followed, then strict actions can be taken against those who are disobeying the rules. They are spelt out to create an atmosphere of discipline in the organization. For example there can be a rule of no smoking in the organization.
5. Programme: it is a combination of goals, policies, procedures, and rules. They are prepared at different levels. A primary programme is prepared at the top level and then to support the primary plan, supportive programmes at different levels are prepared for smooth functioning of the company.
6. Methods: A method is a systematic way of doing routine and repetitive jobs. It is common way of doing a job so that there is no confusion in the minds of employees and comparisons are possible. For example, method of valuation of stock may be LIFO or FIFO.
7. Budgets: It is the statement of expected result expressed in numerical terms. Most of the times, budgets are financial in nature but it does not mean that company prepares only financial budget. Along with the financial budget, it also prepares capital budget, sales budget etc.

Planning

Planning can be defined as “thinking in advance what is to be done, when it is to be done, how it is to be done and by whom it should be done.” It bridges the gap between where we are and where we want to reach in future.

Features of Planning
1. Primacy of planning: Planning is the primary or first function of management. No other function can be performed without planning. It provides the basis for other functions like organizing, staffing directing and controlling.
2. Forward looking: planning is looking ahead and is a futuristic function. It is never done for the past. Managers try to make predictions for the future according to their past experiences.
3. Pervasive: Planning is required at all levels and in all organizations. At the top level, major plans are framed, departmental heads make plans for their respective departments, and lower level managers make plans for the day to day activities.
4. Continuous: Planning is an on going, never ending process. After making plans, planners keep changing them according to the changing environment needs.
5. Planning is a mental exercise: Planning means looking ahead, anticipating opportunities and threats, evaluating alternatives, and choosing the best alternative. All this requires intelligent imagination, sound judgment and foresight. So it is called an intellectual process.
6. Planning involves choice/ decision making: Planning is required only when different alternatives are available and we have to select the most suitable one. If there is only one way of doing a job, then there is no need of planning. For example, if we have to import technology and the license is only with STC, then companies have no choice but to import from them only.
7. Planning focuses on achieving objectives: while planning, specific goals are set out along with the activities required to achieve the goals. After setting the targets, planning decides the method, procedure, and steps to be taken to achieve them.