ORGANISATIONAL STRUCTURE:

Organization Structure:-Defined as the relationships between people, work and resources and can be shown in the organizational chart.

Factors affecting organizational structure

  1. Job design:-Total work is divided into various jobs like sales, finance, production, etc  and the results expected from it
  2. Departmentation:-Jobs are grouped together to form departments on the basis of similar tasks like per unit  cost,   quality control under the purchase department
  3. Span of management:-No of employees that can be effectively managed by superior
    1. Narrow span:- when the size of the organization is large
    2. Wide-span: - when the size of the organization is small
  4. Delegation of authority:-Sharing of authority between the superior and subordinate and clearly specifying who is responsible for whom

Types of Organization Structures

  1. Functional structure and
  2. Divisional structure

FUNCTIONAL STRUCTURE:

Functional structure

  • In a functional organization, all identical works are placed together under one functional head.
  • For example, production, marketing, finance, and marketing are considered essential functions of a manufacturing enterprise.

Suitability: It is most suitable when the size of the organization is large, has diversified activities and operations require a high degree of specialization.

Advantages

  1. Specialization (Occupational):-Employees perform similar tasks within a department and get knowledge in a specific field. Sales, production, etc.
  2. Promotes control and coordination Within a department because of similarity in the tasks
  3. Improves employee training: Training of employees is easier due to limited work
  4. Cost-effective Leads to minimize duplication of effort which results in economies of scale
  5. Equal importance to all departments Provides equal attention and importance to different functions (department).

Disadvantages

  1. Functional Empires Functional head may give importance to their own departments and stop thinking about the interest of the organization.
  2. Limited Growth Functional heads do not get training for top management positions because they work in a particular area (like production or sale).
  3. Inter-departmental Conflicts Can arise when the interests of two or more departments are not the same or regarding sharing of resources
  4. Problem of Responsibility. Functional head is responsible for a particulars function and if some things go wrong it becomes very difficult to fix responsibility.

DIVISIONAL STRUCTURE:

Divisional Structure: -Organization structure comprises separate business units or divisions. Each unit has a divisional manager responsible for the performance and who has authority over the unit.

Suitability:-Suitable for those business enterprises where a large variety of products are manufactured using different productive resources.

Advantages:

  1. Responsibility fixing as divisional heads is accountable for profits. Revenues and costs related to different departments can be easily identified and assigned to them.
  2. Initiative and flexibility because each division functions as an independent unit which leads to faster decision making.
  3. Specialization (Product) helps in the development of different skills in a divisional head and this prepares him for higher positions.
  4. Expansion and growth as new divisions can be added without interrupting the existing operations.

Disadvantages:

  1. Conflict May arise among different divisions regarding the allocation of funds
  2. Add-In Costs Since there may be a duplication of activities across products
  3. Difficulty in Employee Training Due to various products training employees is quite difficult.

Distinguish between Functional and Divisional structure