What is Organization Structure?

Organization Structure primarily facilitates any organization to transact their day-to-day work. It deals with various functions within the organization, the inter-relationship between the functions, departmentalization, and the delineation of different roles, how the jobs have been designed and the hierarchical relationship between them. Covid-19 has made it difficult to forecast the shifting nature of organisational structures. It has made organisations operate in a difficult environment of heightened complexity, acute uncertainty, and sharp volatility.

In the long term, this scenario is unlikely. To survive, organisations have to become more agile, quick-to-response, and flexible — while following a hybrid strategy. The more authority employees have, the higher up they’ll be on the organizational structure and the more organized a structure is, the more efficiently a company operates.

Types of organisational structure

Three types of organizational structures are used by most organizations today: Functional, Divisional and Matrix. Each of these types has pros and cons that one must consider before deciding which one to implement for their business.

• Functional structure:
  This structure helps the organization to group each department according to its purpose. It is followed by small businesses as each department can depend on the skills and knowledge of its employees. One of its drawbacks is a lack of communication. As there are various departments, communication can be restricted by organizational boundaries.
• Divisional structure:
  Within an organization, there are various products and different geographies. This structure is used to maintain the necessary resources and functions within each division to support the product line and geography. It benefits the large organizations in independent operation flow as a failure of one company won’t affect the other company.
• Matrix structure:
  This is a hybrid of divisional and functional structures. This structure is used in large multinational companies, for all the benefits of functional and divisional structures to exist in one organization. This can create power struggles because most areas of the company will have a dual management – a functional manager and a product or divisional manager working at the same level and covering some of the same managerial territories.

Principles of Organizational structure

Organizational structure is the framework of an organization through which individual work can be effectively arranged and organized. A good organizational structure should be developed based on the following principles:

• Specialization:
  It facilitates the division of work into units for efficient performance. Work can be performed better with the application of knowledge and improves the efficiency of the organization.
• Coordination:
  It refers to developing the objectives and activities of specialized departments to design strategic objectives of the organization.
• Decentralization and Centralization:
  De-centralization refers to decision making at lower levels in the hierarchy of authority. In contrast, decision making at a higher level is centralization. The degree of centralization and decentralization depends on the number of levels of hierarchy, degree of coordination, specialization and span of control. Every organizational structure contains both decentralization and centralization, but to varying degrees. The extent of this can be determined by identifying how much of the decision making is concentrated at the top and how much is delegated to lower levels. Modern organizational structures show a strong tendency towards decentralization.