CHAPTER

ORGANISATION
25
STRUCTURE
Organisation structure is the established pattern of relationships among components
or parts of the organisation. It prescribes the relationship among various positions and
activities in business. Since various positions are held by persons so structure creates
relationship among them. The organisation structure provides a framework which holds he
various functions together in accordance with the pattern determined by managers. Aplanned
structure outlines therequired functions, correlates the functions in a systematic manner
and assigns authority and responsibility.

DEVELOPING ORGANISATION STRUCTURE

While developing an organisation structure, the two variables i.e. basic structure and
operating mechanism are to be taken into consideration. The basic structure involves issues
such as how the work of the organisation is to be divided and assigned among postoa
groups, departments, divisions etc. and how to bring the required coordination for achievi's
organisational goals. The operating mechanism includes factors like information sysem
control procedures and application of organisational principles and practices. functions
The development of organisation structure requires decisions such as (0)) the upwil
which are to be performed and (i) the form of structure. The functions to be taken
be decided by studying organisational needs and division of these activitiesprinciples
and 0and and
structures can be decided by studying the application of many organisational positions
practices. The organisation structure establishes formal relationship among various
in the organisation. These relationships can be classified as :
() Relations between senior and subordinates and vice-versa
(in Relations between line positions and specialists
(iii) Staff relations
(iv) Lateral relations.
ORGANISATTONSTRUCTURE 321

pETERMINING THE KIND OF STRUCTURE

Organisational structure acts as a channel for achieving organisational goals. Proper
shouldbe taken to determine a structure which will suit the business needs. The
care
steps will help in deciding a specific structure.
ollowing Activities. Analysis. In first place the activities should bespecified which will help
in attaining enterprise objectives. Every business has to perform a number of
Anctions like manutacturing purchasing, personnel, finance, marketing etc. These
functions should be specified after proper analysis. Every organisation may have
one or two dominating functions. For example, a manufacturing concern may
have production as a main function, designing may be an important function for
ready made garments producer, etc. After specifying all activities intofunctional
areas, these may be listed in order of their importance. The activities may further
be divided and sub-divided into smaller homogeneous units so that the same
may be assigned to different individuals. The chief executive may divide the
activities into functional departments and delegate authority to departmental
managers. The departmental managers may be assisted by deputy managers,
assistant managers, supervisors etc. Ajob is a basic binding block in designing
an organisation structure.
(iD Decision Analysis. In order to attain enterprise goals some decisions are required
for reaching performance levels. What type of decisions are required? Who will
take such decisions ? When should these decisions be taken ? Which managers
should participate in these decisions ? These are the questions which should be
analysed and decided. Though it may not be possible to predict the future course
of things yet the subject has high degree of predictability. The foreseeable
decisions to be taken at different levels of management will require a degree of
authority and responsibility.
() Relations Analysis. The type of relationship required at various levels should
also be analysed. The relationship between superior-subordinates, line and staff,
upward, downward, sideways relations must be analysed to determine the
organisation structure.

TYPES OF ORGANISATION
An organisational structure is mainly concerned with the allocation of duties and
boonsibilities and delegation of authority. It represents hierarchical arrangement of various
b s in the organisation. It helps in allocating authority and responsibility in the
bies. The laying down of pattern of communication and co-ordination are also facilitated
Whod
whom. Theorganisation. It also specifies who is to direct whom and who is to report to
adoption of a particular form of organisation structure largely depends upon the
ature, scale and size of the
business.
ypes of organisation may be discussed as Traditional and Modern organisation.
TradiThesetionalorganisations
Types of Organisation
may are discussed as follows :
LINE ORGANISATION
verticalCalganisation is the basic framework for the whole organisation. It representsa direct
relationship through which authority flows. This is the simplest and oldest, known as
 322 BUSINESS ORGANISATION AND
chain of command or scalar principle. The authority flows from top to the
loower levels.
person is in charge of allthe persons under him and he himself is accountable
only. This organisation is a vertical structure where one person delegates his
MANAGEMENEveTry
subordinate and who in turn delegates to his subordinate and so on. Authority
autflohwsoritysupetoiohisr
from top level person to all the persons responsible for the execution of work.
on the other hand, flows upwards. Everybody is responsible for his work and
isRe sp o ve
n srt
ibicia
tyly,
to his boss. Since authority and responsibility flow in an 'unbroken straight line'
line organisation. In the words of J.M. Lundy, "It is characterised direct by
flowing fromthe top to the bottom of the organisational hierarchy and lineslines of
, a c
it o unt a b
,
is called l e
of authoity
flowing in an opposite but equally direct manner."
This
form organisation followed
of is in military establishments. The
responsibility
Chief is at the top with various other officers at the lower levels. The
positions derive authority from the top. The modern military officers
organisations do not
rely on line organisation. They have staff wings like intelligence,
'Commanderdownwar-in-d
at

medical and so entirely

Chief Executive Office

Production Manager

Plant Superintendent

Forman Shop A Forman Shop B Forman Shop C

Workers
Lower organisation
In line organisation, every manager exercises a direct authority over subordinates who
are directly responsible to their superiors. There is thus a
hierarchical arrangement 0
authority. There are no supportive units for accounting, labour, etc. Every manager
required to incorporate these activities in his department. Following diagram depicts l
line organisation for a production department :
Features of Line Organisation
Line organisation has the following features/characteristics :
(0 In line organisation authority flows from the top to the lower levels and
responsibility flows upwards.
(i) Every person is in incharge of persons working under him.
(iü) Each subordinate receives orders only from one superior and is answerable to

him only.
(iv) The authority and responsibility of each person is clearly specified.
MGANISATION STRUCTURE 323
gditions for Success
systemof line organisation will be successful if following conditions are present:
The
There
should be a hierarchical arrangement of giving
commands commands. The subordinates
L. only through their immediate superiors. The links in the
should getcommand should
chain of not be skipped. This type of organisation helps in
-ordination and control.
co-
should be a single line of command. One person should get orders from one
There
2 supervisor only.
nersons at the same level of authority should be independent of one another.
number of subordinates should be such that they are properly supervised.
4 The
Organisation
Merits of Line
organisation has the following good points :
The line
1 Simplicity. Line organisation is simple to establish and can be easily understood
by the employees. There is no complexity in the organisation because every
nerson is accountable to only one boss. Everybody knows his work and also to
whom he is responsible. So it can be operated simply and clearly.
2. ldentification of Authority and Responsibility. Line organisation helps in fixing
authority and responsibility of each and every person in the organisation. The
authority is given with reference to the assignment of task. The authority should
be commensurate with the work assigned. The allocation of work will also help
in fixing responsibility of various individuals. So line organisation enables the
fixation of authority and responsibility.
3. Co-ordination. The hierarchy in management helps in achieving effective co
ordination. The general manager is incharge of all the departments and he can
easily co-ordinate the work of various departments. Atdepartmental level manager
is incharge and he can direct the activities of his juniors.
4. Bffective Communication. The chain of command goes from top to bottom. There
is a direct link between the superior and his subordinate, both can communicate
properly among themselves. The reactions of subordinates also reach top
management in a short span of time.
5. Statt
Economical. Line organisation is easy to operate and less expensive. Thereare no
personnel to advise line officers. Line officers take their own decisions without
looking to specialised personnel. This greatly reduces the establishment cost.
Qick Decisions. Only one person is incharge of adepartment or division. He has
to take various decisions by himself. There are no staff personnel for consultation
to0. This enables a manager to take prompt decisions. If a decision taking process
involves the consultation of a number of presons then there are likely to be delays
In deciding things. In line organisation only departmental head is required to take
decisions and he will not waste time in deciding things.
Onity of Command, In line organisation every person is under the command of
One boss only. This type of organisation is in accordance with the principle of
Scalar chain.
O Effective Control and Supervision. The number of subordinates is limited under
line organisation. The superior can exercise effective control and supervise over
324 BUSINESS ORGANISATION AND
he pesOns under him. There is a direct link between superior and
This also heips in having better control because the subordinates will
onstant watch.
9. Executive Development. Under this system the departmental head is
MANAGEsubordMinEaNundeteTs
be

to discharge his responsibility in an efficient way. This helps an

many things and develop his capabilities.
invoBved
taking and executing various decisions. His task is challenging and hehe is expeteia
executive to leart,
10. Flexibility. Since the manager has to take all important decisions, he
changes if new situation warrants. He need not to waste time in getting can mae
from above. He can take a decision accordingto the requirements of the
Demerits of Line Organisation
instsirutciuoaiOnoa
Line organisation suffers froma number of drawbacks. Some of these
been discussed here :
1. Excess Work. In line organisation too much is expected from
drawbacks have
PxDected to take numerous decisions and supervise the work executives. Thee
of subordinat
under them. The work load of executives goes on increasing with the exnan
anddiersiñcation of the unit. The line ofice cannot devote sufficient time to e
and every work and are over loaded with responsibilities.
2. Lack of Specialisation. The lack of managerial specialisation is the demerit of ine
organisation. The line oficers cannot be experts in every line of business. Sinoe
thev are to take decisions with regard to every aspect of business, the quality of
decisions may suffer. The officers will have to depend heavily on subordinates fo:
advice.
3. Lack of Co-ordination. There isa lack of co-ordination among various departnents
All departmental heads try to run the departments in their own way and according
to their suitability. There may be a lack of operational uniformity among various
departments. This may become the reason for lack of co-ordination among differeu
departments. This may become the reason for lack of co-ordination among diferen:
departments.
4. Improper Communication. The ultimate authority for taking all decisions lies with
line officers. The line officers may become autocratic and start deciding things
without consulting their subordinates. The subordinates start keeping distance
from the superiors. The decisions are implemented without comments even
these appear to be detrimental to the interests of the organisation. The subordinates
do not convey their reactions or the reactions of workers to the superiors. The lat
of communication creates many problems for the smooth conduct of busines
5. Lack of Initiative. In line organisation final decision-making is done by the
management. The lower level officials do not show initiative in suggesting Superiors
things. They feel that their suggestions may not carry weight with their
so they avoid taking any type of initiative. officers
The
6. Favouritism. There is a scope for favouritism in line organisation.
performance o
work according to their whims and preferencs. They judge the
performance of persons
persons according to their own likings. They judge the persons
maybe
according to their own yardsticks. There is a likelihood that some ignored.
given favours and deserving persons, on the other hand, may be
sRGANISATIONSTRUCTURE 325
Instability. The business is dependent upon some key persons and the sudden
7. disappearance of such persons from the scene mnay create instability in the business.
There is also a lack of grooming the new persons for taking up important work.
The managerial growth also suffers because lower level persons are not involved
in decision--making process.

satablity of Line Organisation

Organisation is suitable in the following cases :
Line
Where the business is on asmall scale and number of subordinates is less.
(i) Wherethe work is of a routine nature and the methods of operation are simple.
where continuous processes are employed as in the case of cement and sugar
industry.
Where the work is done by automatic machines and less supervision is needed.
B. PUNCTIONAL ORGANISATION
edorfunctional organisation, the organisation is divided into a number of functional
Fach department is managed by functional expert in that area. All activities are
goupedtogether. accordingto certain functions like production, marketing, finance, personnel,
ec and are put under the charge of different persons. All the persons in the organisation
ing with a particular function are put under the charge of a person controlling that
ricular function. The person incharge of a function is a specialist in it and brings out the
best in himself.
Every functional area serves all other areas in the organisation. For example, the
gurchase departrment handles purchases for all departments. The executive head of the
function issues orders throughout the organisation with respect to his function only. For
eample, the personnel manager will decide the issues related to salary, performance
ppraisal, promotions, transfers etc. for every empioyees in the organisation whether he/
she is in finance department, marketing department, etc. Thus, an individual in an
nganisation receives instructions from several functional heads. The functional expert
ercises functional authority over subordinates in other departments.
Peatures of Functional Organisation
Following are the features of functional organisation :
() The whole task of the organisation is divided into different functions.
(ü) Each function is performed by aspecialist.
) The functional head is incharge of the activities of his function in the whole
organisation.
() Functional heads operate with considerable independence.

AdvantFunctional
ages organisation
of Functional Organisation
has
the following advantages
. Specialisation. This tvpe of organisation has the benefit of having specialists in
ach area. The work is performed by those who have the specialist knowledge of
hat work The workers have the advantage of getting instructions from specialists.
Ihis makes possible the fullest use of energy in the organisation.
326 BUSINESS ORGANISATION AND

MANAGEPlManENinTgin
2. Increase in Efficiency. There is a division of labour upto manager level.
and execution are also separated. This helps to increase the overall
the organisation. The workers get guidance from expert supervisors and
enhances their performance at work.
ef iciency
3. Scope for Growth. The functional organisation provides wide Scope for
and mass production. The employment of specialists at various levels o
enables the organisation to grow as per the needs of the situation.
4. Flexibility. Functional organisation allows changes in organisation
disturbingthe whole work. The span of supervision can also be adjusted without
to the requirements.
5. Relief to Top Executives. Top executives are not unnecessarily burdened.
accorting
happens in line organisation. The line officer is supposed to be a jack of all trad
and is burdened with all types of works. On the contrary a specialist is a mact
of his line and he has the expertise and capability of taking his own decision
6. Economy of Operations. The use of specialists helps in controlling the waste af
materials, money and time. The consolidation of activities leads to optimumle
of facilities like office accommodation, plant and machinery, etc.
7. Better Supervision. Every superior is an expert in his own area and he will he
successful in making proper planning and execution. The superiors being wel
acquainted with the work, they will be able to improve the level of supervision.
8. DemocraticControl. This type of organisation eliminatesone man control. There
will be a joint control and supervision in the organisation. This boosts the morale
of employees and also enthuses a sense of co-operation amnong them. The
democratic approach motivates workers to go deep into their work and make
suggestions for work improvement.
Disadvantages of Functional Organisation
Following are the disadvantages of functional organisation :
1. Conflict in Authority. The principle of unity of command' is violated in functionad
organisation. Asubordinate is answerable to many bosses. Every superior considers
his work important and wants the workers to give top priority to his assignment. 1ne
workers feel confused andare unable to decide about the priorities of their wotK
2. Lack of Co-ordination. The appointment of several specialists creates probiens
of co-ordination, especially when the advice of more than one is needed for takng
decisions. Specialists try to give more importance to their work as compareu w
other areas. This creates conflicts among specialists and co-ordination beconi
a problem.
3. Difficuty in Fixing Responsibility. Since there is no unity of command, it beco
involved
difficult to fix responsibility for slackness in work. So many persons are
in completing a work and everybody tries to blame others for low performa
decision-
4. Delay in Taking Decisions. The involvement of more than one person in
making process slows down it. The speed or action tends to be hampered uiot
division of authority. Much time is taken in consultingdifferent speciaisb P
todecision-making. The
5. Poor Discipline. The division of authority creates problem of discipline.
Discipline
workers have to obey many bosses, their loyalty becomes divided.
ORGANISATION STRUCTURE 327
tends to break down not only among workers but also among lower level
supervisors.
6. Expensive. Multiplicity of experts increases overheadexpenses of the organisation.
number of specialists are appointed for manning various lines of work. These
persons being specialists, they demand much higher emoluments. Small units
cannot afford to have functional organisation.
7 Group Rivalaries. The emergence of many persons of equal status encourages
oroup rivalaries among executives. Persons connected with different fields try to
reate their groups and then rivalary starts among these groups. Every group tries
to dominate the other. The growth of the unit is adversely affected in a vicious
atmosphere.
LINE AND STAFF ORGANISATION
Roth ine andstaff organisations suffer from same drawbacks. On the one hand, line
aroanisation is autocratic and staff organisation, on the other hand, has loose control. Line
t staff organisation eliminates the drawbacks of both and also has the good points of
em. Itis ahappy blending of line and staff organisations. Both ine and staff personnel
have important roles to play. In this organisation line authority flows in a vertical line in
the same manner as in line orgasation. In addition staff specialists are attached to line
Dositions to advise them on important matters.
This organisation owes its birth to the army. Acommander in the field is assisted by
staf officers in planning and executing his strategies. He will like to know the positions of
his enemies so that he is able to plan his own placings. Staff officer helps the commander
in all aspects of his job.
Aline manager is vested with executive authority. He is responsible for making important
decisions and is also accountable for their implications. Line officers are responsible for the
accomplishment of various objectives. The authority flows vertically from top to bottom.
Staff officers are experts in their fields. They are attached to line managers to advise
them in the field of their specialisation. Their role is of advisers. The line officers may or
may not rely on their advice. The staff organisation facilitates the accomplishment of
Organisational objectives by making available valuable advise and expert knowledge. Staff
Ofhicers may be asked to suggest solutions to various problems encountered by line offiers.
Ihey have no authority to command the line staff but have control within their own
organisation. Louis Allen has clarified these roles as, "line refersS to those positions and
elenents of the organisation which have the responsibility and authority and are accountable
for the accomplishment of primary objectives. Staff elements are those which have
Tesponsibility and authority for providing advice and service to the line in the attainment
of objectives."
Type of Staff
The Staff may be of three types :
1. Personal Staff. Personal staff is attached to individual line officers. The Personal
Assistant or the Private Secretary etc. form personal staff of line managers. These
persons help their bosses in every possible way. The routine work of line officers
ie moctlv handled by the personal stait. They fix routine meetings, open the post,
maintain diaries and accompany the boss on official visits. The line oficers are
sDared of routine works and are able to devote much time for planning and execution.
328 BUSINESS ORGANISATION AND
2. Specialist Staff. These are technically qualified persons who provide
whole organisation. They serve line and other staff in planning,
ordinating their work. Their specialised knowledge is an asset to
ser
organising v
the and co.
icMANAGEMENT
e to he
The appointment of a legal advisor may be helpful to every department
advice is required.
3. General Staff. This staff consists of persons attached to the key
or g a nis
wherati
eon.
his
executto ives. They
have the same background as that of line officers. They are attached
functionaries as their deputies, etc. They may be appointed as Deputy important
Assistant Managers, Special Assistants, etc.
Functions of Staff Authority
Managers,
The staff authority is assigned the following functions :
1. Agency of Control. It has to discharge the functions such as: (a)
(b) cost; (c) audit ; (d) budget ; (e) personnel () accounting; etc. organisation;
2. Agency of Co-ordination. It has to help in co-ordination of work among
departments. These functions are: (a) planningi (b) order and diferent
(c) production planning; (d) communication.
distribution:
3. Agency of Service. It performs functions like: (a) research and
(b) taxes ; (c) statistical analysis ; (d) personnel development. development,
4. Agency of Advice. It has to perform functions such as : (a) legal advice:
(b) public relations; (c) labour relations ; (d) economic.
The following diagram shows line and staff organisation:
LINE AND STAFF ORGANISATION
Board of Directors

Chief Executive

Assistant Assistant

Personnel Finance Production Sales Legal

Manager Advisor
Manager Manager Managor

Foreman-I Foreman-lI Foreman-III

Workers Workers Workers

Advantages of Line and Staff Organisation

This organisation has the following advantages : systematic
in a2
1. Specialisation. Line and staff organisation introduces specialisation line officers
manner. Persons with specialised knowledge are appointed to help officersare
and line
The planning part is generally undertaken by staff personnel
able to devote much time for execution. organisation. The
of
2. Better Discipline. The unity of command is maintained in this type
of line officers.
The staff personnel do not interfere with the executive work
ORGANISATION STRUCTURE 329
workers get command from line personnel and are accountable directly to them
for their performance. This creates better understanding and discipline among
employees.
3. Balanced and Prompt Decisions. The functional managers have the advantage of
NDert advice when taking important decisions. The staff can also be used to
investigate and advise on inter-departmental relationships. The line officers can
take balanced and quick decisions.
.Crowth and Expansion. The line and staff organisation is quite suitable for growth
andexpansion. The burden of line staff is eased by the appointment of specialists.
Iineofficers will be able to devote much time for future
planning. The present staff
ull enable the expansion and growth of unit. Some assistants
to cope with the work if needed.
can be appointed
5 Development of Employees. This organisation provides scope for advancement
of career to able and dedicated employees. There are more
who have capabilities of going up. The separation of functionsopenings for those
of 'planning and
'doing ' also helps in creating more and more job opportunities.
chances increase for Promotional
deserving persons.
6. Lesser Burden on Line Officers. With the appointment of staff
officers the burden
of line officers is greatly reduced. The specialists help line
officers in
things regarding their lines of specialisation. The line officers are left withdeciding
routine
administrative work. They will be ableto devote their time in supervising the
implementation of various plans and policies.
7. Quick Actions. The line officers will have sufficient time to take
various decisions.
Whenever there is a need for certain decisions, they will be able to devote time
and decide the things. This type of situation helps in solving many
issues which
would have created difficulties if timely decisions would not have been
taken.
Disadvantages of Line and Staff organisation
The line and staff organisation suffers from the following drawbacks:
1. Conflict between Line and Staff Personnel. There is a possibility of conflict
line and staff personnel. The responsibility for operations lies with linebetween
officers
while staff officers only advise. The staff officers feel ignored at the hands of line
officers. The line officers, on the other hand, complain of interference by staff
persons in the day-to-day working. The conflict between line and staff officials
adversely affects the work in the organisation.
L. Lack of Responsibility. There is a lack of responsibility for staff officials
not accountable for the actual results of operations. This may tempt them They are
to
rash or theoretical advice. They may also be casual in their approach becausegive the
whole blame for non-performance lies with line.
S. More Dependence on Staff. The line officers become habituated for advice on
Statt. They refer everything to staf for advice. Over- dependence on staff will make
ne officers less creative. They will not give much thought to any activity since
advice will be available from staff.
* Lack of Co-ordinaton There will be a lack of co-ordination between line and
star: The staff advice may be confusedwith line orders. The staff officersmay also
not be clear about their exact role. They may try to dominate the implementation
 330 BUSINESS ORGANISATION AND
part of their advice. Overlapping of functions will create confusion
among employees.
Difference between Line Organisation and Functional Organisation
MANAGEand MdiEsoNrdTer
Line Organisation Functional Organisation
1. Doing of actual work, both physical and Perform only specialised functions
mental. advisory in nature.
2. Centralised authority. Decentralised authority.
3. One supervisor-one subordinate. Several advisors to one subordinate
4. Responsibility is always fixed. No fixed responsibility.
5. Less expensive. More expensive.
6. Suitable for small business. Suitable for big business.
7. More flexible. Less flexible.
8. Have authority of command that Have authority of ideas and knowledge.
flows downwards.

5. Ineffective Staf. The staff officers do not wield any power in the
organisation.
Without power they will not get prestige in the organisation. They will al
unimportant and the quality of advice will also be adversely affected.
6. Expensive. This type of organisation is very expensive because a large number of
specialists are appointed. The persons being experts in their fields, they demand
higher emoluments. Small and medium concerns cannot afford line and staff
organisation because of its expensive nature.
Difference between Line and Staff
1. Staff thinks, lines do.
2. Staff advises, lines perform.
3. Staff tells the line what to do, lines tell staff where to go.
4. Staff has the authority of line, lines have the authority to command.
5. Staff has no fixed responsibility, lines have fixed responsibility.
6. Staff has no authority over the line and has only power to recommend. Line is
responsible for actual execution of work.
Line and Staff Conflict
Line and staff structure is based on the assumption that both will help and suppot
each other. But often there are conflicts between the two and both accuse each other. Ther
is a lack of understanding and both try to dominate each other. Some of the reasons o
Conflict between the two are as follows
1. Line managers have the following complaints against staff :
(a) Staff officers claim credit for programmes which are successful but do not w
to share responsibility for their failure. The blame for unsuccessful taso
thrust on line managers even though they act on the advice of the stal.which
advice
(b) Staff officers are more theoretical than practical. They tend to give without
has not beentested earlier. They emphasise their field of specialisation
giving much thought to the overall interest of the company.
ORGANISATION STRUCTURE
331
(c) Staff officers do not remain contended by giving advice only. They try to
persuade the line for
heir field of activityimplementing
and enter the whatever
they have suggested. They trespass
area meant for line people.
Though staff officers are well qualified and have good knowledge of
but try to dominate line officers. They feel their field
themselves superior
This type oftendency creates conflict and friction between line to line officers.
and staff officials.
2. Staff personnel have the following complaints :
i) Line officers do not make proper use of
expert knowiedge of the staff. They do
not consult staff personnel at the planning level
suggestions. Statf people are consulted only as where they can make practical
a last resort.
(h) Staff people feel that their advice is not
personnel. Line officers do not consult staffproperly implemented by the line
When staff officers try to guide line persons inwhile implementing the advice.
then they are accused of interference. implenmenting the programmes
(c) Line officers are not generally
the staff. They resist new thingsenthusiastic about the new ideas suggested by
and insist on following the traditions.
(d) Staff officers do not have authority to
implement their ideas. They should be
given authority like line officers in supervising
suggestions.
the implementation of their
Allthe complaints of both line and staff personnel are
These conflicts are not based on ideologies. Proper based on lack of understanding.
tust can help in improving the efficiency of both line demarcation of their fields and mutual
and staff personnel.
D. MATRIX ORGANISATION
Matrix organisation is also known as
The essence of matrix organisation is the grid organisation, project or product management.
combining of functional and product patterns of
departmentation in the same organisation. Matrix
organisation attempts to gain the
of both these forms of
departmentalisation while strengths
teature of matrix organisation is that it violates the avoiding the weaknesses. An important
Ihe employees in this classical principle of unity of command.
organisation have two bosses-their functional departmental managers
GENERAL MANAGER

ENGINEERING MANUFACTURING| ACCOUNTING| MARKETING

|MPRODUCT
ANAGER A ENGINEERING MANUFACTURING ACCOUNTING
MARKETING
GROUP GROUP GROUp
GROUP

PRODUCT B
MANAGER ENGINEERING
GROUP
|MANUFACTURING
GROUP
ACCOUNTING|
GROUP
MARKETING
GROUP

PRODUCT
MANAGERC ENGINEERING
GROUP
MANUFACTURING
GROUP
ACCOUNTING
GROUP
MARKETING
GROUP
332 BUSINESS ORGANISATION AND
and their product managers. So this design has a dual chain of command.
next page explains the working of matrix desigm.
It is cBear from the diagram that al the employees
MANAGEMENT
The
diagam
are subject to dual
o

Command. Thev are accountable to their functionai

head as well as product
line chain
i
For example, the engineering grOup will be answerable to the senior executive in manage
as well as product line manager.
of organisation generally occurs in construction, in arrospace
engineering
This kind
launching a weather (designing and
satellite), in marketing (advertising a compaign for a new product, in
the installation of an electronic data processing system, in
management
where professional experts work together on a project.
consultancy firnms
Advantages
Following are the main advantages of matrix design:
when a multinlici..
1. This design helps in co-ordination of various activities organisation.
complex and independent activities are taken up in the
aurho
2. The matrix reduces the drawbacks of bureaucraticdesigmn. The dual lines ofgoals
reduce the tendency of departmental heads to put their departmental f
before the organisational goals.
proid.
3. The direct and freguent contact between different experts in the matrix can
information reaches fact t
for better communication and more flexibility. The
those who need it.
4. The matrix facilitates the efficient allocation of specialists when specialists are
confirmed to one department only, their talent remains under utilised.
Problems
Following problems are faced in matrix organisation :
1. A state of conflict exists between functional and project managers as both compete
for limited financial and human resources.
and vertical influence
2. An imbalance of authority and power, as well as horizontal
problems in matrx
of the project and functional managers can also lead to
organisation.
themselves agansi
3. Because of potential conflicts, managers mnay want to protect
administrative costs.
blame by putting everything in waiting, whích increases
4. This type of organisation requires many time-consuming meetings.
employees. Dual unity
5. This design puts lot of pressure and stress on the individual
of command introduces role conflict and unclear expectations introduce role ambI3
Guidelines for Making Matrix Management Effective
Clemens sugests following guidelines for making this organisation effective :
1. Define the objectives of the project or task. members.
and team
2. Clarify the roles, authorities and responsibilities of managers ratherthan onrank.
3. Ensure that influence is based on knowledge andinformation,
4. Balance the power of functional and project managers. leadership.
provide
5. Select an experienced manager for the project who can
ORGANISATION STRUCTURE 333
Undertake organisation and team development.
6 Install appropriate cOst, terms and quality controls that report deviations from
standards in a timely manner.
Reward project managers and team manager fairly.
8
Network Design
Network design is a newly emerging organisational design which totally abandons the
cdassical,
, hierarchical, and functional structure of organisations. This design also goes beyond
thehorizontal structures. The need for this design arose due to the recent technological
developments in the business environment.
Miles and Snow have identified this design as the "dynamic network." They describe
thenetwork design as "Delayered, highly flexible and controlled by market mechanisms
rather than administrative procedures, firms with this structure arrayed themselves on an
industryvalue,chain according to their core competencies, obtaining complementary resources
ihroughstrategic alliances and outsourcing."
Tanscott and Caston not that such network organisations are "based on Icooperative,
nuli-disciplinaryi teams and business networked together across the enterprise. Rather
ian arigid structure, it is a modular organisational architecture in which business teams
operate as a network of what we call client and server functions."
Iinlike thetraditional organisations, which were the old inflexible hierarchical pyramid,
nefwork organisations are a flexible, spherical structure that can rotate, competent, self
managing teams and other resources around common knowledge base. These teams, capable
df quick action on the firm's behalf both externally and internally. provide adistinct
competitive advantage. Both these designs are shown in the following figure :

THE HIERARCHICAL DESIGN THE NETWORK DESIGN

loday'Mhles and his colleagues

s organisations : have recently identifed three types of radical redesign of
0 Green Field Redesign. This design implies starting from just a clean slate or from
Just a piece of green field, breaking completely from the classical structure and
establishing a totally different design.
) Rediscovery Redesign. In this design, already established companies return to a
Previously successful design by elimninating unproductive structural additions
and modifications.
 334 BUSINESS ORGANISATION AND
(ii) Network Design. In the network design, the firm concentrates on
addthe greatest value in the chain and it outsources to
upstream
stream partners who can do a better job. This network of the
upstream and down stream partners can be optimally effective
and
MANandlAfiGrmEoMrENT
f and
le
where it
downits
can
Another network approach is to require internal unitsof the firm to
fl
market prices, buy and sell to each other at prices equal to those interaci
obtained by outsourcing partners. that exible
can be,
.
at
RECENT TRENDS IN ORGANISATION STRUCTURE
Organisation structures have been changing with the need and
firms. The disintegeration of Soviet Union and opening up of global markets requirements
have
of the
new demands for organisations. The globalisation of economy has created
for large and small organisations. The organistions can gain only if they new
created
mould or
as per the new requirements. Some of the important changes recently noticed are: opportuadjniutyst
Selling Products and Services Around the World
With the opening up of economices to international trade, there are opportunite..
enter new markets. Selling products to international markets poses new
organisations which are structured primarily for domestic sales. In order to challenges for
compete
successfully in global markets, companies have discovered that paying attention to
customs and cultures is important. This will require the association of persons from br
countries. This will necessitate the creation of some type of organisational structurein
countries while activities are to be extended. Some multinationals have extended th
activities from only selling to manufacturing also. The South Korean and Japaness
multinationals which were first selling their products like cars, televisions, fridges, washing
machines, air are conditioners etc. in India have now started producing these prod1ucis
partly or fully, in this country. Under such situations the organisational structure will regquire
some changes to cope with the new opportunities.
The global sales and service functions require integration of company knowledge and
information on aglobal scale. The telecommunication links have enabled firms to maintain
tight controls of costs and provide a high level of service to customers.
Outsourcing Operations Around the World
Many companies have started taking advantage of production operations allover the
world. The manufacturing and retailing companies try to achieve cost savings while outsourcing
some of their activities. Outsouricng allows companies to focus on core competencies, and
takes of strategic partnerships with other firms whose competencies are complementary
synergistic. For example, outsourcing has allowed Nike to focus on design and markeiny
ieaving manufacturing toother companies that specialise in that par of busines.
OBJECTIVE TYPE QUESTIONS
1. MULTIPLE CHOICE QUESTIONS
1. Organisational structure is a means towards
(a) Achievement of organisational goals performance
(b) Achievement of c0-ordination (c) Achievement of effective