The term organisational structure reveals the established pattern of relationship among the constituent parts of the organisation. It prescribes the relationships among various activities and various positions in an organisation. It is nothing but a chart of relationships.
Organisation Structure refers to a system where the work is divided formally. These smaller tasks are gathered and synchronised in order to promote coordination in the organisation. It refers to an outline of groups, individuals, operation systems and job putting efforts to certain stipulated goals. It is the arrangement of jobs which is formally defined. According to Mintzberg (1972), “Organisational Structure is the framework of the relations on jobs, systems, operating process, people and groups making efforts to achieve the goals. The organisational structure is a set of methods dividing the task of determining duties and coordinates them.”‘
According to Hold and Antony (1991), “Structure is not a coordination mechanism and it affects all organisational process. Organisational structure refers to the methods of internal relations of organisation, power and relations and reporting, formal communication channels, responsibility and decision-making delegation is clarified.”
According to Monavarian, Asgari, “Organisational structure is a set of methods dividing the task to determining duties and coordinates them.”
Importance of Organisational Structure:
The organisational structure is a mechanism through which management directs, coordinates and controls the business.
A sound organisational structure:
- Facilitates the management process and overall operations of the organisation and provides better coordination.
- Encourages growth by increasing efficiency and gives clarity about roles and responsibilities.
- Builds relationship across various managerial levels and encourages human beings to attain psychological satisfaction from his work, his position and his working environment.
- Defines organisational relationships and stimulates creativity in the organisation by initiating new and improved ways of the work process.
Features of Good Organisational Structure:
Continuity and Flexibility: Organisational structure should not be rigid and be able to accommodate future requirements also.
Ultimate Authority: The superior is responsible for the performance of his work along with the work of his subordinates.
Tesser Managerial Levels: The more number of management levels, the longer is the delay in communication.
Link between: The Board of Directors, shareholders and the management team should be there. This is because the Board of Directors seldom meets management, hence the organisational structure helps in defining how top-level management and Board of Directors will interact.
Unity of Direction: The organisation structure must focus that each subordinate and member focus on one common goal.
Unity of Command: One person should receive orders from one boss only.
Common Goals: Organisational structure ensures the smooth achievement of goals.
Cooperative efforts: The proper coordination and mutual cooperation among various subsystems in an organisation.
Simplicity: Organisational relations should be kept minimum and straightforward possible with clearly defined roles, powers and responsibility.
Division of Work: It ensures speedy execution of work.
Communication: It mainly downward communication takes place in the form of superiors issuing commands, orders, directives etc.
Clear Line of Authority: Running from top to bottom or sometimes in horizontal lines.
Designing the Structure:
Peter F Drucker has identified three types of analysis which should be made in deciding the design of an organisational structure. These are
Activity Analysis: What all are the tasks to be performed? These are the functional activities t be performed, which form the basis of other activities. It deals with division and sub-division of entire work.
Decision Analysis: What types of decision are needed and at what levels? Take decisions about futurity and the effect of the decision.
Relations Analysis: What are the relationships that exist at various levels of an organisation? The relations can be diagonal, horizontal and vertical.
Factors Affecting Organisational Structure:
According to Peter F Drucker, ” Structure is a tool to achieve short and long-term goals of the organisation. Thus, any discussion should be regarded as goals and strategy unstructured.”
Interaction with the Customer: If the interaction of the lower level management is more with the customers then there’s need of independent decision making; hence, a decentralised structure is appropriate. If the lower management seldom interacts with the customers, then the highly centralised structure is best.
The Sensitivity of Data: If the company deals with sensitive and personal data, then the decentralised structure is best suited as only selective managers can access personal information. Where the information is insensitive, then there can be a centralised structure where the information is centrally stored.
Innovation: If the company is based on innovations and creativity, then the lower the levels of management, the better it is for the company. In this case, flat organisations are best suited as they remove the delay in approval from different layers.
Marketing Consideration: If the company sells differentiated products then the divisional structure is beneficial as there will be separate divisions for each market, on the other hand, is the product, i.e. alike then functional structures are best suited.
Size of the Organisation: If the organisation is large in size then there will be higher managerial levels. Smaller organisations will have 0-1 levels of management.
Business Cycle of the Organisation: There are namely four stages:
- Birth: There are no levels of delegation of authority, no formal structure.
- Youth: The formal structure is introduced in this stage as the customers begin to increase.
- Middle Life: Here, the operations attain zenith hence the organisational structure is large, complex and various layers are introduced.
- Maturity: The firms attain maturity and turns into a lesser innovating and expanding the organisation. Hence, with an increase in profits, the organisations spend fewer resources in experimenting with the organisational structure. There are no new inventions in the organizational structure. They remain stable and are continued in future.
Strategy: When the organisation wants to attain first-mover advantage then the organisation must use organic structures. Firms which aim at producing already existing products must follow mechanistic structure.
Environment: It comprises of the legal, socio-political and economic environment. It includes:
- Stable environment: mechanistic structure is apt as it increases productivity.
- Unstable/Dynamic Environment: Organic structure is beneficial as it helps in tackling the changing environment aggressively.
Technology: Organisational structure depends on the technology and the production of the organisation.
- Small Batch Production: They produce customised and a smaller quantity of goods, hence the organisational structure are more flexible.
- Mass production: They indulge in bulky production, hence there organisational structure is more rigid.
Routine Activities: When the organisation performs more routine activities, then the structure is standardised, while non-routine activities need repeated up-gradation hence decentralised and flexible structure is appropriate.