FOUNDATIONS

OF
ORGANIZATION
AL
STRUCTURE

CHAPTER X:
FOUNDATIONS OF
ORGANIZATIONAL STRUCTURE

What is Organizational Structure

Basic

Elements of Organizational Structure

Common Organizational Designs

The

Simple Structure
The Bureaucracy
The Matrix Structure

New Organization Design Option

Outsourcing

Organization
Team Structure

The Organizational Structures Relevance

to Human Behavior

WHAT IS ORGANIZATIONAL
STRUCTURE
refers to the formal pattern of how people and jobs are
grouped in an organization.
is often illustrated by an organizational chart, specifying
who reports to whom.
consists of mechanisms that serves to coordinate and
control activities of organizational members.
Coordination is the process by which tasks and
departments are interrelated to achieve the goals of the
organization.
Control refers to the regulation of activities in ways that
will enable members to predict and stabilize relationships
with other members of the organization.
The coordinating and control mechanisms must be both
matched to the context of the organization to make the
organization effective.

BASIC ELEMENTS OF
ORGANIZATIONAL STRUCTURE

1. Work Specialization
refers to the degree to which tasks in the
organization are subdivided into separate jobs.
The result is that individuals specialize in doing
part of an activity rather than the entire
activity.

STRUCTURE AND SPECIALIZATION

ADVANTAGES OF WORK
SPECIALIZATION

a)
b)
c)

total productivity tends to multiply geometrically;

simplified tasks can be learned in a relatively short time
and be completed quickly; and
the availability of a variety of jobs makes it possible for
people to choose, or be assigned to positions they enjoy
and for which they are well suited.

BASIC ELEMENTS OF
ORGANIZATIONAL STRUCTURE

2. Departmentation

is a basic element of organizational structure that

refers to the grouping of jobs under the authority of a

single manager, according to some common, rational
basis, for the purpose of planning, coordination, and
control.

The basis for grouping jobs includes the following:

a) Knowledge and skills
b) Work process and function
c) Time
d) Product
e) Customer
f) Location

2. DEPARTMENTATION
BASIS FOR GROUPING JOBS
a.) Knowledge and Skills
positions may be grouped according to
the specialized knowledge and skills
that members bring to the job. The
advantage of this grouping is that
efficiencies are obtained if specialists
are grouped together
UNIVERSITY

NURSING

ENGINEERING

BUSINESS

Figure 1a. A SAMPLE OF GROUPING OF JOBS

ACCORDING TO KNOWLEDGE AND SKILLS

2. DEPARTMENTATION
BASIS FOR GROUPING JOBS
b.) Work process and function

Under this type of grouping, separate

departments are set up to handle activities such
as marketing, production, human resource
management, research and development, and
finance. The purpose of this grouping is to
achieve economies of scale by placing people
with common skills and orientation into
common units.MOTOR CAR DEALER

Sales

Credit

Service

Figure 1b. A SAMPLE GROUPING OF JOBS

ACCORDING TO WORK PROCESS AND FUNCTION

2. DEPARTMENTATION
BASIS FOR GROUPING JOBS
c.) Time

positions may also be grouped on the basis of

when the work is to be done.
Textile Manufacturer
First Shift
6:00AM to
2:00PM

Second Shift
2:00PM to
10:00PM

Third Shift
10:00PM to
6:00AM

Figure 1c. A SAMPLE GROUPING OF JOBS

ACCORDING TO TIME

2. DEPARTMENTATION
BASIS FOR GROUPING JOBS
d.) Product

positions in the organization may be grouped

according to the good or service that is being
produced.
TRADING COMPANY
Motorcycle

Appliance

Lubricants

Figure 1c. A SAMPLE GROUPING OF JOBS

ACCORDING TO PRODUCTS

2. DEPARTMENTATION
BASIS FOR GROUPING JOBS
e.) Customer

groups may also be formed on the basis of the

need to deal with different types of customers.
APPLIANCE DEALER
Cash

Credit

DRUG MANUFACTURER
Government

Consumers

Figure 1c. A SAMPLE GROUPING OF JOBS ACCORDING TO

CUSTOMER

2. DEPARTMENTATION
BASIS FOR GROUPING JOBS
f.) Location

positions may also be grouped according to the

location.
INSURANCE COMPANY
Luzon
Division

Visayas
Division

Mindanao
Division

Figure 1c. A SAMPLE GROUPING OF JOBS ACCORDING TO

LOCATION

BASIC ELEMENTS OF
ORGANIZATIONAL STRUCTURE

3. Pattern of Authority

refers to the extent by which organization

members are allowed to make decisions without
getting the approval of another member.
No single pattern of
authority
is
appropriate for all
organizations because
environments
of
organizations
differ.
Instead, the pattern of
authority must match
the
organizations

BASIC ELEMENTS OF
ORGANIZATIONAL STRUCTURE

3. Pattern of Authority

Authority patterns may either be centralized or

decentralized.
Centralized decision making is concentrated in
the hands of higher-level managers.
better suited for stable environments.
Decentralized decision-making authority is granted
to
middle and lower management
positions.
for complex and changing
environments.

BASIC ELEMENTS OF
ORGANIZATIONAL STRUCTURE

3. Pattern of Authority

Decentralized (cont.)

Advantages of Decentralized Authority:

Efficiency red tapes and bottlenecks are reduced.
Flexibility managers can cope with situations as they come.
Initiative managers are highly motivated by the challenge.
Development managers are provided with opportunity for
training.
Disadvantages of Decentralized Authority:
Control coordinating overall activities is more difficult.
Duplication there is a great chance of efforts duplicated
between departments.
Centralized expertise home office experts may be overlooked or
disregarded.
Competency the organization may not be able to produce
competent managers at all levels.

BASIC ELEMENTS OF
ORGANIZATIONAL STRUCTURE

4. Span of Control

refers to the number of subordinates reporting to

a single supervisor; it may either be narrow or
wide.
Narrow there are few subordinates reporting
to a supervisor. It is characterized by the
following:
there is a closer relationship between manager
and subordinates;
there is less delegation of authority;
controlling of activities are more tight; and
there is more time for rewarding behavior.

4. Span of Control

Narrow

BASIC ELEMENTS OF
ORGANIZATIONAL STRUCTURE

4. Span of Control

Wide there are many subordinates reporting to

a supervisor. It is characterized by the following:
employees work with little supervision;
there is a high level of delegation of authority;
controlling is lighter; and
there is less time for rewarding behavior.

The

appropriate span of control will depend on

the situation. Neither the narrow or the wide
span of control is applicable to all types of
situations

4. Span of Control

Wide

BASIC ELEMENTS OF
ORGANIZATIONAL STRUCTURE

5. Coordination of Activities

refers to the linking of activities in

the organization that serve to
achieve a common goal or objective.

COMMON
ORGANIZATIONAL
DESIGNS
The Simple Structure

is one that is characterized by a low degree of

departmentalization, wide spans of control,
authority centralized in a single person, and little
formalization.
it has little technical and support staff.
it achieves coordination through direct supervision,
often by the chief executive in the upper echelon.
most appropriate for small businesses like the
retail store, service shop, and small manufacturing
firm. Under this arrangement, the manager is also
the owner.

COMMON
ORGANIZATIONAL
DESIGNS
The Simple Structure

The advantage of the simple structure is its

simplicity. With the owner directly managing the
organization, decisions can be made fast. The
structure is flexible because the owner can modify it
anytime as the need arises.
The weakness of the simple structure is its inability
to serve a large organization. This is because of its
low formalization and high centralization which tend
to create information overload at the top. As the
organization grows in size, decision making becomes
slower and after an extended period, the organization
becomes dysfunctional. This is prelude to failure.

COMMON
ORGANIZATIONAL
DESIGNS
The Simple Structure
SAMPLE OF A
SIMPLE
STRUCTURE
(Wilfredo Dungo
Automotive
Repair Shop)

This structure is an
organization chart
for an automotive
repair shop. Wilfredo
Dungo owns and
manages the shop.
Although he