Organizational Structure: Definition, Types, Process, and Importance

What is Organizational Structure?

Organizational structure is a management concept that outlines the methods of doing activities in the organization from beginning to end in order to achieve the defined goals and objectives. It is related to creating different departments and divisions of activity for the integrity of performing the jobs.

A properly organized structure defines all the necessary information that an organization consists of such as rules, roles, responsibilities, flows of work, flows of information, and so on. And it is concerned with organizational design.

The development of a particular organizational structure defines the authority-responsibility relationship. The form of an organizational structure depends upon the nature and size of the organization. Thus, it varies from organization to organization.

The main objective of organizational structure is to develop an organizational concept that helps all members to understand easily their rules, roles, and responsibilities. It helps to make a mutual understanding between employees and the organization.

Types of Organizational Structure

In management, types of organizational structure mainly include line, functional, line & staff, committee, and matrix organization structures. According to the character, time, and situation of the organization, every organization’s structure is important considering its potentiality.

Related: What is Organizing? Definition, Features, Principles, Process, and Importance

Line Organization

This is a simple form of organizational structure. The authority flows from top to bottom with an unbroken chain. The top manager has full decision-making authority though he is responsible for his made decisions. And the entire people of the organization are the followers of his decisions.

Functional Organization

This is the second type of organizational structure. As its name suggests, according to the specialty areas the functions are divided.

For example, production activities to the production department, financial activities to the finance department, etc. And, as per department the head and juniors are different.

Line and Staff Organization Structure

This is the combination of both line and functional organization structures. As we have mentioned their separate definition above.

The main objectives of this organization are to improve the functionality of the organization through effective coordination, optimum utilization of resources, and provide greater flexibility.

Committee Organization

A committee organization is a set of people who are interacted to perform some specific activities to achieve planned objectives. As per the time and situation, various committees are formed in the organization.

Committees are responsible to extract information from the present and future markets which support the quality decisions and progress of the business firm.

Matrix Organization Strucutre

Matrix organization is a special form of organization structure that is developed to solve complex problems. Even if it is an advanced form of organizational structure.

It can be formed by combining two or more organizational structures. Initially, it is difficult to manage this organization, but when it is managed properly the benefits are outstanding.

Process of Designing Organizational Structure

After understanding what is an organizational structure, a question might arise in your mind, how do develop an effective organizational structure?

So, let’s understand the process of structuring an organization through a step-by-step guide,

organizational structure designing process
Process of Designing An Organization Structure

Step 1: Designing Jobs

Job design is the first step in designing the organizational structure. Job design is the process of dividing complex jobs into simple tasks or activities and grouping similar tasks into a job package. It is a process of defining an individual’s work-related responsibilities.

Also Read: What is Job Design? Definition, Meaning, Benefits, and Techniques

Jobs can be redesigned by one or more methods among job rotation, job enlargement, job enrichment, job empowerment, making semi-autonomous groups, and providing alternative work arrangements.

Step 2: Grouping Jobs (Department)

In this step, similar job activities are grouped into units or departments with some logical arrangement. But it is almost impossible to manage everything if the organization grows up. In such a situation, different managerial jobs need to be created and managers need to be hired.

Departmentation can be done on the basis of function, on the basis of product, on the basis of customers, on the basis of location, on the basis of time to serve, etc. From departmentalization, different positions are created.

Step 3: Establishing Reporting Relations

It is required to clarify who needs to report to whom. Normally, lower positions are required to report to a subsequently higher position (immediate superior). Such relationships are established in a vertically linear form.

This is called the chain of command. Thus, a chain of command is a clear and distinct line of authority among the positions in an organization.

Step 4: Distributing Authority

Authority is the decision-making power. Each job position should have a certain degree of authority which allows employees to make decisions during the job. This is a source of inspiration to the employees. There must be a balance between responsibility and authority to maintain good coordination, prompt decision, and discipline in the organization.

Thus, in the organizing process, the authority should be properly distributed among the job position. Only required and sufficient authority should be fixed with responsibility.

Step 5: Coordinating Activities

Coordination is the process of linking the activities of the various departments of the organization. Efforts and output of each department should be integrated in order to increase organizational efficiency. Thus, the efforts of departments should be coordinated.

Coordination is essential because of the interdependency of departments for information and resource. The greater the interdependency more coordination is required in the organization.

For effective coordination, effective communication channels need to be established.

Step 6: Differentiating Between Positions

Finally, as the last building block of organizational structure, line position and staff position need to be differentiated.

A line position is a position in the direct chain of command while a staff position is a position created for providing expertise suggestions, advice, and support to the line position. Staff positions are temporary in nature and hold very little authority.

There can be a contradiction between a staff position and a line position. Thus, line and staff positions should be differentiated clearly.

Importance of Organizational Structure

The followings are the main importance of effective organizational structures in the workplace.

Provides Clear Roles & Responsibilities

Organizational structure establishes clear roles and responsibilities for employees. It defines who is responsible for what tasks and ensures that there is no confusion or overlap in job duties.

This clarity enables individuals to understand their areas of responsibility, promotes accountability, and facilitates effective collaboration within teams.

Ensures Timely Attainment of Goals

A well-defined organizational structure helps in setting and achieving goals in a timely manner. By clearly delineating reporting lines and decision-making processes, it ensures that tasks are delegated efficiently, information flows smoothly, and resources are allocated effectively.

This streamlined approach helps teams stay focused, align their efforts, and work towards achieving organizational objectives.

Eliminates Overlapping and Duplication

An organized structure eliminates overlapping and duplication of efforts within the organization. Establishing clear reporting relationships ensures that each employee knows whom to approach for guidance or support.

This eliminates redundancy, minimizes confusion, and optimizes productivity by allowing individuals to work on their assigned tasks without unnecessary repetition.

Enhances Organizational Productivity

Organizational structures play a crucial role in enhancing productivity. By dividing work into manageable units, it enables specialization and the efficient allocation of resources. Teams can work cohesively, leveraging their skills and expertise, to achieve common goals.

A well-structured organization also facilitates effective communication, coordination, and decision-making, leading to increased productivity across all levels.

Offers Clear Hierarchical Structure

Organizational structure provides a clear hierarchical framework within the organization. It establishes levels of authority, reporting relationships, and communication channels.

This clarity allows for effective decision-making, efficient flow of information, and smooth coordination. Employees know whom to report to and can seek guidance from their supervisors, fostering a sense of direction and stability.

In Conclusion…

An organizational structure is formed to provide an understandable nature of the organization so that the work could be done effectively and efficiently. Thus a proper organizational structure is needed to complete the given jobs as required to achieve the organizational goals.

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