Definition of Organisational Structure

Welcome to the next unit. Hope you have gone through the previous units and are happily travelling through your learning curve. Have you noticed that your two year course is divided into 4 semesters, starts with introductory management concepts, slowly concentrating on special concepts? Then each subject divided into five units, each unit divided into lessons and topics, which are like steps in a stair case, elevating your knowledge. The point is we organise things to improve the efficiency. The same way, the structure of an organisation is an important factor for the improvement of efficiency and performance of the employees in the organisation.

You have seen about organisation structure in your previous semesters. Still, let us have a brief introduction, to refresh the memory. Then, we shall discuss the effectiveness of organisational structure in terms of employee performance.

Business Dictionary defines organisational structure as a hierarchical arrangement of authority and responsibility. The structure helps to

Understand the rights and duties

Role clarification

Clearly draw lines of control

Regulate the flow of information and creates a proper communication channel

Helps in coordinating and controlling the process and people in the organization

Mintzberg defines organisational structure as “the sum total of ways in which it divides its labour into distinct tasks and then achieves coordination among them.”

He further advocates that a good structure should have six components namely

Operating core: The people directly related to the production ofservices or products;

Strategic apex: Serves the needs of those people who control theorganisation;

Middle line: The managers who connect the strategic apex with theoperating core

Techno structure: The analysts who design, plan, change or train theoperating core

Support staff: The specialists who provide support to the organisationoutside of the operating core’s activities

Ideology: the traditions and beliefs that make the organisation unique.

The above mentioned six components are linked by four flows namely,

Authority;

Work material;

Information and

Decision processes.

Organisational structure gives a clear understanding of the size of the organisation, and the work flow and process. Apart from the significances of the organisational structure in general management of the organisation, the size of the work force should be managed efficiently. The process of identifying and managing the necessary size of work force is called as right sizing.

Organizational structure is important for evaluating employee performance. The linear structure of functional and product organizational structures allow supervisors to better evaluate the work of their subordinates. Supervisors can evaluate the skills employees demonstrate, how they get along with other workers, and the timeliness in which they complete their work. Consequently, supervisors can more readily complete semi-annual or annual performance appraisals, which are usually mandatory in most companies.

As our focus here is to see the effectiveness of organisational structure in terms of employee performance, we should next see the different types of organisational structures.

Types of Organisational Structures

Organisational structure is of different types. Broadly speaking, we can classify the following three major types:

Traditional structures

Divisional structures

Adaptive structures

Traditional Structures

As the name suggests, this is the structure based on functions and departments. These structures are well understood on the lines of rules and procedures of the organisation. The lines of authority are clearly depicted on all the levels of management. Now lets us see some of the basic structures under traditional system.

Line Structures

The line of command is the base of this structure. Approvals, Orders, power and responsibility – all flow from top to bottom in this kind of structure. This structure is more suitable for relatively small firms with fewer departments.

Performance Management in Line structure: The line structureclearly draws lines between the function, process, authority and responsibility. It becomes easier to identify and measure the work of the employees. Hence, as a result, this structure helps in evaluation of employee performance in a better light. The skills of employees, their timeliness in completion of work and the responsibility and commitment on completion of the work are well estimated. The line structure is thus preferred in many organisations, as this helps in timely completion of performance appraisals of the employees.

Line and Staff Structure:

Line structure is suitable for small organisations. Line and staff structure is for bigger organisations, where more number of departments and employees are present. Line is represented by those who are directly responsible for achieving organisational goals, and staffs are those employees who play the role of advisors, who is of assistance to the line managers in some specialised areas where line mangers doesn’t have’the required expertise.

The authority flow is from top to bottom, but the line mangers have more legitimate flow of authority than staff managers. Still, the staff managers have the authority to say ‘go’ or ‘no go’ in their area of expertise. Hence, this creates a slower processing of decisions and it s a sort of centralised management system.

Performance Management: The management and appraisal ofperformance of employees in this structure is a little bit cumbersome than the line structure. In the contemporary world of Human Resource and the development in this conceptual area, it is the experts or staff personnel (most often HRM people) who do the major part of appraisals. The important disadvantage of line structure is the managers have to play different roles of expertise. For example, a production manager has to recruit, manage his workers, and appraise them.

In practicality, think if a production manager is basically an engineer and when he is supposed to understand the human side and appraise the workers, there arises the problems in appraisals. In line and staff structure, there is the possibility of utilising the expertise of HRM people to carry over these management jobs of recruiting, placing and appraising the employees with professionalism and empathy.

Divisional Structures

Divisional structure is for large enterprises which deal with multiple products and different markets. Divisions are made based on geographical territories, products or process. Each division has its own divisional manager and runs the divisions as small units of the organisation. Managers are given with the authority and responsibility to run their divisions. The decentralization of powers helps in faster decisions and hence faster achievement of the organisational goals.

Adaptive Structures

All the organisations don’t need to have the customary departments, or it is not that necessary all the projects and situations are similar. According to the necessity of a situation or project, the organisation may have to go for a new structure which suits them. They are called as adaptive structures.

Adaptive structure is generally of two types and they are

Project Structures

Matrix Structure

Project Structure

This structure is well suited for organisations which undertake time bound project works. The focus is to execute the one time operational projects without messing up the existing structure. The employees may be posted to the projects on deputation till the project work is completed and will be absorbed back into the original department where they belong. The project heads usually has the autonomy of running his team.

The advantage being the performance appraisal can be based on the particular project for the period, the employees gets chance to have job rotations and can try their hands on new ventures and new job areas, apart from their day to day monotonous routines. The accomplishment of the project gives a glimpse of measuring the performance of the team.

The disadvantage is that the changing of place, job and designations (sometimes) of certain employees may not go well with the parent department. Next, the project structure is not always based on functionalities and combine different process together for a project, thus resulting in a mangled performance appraisals.

Matrix Structure

This structure was invented to overcome the disadvantages in project structure, thus combining the functional structure and project structure. Also called as hybrid structure, matrix structures are termed as the successful and efficient structure for huge corporates.

In this structure, the organisations is divided into functional divisions and also divided on the basis of the projects or products. The employee will have two immediate superiors instead of one, which defies the basic principle of management, all these years organization have stick to –“Unity of Command”. The flow of authority is from both sides – vertical and horizontal and the employee who is at the meeting point of these grids has to work under both superiors from vertical and horizontal side. This may be well understood with the diagram given below.

Matrix Structure

Functional manager decides on the operational aspects and Project manager exercises his authority over the conduct and completion of his project. He decides on project aspects and has full power over the resources necessary for him to complete the project. The autonomous status of project structure is maintained without spoiling the functional structure thus resulting in better decisions, faster decisions and easier accomplishments of projects. The expertise support of the function heads steer through the difficulties a project manger may face due to his confined status of working inside the project.

Performance Management in Matrix Structure

The performance of the employee is evaluated by the Project manager in most of the organisations. The biggest criticism for the matrix organisational structure is that the unity of command is missing, resulting in confusions in taking up orders and priority of executing the orders. Another problem in matrix structure is responsibility can be easily shifted. When fixation of responsibility falls in question, then the performance cannot be assured.