3.
ORGANIZATIONAL
STRUCTURE
Prof. Lovorka
Galetić, PhD.
ORGANIZATIONAL STRUCTURE
Word “structure” means
composition, complex, scheme
Every organization, every
company, has its inner
composition, and that means
structure
Many authors have defined
organizational structure
Organizational Structure
• The formal system of task and authority
relationships that controls how people are
to cooperate and use resources to
achieve organization‘s goals.
• Can be managed and changed through
the process of organizational design.
ORGANIZATIONAL STRUCTURE
It is often equalized with
organization
Organization is broader concept
which includes:
organization structure
organizational resources
organizational procedures
It is equalized with management it is one
of elements of the organization structure
ORGANIZATIONAL STRUCTURE
Organizational structure is
dynamic, not static, because of the
constant change in the
organizational environment
Relationship: goals – strategy –
structure
Relationship of internal and external
design elements
Designing organizational structure
Choosing the right organization
structure is one of the most
important decisions in the company
There is no “one right way” to
design organizational structure
There are no universal organization
principles which are good for all
cases
Each internal and external design
element has diferent effect in every
special case.
The ways of forming org. structure:
1. Top down system
based on classical theory
set global organization units, departmant services,
and then design specific tasks
2. Basis upward system
3. Combined approach
structuring onganization top down and basis
upward at the same time (bipolar strategy)
4. Sprearhead strategy
changes begin from middle management levels
5. Multiple nucleus strategy
Many organization changes begin at the same time
on diferrent management levels and in various
sections
The ways of forming org. structure:
In every day use, ways that we are
talking about are used combined,
rarely separate
While forming organization structure
of a new company and for big
reorganization procedures top down
system is mostly used.
In all the other cases various
combinations are possible.
The ways of forming organizational
structure:
Stability and flexibility of
organization structure:
Stability makes specialization,
rationalization and expenses
decrease possible
Flexibility makes adjustment to
evironment changes possible
The balance should be found.
Organizational structure has to
provide:
1. reaching organization goals
2. optimal grouping of activities
3. full attention on key functions
4. efficient use of all available
resources
5. organization flexibility
6. clear responsibility
7. rational use of human resources
8. adequate information and
communication system
Formal and informal organization
Formal organization structure is a
result of the process of
organization design and it
represents backbone of each
organization.
It is set by regulations and use of
written rules and procedures
Formal organization
Formal organization structure regulates all
relevant questions referred to organization:
It connects people and resources in closer
and wider groups ( workplaces, work
units, org. units, company)
It allocates and connects organizational
tasks
It defines people status in a company
(managers and employees)
It sets rules and behavioral norms in a
organization
Formal organization
Formal organization structure is shown with
graphs and schemes
Formal and informal organization
Real organization structure (objective
existing) develops spontaniously in process
of formal organization structure functioning
In the moment of setting organization
structure company’s real organization
structure matches formal. While time goes
by, differences between those two
organizational structures get bigger and
bigger
Formal and informal organization
Formal organization structure needs to
adjust to the real:
Simultaneously (constantly adjusting every year
- difference is small)
Reorganization (if difference is big – every 4-5
years)
Differences between formal and real
organization structure come by changing
elements of organization structure
Formal and informal organization
Informal organization is related to people and
their work in organization
Informal organization structure is a group of
relations between people in a organization,
which have grown while they have been
working together, and which effect formal
goals of organization
Informal organization is usually connected
with informal groups in a company. Usually it
is considered negative, which does not have
to be true
Formal and informal organization
In every formal organization there are many informal
groups. They can be:
interest groups – they come as a result of job which
is done by group members
friendly groups – result of companionship between
members outside the company
E.g.: football team, aerobic team
Formal and informal organization
Informal organization structure can not be
shown:
Football Areobics
team team
Saturday shopinng
grup
Formal and informal organization
Informal organization is very
important, it can dominate over formal
organization.
It has hierarchy, it’s leaders and goals
Formal organization intended,
thought trough, planned
Informal organization spontaneous
Types of organization structures
Types of organization structures
represent ways of carrying out internal
work devision in a company, and
forming lower organization units on all
company levels (departments, sectors,
services)
Forming lower organization units in a
company is done according to the
theory of departmentalization
Types of organization structure
There are two types of bureaucratic,
classical, traditional organization structure:
Functional
Divisional (product, geographic, market)
Characteristics:
specialization
clear hierarchy of authority
formal planing
employment based on competency
Types of organization structure
Around 1960
Development of modern, organic
organization structures
Adaptive - adjustment to the
changes in the environment
Most significant: project structure
matrix structure
network structure
horizontal structure
Types of organization structure
In every day use we often find
combined, mixed organization
structures which include classic
and organic structures
(conglomerate organization)
Functional organization structure
Activities are grouped together by common
function from the bottom to the top of the
organization (e.g. manufacturing, research and
development, marketing, finance...)
Most spread form of organization structure
It is applied in:
small and middle companies
if company produces one or several similar
products by using same technology for the
same market (oil, sugar, cement, beer)
Functional organization structure
Observed by number of functional
organization units we can talk
about three basic forms of
functional organizational structure:
Initial
Standard
Developed
Functional organization structure
Initial form fos
Number of formed functional organization units in
a company is smaller than number of business
functions
CEO
Finance Other Functions
Sales Manufacturing
& Accounting
Functional organization structure
Standard form fos
Number of formed functional organization units is
equal to number of business functions
CEO
Finance & Development
HR R&D Procurement Manufacturing Sales
Accounting
Functional organization structure
developed form fos
Number of formed functional organization units is
bigger than number of business functions
CEO
Procurem Home
Manufact Accounting
R&D ent HR Sales
uring & Finance
Develop Manufact Maintainan Export
ment uring ce
prep.
= Manufacturing = Sales
Functional organization structure
Advantages:
high level of specialization
unique coordination of jobs in the
same function
applying one-way models and
procedures
rational use of space and equipment
low overhead expenses
Functional organization structure
Problems:
slow adjustment to changes in the
environment
there is no cooperation and team
work among functional managers
slow and inadequate decision making
starched line of coordination and
communication
absence of functional managers
responsibility for final business result
Functional structure of the company with
foreign branch offices
CEO
Foreign
Branches
Mexico
UK
USA
Marketing Manufacturing R&D Finance Planning HR
Functional structure of the company with
International Division
CEO
Marketing Manufacturing R&D Finance Planning HR
International
Division
International International
Division Divisiona
Services Services
Marketing R&D Planning Finance HR
Typical model of foreign company
organizational structure
CEO
Marketing Manufacturing R&D Finance Planning HR
