Organization Structure

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A Structured Organization

Any organization works in a defined framework which allows the organization to grow over time. The definite structure will provide clarity to the managers, employees and also will keep the functioning of the organization in sync. The employee’s clarity helps the manager to keep expectations and enables efficient decision-making capability. An organizational structure which outlines how the activities are directed in order to achieve the destined goals of an organization. An organizational structure determines the flow of information between the levels within the company.

A Traditional organizational structure is generally of four different types – functional, divisional, matrix and flat. Our discussion is based on the structure of the organization thus, we now proceed ahead.


Organizational Structure Meaning

An organizational structure is a system which crafts the outline about how certain activities are being directed in order to achieve the organizational goals. 

For the smooth flow of information and to avoid unnecessary discrepancies, an organizational structure is of utmost importance. Like, in a centralized structure, the decisions flow from the top level to the lower level. While in a decentralised organization, the right to make decisions is shared all over the organization. 

Be it an MNC or a small local business, businesses of all shapes and sizes uses organizational structures as they define a specific hierarchy form within the organization. A good organizational structure defines each employee's job role and how that sync within the overall system. 

This structuring of the company provides a good visual representation of how it is shaped and how this can move forward for achieving its goals. An organizational structure outlines how certain activities are directed to achieve the goals of an organization.

Key Points of this Context -

  • A successful organizational structure defines the job of an employee 

  • This also assures how the job fits within the overall organization system.

  • A centralized structure is also defined as a chain of command.

  • The decentralized organizational structure gives every employee a decision to take. 

Divisional Organization Structure

Divisional Structures one of the important organizational structures, this is to be grouped into a product or regional divisions.

Key Points of this structure is as follows -

  • The divisional structure is a type of organizational structure which is grouped into each organizational function and further into a division. These divisions then can correspond to their related functions.

  • The division contains all the necessary resources and the functions that are required for support in that product line.

  • A multidivisional form abbreviated as M-form is a legal structure in which one parent company owns another subsidiary company, each of the company uses the parent company’s brand and name.

  • The divisional structure acts as shockproof. With the failure of one division, another division can function independently. It doesn’t directly threaten the working of rest divisions. In the multidivisional structure, the subsidiary companies benefit from the use of the brand and capital of the parent company.

  • One disadvantage of divisional structure is that it includes operational inefficiencies as it is often separated from specialized functions.

  • For the multidivisional structure, disadvantages can include increased accounting and taxes.

Organizations are structured in many ways and these structures are used in determining the character in which these organizations operate and perform. A divisional organization groups each organizational function into a definite division.

FAQ (Frequently Asked Questions)

1. What are the Levels in an Organization Structure?

Ans. Most organizations have the popular three management levels: first-level also known as the top-level, middle-level, and lower-level managers. All these managers are classified according to the organizational hierarchy of the authority and the managers perform different tasks. In the organizations, the total number of managers in each of these levels gives the organization a pyramid structure.

2. Why is the Traditional Organizational Structure Being Replaced Now?

Ans. With the rise of the digital marketplace, the traditional organizational structure like the centralised system now is discarded and, in that place, the modern organizational structure has taken its importance. The decentralized structure is a team-based organization structure which disrupted the old business models. With the advent of technology and growth of knowledge, the employees in each level are well updated with technology and are also capable of good knowledge about the organization, hence easily responsibilities can be shared with them. Thus, decentralised structure replaces traditional structure.

3. What is the Best Organizational Structure?

Ans. Best organizational structure may be functional, if one decides to divide the departments by the functional area, like in marketing, accounting, finance and research development departments. The advantage of using this functional organization is efficient in functioning.

4. What is Meant by ‘Chain of Command’?

Ans. Chain of command is an official hierarchy system that structures the authority who dictates the fellow member. The dictator is someone who is in charge of the team, and of whose permission must be asked.