E very organization to be effective must have an organizational structure. But what is an organizational structure? It is the form of structure that determines the hierarchy and the reporting structure in the organization. It is also called organizational chart. There are different types of organization structures that companies follow depending on a variety of things; it can be based on geographical regions, products or hierarchy. To put it simply an organizational structure is a plan that shows the organization of work and the systematic arrangement of work.

T here are different types of organizational structures and a company should choose the one that best suits their needs.

These are the structures that are based on functional division and departments. These are the kind of structures that follow the organization’s rules and procedures and are characterized by having precise authority lines for all levels in the management. Under types of structures under traditional structures are:

Line Structure – this is the kind of structure that has a very specific line of command. The approvals and orders in this kind of structure come from top to bottom in a line. It is suitable for smaller organizations like small accounting firms and law offices. This is the sort of structure that allows for easy decision making, and also very informal in nature. They have fewer departments, which makes the entire organization a very decentralized one.

Line and Staff Structure – though line structure is suitable for most organizations, especially small ones, it is not effective for larger companies. It combines the line structure where information and approvals come from top to bottom, with staff departments for support and specialization. It is more centralized and line managers have authority over their subordinates, but staff managers have no authority over line managers and their subordinates.

Functional structure – this kind of organizational structure classifies people according to the function they perform in their organization. It usually consists of Vice President, Sales department, Customer Service Department, Engineering or production department, Accounting department and Administrative department.

This is the kind of structure that is based on the different divisions in the organization. These structures can be further divided into:

Product structure – a product structure is based on organizing employees and work on the basis of the different types of products. If the company produces three different types of products, they will have three different divisions for these products.

Market Structure – market structure is used to group employees on the basis of specific market the company sells in. a company could have 3 different markets they use and according to this structure, each would be a separate division in the structure.

Geographic structure – large organizations have offices at different place, for example there could be a north zone, south zone, west and east zone. The organizational structure would then follow a zonal region structure.

This is a structure, which is a combination of function, and product structures. This combines both the best of both worlds to make an efficient organizational structure. This structure is the most complex organizational structure.

It is important to find an organizational structure that works best for the organization, as the wrong set up could hamper proper functioning in the organization.

Answer the following questions. Use information above to help you.

1. Under a matrix structure it is certainly possible (if not likely) that an employee can have two bosses. True / False

2. One of the principal disadvantages of the product structure is that it is difficult to evaluate profit and loss using this structure. True /False

3. Line authority essentially specifies who reports to whom. True / False

4. As Mary Roberts is reviewing the progress of her organization in meeting its organizational goals, she is struck by the fact that her organization has an organizational structure that might be causing problems. The current structure diffuses accountability, makes it difficult to respond to changing conditions quickly, and results in situations where someone might have two bosses. Which of the following organization forms best fits these disadvantages being experienced by Ms. Roberts?

1. matrix structure

2. geographical/regional structure

3. divisional structure

5. Henry Marion is reviewing the organizational structure within his organization. He would like to create a structure that organizes various product families within a division and reduces functional duplication and enhances economies of scale for functional activities. Which of the following organizational structures would you recommend to Mr. Marion?

1. divisional structure

2. geographic/regional structure

3. matrix structure

6. If an organizational structure had the advantages of being well suited to small to medium sized firms with limited product diversification, which of the following organizational structures would be the appropriate match to the advantages listed?

1. market structure

2. functional structure

3. product structure

The board of directors of a limited company is primarily responsible for determining the objectives and policies of a business. It is the directors who determine the direction the business is going to take. They will need to ensure that the necessary funds are available and will appoint key staff to whom they will delegate the authority to run the business on a day-to-flay basis. They will need to design an effective organization structure so that there is both a chain of command linking one level of management with another and an ef­fective communication network so that instructions can be passed downward and informa­tion passed upward.

T he directors are appointed by the shareholders, normally at the company’s annual gen­eral meeting, at which the chairman of the board will be expected to account for their stewardship during the previous year. The company’s accounts will be presented to the shareholders at that time so they can judge for themselves whether or not the board has been successful.

Direction in business is like strategy in a war situation. The strategic decisions determine the areas in which the company’s resources will be employed. Above all it involves plan­ning to ensure that the business first survives and then flourishes. Strategic decisions, made by the board of directors, are concerned with the disposition of resources. These con­trast with the tactical decisions by means of which the senior executives (appointed by the directors) carry out in detail the plans conceived or approved by the board of directors.

The fact that boards of directors tend to meet rather infrequently, say once a week, means that part-time directors can be elected to the board. Since they will not have departmental responsibilities within the company they are often described as non-executive directors. There are arguments in favor of such directors though they may lack a detailed knowl­edge of the company’s activities.

T hey may bring expertise to the board. Some are lawyers, or experts in tax affairs. Some represent influential groups of shareholders whose support is necessary if the board is going to carry out its plans, while others are directors in a number of companies and are used to interlock boards within a group of companies. For example, a holding (or parent) company may appoint a director from their board to serve on the board of a subsidiary company, with a view to keeping a watching brief on the di­rectors’ activities.

1. Having read the above passage, answer these questions in your own words.

1. How would you describe the role of the board of directors?

2. And the role of the senior executives?

3. What happens at the annual general meeting?

4. What is the difference between a strategic and a tactical decision?

5. What part can non-executive directors play in the proceedings?

6. What objections might be raised against the appointment of non-executive direc­tors?

7. What is meant by an interlocking board of directors?

8. How is it that a board of directors can control a company though they only meet, say, once a week?

2. Choose the phrase, a, b, or c, which best completes each sentence, and tick the appropri­ate box.

1. When the directors are discussing the problems facing the company they pri­marily have to consider

A. the interests of the public.

B. their own interests. С. the interests of the shareholders.

2. When a proposal is made and a vote taken the usual arrangement is that

A. each director has one vote no matter how many shares he holds.

B. only the chairperson can vote.

C. the directors with most shares have the most votes.

3. Key members of staff will be chosen by the managing director because

A. he is more knowledgeable than the other directors.

B. he has got to answer to the board for their performance.

С. he earns more than the other directors.

4. Non-executive directors will often be appointed because

A. they have valuable contacts with potential customers.

B. they have departmental responsibilities.

С. no-one else is available.

5. Directors are usually required to have shares in the company so they can

A. be seen to have a personal stake in the business and thus be affected by their decisions.

B. receive share certificates from the registrar’s department.

С. Take on administrative duties.

6. Strategic decisions are concerned with

A. the details of day-to-day administration.

B. the disposition of the company’s resources.

C. the payment of wages.

7. While decision-making powers are commonly delegated to senior executives

A. the directors are not responsible to the shareholders for any mistakes which might be made.

B. they are not responsible for any errors of judgment.

C. the directors remain responsible to the shareholders for any mistakes which might be made.

8. The further ahead one plans

A. the more troubles there are likely to be.

B. the more one can anticipate problems and thus avoid them.

C. the less one can anticipate problems.

9. Tactical decisions are those by means of which the senior executives

A. carry out their own plans.

B. destroy the opposition.

C. carry out the plans prescribed by the board of directors.

10. The directors have to initiate long range plans with a view to ensuring

A. the achievement of the company’s objectives.

B. he maintenance of good relations with the senior executives.

С. compliance with the law.

Read information about managers and executives paying attention to the worlds in bold.