Organizational Structure: Types, Benefits, and Drawbacks

The Organizing Process and Its Importance

Organizing is the process of defining and grouping activities and establishing authority relationships among them. The process of organizing consists of the following steps:

• Identification and division of work
• Departmentalization
• Assignment of duties
• Establishing reporting relationships

Organizing is considered important because it leads to:

• Division of work
• Clarity in reporting relationships
• Optimum utilization of resources
• Growth
• Better administration
• Greater creativity

Organizational Structure: Frameworks for Operations

An organizational structure is the framework within which managerial and operating tasks are performed. It can be functional or divisional. The span of management refers to the number of subordinates a superior can effectively manage.

Functional Structure

This structure groups activities on the basis of functions. The advantages include:

• Specialization
• Better control
• Managerial efficiency
• Ease in training employees

The disadvantages are:

• Functional empires
• Conflict of interest
• Inflexibility
• Restriction in managerial development

Divisional Structure

This structure groups activities on the basis of products. The advantages are:

• Integration
• Product specialization
• Greater accountability
• Flexibility
• Better coordination
• More initiative

The disadvantages are:

• Departmental conflicts
• Costly process
• Ignoring organizational interests
• Increased requirements for general managers

Types of Organizational Organization

Formal Organization

This organization is designed by management to achieve organizational goals. Its advantages are:

• Fixation of responsibility
• Clarity of roles
• Unity of command
• Effective accomplishment of goals

Its disadvantages are:

• Procedural delays
• Inadequate recognition of creativity
• Limited scope

Informal Organization

This organization arises out of interaction amongst people at work. Its advantages are:

• Speed
• Fulfillment of social needs
• Fills inadequacies of the formal structure

Its disadvantages are:

• Disruptive force
• Resistance to change
• Priority to group interests

Authority and Control: Delegation and Decentralization

Delegation

Delegation is the transfer of authority from superior to subordinate. It has three elements: Authority, Responsibility, and Accountability. The importance of delegation is that it helps in:

• Effective management
• Employee development
• Motivation
• Growth
• Coordination

Decentralization

Decentralization is the delegation of authority throughout the organization. Its importance is that it helps in:

• Development of managerial talent
• Quick decision-making, reducing the burden on top management
• Development of initiative
• Growth
• Better control