Chapter – 6
Organizational structure and communication
How can we define organizational structure?
Every system in the world has a structure that defines how it works. It works according to the structure. So organizational structure determines how the organization performs or operates. The term "organizational structure" refers to how the people in an organization are grouped and to whom they report. Organizational structure is a system used to define a hierarchy within an organization. It identifies each job, its function and where it reports to within the organization. The structure is developed to establish how an organization operates and assists an organization in obtaining its goals to allow for future growth. The structure is illustrated by using an organizational chart. It means the structure can be shown in organizational chart. An organizational chart is a visual representation of a business's organizational structure. It shows who report to whom within the company. It also shows what kind of work each department does.
Organizational structure can be described in three different ways.
- as a set of stakeholder group who are connected through communication;
- as a set of managed subsystems;
- as based on a command hierarchy which can be realized in different ways.
The stakeholders :- A stakeholder is an individual or group that has an interest in any decision or activity of an organization. They can either affect or to be affected by the business. Stakeholders include its shareholders, customers, suppliers and employees.
The organization's subsystems :- A system that is a part of large system is subsystem. A group of employees who come together for a single work-related purpose that functions within the large organizational system is the organization's subsystem.
Define the hierarchy ln structure, employees are grouped and assigned a supervisor. It is the most common type of organizational structure. Employees may be grouped together by their role or function, geography or type of products or services they provide. This structure is often depicted as a pyramid because there are multiple levels or authority with the highest level of leadership at the top, their direct employees below them and so forth.
Pros
➤ Better defines levels of authority and responsibility
➤ Shows who each person reports to or who to talk to about specific projects
➤ Motivates employees with clear career paths and chances for promotion
➤ Gives each employee a specialty
➤ Creates camaraderie between employees within the same department
Cons
➤ Can slow down innovation or important changes due to increased bureaucracy
➤ Can cause employees to act in interest of the department instead of the company as a whole
➤ Can make lower-level employees feel like they have less ownership and can’t express their ideas for the company
There are different forms of hierarchy in modern organizations. Andrew and Herschel suggest six prominent forms of hierarchical organization:-
The traditional centralized structure:- This structure follows a system in which power flows upward through the organization, and all employees follow a chain of command. There is a strong control from the senior management group. The traditional centralized organization emphasizes control and co-ordination through a very clear hierarchy. The traditional organizational chart may look like a pyramid. The chief executive officer would sit at the top and layer underneath would consist of department manager who report to the CEO and oversee the overall operations of their department.
The centralized structure with decentralized management:- It depends on one individual to make decisions and provide direction for the company. Small businesses often use this structure since the owner is responsible for the company's business operations.
The divisional form:- Within a divisional structure, the organization has a central office which co-ordinates and controls but the main work of the organization is carried out in its divisions. These divisions may be based on different functions or products, or on different geographical regions. The division will have authority to make decisions within certain limits. It is even possible for there to be divisions within one organization which are in direct competition with one another.
The decentralized structure :- Decentralized structure often have several individuals responsible for making business decisions and running the business. Decentralized organizations depend on a team environment at different level in the business. Individuals at each level in the business may have some autonomy to make decisions.
Matrix structure :-
The matrix structure is a variation of the basic functional structure. It resembles a grid in which employees with similar skills are grouped together and report to more than one manager. This often includes a functional manager who oversees projects and their progress and a product manager who is responsible for the company's strategy and success regarding product offerings. The project manager has direct control over the specialist staff allocated to the project. Both the project manager and the specialist manager may call on the specialist manager for advice and support. The allocated staff are still responsible to their specialist manager for quality of their work, whereas the project managers have full control over the work allocated to the teams.The matrix structure is typically used by large, multinational organizations and promotes the sharing of skills and knowledge across departments to complete goals.
Type 'D' organization :- This is the final form of organization. It characterized by 'distributed work arrangements' where the work is distributed between the organization 'core' and peripheral units which might involve external subcontracting and various other mechanisms based on the use of information technology.
Defining structures within substructures
There are various categories of structure found in organization.
Line structure In a line structure, authority within the organization flows from top to bottom and there are no specialized or supportive services. It is one of the simplest types of organization structure. The organization is typically divided into departments that are overseen and controlled by a general manager, and each department has its own manager with authority over its staff. The departments work independently to support the organization's primary goal.
Benefits of this type of structure include:
➤ Fostering effective communication and stable environment
➤ Providing clearly defined responsibilities and lines of authority.
➤ Adapting easily to changing conditions or situations
➤ All levels of the organization should be informed about matters which are relevant to their areas.
Potential disadvantages include: ➤ Limiting specialization ➤ Becoming rigid and inflexible ➤ Giving too much power to a manager
➤ It leads to excessively long lines of communication.
➤ People at higher levels can easily be overloaded with information.
Functional structure In a functional structure, the organization is divided into groups by roles, responsibilities or specialties. For example, within an organization you may have a marketing department, finance department and sales department with each overseen by a manager who also, has a supervisor that oversees multiple departments. A functional structure can be beneficial because departments can trust that their employees have the skills and expertise needed to support their goals.
Benefits of this type of structure include:
➤ Workers are instructed by specialists with expert knowledge
➤ Lines of communication are short ➤ Establishing clearly defined roles and expectations
➤ Facilitating improved performance and productivity
➤ Allowing for skill development and specialization
Potential disadvantages include:
➤ Workers have many supervisors and may receive conflicting instructions.
➤ Workers may have difficulty in assigning priorities. ➤ Creating barriers, or silos, between functions ➤ Limiting employees’ communication and knowledge with other departments
➤ Inhibiting collaboration and innovation
Committee Structure
The term 'committee' is used for a variety of organizational structures. Committee is a group of people who are elected by the members of an organization to control its affairs. The committee members then elect certain official bearers, normally a chair, secretary and treasurer. The committee may also appoint an executive to carry out policy decisions and to attend to the day-to-day operation of the organization.
The chair, whose authority is conferred by the committee, is responsible for its smooth functioning. However, committee members may, under certain conditions, remove the chair from office. Committees often appoint subcommittees to assist them with specific tasks. These subcommittees may be either standing or ad hoc committees. Standing committees are usually responsible for ongoing activities such as finance, publicity etc. while ad hoc committees are constituted for a special task and are dissolved once the task is completed.
Clubs and professional organizations are often run by committees which operate on democratic principles. Decision-making is usually by majority vote, though they often try to achieve consensus. Some committees, particularly in business, are not truly democratic but have variations on the democratic principle. Most business organizations appoint committees for co-ordination and special purposes.
The potential advantages of this structure include the following:
➤ It promotes a rapid exchange of information and ideas.
➤ It encourages co-operation.
➤ It generates new ideas and information.
There are also potential disadvantages:
➤ Decisions depend on the frequency of meetings.
➤ Effectiveness is highly dependent on the secretariat and chair.
The Role of the Informal Organization
Formal Organization
The formal organization is the organization as expressed in the organizational chart: the official job roles and the lines of responsibility and communication.
Formal organization is a well-defined structure of authority and responsibility that defines delegation of authority and relationships amongst the organizational members. It works along pre-defined set of policies, plans, procedures, schedules and programmes. Most of the decisions in formal organization are based on pre-determined policies.
Formal organization is “a system of well-defined jobs, each bearing a definite measure of authority, responsibility and accountability, the whole consciously designed to enable the people of the enterprise to work most effectively together in accomplishing their objectives.”
It is a deliberately designed structure with formal authority, responsibility, rules, regulations and channels of communication. Some degrees of formalization is necessary for organizations, to function effectively; to avoid taking time-consuming decisions, to handle conflicting situations and exercise control over the activities of subordinates.
Informal organization
The informal organization is that network of relationships which coexist, based on personal and political relationships. The main aim is to achieve common objectives. One can look at it as a single entity as well. Each organization comprises of the human relationships between people who are a part of it. Informal organization does not depend on relationships of ranks. Even functions of people do not define their position within the organization.
Informal organizations generally emerge by default. Polices, procedures or ranks do not play a role in establishing them. People end up creating them by interacting with each other. It always exists in a formal one. Some scholars say that informal organizations basically emerge from joint personal activities. People always end up creating them subconsciously by interacting with each other. Thus, personal and social relationships are mainly responsible for creating an informal organization.
Communication across this informal organization is often dismissed as of low quality, being a mixture of leaks, rumor and speculation. However, sometimes, very accurate information can reach employees through this network, which can be defined in various ways, including the grapevine, the 'old boy' network and company social gatherings.
Features of informal organization
➤ It emerges and develops spontaneously. Formal policies and procedures do not play a role in its creation as in the case of formal organization.
➤ It emerges from social interactions between people. Ranks and functions of people have no relevance here. This is why personal prejudices and attitudes are so important in informal organization.
➤ People generally like to interact more with those with whom they can relate. Hence, things like social, cultural, religious outlook are important in this regard.
➤ Another feature of informal organization is that it exist in each and every enterprise. This is because social interactions between people are inevitable.
➤ Lastly, manager cannot prohibit informal organization; he can regulate it. This regulation is important because it can affect the productivity and moral of the people involved.
Roles or functions of informal organization
➤ The primary function of informal organization is basically to maintain cultural values of people. When people can associate themselves with each other socially, they always feel a sense of togetherness.
➤ It provides social satisfaction to members.
➤ It provides an effective means of communication to its members. They can interact with each other freely and efficiently. Managers can use it to send across messages quickly and directly.
Grapevine
According to Gray Kreps the grapevine is a type of communication that develops among organization members and is not necessarily prescribed by the formal structure and hierarchy of the organization but grows out of organization members' curiosity, interpersonal attraction, and social interaction. He suggests that
a) Grapevine is that mixture of leaks, conjecture, educated guesses and gossip that circulates in an organization
b) It is often seen as evil or malicious
c) It can very fast and accurate
d) It is very powerful and potentially useful channel of communication.
So grapevine is a type of informal communication which is held without following a recommended structure of an organization. It can be described as a casual and unofficial communication system within the organization. It is found in all organizations. It does not follow any prescribed or predetermined rule and spreads any information quickly. It is governed by social and personal relationships rather than officially recognized rules and formalities. It operates both in internal and external channels. It passes opinions, suspicious, and rumors that generally do not have move through formal channels.
The network organization
The network organization can be visualized as a cluster or federation of business units which is co-ordinated by the central core of the organization. It is very different from the classic hierarchical organization structure. The central core provides the broad overall vision and strategy, provides coherent administration, and ensure that the sub-units work together to support the common goal. The network will constantly change to serve the needs of customers and to adapt to changes in the business environment.
It is a working arrangement where members are distributed but work together to achieve common goals. It is an organization where there is a system of nodes ad linked interconnected in various ways and directions.
A network structure is the one in which more than one organization combine to produce a good or provide a service. An organization that has been using network structure is H&M(Hennis & Mauritz). H&M is a core company. The core company distributes its functions to different companies which are present in different countries: product development in Australia, call center company in New-Zealand, the accounting company in Austria, distribution company in Singapore, and manufacturing company in Malaysia.
Managers in the network structure play vital role. They control the internal as well as external relationships. The network structure is less hierarchical. The network organization is also called hub or boundary-less organization.
Teleworking
Teleworkng means working from home or remotely using modern technology and telecommunications to remain in touch with the employer or business. It allows individuals to work either at home, a local café with wifi or at a local telework centre for one or more days each week or full time. The teleworker uses communication tools to carry out work or duties from remote location. Home computer or telephone enable person to work from home while maintaining contact with colleagues, customers or central office. Computer, email account and a smart phone are needed for teleworking.
Qvortrp outlines five common ways of organizing teleworking:
➤ Electronic home offices, where the worker operates from home most of or all the time.
➤ Shared facility centres. Here there is a building, equipped with IT facilities used by various workers from different companies or the self-employed. these centres can be in a rural area or in a residential area.
➤ Satellite work centres. These are similar to shared facility centres except that they are owned by one company.
➤ Private enterprise centres. These are privately owned centres which are usually located in rural regions. They offer facilities for local workers who provide IT-based services to distant customers.
➤ Flexible work facilities. This category covers workers who operate at a distance from the main organization's facilities: they tend to be mobile, using portable equipment and communications.
Virtual Organization
This is the new form of organization. It emerged in 1990. It is also known as digital organization or network organization. A virtual organization is a network of cooperation made possible by, what is called ICT, i.e. information and communication technology. The virtual organization is a social network in which all the boundaries are removed. In this sense, it is a boundary less organization. An individual can work from anywhere. The ICT is the backbone of virtual organization. Reebok, Dell, Nike etc are the prominent companies working virtually.
A virtual organization is one whose employees are spread geographically and communicate via phone, internet, email etc. Organizational unit may be dispersed geographically. Entire organization depends on electronic linking in order to complete the production process.
The vast majority of the employees work entirely online from dispersed geographical location. Organization network is linked by computing technology to share knowledge and skill.
Notes on virtual organization
➤ Virtual Organization can be defined as “an organisational form that enables companies to reduce their physical assets (large headquarters, centralised plants etc.), relying instead on small decentralized units linked by strong communications network.”
➤ In other words, the old physical constraints of plants and office buildings are broken down, and activities of co-ordination and control, which used to take place face-to-face, are now handled remotely over wire.
➤ Thus, it uses information and communication technology to allow it to operate without clearly defined physical boundaries between different functions.
➤ It provides customized services by outsourcing production and other functions to third parties.
➤ Thus, employees may work in anytime zone and customers are able to purchase tailored products from any location.
➤ This leads to more responsive and flexible company with greater market orientation.
Characteristics of Virtual Organization
Various characteristics of virtual organisation include:
➤ Lack of Physical structure: Virtual organizations have little or no physical existence.
➤ Reliance on knowledge: Knowledge is the key driving factor of virtual organisation since physical facilities and contacts are least available.
➤ Use of communications technologies: Virtual organisations rely more on information technology.
➤ Mobile work: The reliance on communication technologies means that the traditional office or plant is no longer the only site where work is carried out. Increasingly, the office is wherever the worker is.
➤ Boundary less and inclusive: Virtual organisations tend to have fuzzy boundaries.
➤ Flexible and responsive: Virtual organizations can be pulled together quickly from disparate elements, used to achieve a certain business goal and then dismantled again.
An alternative viewpoint on features of a virtual organization includes:
➤ Processes transcend the boundaries of a single firm and are not controlled by a single organizational hierarchy.
➤ Production processes are flexible with different parties involved at different times.
➤ Parties involved in the production of a single product are often geographically dispersed.
➤ Coordination is heavily dependent on telecommunications and data networks.
Example:
➤ An example of virtual organisation includes the World Wide Universities network, which provides collaboration for research and e-learning facilities.
➤ This service provides distance learning education to a worldwide market including centres in various countries. Thus, the learners would benefit from a wider choice of specialized courses and lower costs than from travelling for education or going to a single provider.
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