Types of Organisational Structures

In this section we acquaint you with the different types of organisational structures in vogue today.

Spaghetti Organisation

It is a form of boundary-less organisation, which seeks to eliminate the chain of command having limitless span of control and replaces departments with empowered teams. In such an organisation, vertical and horizontal boundaries within the company are eliminated and external barriers between the companyand its customers/suppliers are broken down. By removing vertical boundaries, the management flattens the hierarchy. Status and rank are minimized. In this way, the organisation looks more like a silo than a pyramid.

The boundaries can be eliminated by creating cross-hierarchical teams, participative decision-making practices and the use of 360-degree performance appraisals. Horizontal boundaries can be reduced by replacing the functional departments with cross-functional teams and by organizing activities around processes. These boundaries can also be cut through job rotation of people into different functional areas. This turns specialist into generalists.

The external barriers can be removed with the help of globalisation, strategic alliances, customer-organisation linkages and telecommuting.The one common technological thread that makes the boundary-less organisation possible is a networked computer, which allows people to communicate across intra- organisational and inter-organisational boundaries.In Table , we present the advantages and disadvantages of this type of structure.

Table : Advantages and Disadvantages of Spaghetti Organisation

Advantages

1. In the absence of vertical or horizontal boundaries, communication is faster in the organisation, which facilitates quick decision making.

2. This kind of organisational structure promotes participative decision making which motivates the employee and develops their analytical and creative abilities.

3. Job rotation leads to the development of an employee in all the functional areas.

4. The reach of the organisation spreads, as there are no external boundaries.

Disadvantages

1. In the absence of vertical and horizontal boundaries the relationship between superior and subordinates is not clearly established.

2. The authority and responsibilities are not clearly delegated as a result of which there may be confusion regarding “Who is responsible for What” in the organisation.
 

Amoeba-shaped Organisation
It is another form of boundary-less organisation, which is structured like an amoeba with a central nucleus and a flexible operating structure enabling it to move into different types of projects and markets while operating as cross- functional teams.An amoeba structured company could spin off into smaller independent companies. For example, ENTACT Inc. environmental services company based in Texas, U.S. divides like an amoeba to form new companies. When it has about 40 employees, it spins off into another business with the first company retaining a 90 percent stake hold in the new business, while theemployees of the spin off unit retain 10 per cent. In this manner, ENTACT Inc.has been able to attract new companies. Since it operates without much of a structure and has no middle level management, there is a lot of latitude and freedom in its operations and it can be divided into new operative units with ease.

Table presents the advantages and disadvantages of the amoeba shaped organisation.
 

Table : Advantages and Disadvantages of Amoeba Shaped Organisation

Advantages

1. Flexibility in operations.

2. Freedom to take decisions in the organisation,which motivates the employees.

Disadvantages

1. Absence of middle level management affects the flow of communication from first line employees to the top management.

2. Increase in the number of operating units may drive the organisation into confusion if there is lack of cooperation and coordination.
 

Vertical/Tall Organisations
Vertical/tall organisation refers to increase in the length of the organisational chain of command. The hierarchical chain of command represents the company’s authority-accountability relationship between superiors and subordinates. Authority and responsibility flows from the top to the bottom through all the levels of hierarchy. Accountability flows from the lowest level to the highest level.

Horizontal/Flat Organisation
The horizontal organisation is a more appropriate model for the knowledge age. Companies are increasingly finding this structure more effective as it promotes more decentralized, downsized, team-oriented organisations with empowered workers. Horizontal structure emphasizes the need to start with an understanding of an organisation’s core competencies.In the U.S.A. some well known corporate giants such as AT&T, Du Pont,General Electric, and Motorola are moving towards “the horizontal corporation” in which traditional internal departmental divisions and well defined layers of authority are blurred or destroyed to allow an organisation to respond more quickly and effectively to market changes.

Box : Fundamental Principles for Creating Horizontal Organisation DESIGNING THE ORGANISATION
1) Organise cross-functional processes.

2) Install process owners.

3) Form teams, not individuals, as the cornerstone of organisational design and performance.

4) Integrate with customers and suppliers.

5) Decrease hierarchy by eliminating non-value-added work and by giving team members the authority to make decisions.

INSTITUTIONALISATION OF CHANGE

6) Build a corporate culture of openness, cooperation and collaboration, a culture that focuses on continuous performance improvement and values employee’s empowerment, responsibility, and well-being.

7) Empower people by giving them the tools, skills, motivation and authority they need to discharge their responsibilities.

8) Use information technology to help people reach performance objectives and deliver the value proposition to the customer.

9) Measure for end of process performance objectives as well as customer satisfaction, employee satisfaction,
and financial contribution.

10) Redesign functional departments or areas to work as partners in process performance with core process groups.

11) Emphasize multiple competencies and train people to handle issues and work productively in cross functional areas.

12) Promote multi-skilling, the ability to think creatively and respond flexibly to challenges that arise in the work that teams do.

All core processes lead to one end objective: Creating and delivering something of value to the customer.

Inverted Pyramid
The traditional business is styled in the form of a pyramid with the chief executive officer at the top, senior executives underneath, and so on. There are many layers in the management structure, which reflects who reports to whom. In the inverted management pyramid (Fig.), customers have the most important role in driving the business. It also gives the front line employees a similar ability as they are closest to the customers. Since the customers are considered primary, it also helps to improve the business. The flow of communication from the customers and within the enterprise improves vastly. Once the inverted pyramid idea is accepted, the role of management needs to undergo a change: From a commanding role, it should become a supporting one.

Inverted Pyramid

Table : Advantages and Disadvantages of Inverted Pyramid Structure
Advantages

1. In this structure the customers are given the first preference.This way it becomes very easy to understand their preferences
and plan the strategies of the organisation accordingly.

2. Front line employees are given more responsibility and  authority in the organisation than the top management because they are closest to the customers.

3. Decentralization of authority and responsibility place a very important role in prompt and timely decisions.

4. The inverted pyramid structure motivates the employees as they are placed in a better position than the top management.

Disadvantages

1. This structure may be dangerous because the role of top management is shifted to supporting one from that of commanding one which ultimately leads to the direction less- organisation.


2. In this structure there is absence of clear authority and responsibility levels as a result of which people become
confused and business veers out of control.

3. Frontline supervisor cannot make strategies regarding organisations even though they have proper understanding of the customers because they are not equipped to do so.
 

Orchestra
A firm styled as an orchestra could be an efficient management structure. You may know that an orchestra has a conductor and a team in which every member plays a different instrument and at different times to operate a musical score

The conductor ensures that each player performs in synchrony with the others.

Table : Advantages and Disadvantages of Orchestra Structure
Advantages

1. There is a lot of cooperation and coordination between the employees and the management.

2. The objectives are clearly defined.


3. The flow of information in the organisation is perfect because it is more of information based
management rather than the bureaucratic command control.

Disadvantages

1. A perfect synchrony cannot be expected from the top management and the employees always because there may be some hindrances in
communication flow as there is no middle level management.

2. The authority-responsibility aspects are not clearly defined.

3. The control of whole organisation by the top management alone without the help of middle level management may not give good results.

Cluster Organisation

An organisation may be restructured around certain clusters that are inter-locked or networked representing a cluster organisation. Each cluster consists of a group of people drawn from different functional and staff areas working together on a semi-permanent basis to accomplish certain preset goals. A cluster handles its administrative functions, develops the required expertise, relates to customers, and is accountable for its actions. Each individual within the cluster has responsibility for his/her particular area of activity and also of the performance of the cluster as a whole.Individual clusters in an organisation may differ in size consisting usually of 30 to 50 members to provide for a broad range of functional and staff expertise. Within itself a cluster may have smaller teams of 5 or more individuals to facilitate its work.

Cluster Organisation

Table : Advantages and Disadvantages of Cluster Organisation
Advantages

1. Well defined responsibilities.
 

2. This structure empowers the employee by fostering individual and team work.

Disadvantages

1. Employees in this structure work on a semi-permanent basis. The state of being not employed on a permanent basis by the organisation may depress the employees and dampen their initiative.

2. A cluster, which manages all the activities associated with accomplishing their corporate goals may lose speciality.

3. There is lack of formal hierarchical structure,which may lead to lack of direction in the organisation.

Virtual Organisation

A firm is said to be having a virtual organisational structure when it contracts out almost all functions. The only function retained by the organisation is the name and the coordination among the parties. A virtual organisation might not have even have a permanent office. This is especially common in the fashion industry where you can have clothing labels that are just that. Say the label is
“XXX”. The label has a clear identity in the public eye, but when you try to track down the XXX Taylor Company, you find there are no XXX designers, no XXX manufacturers. There are just 3 people in an office subcontracting out all functions.Thus, a virtual organisation is a network of firms held together by the product of the day. It is an open-ended system of ideas, activities and firms.

Table : Advantages and Disadvantages of Virtual Organisation

Advantages

1. These structures enable business with less capital, less human resources and other inputs.


2. These structures provide flexibility of operation.

3. These structures develop ancillary industries.

Disadvantages

1. Companies do not have strong foundations or strengths in their operations.

2. Organisations have to heavily depend on outside support.

3. Failure in the network results in failure of the organisation.

Matrix Organisation

Matrix organisation structure processes a dual chain of command.Both functional and project managers exercise authority over organisational activities in a matrix structure. The strength of the matrix lies in the ability to facilitate coordination when the organisation has a multiplicity of complex and inter dependent activities. The direct and frequent contacts between different specialities in a matrix make for better communication and greater flexibility.Information permeates the organisation and more quickly reaches those people who need to take account of it.

Table : Advantages and Disadvantages of a Matrix Organisation

1. This structure has considerable flexibility. The personnel can be transferred form one project to the
other depending upon the need of the project.

2. The lower level functional employees are highly Advantages motivated and satisfied with their job, as they are involved in decision making.

3. Promotes making trade off decisions on the basis of what is the best for the organisation as a whole.

4. Encourages cooperation, consensus building, conflict resolution and coordination of related activities.

5. Makes efficient use of functional expertise.

Disadvantages

1. It is very complex to manage.

2. The authority is so much shared that it can result in misappropriated amounts of time being spent on
communications.
 

3. This structure violates unity of command.

4. Requires too much time for meetings and collaboration.

5. It is hard to move quickly and decisively without getting clearance from many other people.

Functional Organisation Structure
In this structure (Fig.) each functional department consists of those jobs in which employees perform similar jobs at different levels. The commonly used functions are: marketing, finance and accounting, human resources, manufacturing, research and development, and engineering.

Functional Organisation Structure

1. In-depth specialisation and focussed concentration on performing functional tasks can enhance operating efficiency and development of core competencies.

2. This structure promotes maximum utilisation of Advantages up-to-date technical skills and enables the firm to capitalise on specialisation and efficiency.

3. This structure promotes common values and goals among employees of the department,facilitating cooperation and collaboration with the functional department.

4. Enhances operating efficiency where tasks are routine and repetitive.

1. The department members will see the activities from the view point of the department rather than the total organisation. This results in the absence of inter-departmental coordination and cooperation.

2. The narrow specialisation kills the initiative of Disadvantages entrepreneurs and the zeal of innovativeness and creativeness.

3. This kind of structure promotes over specialization and narrow management viewpoints.

4. This kind of structure is effective only in stable environment.

5. This also results in absence of accountability.

Product Organisation Structure

Companies producing more than one product, structure their organisations based on product structures (Fig.). Activities are divided on the basis of individual products, product line, services and are grouped into departments in product organisation structure. All important functions, viz. marketing,production, finance and human resources are located within each department.

Table : Advantages and Disadvantages of a Product Organisation Structure
Advantages

1. This organisation structure is appropriate for those firms which produce multiple products.

2. Coordination among functional areas like product design, production, marketing is effective as all
functions are in the same department.

3. Responsibility and accountability for market share, sales, profit/loss can be clearly fixed.

Disadvantages

1. Each department will have production, marketing,human resource, finance managers, secretarial and supporting staff, computers and testing equipment. As such specialised personal and equipment cannot be procured.

2. Inter departmental conflicts arise regarding sharing of common resources, allocation of common and overhead expenses etc.

Product Organisation Structure