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Organizational Structure Defined By Managers Commerce Essay

Paper Type: Free Essay Subject: Commerce
Wordcount: 1819 words Published: 1st Jan 2015

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Organizational Structure may be defined as how managers and supervisors divide, group, and coordinate work between different employees and departments.

Other significant definition may be defined as:

“An Organizational Structure is based on activities such as task allocation, coordination, and supervision, which are directed towards the achievement and fulfillment of organizational goals and objectives”

An organization can be structured in many different ways, depending on their objectives, aims and longterm goals. The structure of an organization will determine the modes in which it operates and performs. Many Organizations have a Hierarchy, but not all.

Organizational Structure has 6 main elements:


Work Specialization is the degree to which organizational tasks are sub-divided into individual jobs. It is also known as “Division of labor”. It is the specialization of labor in specific, circumscribed tasks and like roles. It is a vital element of Job Structure and attributes a major role in success, if it is rightfully utilized. Wor Specialization is more efficient and effective for managers, in order to fulfill organizational perspectives. Managers find it much easier to find talented personnel and train them to perform specific and certain tasks. As Repetition improves the ability of an individual to perform a certain task with lesser time consumed.

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Basically, the jobs are assigned to specialized personal or individuals. Thus, the individuals perform those tasks or fulfill those objectives in which they are specialized or are trained to compile. The essence of Work Specialization is that an entire job being done by an individual, it is broken down into number of steps, with each step being completed by a separate individual. Thus, individual perform their expertise in specialized task rather than the entire job. It can be elaborated with the following example.


In Formula 1 Motorsports Racing, Racing teams Managers hire mechanics that are specialized in certain tasks (during Pit Stops). Some are expert in replacing Front tires, others are expert in replacing Rear tires. Similarly, some are expert in Lifting Car from the back side and others are specialized to perform the responsibility of a “Lolly-Pop Man”. Thus, these teams hire mechanics and assign them jobs that, they are specialized to perform.


Departmentalization is the second element of Organizational Structure and follows Work Specialization. Departmentalization is the way, work and responsibilities are distributed in amongst different departments. Departmentalization refers to the process of grouping activities into departments.”Division of labor” creates specialists who need coordination. This coordination is facilitated by grouping specialists together in departments.

Departmentalization has the following main types:


In Function Departmentalization, Departments are formed to group activities by “function”. Such as in a business firm, the structure might have a Sales Department, a Marketing Department, a Purchase Department and a Human Resource Department etc. All these Departments are different from eachother on the basis of functions, they perform and the responsibilities. Due to similar skills and knowledge, “Economies of Scale” can be achieved. The main advantage of this type of Departmentalization is that, it can be used in all organizations, with reference to their goals and objectives, and it is more efficient and effective, as the people who posses the same expertise and skills, are governed in a singular department.


Activities that are grouped by similar “Product Lines or Product Categories” . Tasks are grouped according to products and services, thus leaving all activities related to the product or the service under a single manager or a singular head. Each major product area in the corporation is under the authority of a senior manager who is specialist in, and is responsible for, everything related to the product line. This departmentalization helps an organization to realize its strong product lines and weak links,increases Accountability. For E.g; Unilever has different product lines such as Dove, Axe and Fair & Lovely etc.


Departments are formed on the basis of “Geography and Territory”; such as North, South, East and West etc. If an organization’s customers are geographically dispersed, it can group jobs based on geography. For example, Coca Cola has developed a Organizational Structure distributing territories, the North American sector and the International sector, which includes the Pacific Rim, the European Community, Northeast Europe, Africa and Latin America groups.



Grouping activities on the basis of “Product or service or customer flow”. Each process require different skills and techniques at different stages of its production or preparation. Thus, this Departmentalization helps the organization to utilize the expertise of individuals at different stages of production.

Thus, departments are followed due to the difference in defined structure. For E.g; A whole process is to be followed for obtaining a Passport, Verification, Documents Submission etc, all from different departments.


Grouping activities on the basis of “common customers or types of customers” Jobs may be grouped according to the type of customer served by the organization. The assumption is that customers in each department have a common set of problems and needs that can best be met by specialists. For e.g; Law Firms provide services to General Public, high profile individuals and Large Corporations.


Chain of Command is an unbroken line of Authority that extends from the top level executive, management to the lowest post, echeleon and clarifies who reports to whom. It is a Hierarchy which shows the Chain of Command and authority, creating a link between the Managers and Sub-ordinates. It has 2 main elements:

Authority(It may be defined as the right of the managers and top level executives to give orders to sub-ordinates. To facilitate Co-ordination, each manager has a certain role to play in hierarchy and has a certain authority over his co-workers and sub-ordinates to fulfill his responsibilty)

Unity of Command(It preserves the unbroken line in the hierarchy. It states that, for the sake of better co-ordination, an individual or a group must only have a single superior, to whom reporting is done. It helps to remove conflicts and work confusion)

For E.g;

Ohio Fire Department is under the control of Ohio Government. Chain of Command goes right from the top level Mayor, to the lower level of managements such as Supervision Divison Chief and Staff Division Chief.


Span of Control is also an important element of Organizational Structure. It basically manipulates the capability of a manager to control a certain number of employees. This number is determined after analyzing the size of the organization. There are two type of spans, 1. Wider Spans 2. Narrow Spans.

If a manager decides to maintain a narrow span, he can maintain close control. However, there are few drawbacks as well. Firstly, they are expensive due to additional level of management. Secondly, Communication process between the top and lower management becomes more complex. Finally, Due to narrow but tight supervision, Managers tend to make strong and tight policies, regulations, which results in discouraging Employee Autonomy and Satisfaction.

In recent years, the emphasis has been laid on maintaining a wider span of control. It is easier to maintain control, easier to communicate with sub ordinates and more importantly, policies are in the favor of Employees autonomy, due to fine supervision.



Centralization is defined as “the degree to which decision making is concentrated at a single point in the organization”.

An Organization, in which there is less input taken from the lower level managers and employees, and the top level management rely and take key decisions by themselves, not involving the lower management’s input. Hence, it is “Centralization”.

For e.g; a Centralized Government is a form of Centralization, as it takes lesser input from lower authorities and has the autonomy to make decisions.

Decentralization maybe defined as “the process of dispersing decision-making governance closer to the people and citizens”. In Decentralization, the lower level personnel provide more input and participate in the decision making.

Decentralization and centralization have played major roles in the history of many societies. An excellent example is the gradual political and organizational changes that have occurred in European history. During the rise and fall of the Roman Empire, Europe went through major centralization and decentralization. Although the leaders of the Roman Empire created a European infrastructure, the fall of the Empire left Europe without a strong political system or military protection. Viking and other barbarian attacks further led rich Romans to build up their large estates, in a way that would protect their families and create a self-sufficient living place. This system was greatly “decentralized”, as the lords of the manor had power to defend and control the small agricultural environment that was their manor.

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“The degree to which jobs within the organization are standardized” Standardization is the certainty of the job. If a job is standardized, the employees know what to do and there is no sort of confusion. If a job is highly standardized, there is minimum amount of discretion over what is to be done, when it is to be done and how it is to be done. It results in consistent and improved performance. The degree of formalization depends on the organization, its policies and its structure. For instance, there a few jobs that are not formalized i.e Departmental Stores Clerk, Gas Station workers etc. On the other hand, companies like P&G and Unilever usually have a standardized way of doing job. It is easy for employees to settle in, as they are able to understand their job properly.


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