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The framework of task-and-authority relationships

in a company that coordinates and motivates
employees to work together toward a common goal.

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A structure that groups people together

because of their expertise or the type of
activity they do (typically into departments).

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1. Specialization

1. Lack of team work

2. Efficiency and productivity

2. Difficult Management Control

3. Healthy competition among

3. Multiple command system


4. Lack of coordination

4. Relief to executives

5. High administrative cost

5. Mass production

6. Delay in decision making

6. Facilitates growth and expansion 7. Spoils human relations

7. Suitable for present environment 8. Narrow outlook of specialists
9. Shifting responsibility
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1. Specialization
offers a high level of specialization.
each unit operates as a type of self-contained mini-company,
charged with carrying out its specific role.
Employees typically start their careers in an entry-level position
within the function and develop specialized knowledge as they
move up within the hierarchy.
They become experts within their functional area, and the unit and
company benefit from their expertise and experience over time.

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2. Efficiency and Productivity

A worker who is an expert in his functional area can perform tasks
with a high level of speed and efficiency, which enhances
minimum amount of mistakes
career paths within the functional unit are clear, the employees may
be highly motivated to advance their careers by reaching the next
rung on the ladder, which may also make them more productive.

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Healthy competition among experts

the management makes the recruitment, selection, appointment

and placement of the managers on the basis of their specialization.

thus it will encourage healthy competition among functional


In the present day of competitive business environment, every

manager wants to demonstrate a better performance.

the spirit of healthy competition brings out efficient executives

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4. Relief to executives
work is divided on the basis of functional specialization.
Under this structure, managers are not over burdened with maximum
workload as in the case of line organization.
Here, every manager has to work in one line of activity where he has
functional specialization.
This contributes to develop working efficiency of an enterprise.

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5. Mass production
There is a provision of functional specialization and standardization
in work in functional organizations.
This contributes to developing working efficiency of both the
executive and subordinate level members.
The development of efficiency facilitates in maximizing productivity
of the enterprise.
Thus, an enterprise can be involved in mass production and
distribution on the basis of requirement.

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6. Facilitates growth and expansion

The functional organization structure provides preference for
growth and expansion of business activities.
It creates scope for the existing volume of business to grow and
also for the expansion of various line of business.
Each and every executive is an expert in his own sector. The
executives can handle their business in an effective manner in
accordance with requirements.

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7. Suitable for present environment

The functional organisation structure is suitable for the management of
large scale business enterprises in present day environment.
The development of production volume, expansion of markets,
customers, government regulation etc. create new and challenging
environment in business activities.
The completion of business operation under such environment requires
the services of various areas.
The functional organization fulfils such type of requirements for
successful operation of business.
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Problems when the range of goods and

services a company makes increases
Problems as companies attract customers with
different needs
Problems when companies expand nationally
and globally

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1. Lack of Teamwork
difficulty working well with other units.
If a project calls for several units to work together, units may become
territorial and unwilling to cooperate with each other.
In essence, each unit may act in what it perceives to be its own best
interests instead of those of the organisation as a whole.
Infighting may cause projects to fall behind schedule.

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Difficult Management Control

can pose a challenge for top management to maintain control as the

organization expands.
As organisations get larger and top management needs to delegate
more decision-making responsibilities to each functional area, the
degree of autonomy may also increase, making coordination of
activities more difficult.
If the company expands into new geographic areas, maintaining
control of and managing the separate functions can be even more of a
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Multiple command system

o The lack of unity of command is the major limitation of functional

organization structure.
o The subordinates are always in confusion to obey orders because
they receive more than one order at a time.
o There may be a possibility of division of loyalty of subordinates
among many functional managers.
o Besides, there is more difficulty in fixing the responsibility of jobs.
o Here, both functional specialists and subordinates do not want to
take full responsibility of works because of the violation of the principle
of unity of command.
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4. Lack of coordination
o Every department of the enterprise is given to a
functional specialist.
o The department heads are independent to perform their
departmental works.
o There is no provision of formal relationship among the
departmental specialists. There is lack of mutual
understanding among them.
o The general manager may face serious problems in
coordinating departmental activities because the static
and narrow vision of departmental specialists.
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5. High administrative cost

o The functional organization needs more administrative cost.
o In such case of an organization, many functional specialists are
appointed in various departments.
o The functional experts are to be paid more remuneration.
o So, it is impossible to minimize cost and maintain higher efficiency in
o Thus, this structure is not suitable for small and medium scale
enterprises having limited resources.

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6. Delay in decision making

o Quick decision and prompt implementation are present day needs of
a business organization.
o However, in functional organization, there is no possibility of quick
o It is essential to take suggestions and guidance from experts before
taking a decision.
o Thus, the management has to invest more time to come into a
concrete decision.
o The delay in decision making, in some situations, may become the
reason for business loss.
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7. Spoils human relations

o In functional structure, it is more difficult to maintain a mutual relation
among members of the organization.
o There is complexity in the relationship between the supervisors and
the subordinates which spoils human relationship in the enterprise.
o Due to lack of unity of command, a subordinate has to work under
many executives.
o In many situations he receives conflicting instructions from
executives which may divide his loyalty.
o Therefore, it is difficult to maintain a discipline in a functional
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8. Narrow outlook of specialists

o The narrow of departmental specialists creates problems in functional
organizations to achieve overall objectives of the enterprise.
o The departmental specialists are more concerned about efficient functioning
of their respective functional areas.
o They do not want to maintain mutual relations with co-workers of other
functional areas.
o In a similar manner, they do not cooperate with each other in solving
organizational problems.
o In such way, the chief executive has to face many problems while maintaining
coordination among all the functional area of the enterprise.
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Shifting responsibility

o Fixing a definite responsibility for the functional specialist or a

subordinate is difficult in this type of organization.
o There is lack of unity of command everyone wants to shift
responsibility of unsatisfactory works to others.
o For instance, a functional specialist may shift his responsibility to
functional specialists.
o Such an environment creates problems in achieving defined

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Members of the organisation are grouped on the basis of

common products,
geographic markets, or
customers served
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a structure in which divisions are created to

serve the needs of customers in a particular
region, country, or world area

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Divisional Structure


1. Suitable

1. Source of conflict

2. Facilitates specialization

2. Under utilization of capacity

3. Maintain direct attention

3. Problem for effective control

4. Effect monitor and evaluation

4. Maximize administrative cost

5. Accountable divisional

5. Difficulty in coordination

6. Optimum use of resources

6. More inter dependency

7. Ignore common goals

7. Efficiency integration

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Divisional Structure
It is suitable for the organisation having diversified business activities.
Under it there are some big businesses houses involve in various line
of business which are inter related to each other.

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Divisional Structure
Facilitates specialization
It brings specialisation in a product or service which makes optimum
utilization of human and other physical resources.
All the divisions have inter relation to each other to meet common
goals. They are experts in their own area of business.
Corporate manger maintains coordination over their activities.

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Divisional Structure
Maintain direct attention
It directs attention toward specific product line and service.
big business organisations involve in production of similar types of
products or service in different geographical locations.
Because, they provide direct attention for improvement of quality of
products or service to gain competitive advantages in market.

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Divisional Structure
Effect monitor and evaluation
It facilitates to monitor and evaluate the performance of each
production or service department.
Corporate head office maintains timely supervision over the
performance of divisional business units.
It is supportive for evaluation of achievement of actual performance.
If any deficiency is found in actual performance, corporate manager
takes necessary measures.

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Divisional Structure
Accountable divisional managers
In this organizational structure, divisional managers have given in
dependency in doing work.
They are efficient and self responsible for accomplishment of
assigned work.
They submit progress report of the performance to corporate office
within specified time.
It makes accountable to divisional managers for the profitability of
each product/service.
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Divisional Structure
Optimum use of resources
This structure permits maximum use of specialized production or
service facilities.
There is the opportunity of coordination and share resources among
the departments.
Healthy competition for resources among divisions can enhance
effectiveness through mutual cooperation.
It facilitates for effective performance of the organization.

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Divisional Structure
Efficiency integration
A separate division is formed for a product line or service.
Each division is dependent and responsible to improve and expand
its business performance.
The corporate head office is responsible for maintaining coordination
of the activities of all divisions.
It helps to integrate efficiency of divisions for common benefits.

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Operating costs are much higher

Having more managers can result in

communications problems, slower decision
making, and lower performance

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Divisional Structure
Source of conflict
In this structure works are divided into different into departments on
the basis of nature.
There may be the possibility of conflict between departments as the
responsibilities are inter dependent to each other.
It may create obstruction in smooth functioning of the organization.
Corporate executive needs to invest more time and effort to resolve

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Divisional Structure
Under utilization of capacity
There may be the possibility of under utilization of plant capacity if
the demand of the product or service is not sufficient.
The under utilization of capacity may be the reason of wastage of
It maximizes cost of product or service.
It minimizes competitive advantages of the organization and
becomes difficult to face competition in the market.

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Divisional Structure
Problem for effective control
In organization various departments and branches are formed on the
basis of nature and size of business.
The divisional managers are independent and responsible for all the
activities of the concerned department.
It creates the problem to top level manager for effective control over
functions of divisions.

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Divisional Structure
Maximize administrative cost
In divisional organization, there is the provision of functional
Divisional managers are expert in their own area of performance.
Management needs to bear additional expenses to pay more
remuneration and other facilities to experts.
Therefore, it is not suitable for small organizations having limited
It maximizes administrative cost.
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Divisional Structure
Difficulty in coordination
Works are divided in different division on the basis of nature and size
of business.
Each work is assigned to the terms by considering their efficiency.
Divisional managers are independent and self responsible for doing

If there is lack of mutual relation among the departmental managers

then executive needs to devote more time to maintain coordination
over their performance.

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Divisional Structure
More inter dependency
This design develops for maintaining strategic relation among related
diversify business activities.
There is inter relation over the performance of all the departments.
The lack effective performance in one department creates problems
in the performance of all the business units of the organization.
In such situation for smooth functioning of the organization corporate
head office needs to play major role.

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Divisional Structure
Ignore common goals
The divisional managers may ignore overall objective of the
Corporate head office divides job to each division on the basis of
nature, size and location of business.
There is inter relation of the performance of all the division.
If divisional managers do not maintain mutual relation to each other it
becomes difficult to meet common goals.

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a structure that groups

people and resources in two ways
simultaneously by
function and by product

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1. The company can develop new products more

2. It can maximize communication and
cooperation between team members
3. Maximizes innovation and creativity.

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Dual reporting relationships


Bosses come into conflict over precisely who is

in charge of which team members and for how


Employees feel the lack of a stable home


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The difference between tall and flat organizational structures is the layers
of management.
In a flat organizational structure. There may be just one top manager
who is an owner or CEO of the company, overseeing a handful of other
employees, all with equal levels of authority.
In a tall organizational structure, by contrast, there are multiple layers
of authority between the CEO and low-level employees.
For example, an entry-level employee may report to a supervisor, who
reports to a manager, who reports to a director, who reports to a vice
president, who, finally, reports to top management.
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