4 TYPES OF ORGANIZATION

N. Rekha

Introduction

An organization is a social entity with group of goals that is linked to an external environment. The type of organization is determined by the nature and type of organization. The word is derived from the Greek word organon, which means “organ”. All organization have a management structure that determines relationship between different activities and the members, and subdivides and assigns roles, responsibilities, and authority to carry out different tasks. Organizations are open systems – they affect and are affected by their environment.

Objectives:

To know the basic types of organization.
To find out the suitability of type of organization.

1. Line or Military Organization

Line organization is the oldest form of organization. The persons having the higher decision-making authority are at the top, and those having the least decision making authority are at the bottom level. In between there are levels of management, such as intermediate and supervisory. Line executives are the members who are directly involved in the basic activities of an organization. They are the people who do and make things happen to attain the main objectives of the organization . They form the backbone of any organization.

The superior at each level makes decisions within the authority delegated to him by his own boss. He communicates his decisions and orders to his subordinates. The subordinates, may himself be a superior in relation to the persons (sub-subordinates) placed under his charge, makes decisions within the scope of his authority and passes them to the sub-subordinates. Each person is accountable to the one and only one person who delegates authority and assigns duties to him. Any change in this may create problem. For example, if the production manager bypasses a foreman and gives directly instructions to the workers, he may put the worker in a difficulty position of being answerable to two persons at one and the same time. This will also affect the foreman’s control over his subordinates in general.

Kinds of Line Organization

Pure line Organization – In pure line organization , at any given level of work all the individuals perform the same type of work.

For example, at the lowest level all the workers may be engaged in a similar activity, but for better control and supervision they are divided into different groups, each placed under the charge of a foreman.

Departmental line organization – In this organization there is the chief executive or general manager at the top. Under him, there are a number of departments each headed by a departmental manager. All departmental head derives his authority from the general manager and delegates authority to his immediate subordinates. These subordinates then delegate authority to their own subordinates and so on. In this type all the departmental heads enjoy equal status and authority. They also have freedom to function independently. The marketing manager, for example will not interfere in the decision- making by finance manager or production manager and vice- versa. In production department there may be number of foreman each having a certain number of workers under him, but there is no formal line of authority or responsibility. The workers placed under a foreman have no direct contact to the production manager.

Feature

Has only direct vertical relationships between different levels in the firm

Advantages

1. Easy to establish and simple. There are no complications in defining the relationships.

2.Easily understood by the workers.

3.There is unity of command and control to which an employee can be given orders by one superior only.

4.There is flexibility as each executive knows what he has to do and feels free to make suitable adjustments to realize the goals set for him.

5. Tends to simplify and clarify authority, responsibility and accountability relationships

Disadvantages

1.Line executive are responsible for both planning and execution of the work assigned to the them. There are no specialist to assist them.

2.An executive with line authority has complete control over his unit. He alone is held responsible for the performance of his subordinates. This gives a great burden on a single individual.

3.A line organization does not provide for communication from the subordinates upwards. The workers work as per orders of the superiors and lose their sense of creativity and capacity for independent thinking. They do not have the right to address their opinions about the orders communicated to them even if the decision has been incorrectly made.

4.A line executive has monopoly over decision making and he is not obliged to seek advice or listen to suggestions from any partner. This may result in arbitrariness in decision making leaving ample scope for decisions to be based on individuals likes and dislikes of the executive rather than objectivity and expertise.

5. Managers may have to become experts in too many fields.

Suitability – Even having many demerits, line system of organization will be suitable for enterprise which are small, or where the work involved is a routine nature or machine based.

2. Line and Staff Organisation

Large organizations belong to this type of organization. This type of organization have direct, vertical relationships between different levels and there also specialists for advising and assisting the line executives. This organization has both line and staff departments. Staff departments provide assistance and advice in specialized areas (for example quality control advising production department)

Types of staff

Personal staff – Personal staff consists of a personal assistant or advise attached to the line executives at any level. His main function is to help the line executives also to perform any other work assigned to him.

Specialized staff – The staff has expert knowledge in special fields such as accounting, personnel management, public relations, etc. For each of these functions, there may b an expert or group of experts placed under a separate department.

General staff – This staff in this category consists of experts from different fields. But generally, the staff function at higher levels and is meaning to aid and advise the top management.

Feature

1. Line and staff have direct vertical relationship between different levels.

2. Experts are responsible for advising and assisting line managers in specialized areas.

Advantages

1.Line executives and the enterprise as a whole, benefits from the expert advice and guidance provided by the staff officers.

2. Staff executives carry on detailed analysis of each managerial activity. Line executives need not have to look after specialized investigation of each problematic situation.

3. Training of young staff executives – A line and staff organization provides opportunity to young staff executives to acquire expertise in their respective fields.

Disadvantages

1.Confusion – it is difficult to determine the pattern of authority relationships between line and staff executive, which might create confusion.

2. Expertise not given by authority – Staff officers may be experts in their field of activity but they have only a advisory role. They lack authority to implement their action.

3.Centralization is seen in this type as line executive alone have the power to make and execute the decisions. Hence, it tends to have centralization of authority positions.

4. Conflict between line and staff may arise.

3. Functional Organization

A functional organization is one where the work is organized on the basis of specialization. Here each specialist conveys his instructions directly to the line personnel, rather than through a formal chain of command. The various functional departments in such an organization provides various services to the line mangers in respect of work study, maintenance, purchase of materials, control of stocks, quality control etc. In the absence of services provide by these departments, the line managers will be required to perform these functions on their own. This organization has developed from the increasing complexity of operations in an organization. How to rationalize functional organization In functional organization the following points need to be noted

Provision of activities – Work allocation should cover all activities of different departments. For each activity there should be one or the other department to perform it.

Duplication to be avoided – Care should be taken to see that the same activity is not handled by two different departments.

Interrelation of activities – Activities placed under the charge of one department should be inter-related.

Advantages

1. The worker at each work level concentrates on lesser activities which in turn acquires efficiency in his area of work.

2.Functional organization results in great relief to line executives as the specialist give instructions directly to the lower level workers.

3.Specialization and proper standardization leads to increase in production level.

4. The presence of specialist at each level of work point there is no need to have well-trained line executives at each work point.

Disadvantages

1. There is presence of too many boss- relationships between persons and department. A worker is placed under number of bosses; he finds it difficult to manage the different, sometimes conflicting orders received from them. This leads to complex relationship.

2. In effective coordination is found due to difficulty in ruling out the limits of authority of each specialist.

3.Workers have lesser opportunity to decide things on their own, as there are many specialist to guide and direct them which in turn leads to centralization.

Suitability of Functional Organization

Functional Organization is suitable for all type of enterprises whether it is big or small, machine-based or labor- based. But to make it fruitful this should practiced only at higher levels. It will not be successful if it is practiced at lower levels as it may become difficult to determine who has authority on whom, who is responsible to whom and what work each one is supposed to do.

4. Project Organization

A project organization is a temporary organization designed to achieve specific results by using teams of specialists from various functional areas in the organization. Project organization is set up to overcome the major weakness of the functional organization, namely, absence of unity of command, delay in decision- making and lack of coordination. The organization is designed with specific objectives in view and there is also provision of disband it after the programme or project has been accomplished. Hence, in this type of organization department charged with completion of a specific programme may exist for a long time as a large programme cannot be accomplished within in a short duration. The project may become a permanent effort that it becomes a programme (or branch) organization. The latter may in turn be separated from parent organization and be established as a full-fledged product division functionally organized.

Feature

A project organization is a remarkable illustration of relationship between environment, strategy and structure. The grouping of activities on the basis of each project paves way to introduction of new authority patterns, greater authority being given to the project board and the success of the project depends upon coordination of activities. It makes for meaningful control and fixation of individual responsibility.

Drawbacks

In a project organization uncertainty is the key factor. This is due to the diverse background of the professionals who are deputed the project. Next, in the absence of well-defined areas of responsibility, flow of communication and criteria to judge the performance the project managers find it difficult to motivate and control the staff in a traditional manner. Decision making process is a tedious and any delay in it may lead to major consequences in delaying or completion of project on time. Effective project management may also be hindered by the top management who may not be knowing the actual problem of the project centre.

Characteristics of Project Organization

1.Personnel are put into a project from the existing permanent organization and are under the control of the project manager.

2.The project manager specifies what effort is needed ad when work will be performed whereas the particular department manager executes the work using his resources.

3.The project manager gets the needed support from other departments like production, quality control etc for completion of the project.

4.The authority on the project members is hared by project manager and the respective functional managers in the permanent organization.

5.The services of the project team members are temporarily loaned to the project manager till the completion of the project.

6.Conflict may arise between the project manager and the department manager on the issue of exercising authority over team members.

7.Full and free communication is essential among those working on the project.

5. Matrix Organization

It is a permanent organization designed to achieve specific results by using teams of specialists from different functional areas in the organization. A matrix organization is effective where a large number of small projects need to be completed. It is suitable for projects such as, weapon development, building, aerospace, involvement of high-technology, etc.

Feature

Superimposes a horizontal set up divisions and reporting relationships onto a hierarchical functional structure

Matrix Organization

Advantages

1. It provides dual benefit by functional and purpose departmentation, i.e., technical specialization and emphasize on ultimate goal.

2.This structure focuses on organization resources on the specifies projects, thus enabling better planning and control.

3.It is the most suitable structure to respond rapidly to external change.

4.This organization is highly flexible as regards to adherence to rules, procedures etc.

5. As any division has to harness its efforts towards accomplishment of a single project, employees are effectively motivated.

6. It provides better development of personnel by providing training from efficient managers.

7. Decentralized decision making.

Disadvantages

1. The matrix organization does not follow “one subordinate – one boss” principle and the employee is required to report to more than one superior which creates difficulty in identifying their bosses.

2.Potential confusion over authority and responsibility.

3.High prospects of conflict.

4. High administrative cost.

5. Overemphasis on group decision making.

6.This type brings temporary drafting of people, mainly professionals, from various departments. This makes it difficult to coordinate and control the functioning of a heterogeneous group, particularly in the absence of line authority.

6. Committee Organization

A committee means a group of persons formed for a stated purpose. The board of directors, for example, is a committee form of organization and there are other committees like finance committee, planning committee etc.

Characteristics

Plurality of persons is seen in committee organization. A committee with large number of persons may result in unwieldy , resulting in lack of communication between members in turn delay in decision making.

The scope of committee organization is limited as it is appointed to deal with one or more specific problems.Authority structure of a committee have authority to go into the details of the problems assigned to the committee. The decision making is on the basis of one member one vote.

Types of Committees

1. Standing and ad-hoc committee – A standing committee is a permanent one which is virtually always present in the organization.

And ad-hoc committee, on the other hand is a temporary committee which is formed for particular purpose and deals with specific problem.

2. Executive and advisory committee – This committee is charged with the responsibility and executes its decision.

In case of advisory committee examines the problem in detail and makes recommendation which may or may not be put into action for whom these are meant.

3. Formal and informal committee – Formal committee is formed according to the rules and regulations of the organization. It is formally structured in the organization to accomplish the stated objectives. It has a formal flow of authority.

A informal committee is not formed according to the policies or rules of the organization. It does not posses formal authority.

Advantages

1. Group judgment are better than individual decisions

2. Good interaction between committee members leads to better coordination of activities.

3. Committee organization promotes motivation to participate in group decision making.

4. Group discussion will lead to creative thinking.

Disadvantages

This type of organization may lead to delayed decision, consume more time and hence more expensive.
Group judgment may result in compromised and ineffective decision.
Buck passing may result.

Hybrid Organization

This type of organization is used by multinational companies operating in the global environment. This kind of structure depends on factors such as degree of international orientation and commitment. Multinational corporations may have their corporate offices in the country of origin and their international divisions established in various countries reporting to the CEO or president at the headquarters.

Advantages

Alignment of corporate and divisional goals.
Adaptability and flexibility in divisions.
Functional expertise and efficiency.

Disadvantages

Conflicts between corporate department and units.
Slow response to exceptional situations.
Excessive administration overheads.

Summary

The employees must work in close coordination with each other and try their level best to achieve the organization’s goals. It is essential to manage the employees well for them to feel indispensable for the organization. These all aspects are met through indepth knowledge of different types of organization and its suitability.

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Text book references

Dinkar Pagare, Principles of Management,Sultan Chand & Sons Pub 2015, 9788180548390.
Sethi, M. and Malhan, S.M. Catering Management an Integrated Approach”, WileyEastern Limited, Mumbai, IInd edition reprinted, 2007.
Kinton, R., Cessarani, V. and Foskett, D. The Theory of Catering, Hodder and Stoughton, 2009.
Sharma .H., HRM in Hospitality Industry , ABD Publishers , 2006.
Tripathi, P.C. Personnel Management – Industrial Relation, Sultan Chand and Sons, New Delhi, 2003.