20 Functional Organisations

Niti Goyal

Learning Outcome:

After completing this module the students will be able to:

• Understand the meaning & objectives of organisation structure
• Guiding principles of organisation structure
• Basic forms of organisational structures
• Functional Organisation

Introduction

Functional organisation is one of the basic forms of organizational structures. An organisation structure gets developed through the process of organizing. Organizing is one of the functions of management which follows planning. Organizing provides structure to the organisation. According to Chester Barnard, “Organizing is a function by which the concern is able to define the role positions, the jobs related and the co-ordination between authority and responsibility.

The term ‘organization’ can be used in two ways :

Organization as a process : Organisation as a process refers to identifying the activities to be performed for accomplishment of objectives, Grouping similar activities, Assigning authority and responsibility , establishing accountability, and Coordinating the efforts so as to achieve the business objectives. .

Organization as a structure: Organisation can also be defined as the structure of formal relationships. It is a network of authority & responsibility relationships. Organisation brings together people, functions and physical facilities. It determines the flow of communication and flow of authority and responsibility in the organisation.

The organisation structure establishes relationships among various job positions in the organization, It emphasize not on the fact that who will perform the job but establishes relationship among various posts in the organisation.

An organizational structure can be broadly classified into both formal and informal structures. Formal organisation structure is designed deliberately by the executives so as to achieve the organizational goals. And an informal organisation structure gets developed within the formal structure on its own through sentiments, interactions and other interrelated attributes of the people.

Formal organisation structure can further be classified into three basic forms:

1. Line organisation

2. Line and staff organisation

3. Functional organisation

Objectives of Organizing

The main focus of this chapter is on studying the functional organisation. Before we discuss what functional organisation is, we will first discuss why we need organization structure. Or what is the purpose of organization structure. The below are some of the objectives of organizing:

1. Effective management – Organisation structure identifies various activities to be performed and establishes relationship among various activities. The authority and responsibilities attached to various posts are also defined. It also determines the flow of communication within the organisation. Thus it provides a structure or the framework for effective management.

2. Efficiency – Organisation clearly defines the activities to be performed at each level. This reduces confusion in the roles and responsibilities and thus brings efficiency in the operations.

3. Sustained growth and diversification – Organization plays an important role in growth of the enterprise by clarifying the role positions to the managers. It coordinates the activities and establishes authority and responsibility. It is organisation structure which facilitates division of work and thus leads to growth and diversification.

4. Well defined jobs – The role of Organising is to define the various positions in the organisation and to establish relationship among them. It emphasise on posts rather than on people. Organising clarifies the role of every person in the organisation.

5. Clarifies authority – Organizational structure helps in clarifying the role positions to every manager and also the authority attached to his position so that he could perform his role effectively. The authority is delegated keeping in view the responsibility so that a balance between authority and responsibility is maintained. Well defined jobs and responsibilities attached helps in bringing efficiency and thus increase productivity.

6. Co-ordination – Organization co-ordinates different departments of the enterprise. It establishes relationships among positions and ensure mutual co-operation . Harmony of work is brought by higher level managers exercising their authority over interconnected activities of lower level manager.

7. Effective administration – The organization structure is helpful in defining the jobs positions. The roles to be performed by different managers are clarified. Specialization is achieved through division of work. This all leads to efficient and effective administration.

8. Scope for new changes – Where the roles and activities to be performed are clear and every person gets independence in his working, this provides enough space to a manager to develop his talents and flourish his knowledge. A manager gets ready for taking independent decisions which can be a road or path to adoption of new techniques of production. This scope for bringing new changes into the running of an enterprise is possible

PRINCIPLES OF ORGANISATION

Organisation structure provides a base to the organisation. Organizational structure varies according to a firm’s size, mission, objectives and environment in which firm operates. For proper designing of organization structure, the following principles should be considered:

(i) Division of work : Division of work means dividing the work into smaller tasks and assigning each task to an employee. These tasks when repeated again and again will lead to efficiency and leads to specialization of the worker in that job. In this way, efficient and higher production could be achieved . It also reduces wastage and leads to decrease in costs. Division of work is considered necessary for efficiency. An organisation structure should be so designed so that it permits division of work.

(ii) Objectives of Organisation: An organization is established for the attainment of certain objectives. The organizational structure varies according to the objectives that have to be achieved. The authority, responsibility and accountability are also assigned accordingly.

(iii) Span of management : Span of management or span of control also refers to the number of employees under the direct supervision of the superior. Organisation structure also depends on this span of control. Span of control itself depends upon a number of factors. e.g it depend upon the ability of the superior and nature of his work. Larger the span of control is more difficult to supervise and coordinate. It depends upon the ability of the manger and the nature of his work. Span of control determines the number of levels in the organisation. The larger the span of control, the more employees under the managers direct supervision and less is the managerial levels and vice versa. In the figure 1 given below, the span of control is wide. A manager here supervise seven employees under him directly and hence one level of management hierarchy but in fig two, the span of control is narrow. There are two employees under manager’s direct supervision who then supervise three employees each and hence two levels of hierarchy. So span of control directly influenced organisation structure.

Figure 1: Wide Span( one level of management)

Figure 2: Narrow Span( two levels of management)

(iv) Unity of command : Unity of command means that an employee receives instructions from only one boss. An employee cannot serve two masters effectively. There will be confusion in his mind as to whom he should obey. Organization structure should ensure that the principal of unity of command is never sacrificed otherwise it will lead to mismanagement, chaos conflicts in the organisation.

(v) Flexibility : Organizational structure should be flexible enough so that necessary changes could be incorporated as per the changes in external environment. Also it should permit enough scope for expansion as the need arises.

(vi) Management by exception : Management by exception refers to the fact that the managers at top level handle the exceptional matters only and not the daily chores so that their expertise and knowledge are not wasted in the routine matters. Routine problems should be passed on to lower levels and resolved there It leads to organizational effectiveness. The principle of exception is thus of significant practical utility and applies to all levels in the organization structure.

(vii) Decentralization : Decentralization is of great significance to big organizations. Decentralization means delegation of authority to the lowest level in the organisation. It is giving authority to the departments to work on their own within the framework of the objectives without frequent interruptions from the top management. Decentralization is significantly important for big organizations since all the work cannot be handled by the top management themselves. An important decision here is to determine how much decentralization should be there and on what matters.

(viii) Authority and Responsibility: Authority empowers an individual to take decisions and to command and to exercise control over his subordinates for execution of policies and programmes. Responsibility is the duty to perform an assigned task. There should be a balance of authority and responsibility otherwise, the subordinates cannot discharge their responsibility properly.

(ix) Scalar chain: Scalar Chain means a stepwise chain of superior subordinate relationship which starts from top management and ends at supervisory levels. A scalar chain has been shown in figure below. It links all the managerial positions from top to bottom. Authority decreases as one goes down in the chain. Scalar chain of command suggests that there should be clearly defined and uninterrupted chain of authority from top to bottom. It not only promotes smooth communication and gives confidence to managers for making decisions based on their authority.

Figure 3: Scalar Chain of Command

Forms of Organisation Structure

Organization creates structural relationship among different departments and the individuals working there for the accomplishment of desired goals. The establishment of formal relationships among the individuals working in the organization is very important to make clear the lines of authority in the organization and to coordinate the efforts of different individuals in an efficient manner. In order to organize the efforts of individuals, any of the following types of organization structures may be set up :

(i) Line organization,

(ii) Line and staff organization

(iii) Functional organization.

The main focus of this chapter is to study the functional organisation. But before discussing the functional organisation it is important to study line and line and staff organisation as it comprises of line authority found in line organization and staff authority characterized by line and staff organization and the third form of authority known as functional authority.

1. Line Organization

Line organisation is also known as Military Organisation. Line organization is the simplest and the oldest form of organisation structure suitable for small organisation. It follows a Scalar Chain of command. In this authority flows directly from top to bottom through various managerial positions. In this type of organization, the line of command flows on an even basis without any gaps in communication. The top management has complete control over the subordinates through the chain of command. The line organisation has been depicted in the diagram below. At the top most level, there is chief executive; followed by departmental heads, after that there are managers under the departmental heads. Then at the fourth level , there are area sales manager and the foreman. Authority flows down the line from chief executive to the last level in the organisation Each employee can exercise his authority independently without any interference.

Figure 4:Line Organisation

Features of Line Organization

1. It is the most simple form of organization.

2. Authority flows from top to bottom in the organisation.

3. Specialized services donot exist in this form organization.

4. Line officers have complete authority to do their respective functions. They can independently take decisions in their areas.

5. Unity of command is observed in this organisation structure.

6. Departmentalization may exist in this form of organisation depending upon the organizational needs.

Merits of Line Organization
 
1. Simplest- It is the most simple and oldest form of organisation..

2. Unity of Command- Unity of command is observed in this organisation structure. Each subordinate receives instructions from only one superior. Unity of command helps in establishing accountability.

3. Better control- Unity of Command ensures better control. Also, line managers have full authority to discharge their functions. So they can perform their responsibilities efficiently.

4. Fixed & independent authority & responsibility- In this type of organization, every line executive has got fixed authority, and fixed responsibility attached to every authority.

5. Prompt decision- In line organisation, prompt decisions could be taken due to factor of unity of command.

6. No conflict: In line organisation only form of authority exists..e line managers. All decisions are taken by line managers independently without any interference. So there is no conflict of authority as is the case in the line and staff organisation.

Demerits of Line Organization

1. Lack of specialization- In a line organization all decisions are taken by line managers themselves. No specialist opinion is taken to guide the line managers.

2. Inadequate communication- Inadequate communication may arise in line organisation since subordinates may hesitate to communicate upwards because of their authority relationships.

3. Authority leadership- The line officials have independent authority which could be misused by them. Line managers may become autocratic.

2. Line and Staff Organization

In Line and staff organization two types of authority coexist: line authority and staff authority. Line and staff organisation is an extension of line organisation where along with line managers staff manages also exist. Staff mangers are specialists who play an advisory role for the line managers, but the ultimate authority vests with the line managers. Whether they will implement the advice of the staff specialists or not is at their discretion. Figure 5 below exhibit the line and staff organisation structure. The staff authority has been depicted by dotted lines. eg the assistant to chief Executive is a staff official. Line and staff organization structure is suitable for medium and large-sized firms.
Figure 5: Line & Staff Organisation

Features of Line and Staff Organization

1. There are two types of authorities: line managers and staff managers.

2. Line and Staff Organization is more complex than line Organization.

3. Staff managers are specialists in their areas and thus efficiency can be achieved .

4. The ultimate authority remains with the line executive and staff executives only play an advisory role.

5. Suitable for medium to large organisations.

Merits of Line and Staff Organization

1. Sharing of workload- The workload of the line executives gets shared as the advisory service can be provided by the staff expert. Thus, a line executive can concentrate only on the execution of plans.

2. Expert advice- The staff managers are expert in their field and can offer expert advice to the line executive at the time of need which leads to efficiency.

3. Specialization- Line executives can concentrate on plan execution and staff executives can play advisory role. Thus the benefits of specialization get available to enterprise.

4. Benefits of Research and Development- Due to the presence of staff experts, the work load of the executives gets divided. So they get more time and can hence can concentrate on bringing innovations and go for research work in those areas.

5. Balanced decisions- Balanced decisions in line and staff organisation are possible as the decisions are implemented after taking the expert advice, the line managers can deliberate upon the advice offered to them by the staff specialists which automatically ends up in balanced decision.

Demerits of Line and Staff Organization

1. Lack of unity of command: – In a line and staff organization, the workers get directions from both line and staff experts , thus the principle of unity of command gets disobeyed.

2. Lack of sound advice- The ultimate authority rests with the line managers. The staff managers are only advisors. The staff specialist may become careless and my provide wrong suggestions which may adversely affect the enterprise.

3. Line and staff conflicts- Line and staff organisations are characterized by conflicts among the line and the staff authority. Both try to prove themselves superior over the other. This leads to lack of coordination and hampers a concern’s working.

4. Costly- In line and staff concern, staff managers are specialists. High remuneration need to be paid to them. This proves to be costly for a concern.

5. Lack of motivation for staff specialists – The staff experts only play advisory role to the line managers. They have no authority to get their decision implemented. Sometimes, due to personality conflict among them, the line managers may not implement their advice even if its valuable. This may demotivate the staff experts.

6. Staff managers steals the credit- In a line and staff concern, the higher returns are considered to be a result of staff managers advice. This distresses the line officials and affects the organisations working.

3. Functional Organization

The concept of Functional organization was suggested by F.W. Taylor. Functional organizational structure is a complex organisation structure where three types of authorities exist. Line authority, staff authority and a third form of authority known as functional authority. This is an extension of line and staff organisation. The functional authority of functional managers is similar to line authority of line managers but is restricted to few specialized activities only. The structure of functional organisation has been given in figure 6 below. The functional authority has been depicted by the bold dotted lines. Functional organisation structure overcomes the problem of the line and staff organisation where the staff managers were given no authority to implement their advice or suggestions and the line managers had complete authority over the execution of work. This led to distress in the staff specialists. In functional organisation, staff experts are also given line authority but in a limited way. Thus, the expertise of staff managers could be utilized to a greater extent for the benefit of the organisation. But the biggest flaw with the functional organisation is that the unity of command is totally disobeyed. An employee receives instructions from three authorities which makes this structure ineffective.

Figure 6: Functional Organisation

Features of Functional Organization

1. Complex form of organization.

2. Three authorities exist- Line, staff and functional authority .

3. Principle of unity of command is disobeyed as employees receive instructions from three types of authorities: line, staff and functional authority.

4. More importance is given to staff experts as along with staff authority they also enjoy line authority though restricted to few activities only.

Merits of Functional Organization

1. Specialization- The extent of specialization is highest in functional organisation.

2. Effective Control- Management control is simplified as the mental functions are separated from manual functions. Checks and balances keep the authority within certain limits. Specialists may be asked to judge the performance of various sections.

3. Efficiency- In functional organizations staff expert are given authority though in a limited way, a staff expert can utilize his expertise for efficient decision making.

Demerits of Functional Organization

1. No unity of command- Employees in functional organisation receives order and instructions from three authorities. Thus unity of command gets disobeyed.

2. Lack of Co-ordination- Disciplinary control becomes weak as a worker is commanded not by one person but a large number of people. Thus, there is no unity of command and hence no coordination could be achieved.

3. Difficulty in fixing responsibility- Because of lack of unity of command, it gets difficult to fix responsibility .of the workers and hence they can easily shirk away from their work.

4. Conflicts- Functional organisations are characterised by conflicts among the line authority and the line authority of the staff experts. They may think themselves superior to each other and may indulge in leg pulling. Moreover, staff exerts get more importance in functional organisation . This may distress line authorities.

5. Costly- Maintenance of specialist’s staff is expensive for a concern.

Summary

Every organization needs a structure in order to operate systematically. The organizational structure brings together the human, financial and the physical resources. It provides a framework of relationships among them .There are three basic forms of organizational structures: Line organisation, line and staff organisation and functional organisation. Line and staff organisation is an extension of line organisation and functional organisation is an extension of line & staff organisation. In a functional organisation line authority, staff authority and functional authority exist together. This form of organizational structure disobeys unity of command. The degree of specialization is highest in this organizational structure. This organisation structure is suitable for medium & large sized firms.

References:

• Kootnz & O’Donnell, Principles of Management.
• J.S. Chandan, Management Concepts and Strategies.
• Arun Kumar and R. Sharma, Principles of Business Management.
• Sherlerkar and Sherlerkar, Principles of Management
• B.P. Singh, Business Management and Organizations
• http://www.yourarticlelibrary.com/organization/forms-of-organisational-structureline-functional-and-line-and-staff-organisation/25679/