Forms Of Organization Structure Business Essay

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What are elements of an organization structure, and the factors influencing its choice. Take example of ABB LIMITED PROCTER AND GAMBLE INDIA and explain with logic as to how are their structures suited to their requirements or the factors influenced their choices of Organization Structure.


Organization structure can be defined as the framework within which managerial and operating tasks are performed. It specifies the relationship between people, work and resources.

The two most commonly found forms of organization structure:

functional structure 2.divisional structure


A functional structure is an organizational design that groups similar or related jobs together.

For example: in a manufacturing enterprise, each major function of purchasing , marketing, research and development (R AND D) and personnel may be grouped into different departments as shown in the figure.

Managing director



R and D



Functional structure is most suitable when:

the size of organization is large,

it has diversified activity, and

operations required a high degree of specialization


leads to Specializations

Efficiency improves

Minimizes cost

Better control and coordination

Proper attention

Ease in training employees


Paid less emphasis on organizational objective than the departmental plan.

Problems in coordination

Conflicts of interest



In large diversified organizations , activities and personnel are grouped into a number of divisions on the basis of different products manufactured or geographical areas .











Divisional structure is suitable for those business enterprises whereas large variety of products is manufactured using different productive resources.

When an organization grows and needs to add more employees, create more departments .


Product specialization

Greater accountability

Flexibility and more initiative

Growth and expansion


Conflicts among different divisions


Ignoring of organizational interests





Elements of delegationAccording to Louis Allen-"delegation is the entrustment of responsibility and authority to another and the creation of accountability for performance"


Authority refers to the right of an individual to command his subordinate and to take action within the scope of his position.

The concept of authority arises from the established scalar chain which links the various job positions and levels of an organization.

Authority is needed to discharge a given responsibility.

Authority flows from top to bottom, i.e., the superior has authority over the subordinate


Responsibility is the obligation of a subordinate to properly perform the assigned duty.

It arises from a superior-subordinate relationship because the subordinate is bound to perform the duty assign to him by his superior.

Responsibility flows upward, i.e., a subordinate will always be responsible to his superior.


Accountability implies being answerable for the final outcome,

Accountability cannot be delegated. The manager shall still be accountable for the performance of the assigned task. He cannot escape from the responsibility for any default or mistakes on the part of his subordinate.

Accountability flows upward, i.e., a subordinate will be accountable to a superior for satisfactory performance of work.


While authority is delegated, responsibility is assumed, accountability is imposed.

Responsibility is derived from authority and accountability is derived from responsibility.


ABB is a multinational corporation headquartered in Zurich, Switzerland, operating in robotics and mainly in the power and automation technology areas. It ranked 143rd in Forbes ranking (2010).

ABB is one of the largest engineering companies as well as one of the largest engineering companies as well as one of the largest conglomerates in the world. ABB has operations in around 100 countries, with approximately 145,000 employees in June 2012, and reported global revenue of $ 40 billion for 2011.

ABB is traded on the SIX Swiss Exchange in Zurich and the Stockholm stock exchange in Sweden since 1999, and the New York stock exchange in the United States since 2001.


ABB is the world's largest builder of electricity grids and is active in many sectors, its core businesses being in power and automation technologies. The company has one corporate division and five production divisions since reorganization in January 2010.


Power plants are the key components for the transmission and distribution of electricity. The division incorporates ABB's manufacturing network for transformers, switchgear, circuit's breakers, cabels, and associated high voltage and medium voltage equipments such as digital protective relays. It also offers maintenance services. The division is subdivided into three business units- high voltage products, medium voltage products and transformers.


Power systems offer turnkey systems and services for power transmission and distribution grids, and for power plants. Electrical substations and substation automation systems are key areas. Additional highlights include flexible AC transmission systems (facts), high voltage direct current (HVDC) systems and network management systems. In power generation, power systems offer the instrumentation, control, and electrification of power plants. The division is subdivided into four business units- grid systems, substations, network management, and power generation.


The division "discrete automation and motion" provides products and services for industrial production. It includes electric motors, generators, drives, programmable logic controllers (PLCs), analytical, power electronics and industrial robots. ABB has installed over 200,000 robots. In 2006 ABB's global robotics manufacturing headquarters moved to shanghai, china. Also, wind generators and solar energy are in this division.


The low voltage products division manufactures low- voltage circuits breakers, switches, control products, wiring accessories, enclosures and cable systems to protect people , installations and electronic equipment from electrical overload. The division further makes KNX systems that integrate and automate a building's electrical installations, ventilations systems, and security and data communication networks. Low voltage products also incorporate a low voltage systems unit manufacturing low voltage switchgear and motor control centers. Customers include a wider-range of industry ANF utility operations, plus commercial and residential buildings.


The main focus of this abb business is to provide customers with systems for control, plant optimization, and industry specific automation applications. The industries served include oil and gas, power, chemicals and pharmaceuticals, pulp and paper, metals and minerals, marine and turbo charging.


The corporate and other department of ABB deals with the overall management and functioning of the company as well as asset management and investment. It supports MNCs.


Procter and gamble co. (p & g, NYSE: PG) is a fortune 500 American multinational corporation headquartered in downtown Cincinnati, Ohio [3] that manufactures a wide range of consumer goods. It is 6th in fortunes most admired companies 2010 list. [4] P & G is credited with many business innovations including brand management and the soap opera.

Procter and gamble is a leading member of the U.S. global leadership coalition, a Washington D.C.- based coalition of over 400 major companies and NGOs that advocates for a larger international affairs budgets, which funds American diplomatic and development efforts abroad .

The environment for company's tiday is anything but stable. Managers can no longer forecast with certainty the outcome of their organizations. This has drawn attentions to chaos theory, which suggests relationships between complex systems, including organizations, are nonlinear and are composed of many choices that create varying effects and render the environment unpredictable.

In the new environment managers are seeking solutions for today and the future of their organizations. The learning organizations offers hope for the future as they seek to change key dimensions of their firms in a chaotic environment. A comparison of both approaches followed by an example will further illustrate the purpose of this article.

Traditionally, the most common organizational structure is controlled through the vertical hierarchy. Decision making comes from top management and works its way down through the organization. According to daft, "this structure can be quite effective. It promotes efficient production and in depth skill development, and the hierarchy of authority provides a sensible mechanism for supervision and control in large organizations, (29-30) . Although this structure may promote efficiency, in a rapidly changing environment, this type of structure may become overloaded. Because decisions rest solely with management, they are not able to respond to changes in the market quickly enough to succeed.

In the learning organization, structures are more horizontal, and task is created around processes rather than departmental functions.

Furthermore, the hierarchy is considerably flattened, with only a few top managers in finance and HR functions. Daft says, "self - directed teams are the fundamental work unit in the learning organizations . Boundaries between functions are practically eliminated because teams include embers from several functional areas, (30). In a rapidly changing environment , the structure of a learning organization allows firms to quickly change and adapt to new market demands.

In traditional organizations, strategy is formulated by top managers of the firm

Which every worker is expected to abide by. Executives use strategy to guilt their organizations through efficiency and performance. Workers have little or no say in the direction and strategy of the firm.

Factors affecting choice of organizational structure

The factor which determine the structure, aims & activities of the organization, can be grouped into;

External factors:

Those from the enabling environment which are not under the control of the organization but affects its structure and development. It includes:

Economic factor such as wood demand, wood supply, forest/land market, role of certificate, level of wages etc. for example: high level of wages add pressure on forest manager to improve management of the forest either by themselves or through organizations.

Socio-economic factor such as forest ownership structure, size of forest holding, occupation of owner, residency of owner, involvement of groups/ organizations in political processes and decision making .for example: interest representation is one of the basic task of many organizations. The involvement in political processes (formal and informal) can increase the attractiveness of belonging to an organization.

Political administrative factor such as: role $ influence of forest authority, legal framework, support programs. For example: government often implement programs to encourage formation or improve the functioning of the forest owner organizations. The programme may include financial incentives either directly or indirectly, information and technology.

Internal factors

Purpose of the organization such as interest representation, information, economics, supply, production/management, marketing, combinations such as organization purposes may also consists of combinations of interest representation, information task or economic objective.

Organization instruments such as


Formal organization and informal organization

Legal form

Public body

Private body

Membership type

Member group


Structure type

Technological approach

Participation and delegation

Individual choice factors

Factor effecting evaluation of expected benefits

Factor affecting evaluation of effecting cost of membership

Issues regarding becoming a member

Issues regarding continuing cost of membership.