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An organization is a group of people with same aims, goals and achievements and social arrangement which controls its own performance. Organizations can be regarded as people management systems. They range from simple hierarchies along traditional lines to complex networks dependent on computer systems and telecommunications. Human resource managers can encourage organizations to adopt strategies (for their structures) which foster both cost-effectiveness and employee commitment. Organizational structures can be classified into a number of types, including functional, divisional, matrix, federations and networks.

Organizational Structure

Every organization to be effective must have an organizational structure. It is the form of structure that determines the hierarchy and the reporting structure in the organization. It is also called organizational chart. There are different types of organization structures that companies follow depending on a variety of things; it can be based on geographical regions, products or hierarchy. To put it simply an organizational structure is a plan that shows the organization of work and the systematic arrangement of work.

Types of Organizational structures


Traditional organizational structures focus on the functions, or departments, within an organization, closely following the organization's customs and bureaucratic procedures. These structures have clearly defined lines of authority for all levels of management. Two traditional structures are line and line-and-staff.


The line structure is defined by its clear chain of command, with final approval on decisions affecting the operations of the company still coming from the top down. In this structure president or CEO can easily provide information and direction to subordinates, thus allowing decisions to be made quickly.


Based on the company's general organization, line-and-staff structures generally have a centralized chain of command. The line-and-staff managers have direct authority over their subordinates, but staff managers have no authority over line managers and their subordinates. This type of structure combines the flow of information from the line structure with the staff departments that service, advice, and support them the decision-making process is slower than in a line organization.


A variation of the line-and-staff organizational structure is the matrix structure. In today's workplace, employees are hired into a functional department (a department that performs a specific type of work, such as marketing, finance, accounting, and human resources) but may find themselves working on projects managed by members of another department. Because the matrix structure is often used in organizations using the line-and-staff setup, it’s also fairly centralized. However, the chain of command is different in that an employee can report to one or more managers, but one manager typically has more authority over the employee than the other manager(s).


Organizations with a centralized structure have several layers of management that control the company by maintaining a high level of authority, which is the power to make decisions concerning business activities. Since this organizational structure tends to be fairly bureaucratic, employees have little freedom. Centralized organizations are known for decreased span of control a limited number of employees report to a manager, who then reports to the next management level, and so on up the ladder to the CEO


Because individual creativity can be stifled and management costs can be greater in a centralized organization, many organizations continue to downsize into a more decentralized structure. Decentralization seeks to eliminate the unnecessary levels of management and to place authority in the hands of first-line managers and staff thus increasing the span of control, with more employees reporting to one manager. Because In decentralize structure top management hears staff concerns and complaints in a more direct manner and management has a more hands-on approach. The hands-on approach involves less bureaucracy, which means there is a faster response to situations that demand immediate attention. This structure also takes advantage of bottom-up communication, with staff issues being addressed in a timely manner.

Organizational change for enterprise growth


During the mid-1990s, IBM revitalized its market strategy and product line architecture the need for this strategic and product line renewal could not have been more pressing. In 1990, IBM reported net earnings of approximate $6 billion. A year later, it reported a small net loss. In 1992, the loss approached $7 billion. By 1993, losses exceeded $8 billion! Market innovation was an important aspect of IBM's turnaround defined compelling user needs and frustrations, and drove these into new product designs in both hardware and software. IBM moved from a transactions processing orientation for all large corporate users, to an e-business consumer and focus within specific vertical markets.

Toyota Company

Toyota Motor Company was founded in 1937 by the Toyoda family. Business was relatively unsuccessful until Eiji Toyoda introduced the method of lean production after studying Ford’s Rouge plant in Detroit in 1950.This lean production method became known as the Toyota Production System. The production executive, Taiichi Ohno, successfully helped Toyoda improve his company using this new production method and mode of thinking.

Organization structure of Toyota

Toyota employees and executive’s one quickly learn the word “I” instead of “we”. Employees are encouraged to share information and because higher ranking employee are encouraged to serve as mentor of lower level employee. Toyota has a more horizontal organizational structure “Matrix structure” Toyota’s use of matrix structure gives the company significant advantage because people working with “responsibility without authority” challenge to uncover truth and find solutions.


Both large and small organizations are increasingly required to network or enter into strategic alliances with other firms, in order to achieve success. Strategic inter-organizational alliances and networking (through technology) are becoming the keys in managing organizations in the 1990s. Many firms (both small and large) have now realized the need for business alliances.

Salient Benefits

It can serve as a transitional stage to help organizations to become leaner, more innovative and responsive in order to meet today’s organizational challenge to change. Enterprise networking also offers more timely, cost effective and integrated ways to make information available throughout an entire enterprise. Enterprise networking techniques are also being used to eliminate routine tasks.

Outsourcing: a major drive to network formation

An outcome of outsourcing has been the growth in the number of integrated companies, which are vendors that offer companies a customized network of vehicles, drivers, dispatchers, managers and transport control systems In the strictest sense of the word, outsourcing refers to the transfer of assets, such as computers, networks and people, from a using organization to a service vendor, which then assumes under long-term contract the responsibility for the outsourced activity

Current examples of this arrangement include Digital Equipment Corporation’s operation of Kodak’s network and MCI’s and IBM’s operation of Merrill Lynch’s network. EDS and Texas Air formed a joint venture to provide reservation systems; EDS paid $250 million to Texas Air for assets of System One subsidiary transferred to joint venture; EDS acquired 2,300 of 3,000 System One employees under ten-year facilities management contract. Chevron and IBM will manage the SNA network, AT&T the private voice network, Hughes the retail point-of-sale network at 2,000 service stations

The globalization of networking

The most popular European examples of networking are found in Denmark. In 1989, the Danish government earmarked $25 million to create a networking programmed. Companies joined in groups of three, four and five to chase exports and expand their product lines. Manufacturers pooled resources and skills, technology and information. Companies in the service sector combined research, training and marketing. Within 18 months, 3,500 of Denmark’s enterprises (ranging from law firms to furniture makers) were operating in these networks.

Trust: a stumbling-block to successful networking

Strategic alliances should not be regarded as “quick-fix” management solutions. Many alliances are plagued by clashing cultures and conflicting interests. If alliance partners are not pulling together in the same direction or have not agreed on how to measure success, there are going to be problems. What must be borne in mind is that involvement builds knowledge and knowledge tends to build trust.


Combination of strategy, structure and management. The move from a functional organization to an integrated one is a major undertaking that may take years to implement effectively. However, the time constraint is of no real consequence. Today’s corporate partners are less interested in short-term ventures designed to save a few dollars and more focused on long-term alliances where gains are made over many years. Alliances are therefore constructed as effective means to acquire access to new markets and special expertise, or to beat others to market. Strategic alliances are also becoming increasingly necessary to support innovative activities.

The need for alliances is also driven by rapidly advancing technology Networking is the ability to develop and cultivate a large and diverse group of people who will gladly and continually refer business to one another. In recent years, the rise of the “network” form of organization has been dramatic. What is also important to note is that networking is quickly following the rationales of the global economy and, as a result, we are now witnessing the formation of networks on a global scale.


Zeffane, R.M. (1994), “Inter-organizational alliance and

networking: the role of technology”, Leadership &

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Zeffane, R.M,The widening scope of

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economic, sectoral and social dimensions

Rachid Zeffane

Paul F. TakakOutsourcing