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The term organization is derived from the word 'organism' which means a structure of body divided into parts that are held together by a fabric as one organic unit. In firms, most managers and employees work together to achieve organizations goal, this binds them together by coordinating with each other. Division of work and authority and relationship building comes with the organization structure.
Organizing is creation of administrative set up for execution of business plan. It provides the framework within which management does its job. Organization facilitates efficient administration, direction and control. It avoids wastage of raw materials and human resource. There different structures which are used by various organizations. These different types of organization structure are:
Product based structure
Territory based structure
Customer based structure
For the further study I have taken up the case of Life Insurance Corporation (LIC) which follows the Geographical or Territory Based Structure.
GEOGRAPHICAL OR TERRITORY BASED ORGANISATION STRUCTURE
Geographical structure is followed in case of service organization which have offices in different regions or geographical areas. A geographic organizational structure is typically found in companies with operations spread over a large region, such as national or international offices such as in case of LIC as it helps in concentrating on the special requirements of the customers of each region. Each location will have its own internal structure and management layers, allowing them to run as a pseudo-independent operation. Each regional office has independent functional departments to realize its objectives. LIC also has semi-autonomous divisions in different regions of the country and each division controls the LIC branches in its territory. Every branch has separate departments for operations such as new policies, collection of premium, adjustment of claims and administration.
The production and business are performed by the branch offices which understand the local requirements and sensitiveness of people. They can utilize the local conditions and can capitalize on the local situations, raw materials and market. The decentralization of commercial banks have given very useful results as the efficiency, effectiveness and economy of the bank functioning have increased. There is enough scope for utilization of the existing resources of the corporation as well as market potentials in the field. Coordination and control are exercised by the Central Office. Each branch unit is effectively managed as per the local conditions same as in case of LIC shown in following diagram.
GEOGRAPHICAL OR TERRITORIAL BASED STRUCTURE IN CASE OF L.I.C
Organizational structure signifies the formal layout of a company's workforce. It provides the status or designation the personnel will hold. It defines accountability relationship, decision-making authority, and the physical presence of employees in organization by dividing them into different departments. Organizational structure groups based on territory have representatives from each department into units formed to serve one specific market or region. These units are highly effective if located within the regions they serve and employ workers from the local labor pool.
Following are the benefits of this type of organizational structure:
Communication and Collaboration
Communication by representatives of the various other business functions becomes much more personal in this form of organizational structure. It is better to good working relationships with people who work side by side in different departments rather than with those on the other side of the world through email and telephone. Developing such groups encourages the development of strong, collaborative teams that works together, engage in decision-making process together and understand each other's personality and work style. This type of environment develops ability to adapt quickly to changes in divisional goals and processes.
If local people are hired for management jobs will enable the firm to know well about the local environment, customers, culture, and legal climate. Local marketing managers understand what exactly drives local purchase behavior. Local accounting managers would be able to understand the tax structure and financial reporting requirements of that region and local staffing managers would understand the management practices that are most effective in the region. Decision-making effectiveness can be improved by depending on the knowledge and experience of local talent. Placing a mix of local and home office leaders at the helm of a geographical unit leads to advantage of melding local culture with company culture, ensuring that the company is able to adapt to local conditions.
Focus on geographical areas
According to Lamar.edu, customer service of the company can be enhanced using geographical based structure. The local representatives make the customers more comfortable and know them well by understanding their language and idiomatic expressions. Customer support representatives will also have greater access to representatives from other functions which can allow them to handle customer issues much more efficiently. For example, in a functional structure, a customer support representative in India if speaks with a customer from England, then call an account manager in Germany to know how to help the customer whereas in a geographical structure, the support representative in India would speak with a customer from India, then ask an account representative down the hall for the required information. This structure focuses all functions in one geographical area which allows each department to operate effectively and fit with local trends.
Performance Strategy and Measurement
Besides from operational advantages, this structure offers strategic advantages as well. The performance of individual markets and work groups is simplified under this structure, as metrics such as revenues, profit margins, costs, and performance improvements can be tagged to specific regions. Home office executives have an invaluable strategic resource in their pool of local management talent; local managers from various departments can be consulted when making decisions, such as which new products to introduce, where to concentrate research efforts, and on which products or services to focus in different regions.
Coordination and Expansion
A regional division can achieve better coordination and supervision also becomes easy in particular area. This helps in reducing transportation and distribution costs. This form of structure helps in expansion of business in various regions in systematic manner.
Companies may find it difficult to run a organizational structure based on geographical area because centralized decision-making is not possible. Business owners must believe on other individuals to take corrective actions and improve operations rather than giving a direction from the company's main office or headquarters.
There is multiplication of physical facilities which leads to uneconomical operations.
There may arise the problem of integration between various regional offices. They may compete in certain areas with each other which is not healthy for the organization.
Conflict between local and central management
Duplication of resources and functions
There will also be problems in providing centralized services to various departments which are located in different regions.
If any attempts are made to enforce uniform marketing and personnel policies in all the regional units may be contrary to the local needs of some units.
Every organization needs a good structure in order to operate in systematic manner. The organizational structures can be used by any organization if the structure meets the nature and the maturity of the organization. In most cases, organizations evolve through structures when they progress through and enhance their processes and manpower.