Organizational Structure The Formation Of An Organization Commerce Essay


Organizational structure is very much initial and essential step in the formation of an organization. When individuals are well aware about structure like departments, authorities and responsibilities division they work very efficiently and in good manner. Many schools of thought define organizational structure. The researcher found ( 2010) unique definition of organizational structure that it is a form of an organization that is apparent in the way functions, departments, divisions and people link together and interact. Organization structure may be represented by an organization chart, it reveals vertical operational responsibilities, and horizontal linkages. Organizational structure may be much complex due to its size and its geographic dispersal

The Researcher realized that organization structure consists on departments, functions and divisions which based on individuals workers at their selected positions. They are all linked together and they are all responsibility at their own working capacity and works in their span of working as a creative part of organization. And intricacy in organizational structure depends upon its capacity, its business worth, its geographical location, its choice of business and many other conditions which effect internally or externally on the organization. As the same statement (George & Jones, 2005) also defines organizational structure as it is the relationship between the management team and the workforce for performing formal task and reporting.  Structure of organization designed by the management team and the basic inspiration is the motivation of employees to work hard with best coordination for doing desired work

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George and Jones explained the organizational structure as relationship of management team and the individual work force which plays their role at their best. Management also motivates the senior and junior support staff on their efforts and the main task is coordination for best results in favor of organization. Coordination depends on best communication style exercised within the organization and (Hall 1987) also defines organizational structure as communication flows, interaction of individuals and best use of power relationship for all the activities of organization. In the light of above views the organizational structure is complex design of individuals at different positions, different departments and divisions, with appropriate coordination and communication between employees for best and working in stipulated time period in reasonable cost. At present age the need of organizational structure very much essential, but think about early ages of human life or during the evolution of society and economy the need of organization and organizational structure exists, and scholars of this evolutionary group initialized the idea of organizational structure in what sense. The researcher found some references about the history of organizational structure and presented here under


Organizational structure has background from ancient times. Collectors and hunters used to manage tribal organizations. At the next step of revolution of economic history it was observed that through clerical strength industrialists developed structures of organizations at that time. Organizational structures have different types as the revolution of economies and described as:

Pre-Bureaucratic Structures

With the development of economies the concept of entrepreneurial business raised, at this time organizational structures are called pre-bureaucratic structures. Most of the operations directed and controlled by unitary structure and the strategic leader makes all key decisions. But these structures have very low standardization of tasks. The researcher realized that most decisions taken by single person either at very minor level. This may be fits for entrepreneur or sole proprietor ship where business scale may be high but working span based on single decision maker. Supervision of Organizational structure totally summarized by Entrepreneur and all the employees followed the instructions for doing their job with neglecting the results which may be in favor or oppose of business.

Due to this reason the level of standardization exists in minor sense in pre-bureaucratic structure. Set pattern, style of working enhance working efficiency and these were initial frame work of standardization.

Bureaucratic Structures

(Burns and Stalker 1961) indicates organization structures which have certain degree of standardization. Degree of standardization creates the sense of quality maintenance for products and services. (Chandler 1962, 1977) and williamson (1975, 1985) also comment on the shifting of organizational structure from unitary to multi-divisionary structures for market positioning and resource allocation among divisions, because many organizations enhances business at multinational basis and style of structure suite to them. The researcher further observed about standardization in organizational structure and found the term degree of standardization and its benefit also. Degree may help to improve and maintain the quality of product or service. The researcher realized that shifting to flat structure for marketing positioning already applied in organizations. The researcher tried to find the effect of shifting on multi-divisionary structures for enhancement in degree of standardization, due to reducing in implementation time or cost..

Post-Bureaucratic Structures

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(Donnellon, Hecscher, 1994) initiates the post bureaucratic organization theory which may include total quality management, culture management and matrix management. The ideas of post bureaucratic structures specifically contrast with the weber’s ideal type bureaucracy. (Grey C, Garsten C) also describes the post bureaucratic organization as such type of organization where decisions are based on dialogue and consensus rather than authority and command. It is used to encourage participation and help to empower people who normally experience oppression in groups. Some researchers studied that how simple structures could be used to generate improvisational outcomes in product development (Miner et al, 2000).

The researcher found the good examples of companies which shifts from unitary structures to typical bureaucracy like shell Group and when the management converted the structure to matrix the company failed in market. Starbuck empowers employees to make their own decisions and train them to develop both hard and soft skills. Some experts initiates the matrix structure as multinational design (Robbin, judge2007) which maintains coordination among products, functions and geographic, and the same design adopted by many global companies like Toyota, Procter and gamble and Uniliver. Over the last decade the competition, global trends, customer demands and many other factor set the mind of business person that many companies has become flatter in which less hierarchical divisions involved which is necessary for survival of the organization. After that another approach introduced and today organization structures designed as per business strategy and the new styles developed in the formation of organizational structures. These are functional structures, divisional structures, Team, Network and Boundary less Structures.

Functional Structure

(Miles, Snow 1992) describes this structure. This style of organizational structure describes the specific activity of business. The organization engaged the employee for specialized set of tasks. In some businesses, when standardized goods and services made at large volume and low cost the functional structure will best fit the operations. In functional structures coordination and specialization of task are centralized which produce a limited amount of products or services efficient and predictable. The advantage of this structure is most useful for those industries which involved in manufacturing of heavy machinery, Electrical equipment and tools which have standardized technical specs. Likewise at the other side functional structures are helpful for organizations provide specific services to their customers. Most of the service provider companies adopt the same structure for their particular scope of work, specified customers, isolated style of workings and pre-determined targets within stipulated time period.

Divisional Structure

(Theraja 2008) consider the style in his book. Divisional structure also known as product structure. Each organizational function is grouped into division. Like an industry makes products of same nature like textile industry which invloves spinning, dying , knittting, Weaving units they consider as individual division as per their activities for each unit. Each division within a divisional structure contains all the necessary resources and functions within it. Divisions can be categorized from different points of view. There can be made a distinction on product/service basis (different products for different customers: households or companies) or on geograpical basis (like UAE and Asian Division).

Matrix Structure

In matrix structure induviduals grouped by both function and product. Structure can combine the best operations of structures which followed separately at their areas. Excellent practice followed in a matrix organization, and the management frequently uses teams of employees to accomplish work, in order to take advantage of the strengths, as well as make up for the weaknesses, of functional and decentralized forms. Matrix structure is amongst the purest of organizational structures, a simple lattice emulating order and regularity demonstrated in nature. As project matrix divided into three categories stated in below:

Weak / Functional Matrix: in this type of structure functional manager manage the resources and asssigned project area. Organization limitize the project manager and he is only responsible to oversee the cross- functional aspects of the porject.

Balanced / Functional Matrix: Such type of structures the best aspects of functional and projectized organizations merged. It is the responsibility of project manager to oversee the project. project manager and the functional managers equally powered from the higher management. In some situations it is consider the most difficult system to maintain as the sharing power is delicate proposition.

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Strong/Project Matrix: Project manager is primarily responsible for the project. Functional managers provide technical expertise and assign resources as needed.


(Theraja 2007) Newest concept of organizational structures os team. If the organization have hierarchical or flat sturctures the management works as team. An organization gathered a set of people who synergize individual competencies to achieve unique dimensions, the quality of organizational structure revolves aropund the comptencies of teams in totality. In banking concept of floor financing emerged and management creates a team which have common interest to sell more cars through leasing. Team works for maximum car selling through leasing facility to resonsible and rapport individuals .


(Walker 2007) Managers in network structures spend most of their time coordinating and controlling external relations, usually by electronic means. Many businesses involves in this structures and concerned staff engaging in network to sell more strategy for a porduct and service.

Boundary less Structure:

(Andreson 2007) discuss this type of organizational structure that it is such type of organizational structures have no boundary of their business links. They have virtual business entity which engaged in 24 hrs business on internet. This means while the core of the organization can be small but still the company can operate globally be a market leader in its niche.Many businessman follow this type of strategy and have good range of products displays through internet and makes more profit to sell these products at different levels and different quantity but same quality and price.

Magnificient companies develop, modify and change their organizational structures so that they align with their strategies. For the last decades most of the organization shifting back to flatter structures. Being at risk of losing profits or even going bankrupt due to the major financial downturn today, a lot of companies are moving to flatter structures. Losing profit at the basis of cost enhancement and other factors which caused loss in diversed shapes but as per ethics each and every organizational structure has common determinants which observed by organization in formation of organizational structure or shifting from existing structure to another one. These determinants are dicussed as below

Detereminants of oganizational structure

In every organization, management care about all the determinants when creates organizational structure. Main determinants of organizational structure are

1. The Environment

Reseracher found many school of thoughts about determinants of organizational structure like (Burns and Stalker 1961) says that environmental conditions plays prominent role for appropriateness of organizational structure. Further stated by (Lawrence and Lorsh 1967) that performance of such companies much better if their internal capabilities and characteristics matches with environmental requirements. Reseracher realized environment arround the organization or business affected in both sense negative or positive. Some internal environments also conserve the resources and help to use in right manner or some time caused deffciency or decline.

2. The Size of the organization

(Stephen P. Borgatti, 1996) stated that organization size consists on number of personnel., output, capcacity and resources. Also explained that when the size increased the structures and actitivities also increased but concentration of power decreased. When organziation tends to enhancement its volume as working capacity, extension in services or products they have already made, personnel in shape of making new divisions or resources which are in shape of fund flows the structure direclty proportionate with it and increased with the size of organization but concentration of power may be decreased. Planned organization have best solution for concentration of power, they authorized appointed person at their span of working. The authorized person is competent and skilled to take immediate decision as best choice for organization growth.

3. Technology

In current scenario the communication technology is very essential for organzational strucutre. Researcher found the view of different authors like (Parsons 1951) says that coordination and communication processes importance increased at each level, either managerial, technical or institutional. It considers very complex issue in organization and in all dynamics of organization environment (Emery and Trist,1960). In some other school of thought technology is one of the internal important factor of organization. In any organization managerial porcesses and technology has relationship and technology determines the way of organizational management.Technology determines the principles, theories and structures of organization (Zareei Matin, 2003, p-155). Resarcher agreed with this statement and observed that communication technology in organization plays prominent role for managerial activities. Further realized that communication technology raised at each level in organizational structure with growth of organization.

The Organization Strategy:

(Fe`rery 2006) said that strategy consists on three dimension which were called dynamics of strategy, these are value, parimeter and imitation. Researcher realized that all of three factors exercised by organizational structure and also realized that best fit between organizational strategy, structure and management process make it a successful organization (Raymond Miles and Charles Snow 1992). The researcher found that strategies and structure has complex relationship in organization and growth of organization possible in the sense that strategy chosen for business as per requirement of organizational structure or sometime there may be remarkable change required in organizational structure as per market demand.

During research another point explored by researcher and gathered the infromation about organizational structure affects on culture of organization and discussed below.

Effect of organizational structure on organization culture

Reseracher tried to found the effect of strucutre on culture and achieved suggestion that in change process of organization culture is an integral part (R.Dension and K. Mishra 1995)

Sub headings

Community organizing practice

The Organizer’s role

Practice Keys

Quality standards

In an organizational structure monitoring of absolute application of quality standards is very important task and most of the firms exercised it carefully. The researcher observed some standards relevant to the population of study like implementation time, implementation cost, motivation, monitoring, communication and systematic approach. The researcher gathered infromation about these quality standards from different sources relevant to the study and discussed in following

Frame work on literature review




effect on Culture

Organizational Structure and Standardization

Quality standards

Application in current structure

ISO 9001, 14001

Implementation of ISO in current structure