Design of organisation structure is considered to be a matter of choice among a large number of alternatives. There are various forms of organisation structure; however, not all of them are suitable for all situations because of the differences in contextual variables which affect the organisation structure. From this point of view, managers must be aware of the various alternatives so that they are able to choose a suitable structure for their organisations.

The classification of organisation structure is based on the way various activities are grouped together to create departments and units and prescribing their relationships in the organisation. Thus, there are seven types of organisation structure-line, line and staff, functional, divisional, project, matrix, team based, and free-form. Each of these emphasises different arrangement of organisational activities. Some of these are designed on mechanistic pattern, for example, line, line and staff structures; some are designed on organic or dynamic pattern, for example, matrix and free-form structures. Others have a combination of both mechanistic and organic patterns in varying degrees. Further, some of the structures are basic, for example, functional, divisional, etc.; some emerge because of overlays which denote superimposition of one element over another, for example, matrix structure. Besides the basic organization structure, organisations may create committees taking personnel from different departments where the processes are quite different as compared to a department.

Henry Mintzberg has given a different scheme of classification of organization structures. Rather than focusing on structural imperatives, people, or rules, his description of structure emphasizes the ways activities are coordinated. Accordingly, there are five types of structures simple structure, machine bureaucracy, professional bureaucracy, divisionalised, and adhocracy. In each structure, arrangement of activities and, therefore, coordination mechanisms differ. In the further analysis of forms of organization structure, we shall take earlier classification as it deals with various forms in more comprehensive way. 1

1. Line Organization Structure

Line organization structure is also known as scalar, military, or vertical organization and perhaps is the oldest form. This concept holds that in any organization or hierarchy derived from a scalar process, there must be a single head who commands it. Although an executive can delegate authority, he has ultimate responsibility for results. Line organization can be designed in two ways:

A. Pure Line Organisation Structure

Under this form, similar activities are performed at a particular level. Each group of activities is self-contained unit and is able to perform the assigned activities without the assistance of others. Pure line organization structure has been depicted in following figure 

B. Departmental Line Organisation Structure

Under this form, entire activities are divided into different departments on the basis of similarity of activities. Each department is placed under one departmental head. All persons in the department are subject to control by the departmental head. The basic objective of this form is to have uniform control, authority, and responsibility. Departmental line organization structure has been depicted in following figure 

Features / Characterstics

1. Lines of authority and instructions are vertical, that is, they flow from the top to the bottom.

2. The unity of command is maintained in a straight and unbroken line. It implies that each subordinate receives instructions from his immediate superior alone and is responsible to him only.

3. All persons at the same level of organization are independent of each other. It implies that all the departmental heads are supreme in their respective areas and independent of one another and are responsible to the chief executive. This applies to all other positions also.

4. This structure specifies responsibility and authority for all the positions limiting the area of action by a particular position holder.

Merits 

1. Simplicity

This organisation is quite simple in both understanding and implementation. Every person is clear about what is expected of him. Since a person is receiving orders and instructions from only one superior, he does not have any confusion in his mind about his role and responsibility in the organisation.

2. Discipline

Since each position is subject to control by its immediate superior position. often the maintenance of discipline is easy. Unity of command and unity of direction foster discipline among the people in the organization.

3. Prompt Decision

Most of the decisions in such organisations are taken by the superiors concerned. This makes the desicion-making process easier and less time-consuming. Moreover, since they have not to consult others or look for others' advice, they can make the decisions very quickly.

4. Orderly Communication

Line organisation follows scalar chain method of communication. It implies that communication going up and down will pass through the immediate superiors. This system of communication is easy to maintain, orderly in nature, supports the authority of the superior, and provides for closeness of contact thereby reducing chances of miscommunication.

5. Easy Supervision and Control 

The line organisation provides for easy supervision and control because each subordinate is controlled by a single superior. The superior has direct and close contact with his subordinates which facilitates supervision and control.

6. Economical 

The line organization is quite economical because it does not use staff specialists whose appointment is a costly affair specially for small organisations. Every person in the organization is directly responsible for his contribution to the organizational objectives.

7. Overall Development of the Managers 

Since the line organization does not have provision for staff specialists, various managers have to combine among themselves the expertise of a staff member. Thus, the functions of managers are more comprehensive which leads to the overall development of the managers concerned.

Demerits 

1. Lack of Specialisation 

The line organisation does not offer scope for specialisation. A manager has to perform a variety of functions which may not necessarily be closely interrelated. Any manager, whatever may be his qualities, cannot cope up with the requirement of various intricacies of business system. The result is that he cannot make a very valid decision for all requirements in the organisation. The quality of management is, thus, not very satisfactory in this type of organisation structure.

2. Absence of Conceptual Thinking 

The managers in this system do not find time for conceptual thinking so essential for organisational growth and development because they remain quite busy in their day-to-day managerial problems. A man's ability being limited. he cannot meet the diversified and varied demands of his functions because he has too much and too numerous activities to perform. Many times, even the managers are involved in non-managerial functions also which not only hamper their efficiency but leave little scope, whatsoever may be, for concentrating on long-term problems of the organisation.

3. Autocratic Approach

The line organisation is based upon autocratic approach. The line of authority, being direct, demands high level of obedience on the part of the subordinates. It leaves little consideration to them which ultimately dampens the initiative on their part. This may also result in one-way communication, that is, only downward communication, and the manager at the top may sometimes be devoid of the actual knowledge of the situation.

4. Problems of Coordination

Coordination among various activities and the departments is achieved through horizontal relationship, whereas the line organisation stresses only vertical relationship. Thus, there is acute problem of coordination. particularly in a large organisation.

5. Lack of Groundwork for Subordinates' Training

In line organisation, the superiors take decisions and subordinates merely transform them into action. Thus, they are mostly involved in routine type of activities which prevent them from learning new methods of working or taking overall view of the organisation concerned as they are quite unrelated from other parts of the organisation. Thus, a succession problem is there, and if a high- level person is retiring or leaving the job, or unavailable for other reasons, his position cannot be filled up easily by existing organisational personnel.

6. Suitability

The line organisation structure is not suitable for large-scale organisations because it cannot fulfil the requirements of large organisations. However, it is quite suitable to small- scale organisations where the number of subordinates is quite small. The need for small organisations is centralised control, only few levels of authority, direct inter personal communication, and direct control and supervision. The various limitations of the line structure for large-scale organisations give way for the emergence of other types of structures.

2. Line and Staff Organisation Structure

Line and staff organisation structure refers to a pattern in which staff specialists advise managers to perform their duties. When the work of an executive increases, its performance requires the services of specialists which he himself cannot provide because of his limited capabilities on these fronts. Such advice is provided to line managers by staff personnel who are generally specialists in their fields. The staff positions or departments are of purely advisory nature. They have the right to recommend, but have no authority to enforce their preference on other departments.

In actual practice, somtimes it is difficult to determine which departments are line or staff. The problem can usually be solved by classifying activities within an organisation in two ways: (i) that which is substantive (direct) in its contribution to the organisationi's overall objectievs, and (ii) that which is objective (indirect) in its contribution. The departments performing former group of activities are line ones, and those performing latter group of activities are staff ones. Line and staff organisation structure may be presented as shown in figure below.

The positions and departments in rectangles are staff and others are line.  These staff specialists may provide services to a particular position, department, or organisation as a whole. 

Merits

As against line organisation structure, line and staff organisation structure offers the following advantages

1. Planned Specialisation

The line and staff structure is based upon the principle of specialisation. The line managers are responsible for operations contributing directly to the achievement of organisational objectives whereas staff people are there to provide expert advice on the matters of their concerns. Thus, there is ample chance for creative thinking for generating new ideas and actions which are quite important for the organisations. It is said that "routine keeps the ship of industry afloat, but creative thought is the motive power that gives it headway."

2. Quality Decisions 

The quality of decisions in line and staff structure is high because the decisions come after careful consideration and thought. Each expert gives his advice in the area of his specialisation which is reflected in the decisions.

3. Prospect for Personnel Growth

This system of organising offers ample prospect for efficient personnel to grow in the organisation. Not only that, it also offers opportunity for concentrating in a particular area, thereby increasing personal efficiency. This is also according to the personal liking, that is, one is expected to work better in one's main discipline.

4. Training Ground for Personnel

It provides training ground to the personnel in two ways. First, since everybody is expected to concentrate on one field. one's training needs can easily be identified. Second, the staff with expert knowledge provides opportunities to the line managers for adopting rational multi-dimensional approach towards a problem. Thus, by observing how staff people look at and solve a particular problem, line managers themselves sharpen their diagnostic and problem-solving abilities. Thus, they easily take the totality of view of the organisational functioning.

Demerits

The line and staff structure suffers from some limitations which particularly become acute when it is not implemented properly. Following are some basic problems and limitations:

1. Lack of Well-defined Authority 

Though it is easy to say about line and staff authority, often in practice, it becomes difficult to differentiate clearly between line and staff because, in actual practice, the authority is often diffused. Thus, the managers may not be clear as to what is expected of them or what is the actual area of the operation of their authority. Thus, confusion may be created in the organisation.

2. Line and Staff Conflicts 

The main problem of line and staff structure is the conflicts between line and staff managers, as discussed in Chapter 15. Such conflicts may be because of various reasons and sometimes the organisational conflicts may be taken as personal conflicts resulting in interpersonal problems.

Suitability

This structure can be followed in large organisations where specialisation of activities is required because it offers ample opportunity for specialisation. When employed in the large organisations, its success depends upon the degree of harmony that is maintained among various departments and personnel, the clarity in line of authority, and interpersonal contact of executives particularly in line and staff positions. In the natural course of growth, an expanding organisation may adopt this structure to enhance the efficiency. This structure, however, is not suitable for small organisations as it is quite costly for them. Moreover, they cannot take the full advantage of experts because of lack of adequate activities for them.

Functional Organisation Structure

Functional organisation structure is most widely used in the medium and large organisations having limited number of products. This structure emerges from the idea that the organisation must perform certain functions in order to carry on its operations. It seems natural that the organisation begins its operations by emphasizing the kind of work it must do to meet its objectives. As it grows and division of labour leads to specialization, the organisation has more work to do; it adds new specialties and further divides its presently employed specialties.

Functional structure is created by grouping the activities on the basis of functions required for the achievement of organisational objectives. For this purpose, all the functions required are classified into basic, secondary, and supporting functions according to their nature and importance. The basic or major functions are those which are essential for the organisation. For example, in a manufacturing organisation, production and marketing are basic functions when departments are created on the basis of basic functions and a manager feels that his span of management is too wide to manage effectively, which invariably happens in large organisations, several departments are created on the basis of dividing a basic function into sub-functions. For example, marketing may be subdivided into marketing research, advertising, sales, and so on. Thus, the process of functional differentiation may continue through successive levels in the organisation. Apart from basic and secondary functions, departments are also created to take advantages of specialization and to support basic and secondary activities. Such departments may be finance, accounting, personal, industrial relations, legal, etc. These departments may be created and placed according to their role in the organisation. For example, if the organisation emphasizes product development and innovation, research and development department may be given high status.

Authority relationships in functional structure may be in the form of line, staff, and functional. In fact, the concept of functional authority is very appropriate for functional structure. 

Features / Characteristics

1. Specialization by functions,

2. Emphasis on sub-goals,

3. Pyramidal growth of the organisation,

4. Line and staff division,

5. Functional authority relationship among various departments, 

6. Limited span of management and tall structure. 

The organisation chart of functional structure can be presented in figure below

Suitability of Functional Structure

Functional structure has certain potential advantages and disadvantages. Whether or not these advantages are realised depends on the specific organisation's situation. The establishment of a functional structure becomes necessary as a small organisation grows and business activities become more and more complex. In such a situation, there is a need for more formalised and systematic approach to major activities and for increased delegation of authority of decision making throughout the organisation. However, top management will continue to control decisions that involve strategic and coordinative variables. The functional structure works better if the organisation has one major product or similar product lines. In such a case, the organisation may take the following benefits: 

1. Functional structure can result in high degree of specialisation because a unit or department is concerned only with one aspect of total activities. Thus, the organisation can employ greater variety of skills.

2. Functional structure brings order and clarity in the organisation by prescribing what one is expected to do. Everyone understands his job clearly which adds to efficiency.

3. It promotes professional achievement as a person is restricted to his own area of specialisation. Thus, it provides satisfaction to specialists.

4. There is economy in the use of organisational resources because various units of the organisation use the centralised resources of a kind. Thus, there is no duplication of activities and processes which save resources.

5. There is high degree of control and coordination of functions because all work of one kind is under one manager. Also, there is a clear chain of command for communication and authoritative decisions. However, from total organisation's point of view, this poses problems in control and coordination.

Problems in Functional Structure

The relative advantages of functional structure are like two-edged swords; they can cut both ways. In some circumstances, they can lead to disadvantages. For example, specialisation may lead to parochialism and goal displacement, or control and coordination may lead to overload for a manager. Therefore, if there is too much emphasis on any aspect, there may be dysfunctional behaviour of that aspect. The functional structure is not suitable to an organisation which takes up diversification, as the new activity may be quite different than the activities being performed by the organisation. Thus, diversification cannot be managed properly within the context of functional structure; or at least at some level, there may be violation of functional structure. In such a situation, functional structure presents following problems:

1. Responsibility for ultimate performance cannot be fixed in functional structure because no one is responsible for product cost and profit. Each department focuses on its contribution to the product, but not the entire product. Only top man is pulling everything together. Not only does this place the burden of control and coordination for the operations at the top, where the emphasis should be on longer- range problems but it makes judging the performance of each department difficult. 

2. Functional structure essentially generates slow decision-making process because the problem requiring a decision has to go through various departments as all of them have something to say on the matter. As against this, complex and markedly different activities require faster decision making because time factor is of prime importance.

3. Functional structure lacks responsiveness, necessary to cope up with new and rapidly changing work requirements. For example, if the organisation decides to add a new business, there is a question as how to add this because it may mean a new functional structure as the new business cannot be easily absorbed by old functional structure.

4. Functional structure offers usually line and staff conflict and interdepartmental conflict. The heightened degree of such a conflict becomes detrimental to organisational efficiency.

Divisional Organizational Structure

The second basic structural form employed by organisations is the divisional structure. While growth through expansion in same line of business forces a small organisation to organise on functional basis, growth through geographic and product diversification necessitates the adoption of divisional structure. In India, many companies have diversified into unrelated businesses and have found functional structure quite unsuitable for them. For example, companies like DCM Limited, Voltas Limited, Century Spinning Mills, Gwalior Rayon, etc., adopt divisional structure.

Divisional structure, also called profit decentralization by Newman and others, is built around business units. In this form, the organisation is divided into several fairly autonomous units. Each unit is relatively self-contained in that it has the resources to operate independently of other divisions. For example, each division has its own manufacturing, engineering, marketing, etc. Each unit is headed by a manager who is responsible for the organisation's investment in facilities, capital, and people as well as for unit's development and performance. Divisional structure is similar to dividing an organisation into several smaller organisations but it is not quite the same, since each smaller organisation is not completely independent. Each unit is not a separate legal entity: it is still part of the organisation. Each unit is directly accountable to the organisation.

Basis of Divisionalisation

There are different bases on which various divisions in an organisation can be created. The two traditional bases are product and territory. Later, many organisations have moved from these bases to create divisions on the basis of strategic business units. In each of these bases, functions involved and, therefore, departments created are different.

A. Product Divisionalisation

In this form, each major product or product line is organised as a separate unit. Each unit has its own functional structure for various activities necessary for the product. Multi-product organisations use this as basis for divisionalisation. This is appropriate specially when each product is relatively complex and large amount of capital is required for each product. The product requires different type of efforts as compared to others in terms of marketing and/or production. For example, Century Mills has separate divisions for textiles, cement, and shipping. Reliance Industries Limited has six product divisions: textiles, polyster, fibre intermediates, polymers, chemical, and oil and gas. Each division caters to different customers and has different types of competition.

B. Territorial Divisionalisation 

In this form, regional offices are established as separate units. Each regional office has its own set of functional departments and operates under the strategic policies and guidelines established by corporate management. This is useful

Features of Line and Staff Organization

1. Line authority achieves the major organizational goal and staff authority assists the line authority in achieving these goals.

2. Staff has specialized knowledge in their fields and offer suggestions to line managers when they feel necessary to do so.

3. No formal relationship is established between line and the staff.

Merits of Line and Staff Organization

1. This type is based on specialization 

2. It brings expert knowledge upon the whole concern 

3. Increased efficiency of operations may be possible 

4. Mass production is possible

Demerits of Line and Staff Organization

1. There arises confusion unless the duties and responsibilities are clearly / Indicated by charts and office manuals.

2. Advice and expert information are given to the workers through the line officers. It is possible that the workers may misunderstand or misinterpret.

D. Committee Organisation 

Committee organisation is widely used for the purpose of discharging advisory functions of the management. Committees are found in different levels of organisation. A committee is a group of people who meet by plan to discuss or make a decision on a particular subject. Because of its advantages, committee organisation is preferred. Committee means a body of persons, for example, Management committee consisting of General Manager and Departmental heads.

According to Davis, "A committee is a group of individuals who meet for the purpose of effecting an integration of ideas concerning a solution for some problems."

According to New man, "A committee consists of a group of persons specifically designated to perform some administrative act. It functions only as a group and requires the free intercharge of ideas among its members."

Committee have become an important instrument of management in modern organisations; they may be used for the following objectives:

1. To secure view-point and consultation of various persons in the organisations. 

2. To give participation and representation to different groups or interests;

3. To co-ordinate the activities of different departments;

4. To review the performance of certain units;

5. To facilitate communication and co-operation among diverse groups. 

Merits of committee organisation

1. It facilitates co-ordination of activity of various departments. 

2. Pooled knowledge and judgement become available to the business thus its efficiency increases.

3. It is a good media of training and educating employees. 

4. It helps to improve the motivation and morale of employees. 

5. It promotes mutual understanding, team work and co-operation among employees.

6. Intelligent solutions can be secured for complex problems.

7. It is useful in coordinating plans and in their execution.

8. It is an effective instrument of communication.

9. It is a method of executive development.

Demerits of committee organisation

1. It is not only costly in terms of time it consumes, but also in terms of money involved.

2. Difficulty in reaching agreement results in indecision.

3. Compromise at the cost of efficiency is often affected.

4. Indecision may lead to a breakdown of group action.

5. Committee management is slower in reaching decisions than a one-man rule.

Misuses of the committee organization

The committee organisations are generally found only in big business enterprise. Some examples of misuse of the committee organisation may be as under:

1. Decisions by Compromise

Decisions by compromise is a very common misuse of the powers of officers of the committee. It is interesting to note that some decisions are against the interests of firm.

2. Expensive

The members of the committee make many unnecessary expenses in the name of the organisation. 

3. Injustice with minority

All the decisions of the committee are taken by the rule of majority. The decisions of committee are imposed upon minority.

4. Domination of few persons

Practically the committee is dominated by a few persons who can speak loudly and fluently. Such members influence the decisions of committee in undesirable manner.

5. More problems but limited time

The members waste their time on meaningless and fruitless discussions. There are many problems to be solved but time is limited. It becomes difficult to determine the responsibility of an individual member.

Suggestions for making commitee effective

Committee Organization may be made effective by following the guidelines, in brief:

1. The objective for forming a committee must be clearly specified.

2. Members of the committee must be rationally nominated.

3. The agenda for discussion should be sent to members in advance.

4. The Chairman of the committee should be effective in directing group-thinking towards committee objectives.

5. The meetings of the committee should be well planned.

6. The authority of the committee should be well defined.

7. The scope of the committee must be clearly defined and properly communicated. 

8. The members must be capable enough to understand, analyse and decide the problems. 

9. It is essential that the rights and duties of all members of committee must be clearly defined.

10. There should be periodic review of the functioning of a committee. 

E. Project Organisation

The project structure consists of a number of horizontal organisational units to complete projects of long duration. Each project is vitally important to the organisation. A team of specialists from different areas is created for each project. The size of the project team varies from one project to another. The activities of a project team are coordinated by the project manager who has the authority to obtain advice and assistance of experts both inside and outside the organisation. A bridge, dam or fly-over are constructed as project organisations. Once the objective is framed, work force is gathered and authority-responsibility structure is created by giving the project manager authority to exercise control over the activities of group members.

A project team is a temporary set up. Once the project is complete the team is disbanded and the functioning specialists are assigned some other projects. According to Hodgetts who defined a project organisation as "the gathering of the best available talent to accomplish a specific and complex undertaking within time, cost and/or quality parameters, following by the disbanding of the team upon completion of the undertaking."

Benefits (Project Organisation)

1. It provides concentrated attention to the project.

2. It permits timely completion of the project.

3. The project manager lays responsibity of his group members and facilitates feedback and control.

4. It allows maximum use of specialized knowledge and skills.

5. It provides greater flexibility in handling specialized project.

Limitations (Project Organisation)

1. Organisational uncertainties may lead to inter-departmental conflict. 

2. Project managers of small project organisations do not have formal authority over their group members.

F. Matrix Organisation

Matrix organisation is also known as grid or project organisation. Matrix organisation is created by merging the two or more complementary organisations, say, purchase section and sales section. A team may be set up within the existing organisation, to conduct a study of a particular product or design or to complete a specific assignment in time. A project manager has a project team consisting of people from several functional sections. For instance, a project team is formed to market the television, and for this people will be drawn from different functional departments, say, production, research, marketing, engineering, etc. These specialists are drawn from respective departments, borrowed to perform their part in the project work. When the project work is complete, they go back to their respective departments. This type of organisation is needed when a special type of urgent assignment of jobs or complicated job or a new product etc., is introduced. Generally, such organisation may be temporary.

Merits (Matrix Organization)

1. Specialized product knowledge is acquired.

2. It is economical to draw experts from various sections.

3. Expansion, improvements, diversification, etc., are the result.

4. The chances of success of the project are higher.

5. It allows effective use of resources.

Demerits (Matrix Organization)

1. Administrative costs are high.

2. Workers under this type have to report to two bosses.

3. There arise conflicts between functional managers and project managers.

G. Network Organization

The network organization is a collection of independent, mostly single-function firms that collaborate to produce a goods or service. As depicted in chart, the network organization describes not one organization but the web of relationships among many firms. Network organisations are flexible arrangements among designers, suppliers, producers, distributors and customers where each firm is able to pursue its own distinctive competence yet work effectively with other members of the network. Often members of the network communicate electronically and share information to be able to respond quickly to customer demands. In effect, the normal boundary of the organization becomes blurred or porous, as managers within the organization interact closely with network members outside it. The network as a whole, then, can display the technical specialization of the functional structure, the market responsiveness of the product structure, and the balance and flexibility of the matrix.

A very flexible version of the network organization is the DYNAMIC NETWORK - also called MODULAR OR VIRTUAL Corporation. It is composed of temporary arrangements among members that can be assembled and reassembled to meet a changing competitive one environment. The members of the network are held together by contracts that stipulate results expected (market mechanisms) rather than by hierarchy and authority. Poorly performing firms can be removed and replaced.

Network organisation is "a multinational structural arrangement that combines elements of function, product and geographic designs, while relying on a network arrangement to link world wide subsidiaries." This organisational format helps MNC's to take advantage of global economies of scale along with catering to local customer demands. This structure links subsidiaries of a company that are spread world wide. Some subsidiaries specialise in manufacturing while others in sales. All of them are, however, linked with headquarters. Some are closely controlled by headquarters while others are more autonomous. The structure is, thus, a combination of geographic, functional and product elements.