Learning out come will see students being able

Learning out come will see students being able to : M 2. – Analyse the advantages and disadvantages of interrelationships between organisational functions and the impact that they can have upon organisational structure

8 Types of Organisational Structures: their Advantages and Disadvantages The formal organisation is usually characterised by an organisational chart and job descriptions. The official reporting relationships are clearly known to everyone. Alongside the formal organisation exists informal organisational structures which is a set of evolving relationships and patterns of human interaction within an organisation that are not officially prescribed.

Types of Organisational Structures Line organisational structure. Staff or functional authority organisational structure Line and staff organisational structure. Committee organisational structure. Divisional organisational structure. Project organisational structure Matrix organisational structure Hybrid organisational structure

Line Organisational Structure A line organisation has only direct, vertical communication and relationships between different levels in the firm. For example, in a typical firm, line departments include production and marketing. In a line organisation authority and communication follows a chain of command. Advantages: 1. Tends to simplify and clarify authority, responsibility and accountability relationships 2. Promotes fast decision making 3. Simple to understand. Disadvantages: (1) As the firm grows larger, line organisation becomes more ineffective. (2) Improved speed and flexibility may not offset the lack of specialized knowledge. (3) There is a tendency to become overly dependent on the few key people who an perform numerous jobs.

Line and Staff Organisational Structure Most large organisations belong to this type of organisational structure. These organisations have direct, vertical relationships between different levels and also specialists responsible for advising and assisting line managers. Such organisations have both line and staff departments. Staff departments provide line people with advice and assistance in specialized areas (for example, quality control advising production department). Some advantages are: 1) Even through a line and staff structure allows higher flexibility and specialization it may create conflict between line and staff personnel. (ii) Line managers may not like staff personnel telling them what to do and how to do it even though they recognize the specialists’ knowledge and expertise. (iii) Some staff people have difficulty adjusting to the role, especially when line managers are reluctant to accept advice. (iv) Staff people may resent their lack of authority and this may cause line and staff conflict.

Committee Organisational structure Committee Organisational Structure Features: (a) Formed for managing certain problems/situations (b) Are temporary decisions. Advantages: 1. Committee decisions are better than individual decisions 2. Better interaction between committee members leads to better co-ordination of activities 3. Committee members can be motivated to participate in group decision making. 4. Group discussion may lead to creative thinking. Disadvantages: 1. Committees may delay decisions, consume more time and hence more expensive. 2. Group action may lead to compromise and indecision. 3. ‘Buck passing’ may result.

Divisional Organisational Structure: In this type of structure, the organisation can have different basis on which departments are formed. They are: (i) Function, (ii) Product, (iii) Geographic territory, (iv) Project and (iv) Combination approach.

Matrix Organisational Structure: This is a permanent organisation designed to achieve specific results by using teams of specialists from different functional areas in the organisation. Advantages: 1. Decentralised decision making. 2. Strong product/project co-ordination. 3. Improved environmental monitoring. 4. Fast response to change. 5. Flexible use of resources. 6. Efficient use of support systems. Disadvantages: 1. High administration cost. 2. Potential confusion over authority and responsibility. 3. High prospects of conflict. 4. Overemphasis on group decision making. 5. Excessive focus on internal relations.

Informal Organisational Structures The informal organisation has the following characteristics (i) Its members are joined together to satisfy their personal needs (needs for affiliation, friendship etc. ) (ii) It is continuously changing: The informal organisation is dynamic. (iii) It involves members from various organisational levels. (iv) It is affected by relationship outside the firm. (v) It has a pecking order: certain people are assigned greater importance than others by the informal group. Even though an informal organisational structure does not have its own formal organisational chart, it has its own chain of command:

Benefits of Informal Organisation: i) Assists in accomplishing the work faster. (ii) Helps to remove weakness in the formal structure. (iii) Lengthens the effective span of control. (iv) Compensation for violations of formal organisational principles. (v) Provides an additional channel of communication. (vi) Provides emotional support for employees. (vii) Encourages better management.

Disadvantages of informal organisation: (i) May work against the purpose of formal organisation. (ii) Reduces the degree of predictability and control. (iii) Reduces the number of practical alternatives. (iv) Increases the time required to complete activities.

Reference ONLINE RESOURCES Entrepreneurship. org (2015) – Defining your business strategy{online} Available at: http: //www. entrepreneurship. org/- accessed January 2016 Investopedia. com (2016)- Defintion Business Structures{Online} Available at http: //www. investopedia. com/ - accessed January 2016 Smallbusiness. chron. com (2016)- Organisational Structures-{online} Available at http: //smallbusiness. chron. com/- accesses January 8, 2017 yourarticlelibrary. com (2017)- Business Function and Structure(online) Available. yourarticlelibrary. com/ accessed January 2, 2017 LIBRARY RESOURCES Business Studies For You 2 nd edition - David Needham and Robert Dransfield (Nelson Thornes) Pages 97 -117