flowchart LR L[Line] --> LF[Line and<br/>Staff] L --> F[Functional] LF --> M[Matrix] F --> M M --> P[Project /<br/>Network] style L fill:#FFEBEE,stroke:#C62828 style M fill:#FFF3E0,stroke:#EF6C00 style P fill:#E8F5E9,stroke:#2E7D32
49 Organisation Structure
49.1 Meaning of Organisation
Organisation is the process of identifying and grouping the work to be done, defining and delegating responsibility and authority, and establishing relationships — to achieve common objectives. The output of organising is an organisation structure — the formal pattern of authority, responsibility and communication (robbins2022?; koontz2020?).
Three working ideas:
- It establishes who reports to whom.
- It establishes who does what.
- It establishes how decisions and information flow.
49.2 Principles of Organisation
TipTen Classical Principles of Organisation
| Principle | Working content |
|---|---|
| Objective | Structure should support the firm’s goals |
| Specialisation / Division of work | Activities split into specific roles |
| Span of management / control | Number of subordinates a manager can effectively supervise |
| Scalar chain | Authority line from top to bottom |
| Unity of command | One superior per subordinate |
| Authority and responsibility | Equal weight; both must be clear |
| Delegation | Authority should be pushed to the lowest competent level |
| Coordination | Synchronise activities of different units |
| Flexibility | Structure adjusts to environment |
| Continuity | Stable yet adaptive over time |
49.3 Span of Management
The span of management (also span of control) is the number of subordinates one manager can directly supervise. A narrow span produces a tall organisation with many levels; a wide span produces a flat organisation with fewer levels.
TipTall vs Flat Structure
| Dimension | Tall (narrow span) | Flat (wide span) |
|---|---|---|
| Levels | Many | Few |
| Coordination | Tight at the top | Relies on autonomy |
| Communication | Slow, distorted | Fast, direct |
| Manager autonomy | Lower for subordinates | Higher |
| Cost | Higher (more managers) | Lower |
V.A. Graicunas (1933) proposed a mathematical formula relating the span to the number of relationships a manager must handle:
\[ N = n \cdot \left(\dfrac{2^n}{2} + n - 1\right) \]
where \(n\) is the number of direct subordinates and \(N\) is the total relationships.
49.4 Departmentation
Departmentation (departmentalisation) is the process of grouping activities and jobs into departments.
TipBases of Departmentation
| Basis | Working content | Suitable for |
|---|---|---|
| Function | Marketing, finance, production, HR | Smaller, single-product firms |
| Product | One department per product line | Diversified firms |
| Customer | Departments by customer type — retail, B2B, government | Where customer needs differ sharply |
| Geographical / Territory | Regional units | Spread-out operations |
| Process | Stages of work — fabrication, assembly, finishing | Process industries |
| Time / Shift | Day shift, night shift | Continuous operations |
| Matrix / Hybrid | Two or more bases combined | Project-based firms |
49.5 Centralisation vs Decentralisation
TipCentralisation vs Decentralisation
| Dimension | Centralisation | Decentralisation |
|---|---|---|
| Decision authority | Top management | Pushed down to lower levels |
| Speed | Slow, consistent | Faster, locally adapted |
| Control | Tight | Looser, monitored by KPIs |
| Manager development | Limited at lower levels | Develops managerial talent |
| Suitable for | Crisis, smaller firms, uniform products | Stable conditions, large firms, diverse markets |
49.6 Forms of Organisation Structure
TipSix Major Forms of Organisation Structure
| Form | Working content | Strength | Weakness |
|---|---|---|---|
| Line | Direct vertical lines of authority | Simplicity, clear authority | Lack of specialisation |
| Functional | Specialists head functional departments | Specialisation, expertise | Conflicts, divided authority |
| Line and Staff | Line for command + staff specialists for advice | Combines authority and expertise | Possible line-staff conflict |
| Committee | Decisions by committees | Pooled judgement | Slow, diluted accountability |
| Matrix | Dual reporting — function + project | Flexibility, expertise on projects | Confusion, dual loyalty |
| Project / Network | Temporary structures around projects | Adaptive, lean | Job insecurity |
49.7 Formal vs Informal Organisation
TipFormal vs Informal Organisation
| Dimension | Formal | Informal |
|---|---|---|
| Origin | Deliberately created | Spontaneous |
| Structure | Documented | Unwritten |
| Communication | Through scalar chain | “Grapevine” |
| Behaviour governed by | Rules, policies | Norms, friendships |
| Authority | Position-based | Personality-based |
49.8 Modern Designs
TipModern Organisation Designs
| Design | Working content |
|---|---|
| Boundaryless organisation | Eliminates internal and external barriers (Jack Welch’s idea at GE) |
| Virtual organisation | Networked structure of independent units, often digital |
| Learning organisation | Continuous learning embedded (Senge 1990) |
| Holacracy / Self-managing teams | Authority distributed among self-organising teams |
| Team-based / Cross-functional | Cross-departmental teams for projects |
| Hollow / Modular | Outsource non-core; keep design and brand |
49.9 Authority, Responsibility, Accountability
- Authority — formal right to command resources and make decisions.
- Responsibility — obligation to perform the assigned task.
- Accountability — answering for the outcomes; cannot be delegated.
The principle of parity: authority and responsibility should match. Delegation transfers authority and responsibility, but accountability remains with the original manager.
49.10 Exam-Pattern MCQs
NoteEight-question set
Q1. Which of the following is not a classical principle of organisation?
A. Unity of command B. Scalar chain C. Span of management D. Random assignment of tasks
Answer: D. Tasks must be grouped purposefully (specialisation), not randomly assigned.
Q2. Match each base of departmentation with its example:
| Basis | Example | ||
|---|---|---|---|
| (i) | Functional | (a) | Asia, Europe, Americas |
| (ii) | Product | (b) | Marketing, finance, HR |
| (iii) | Geographical | (c) | Day shift, night shift |
| (iv) | Time | (d) | Refrigerators, washing machines, AC |
A. (i)-(b), (ii)-(d), (iii)-(a), (iv)-(c) B. (i)-(a), (ii)-(b), (iii)-(c), (iv)-(d) C. (i)-(c), (ii)-(a), (iii)-(b), (iv)-(d) D. (i)-(d), (ii)-(c), (iii)-(b), (iv)-(a)
Answer: A.
Q3. A narrow span of management produces:
A. A flat structure with few levels B. A tall structure with many levels C. No effect on the number of levels D. Bureaucratic paralysis
Answer: B. Narrow span → many levels → tall structure.
Q4. Match each form of structure with its content:
| Form | Content | ||
|---|---|---|---|
| (i) | Line | (a) | Combines line authority with staff advice |
| (ii) | Functional | (b) | Direct vertical lines of authority only |
| (iii) | Line and Staff | (c) | Specialists head each functional department |
| (iv) | Matrix | (d) | Dual reporting — function and project |
A. (i)-(b), (ii)-(c), (iii)-(a), (iv)-(d) B. (i)-(a), (ii)-(b), (iii)-(c), (iv)-(d) C. (i)-(c), (ii)-(d), (iii)-(b), (iv)-(a) D. (i)-(d), (ii)-(a), (iii)-(c), (iv)-(b)
Answer: A.
Q5. “Authority can be delegated, but accountability cannot.” This statement is:
A. False — both can be delegated B. True — accountability stays with the original manager C. True only in family-owned firms D. False — neither can be delegated
Answer: B. Authority and responsibility are delegable; accountability is not.
Q6. Which of the following best describes a matrix structure?
A. Pure line authority B. Functional specialists with no line authority C. Dual reporting along functional and project lines D. Independent division per product
Answer: C. Matrix = dual reporting along function and project (or product / region).
Q7. Match each modern design with its core idea:
| Design | Core idea | ||
|---|---|---|---|
| (i) | Boundaryless organisation | (a) | Networked structure of independent units |
| (ii) | Virtual organisation | (b) | Continuous learning embedded |
| (iii) | Learning organisation | (c) | Self-organising teams with distributed authority |
| (iv) | Holacracy | (d) | Eliminates internal and external barriers |
A. (i)-(d), (ii)-(a), (iii)-(b), (iv)-(c) B. (i)-(a), (ii)-(b), (iii)-(c), (iv)-(d) C. (i)-(c), (ii)-(d), (iii)-(b), (iv)-(a) D. (i)-(b), (ii)-(c), (iii)-(d), (iv)-(a)
Answer: A.
Q8. Arrange the following typical sequence of organisation evolution from simple to complex:
- Matrix
- Line
- Line and Staff
- Functional
A. (ii), (iii), (iv), (i) B. (i), (ii), (iii), (iv) C. (iv), (iii), (ii), (i) D. (iii), (iv), (i), (ii)
Answer: A. Line → Line and Staff → Functional → Matrix.
ImportantQuick recall
- Organisation structure = formal pattern of authority, responsibility and communication.
- Classical principles: objective, specialisation, span of management, scalar chain, unity of command, authority-responsibility parity, delegation, coordination, flexibility, continuity.
- Span of management — narrow → tall; wide → flat. Graicunas (1933) formula for relationships.
- Departmentation: functional, product, customer, geographical, process, time, matrix.
- Centralisation vs Decentralisation — trade-off between consistency and adaptability.
- Forms: Line, Functional, Line and Staff, Committee, Matrix, Project / Network.
- Authority delegated, responsibility delegated, accountability NOT delegated.
- Formal (deliberate, documented) vs Informal (spontaneous, grapevine).
- Modern: Boundaryless (Welch GE), Virtual, Learning (Senge 1990), Holacracy, Team-based, Hollow / Modular.