Organization structure and benefits of alternative ways of structuring an organization

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1.        Organization structure and benefits of alternative ways of structuring an organization

1.1    Concept explanation of organization structure


Organizational structure is the framework for an organization to carry out its vision and mission (Robert 2007, p69). Three major components are usually included in the organizational structure: firstly, organization structure identifies the formal reporting relationships in term of span of control; secondly, organization structure groups employees into different functioning departments by different job positions and thirdly, organization structure is expected to design to systems to ensure the effective departmental communications (Daft 2010, p90).


1.2    Benefits of informal and formal organization structure


Though there are various ways of classifying the organization structure, here for the convenience of our study we simply categorize organization structure into two major types: informal organization structure and formal organization structure.


1.2.1            Informal organization structure


Informal organization usually exists among the medium and small size business and especially in the family business, management tend to achieve the co-ordination and management by relying powers of coercion and persuasion. There are three major benefits by adopting the informal organization structure. Firstly, informal organization structure helps save administration cost which is used to support the complex hierarchy because the informal structure proposes much fewer changes to the original form of the business; secondly, by using an informal way of structuring the business, the firms could be able to change the business to get adapted to the changing business environments and this flexibility is not easy to be found in a hierarchy structured company; thirdly by adopting an informal way of structuring the business, persuasion and interpersonal skills could be more effective. For example, in a family business which is usually structured in an informal way, relationship is more important than level of the management. Under such circumstances, persuasion and interpersonal skills could be more effective to push for changes and achieve the business goals.


1.2.2            Formal organization structure



Figure 1.0 A typical formal organization structure (Source: Kapoor & Kansal 2003, p250)

By using a formal organization structure there are at least two benefits than using a formal way. Firstly, the physical distribution of the work in term of different departments as shown in the figure 1.0 above will help pursue the target of specialization. And by specialization, it is known that people could focus on the job that they are good at and thus achieve better results. Secondly, by using a formal structure which is a hierarchy though would cost administration cost could help organizations to grow larger than the informal structured companies. In a large scale business companies, distribution functions could on hand one makes sure that employees are focusing on the job assigned by them through the system and on the other hand it also help keep the interdepartmental communications which are formal and under a well designed system.



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