Types of Organisational Structures: their Advantages and Disadvantages

Various types of Organisational Structure

1. Line Structure
2. Line & Staff Structure
3. Functional / Staff Structure
4. Project Structure
5. Matrix Structure

1. Line Structure:
   A line organisation has only direct, vertical relationships between different levels in the firm. There are only line departments-departments directly involved in accomplishing the primary goal of the organisation. For example, in a typical firm, line departments include production and marketing. In a line organisation authority follows the chain of command.
   Fig 1: Single line organisational structure Features:
   Has only direct vertical relationships between different levels in the firm.
   Some of the advantages of a pure line organisation are:
   

   • A line structure tends to simplify and clarify responsibility, authority and accountability relationships. The levels of responsibility and authority are likely to be precise and understandable.
   • A line structure promotes fast decision making and flexibility.
   • Because line organisations are usually small, managements and employees have greater closeness.

   However, there are some disadvantages also. They are:
   

   • As the firm grows larger, line organisation becomes more ineffective.
   • Improved speed and flexibility may not offset the lack of specialized knowledge.
   • Managers may have to become experts in too many fields.
   • There is a tendency to become overly dependent on the few key people who an perform numerous jobs.
2. Line & Staff 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).
   Fig 2: Line and Staff Organisational Chart.
   The line functions are production and marketing whereas the staff functions include personnel, quality control, research and development, finance, accounting etc. The staff authority of functional authority organisational structure is replaced by staff responsibility so that the principle of unity of command is not violated.
   Three types of specialized staffs can be identified:
   (i) Advising,
   (ii) Service and
   (iii) Control.
   Some staffs perform only one of these functions but some may perform two or all the three functions. The primary advantage is the use of expertise of staff specialists by the line personnel. The span of control of line managers can be increased because they are relieved of many functions which the staff people perform to assist the line.
   Features:
   1. Line and staff have direct vertical relationship between different levels.
   2. Staff specialists are responsible for advising and assisting line managers/officers in specialized areas.
   3. These types of specialized staff are (a) Advisory, (b) Service, (c) Control e.g.,
   (a) Advisory: Management information system, Operation Research and Quantitative Techniques, Industrial Engineering, Planning etc.
   (b) Service: Maintenance, Purchase, Stores, Finance, Marketing.
   (c) Control: Quality control, Cost control, Auditing etc.
   Advantages:
   (i) Use of expertise of staff specialists.
   (ii) Span of control can be increased.
   (iii) Relieves line authorities of routine and specialized decisions.
   (iv) No need for all round executives.
3. Functional / Staff Structure:
   The jobs or positions in an organisation can be categorized as:
   (i) Line position: a position in the direct chain of command that is responsible for the achievement of an organisation’s goals and
   (ii) Staff position: A position intended to provide expertise, advice and support for the line positions.
   The line officers or managers have the direct authority (known as line authority) to be exercised by them to achieve the organisational goals. The staff officers or managers have staff authority (i.e., authority to advice the line) over the line. This is also known as functional authority.
   An organisation where staff departments have authority over line personnel in narrow areas of specialization is known as functional authority organisation.
   Fig 3: Staff or Functional Authority Organisational Structure.
   In the line organisation, the line managers cannot be experts in all the functions they are required to perform. But in the functional authority organisation, staff personnel who are specialists in some fields are given functional authority (The right of staff specialists to issue orders in their own names in designated areas).
   The principle of unity of command is violated when functional authority exists i.e., a worker or a group of workers may have to receive instructions or orders from the line supervisor as well as the staff specialist which may result in confusion and the conflicting orders from multiple sources may lead to increased ineffectiveness. Some staff specialists may exert direct authority over the line personnel, rather than exert advice authority (for example, quality control inspector may direct the worker as well as advise in matters related to quality).
   While this type of organisational structure overcomes the disadvantages of a pure line organisaional structure, it has some major disadvantages. Disadvantages:
   (i) the potential conflicts resulting from violation of principle of unity of command and
   (ii) the tendency to keep authority centralized at higher levels in the organisation.
4. Project Structure:
   The line, line and staff and functional authority organisational structures facilitate establishment and distribution of authority for vertical coordination and control rather than horizontal relationships. In some projects (complex activity consisting of a number of interdependent and independent activities) work process may flow horizontally, diagonally, upwards and downwards. The direction of work flow depends on the distribution of talents and abilities in the organisation and the need to apply them to the problem that exists. The cope up with such situations, project organisations and matrix organisations have emerged.
   A project organisation is a temporary organisation designed to achieve specific results by using teams of specialists from different functional areas in the organisation. The project team focuses all its energies, resources and results on the assigned project. Once the project has been completed, the team members from various cross functional departments may go back to their previous positions or may be assigned to a new project. Some of the examples of projects are: research and development projects, product development, construction of a new plant, housing complex, shopping complex, bridge etc.
   Fig 4: Project organisational structure.
   Feature:
   Temporary organisation designed to achieve specific results by using teams of specialists from different functional areas in the organisation.
   Importance of Project Organisational Structure:
   Project organisational structure is most valuable when:
   (i) Work is defined by a specific goal and target date for completion.
   (ii) Work is unique and unfamiliar to the organisation.
   (iii) Work is complex having independent activities and specialized skills are necessary for accomplishment.
   
   (iv) Work is critical in terms of possible gains or losses.
   (v) Work is not repetitive in nature.
   
   Characteristics of project organisation:
   1. Personnel are assigned to a project from the existing permanent organisation and are under the direction and control of the project manager.
   2. The project manager specifies what effort is needed and when work will be performed whereas the concerned department manager executes the work using his resources.
   3. The project manager gets the needed support from production, quality control, engineering etc. for completion of the project.
   4. The authority over the project team members is shared by project manager and the respective functional managers in the permanent organisation.
   5. The services of the specialists (project team members) are temporarily loaned to the project manager till the completion of the project.
   6. There may be conflict between the project manager and the departmental manager on the issue of exercising authority over team members.
   7. Since authority relationships are overlapping with possibilities of conflicts, informal relationships between project manager and departmental managers (functional managers) become more important than formal prescription of authority.
   8. Full and free communication is essential among those working on the project.
5. Matrix Structure:
   It is a permanent organisation designed to achieve specific results by using teams of specialists from different functional areas in the organisation.
   Fig 5: Matrix organisation
   Feature:
   Superimposes a horizontal set of divisions and reporting relationships onto a hierarchical functional structure
   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.
   This type of organisation is often used when the firm has to be highly responsive to a rapidly changing external environment.
   The problem with this structure is the negative effects of dual authority similar to that of project organisation. The functional managers may lose some of their authority because product managers are given the budgets to purchase internal resources. In a matrix organisation, the product or business group managers and functional managers have somewhat equal power. There is possibility of conflict and frustration but the opportunity for prompt and efficient accomplishment is quite high.