Types of Organisation Structure

What is Organisation

Organisation refers to a collection of people who are working towards a common goal and objective. In other words, it can be said that organisation is a place where people assemble together and perform different sets of duties and responsibilities towards fulfilling the organisational goals.

Types of Organisation and their Structure

There are two broad categories of organisation, which are:

1. Formal Organisation

2. Informal Organisation

Formal Organisation: Formal organisation is that type of organisation structure where the authority and responsibility are clearly defined. The organisation structure has a defined delegation of authority and roles and responsibilities for the members.

The formal organisation has predefined policies, rules, schedules, procedures and programs. The decision making activity in a formal organisation is mostly based on predefined policies.

Formal organisation structure is created by the management with the objective of attaining the organisational goals.

There are several types of formal organisation based on their structure, which are discussed as follows:

1. Line Organisation

2. Line and Staff Organisation

3. Functional Organisation

4. Project Organisation

5. Matrix Organisation

Let us learn about these organisation structures in detail in the following lines.

Line Organisation: Line organisation is the simplest organisation structure and it also happens to be the oldest organisation structure. It is also known as Scalar or military or departmental type of organisation.

In this type of organisational structure, the authority is well defined and it flows vertically from the top to the hierarchy level to the managerial level and subordinates at the bottom and continues further to the workers till the end.

There is a clear division of accountability, authority and responsibility in the line organisation structure.

Advantages of Line organisation

1. Simple structure and easy to run

2. Instructions and hierarchy clearly defined

3. Rapid decision making

4. Responsibility fixed at each level of the organisation.

Disadvantages of Line organisation:

1. It is rigid in nature

2. It has a tendency to become dictatorial.

3. Each department will be busy with their work instead of focusing on the overall development of the organisation.

Line and Staff Organisation: Line and staff organisation is an improved version of the line organisation. In line and staff organisation, the functional specialists are added in line. The staff is for assisting the line members in achieving the target effectively.

Advantages of Line and Staff organisation

1. Easy decision making as work is divided.

2. Greater coordination between line and staff workers.

3. Provides workers the opportunity for growth.

Disadvantages of Line and Staff Organisation

1. Conflict may arise between line and staff members due to the improper distribution of authority.

2. Staff members provide suggestions to the line members and decision is taken by line members, it makes the staff members feel ignored.

Functional Organisation: Functional organisation structure is the type of organisation where the task of managing and directing the employees is arranged as per the function they specialise. In a functional organisation, there are three types of members, line members, staff members and functional members.

Advantages of Functional organisation

1. Manager has to perform a limited number of tasks which improves the accuracy of the work.

2. Improvement in product quality due to involvement of specialists.

Disadvantages of Functional organisation

1. It is difficult to achieve coordination among workers as there is no one to manage them directly.

2. Conflicts may arise due to the members having equal positions.

Project Organisation: A project organisation is a temporary form of organisation structure that is formed to manage projects for a specific period of time. This form of organisation has specialists from different departments who are brought together for developing a new product.

Advantages of Project organisation

1. The presence of many specialists from different departments increases the coordination among the members.

2. Each individual has a different set of responsibilities which improves control of the process.

Disadvantages of Project Organization

1. There can be a delay in completion of the project.

2. Project managers may find it difficult to judge the performance of different specialists.

Matrix Organisation: Matrix organisation is the latest form of organisation that is a combination of functional and project organisation. In such organisations there are two lines of authority, the functional part of the organisation and project management part of the organisation and they have vertical and horizontal flow of authority, respectively.

Advantages of Matrix Organisation

1. Since the matrix organisation is a combination of functional and project management teams, there is an improved coordination between the vertical and horizontal functions.

2. Employees are motivated as everyone will be working towards one project.

Disadvantages of Matrix Organisation

1. Due to the presence of vertical and horizontal communication, there will be increased cost and paperwork.

2.Having multiple supervisors for the workers leads to confusion and difficulty in control.

Informal Organisation: Informal organisations are those types of organisations which do not have a defined hierarchy of authority and responsibility. In such organisations, the relationship between employees is formed based on common interests, preferences and prejudices.

This was all about the topic of Types of Organisation Structure, which is an important topic of Business Studies for Commerce students. For more such interesting articles, stay tuned to BYJU’S.