abhishreshthaa
Abhijeet S
TYPES OF ORGANIZATIONAL STRUCTURES:
Functional Structure
Advantages
Disadvantages
Uses of Functional Structure.
An Example: Organisation by Product/Divisional Structure
Matrix Structure
Horizontal Structure
Hybrid structure
Responsibility structure
Controllability
This principles says that manager should be assessed & rewarded only for those factors that are under his/her control
Goal Congruence.
GC is achieved when employees while working towards their best self interest as perceived by themselves takes decision that are successful in attaining the overall goal of the organisation
Transfer Pricing
It is the monetary value assigned in responsibility accounting for exchanges that take place between responsibility centres.
Suppose raw material has been supplied from selling department to buying dept.
The value is treated as revenue for the selling centre and cost of the buying centre.
Cost Centers
Cost centers are held responsible for the cost incurred but not for getting revenue.
Revenue Center
Managers of revenue centers are held responsible for revenue . maximize net revenues
Any cost traceable to rev centre are normally adjusted with the sales revenue to calculate net revenue for the centre.
Functional Structure
Advantages
- Specialisation – each department focuses on its own work
- Accountability – someone is responsible for the section
- Clarity – know your and others’ roles
Disadvantages
- Closed communication could lead to lack of focus
- Departments can become resistant to change
- Coordination may take too long
- Gap between top and bottom
Uses of Functional Structure.
- FS can be adopted by organization that are small or medium sized, but require a formal structure to coordinate their activities.
- Domino’s pizza has a functional structure in which operations ,distribution ,finance & administration are the major functional department.
- The company could adopt a functional structure because it deals only with pizzas
An Example: Organisation by Product/Divisional Structure
- Organisation by Area
- Hewlett-Packard’s Headquarters Worldwide
- Divisional Structure
- Fosters higher adaptability to change due to small size.
- Higher decentralization.
- Easy to measure performance.
- Increased speed of communication , understanding, analysis and processing.
- Disadvantage could be Negative impact of a decision on other division.
Matrix Structure
- An employee reports simultaneously to two different supervisors.
- Project based org and new product development.
- Economies of scale and customer orientation so more profitability.
- Appropriate where high degree of interaction is needed between the functions .
- Dual authority better allocation and more conflict.
Horizontal Structure
- Grouping managers and employees into synergistic team for problem solving.
- The emphasis is on teams which direct themselves.
- They are provided with resource , motivation and authority to take core decision.
- Customer centric approach with more creativity trust and cooperation.
- There is neither vertical hierarchy nor functional divisions.
Hybrid structure
- Combination of different structures.
- Idea is to give strength to by combining the strong positive issues and eliminating the negative issues.
- Appropriate for flexible and highly adaptive org.
- Functional and divisional combination
- Functional and Horizontal combinations.
- Scope of different ways of thinking and a participative style of management.
Responsibility structure
- A responsibility structure is a collection of responsibility centers.
- Each responsibility center is a function, division or unit of an organization under a specified authority with a specified responsibility.
- Performance evaluation of each of these responsibility centers is done based on certain criteria (specific to each type of center) to assess its contribution as a whole.
- According to ICWAI responsibility accounting is “a system of management accounting” under which accountability is determined according to responsibility allotted to various levels of management.
- It should be able to pinpoint the contribution of each manager to the achievement of organization's goal.
- While designing responsibility structure organization needs to consider controllability & goal congruence and transfer pricing.
Controllability
This principles says that manager should be assessed & rewarded only for those factors that are under his/her control
Goal Congruence.
GC is achieved when employees while working towards their best self interest as perceived by themselves takes decision that are successful in attaining the overall goal of the organisation
Transfer Pricing
It is the monetary value assigned in responsibility accounting for exchanges that take place between responsibility centres.
Suppose raw material has been supplied from selling department to buying dept.
The value is treated as revenue for the selling centre and cost of the buying centre.
Cost Centers
Cost centers are held responsible for the cost incurred but not for getting revenue.
- Example Maintenance department
Revenue Center
Managers of revenue centers are held responsible for revenue . maximize net revenues
Any cost traceable to rev centre are normally adjusted with the sales revenue to calculate net revenue for the centre.