An organization structure refers to the determination of entire organization system of an enterprise. The policies of an enterprise determine the limits within which the enterprise has to work and progress. Similarly the organization structure determines the shapes of the enterprise according to which the administrative and organizational decision and development take place. The organization structure may be compared with a map outline of a building. The organization is a structure in a given framework, it is a scheme of relationship in action.
Factors Determining the Organization Structure
An efficient organization must have healthy structure, while taking a decision on organization structure we must take the following factors into consideration.
- Departmentation or Departmentalization
- Determination of Operating Responsibilities
- Facilitating Units
- Provision for Top Management
- Continuity or Perpetuity
Departmentation or Departmentalization
The very first step towards organization structure is the division of key function of any business. This classification is known as departmentation or departmentalization. Here the classification of functions of any enterprise which may be done on the basis of the following:
- Functional Basis
- Process Basis
- Regional Basis
- Production Basis
- Market Basis
- Numerical Basis
Whatever the basis will be, it is necessary that the classification should be able to fulfill the following objective.
- Establishment of convenient and simplified coordination
- Establishment of better control system
- Accrual of advantages of specialization
- Development of all faculties of the entire working force
- Local aspirations and its fulfillment
- Full attention on main functions of the enterprise
Determination of Operating Responsibilities
After the classification responsibilities are determined. A positive correlation exists between the responsibilities and authority. Without an authority responsibility is rendered meaningless and without responsibility authority is a barren land on which nothing could grow. Of course, responsibility and authority flow from general policies already laid down but a decision like centralization and decentralization can be taken here and then within the framework of the policies and program responsibility and authority may be determined.
After the determination of responsibilities and authority following a decision on units in which the whole enterprise is classified. Units, with the help of which the organization acts and attains its objectives may be classified and organized either on the basis of Departments, Section or Committee. Certainly before taking a decision on the basis of the formation of facilitating units
- The need for and extent of coordination
- The span of management
- Equality of functions and
- Proper attention on all activities are considered and then a decision to form and organize a unit is taken.
Provision for Top Management
Since cooperation is an artificial person therefore, a decision with regard to the person who will take care of this artificial person should have to be taken carefully. The top management generally represents this artificial and legal person. The top management, as per the requirement of the law may either be
- The board of directors or
- The Managing Directors
- The Chief Executive alone
Continuity or Perpetuity
The organization structure once taken shape should continue for a longer period without sacrificing its flexibility character. The factors which have to be taken into consideration before taking a final structural decision lead to a balanced development of the enterprise.