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Function wise Departmentation

The advantages of this type of structure are as follows :

It is a logical reflection of functions.

It follows the principle of specialisation.

Maintains power and prestige of major functions.

Inter-departmental co-ordination is facilitated.

The structure is simple, logical and easy to understand.

Provides a good means of control at the top.

There are also some disadvantages :

Responsibility for profits tends to be at the top.

There may be chances of heavy centralisation in decision-making.

Where geographical centralisation is desirable or required, this form becomes unsuitable.

This is not very suitable where product lines have to be emphasized.

There is a lower potential for manager development. VirtuosoCoder.in

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Product wise Departmentation : The advantages of this type of structure are : Places greater effort on individual product line. Better customer service arising from greater product knowledge. Simplifies departmentation of profitability of each product line. Responsibility for profits is at the

Division level. Improves co-ordination of functional activities. New department may be added without difficulty. Permits growth and diversity of products and

services. Detailed information on markets for specific products will be generated. Extremely suitable where product lines are complex or vary greatly. Furnishes measurable training ground for Managers. Some of the disadvantages inherent in such departmentation are : A customer has to deal with different salesmen or managers for different products of the same

company. Extra costs of maintaining separate sales force for each product. Duplication of costs on travel, etc. Tends to make maintenance of economical central services difficult. Results in increased problems of the top management control. VirtuosoCoder.in

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Territorial or Geographical Departmentation

The advantages of such departmentation are:

Regional expertise is generated and managers can tackle customers or competition better. Places

responsibility at lower levels.

Proximity will reduce costs of operation and administration.

Places emphasis on local markets and problems. Local conditions might warrant different types of

selling. This is possible only in territorial departmentation.

Improves co-ordination at the regional level.

Better face-to-face communication with local interests in mind.

Better manager development.

Some disadvantages are listed as follows:

Involves higher costs of co-ordination and control from headquarters.

Results in more managerial levels which increases overhead costs.

Unsuitable for departments like Finance, where no gains are possible by specialisation on local

factors.

Increases problems of the top management control.VirtuosoCoder.in

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Departmentation by Customers

Some advantages of this type of structure are :

Greater specialized customer service.

Where marketing channels are considerably different for various types of customers, this type

of structure is very useful.

Some disadvantages of this type are:

May not be enough work for certain types of customers. Hence, under employment of

facilities and manpower specialized in terms of customer groups.

Problems of co-ordination might pose difficulties.

Unequal development of customer groups.

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Project organisation : It is oriented towards the completion of a big project or a small

number of big projects.

A team of specialists from different areas is created for each project.

The size of project team varies from one project to another.

The activities of project team are coordinated by the project manager who has the authority to

obtain advice and assistance of experts both inside and outside the organisation.

The core concept of project organisation is to gather a team of specialists to work on and

complete a particular project.

The project staff is separate from and independent of the functional departments.

Project organisation is employed in aero-space, aircraft manufacture, construction and

professional areas like management consulting.

Suitability of project organisation :

o The project is a one-time assignment with well defined specifications

o The assignment presents a unique or unfamiliar challenge

o The project must be completed within the given time limit VirtuosoCoder.in

Merits of project organisation :

o It permits the timely completion of project without disturbing the normal routine of rest of

organisation.

o It allows maximum use of specialized knowledge avilable with the organisation.

o It adopts a logical approach to any challenge in the form of a project with definite beginning,

end and well-defined result.

o It has been found fit a number of widely-varying situations, from building contractors and

advertising agencies to accounting and consulting firms.

Demerits of project organisation :

o There is organisational uncertainty because a project manager has to deal with professionals

drawn from diverse fields. Often they differ in approach and interest.

o A project manager does not have unlimited authority. Therefore, budgets, manpower and

control are serious problem.

o There is considerable fear among personnel that the completion of project may result in loss

of job. VirtuosoCoder.in

Choice of method of departmentation / choosing a basis for departmentation / criteria

for grouping of activities :

Specialization

Coordination Local conditionsCost

Control

Special attention to key areas

Human consideration

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Matrix Organisation – Meaning :

• Matrix Organisation was introduced in USA in the early 1960's. It was used to solve

management problems in the Aerospace industry.

• Matrix Organisation is a combination of two or more organisation structures. For example,

Functional Organisation and Project Organisation.

• The organisation is divided into different functions, e.g. Purchase, Production, R & D, etc.

Each function has a Functional (Departmental) Manager, e.g. Purchase Manager, Production

Manager, etc.

• The organisation is also divided on the basis of projects e.g. Project A, Project B, etc. Each

project has a Project Manager e.g. Project A Manager, Project B Manager, etc.

• The employee has to work under two authorities (bosses). The authority of the Functional

Manager flows downwards while the authority of the Project Manager flows across (side

wards). So, the authority flows downwards and across. Therefore, it is called "Matrix

Organisation".

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An example of matrix organisation is shown in the following diagram:-

                                                                                                                                                             

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Features of Matrix Organisation :

• The characteristics or features of a matrix organisation are:-

o Hybrid Structure : Matrix organisation is a hybrid structure. This is so, because it is a

combination of two or more organisation structures. It combines functional organisation with

a project organisation. Therefore, it has the merits and demerits of both these organisation

structures.

o Functional Manager : The Functional Manager has authority over the technical (functional)

aspects of the project.

• The responsibilities of functional manager are :-

– He decides how to do the work.

– He distributes the project work among his subordinates.

– He looks after the operational aspects.

o Project Manager : The Project manager has authority over the administrative aspects of the

project. He has full authority over the financial and physical resources which he can use for

completing the project. VirtuosoCoder.in

The responsibilities of project manager are:-

– He decides what to do.

– He is responsible for scheduling the project work.

– He co-ordinates the activities of the different functional members.

– He evaluates the project performance.

o Problem of Unity of Command : In a matrix organisation, there is a problem of the unity of

command. This is so, because the subordinates receive orders from two bosses viz., the

Project Manager and the Functional Manager. This will result in confusion, disorder,

indiscipline, inefficiency, etc. All this will reduce the productivity and profitability of the

project.

o Specialisation : In a Matrix organisation, there is a specialisation. The project manager

concentrates on the administrative aspects of the project while the functional manager

concentrates on the technical aspects of the project.

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o Suitability : Matrix organisation is suitable for multi-project organisations. It is mainly used

by large construction companies, that construct huge residential and commercial projects in

different places at the same time. Each project is looked after (handled) by a project manager.

He is supported by many functional managers and employees of the company.

Advantages of Matrix Organisation

• The benefits or merits or advantages of a matrix organisation are:-

o Sound Decisions : In a Matrix Organisation, all decisions are taken by experts. Therefore, the

decisions are very good.

o Development of Skills : It helps the employees to widen their skills. Marketing people can

learn about finance, finance people can learn about marketing, etc.

o Top Management can concentrate on Strategic Planning : The Top Managers can spend

more time on strategic planning. They can delegate all the routine, repetitive and less

important work to the project managers.

o Responds to Changes in Environment : Matrix Organisation responds to the negative

changes in the environment. This is because it takes quick decisions.VirtuosoCoder.in

o Specialisation : In a matrix organisation, there is a specialization. The functional managers

concentrate on the technical matters while the Project Manager concentrates on the

administrative matters of the project.

o Optimum Utilisation of Resources : In the matrix organisation, many projects are run at the

same time. Therefore, it makes optimum use of the human and physical resources. There is

no wastage of resources in a matrix organisation.

o Motivation : In a matrix organisation, the employees work as a team. So, they are motivated

to perform better.

o Higher Efficiency : The Matrix organisation results in a higher efficiency. It gives high

returns at lower costs.

Limitations of Matrix Organisation

• The demerits or disadvantages or limitations of a matrix organisation are:-

o Increase in Work Load : In a matrix organisation, work load is very high. The managers and

employees not only have to do their regular work, but also have to manage other additional

works like attending numerous meetings, etc.VirtuosoCoder.in

o High Operational Cost : In a matrix organisation, the operational cost is very high. This is because

it involves a lot of paperwork, reports, meetings, etc.

o Absence of Unity of Command : In a matrix organisation, there is no unity of command. This is

because, each subordinate has two bosses, viz., Functional Manager and Project Manager.

o Difficulty of Balance : In a matrix organisation, it is not easy to balance the administrative and

technical matters. It is also difficult to balance the authority and responsibilities of the project

manager and functional manager.

o Power Struggle : In a matrix organisation, there may be a power struggle between the project

manager and the functional manager. Each one looks after his own interest, which causes conflicts.

o Morale : In a matrix organisation, the morale of the employees is very low. This is because

they work on different projects at different times.

o Complexity : Matrix organisation is very complex and the most difficult type of organisation.

o Shifting of Responsibility : If the project fails, the project manager may shift the

responsibility on the functional manager. That is, he will blame the functional manager for

the failure.VirtuosoCoder.in

Types of organisation : Organisation requires the creation of structural relationship among

different departments and the individuals working there for the accomplishment of desired

goals.

The establishment of formal relationships among the individuals working in the organisation

is very important to make clear the lines of authority in the organisation and to coordinate the

efforts of different individuals in an efficient manner.

In order to organise the efforts of different individuals, any of the following types of

organisational structures may be set up :

o Line organisations

o Line and staff organisation

o Functional organisation

o Committee organisation

o Project organisation

o Matrix organisation

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Line organisation : The line organisation represents the structure in a direct vertical relationship

through which authority flows.

• It is also known as scalar or military organisation.

• The line of authority flows vertically downward from top to bottom throughout the organisation.

• The quantum of authority is highest at the top and reduces at each successive level down the

hierarchy.

• The line of authority consists of an uninterrupted series of authority steps and forms a hierarchical

arrangement.

Advantages of line organisation :

o It is very easy to establish line organisation and it can be easily understood by the employees.

o It facilitates unity of command and thus conforms to the scalar principle of organisation.

o There is clear-cut identification of authority and responsibility relationship. Every employees are

fully aware of the boundaries of their jobs.

o It ensures excellent discipline in the enterprise because every individual knows to whom he is

responsible.VirtuosoCoder.in

o It facilitates prompt decision making because there is definite authority at every level. An

executive cannot shift his decision making to others, nor can be blammed be shifted.

Disadvantages of line organisation :

o With growth, the line organisation make the superiors too overloaded with work. If the

executives try to keep up with every activity, are unable to pay proper attention to each one.

It will hamper their effectiveness.

o If the top executives are not capable, the enterprise will not be successful.

o Line organisation is not suitable for big organisation because it does not provide specialists in

the structure. Many jobs require specialised knowledge to perform them.

o There is no practically no communication from bottom upwards because of concentration of

authority at the higher levels.

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Line and staff organisation : Line executives are gerenalists and do not passess specialised

knowledge which is must to tackle complicated problems.

With a view to give specialist aide to line executives, staff positions are created throughout

the structure.

Staff elements bring expert and specialised knowledge to provide advice to line managers so

that they may discharge responsibilities successfully.

In line and staff organisation, the line authority remains the same as it does in the line

organisation.

Authority flows from top to bottom . The main difference is that specialists are attached to

line managers to advice them on important matters.

The specialists stand ready with their specialty to serve line men as and when their services

are called for to collect information and to give help which will enable the line officials to

carry out their activities better.

The staff officers do not have any power of command in the organisation as they are

employed to provide expert advice to the line manager.VirtuosoCoder.in