After reading this article you will learn about the organisation structure and its compatibility to management objectives.

Organisation Structure:

Formal Organisations are contrived social entities designed to fulfill specific purposes. Organizations constitute a group of individuals of varying levels of expertise combined into a social structure of some type to accomplish one or more functions. The purpose of organising is to achieve the most effective utilization of human, material, and monetary resources by the establishment to accomplish specific objectives.

The purpose, of course, is to maximise the productive output and minimize waste. The organization structure consists simply of those aspects of the pattern of behaviour in the organization that are relatively stable and that change only slowly.

Structure implies the pattern in which various parts are interrelated or inter-connected. Organ­isation Structure establishes the relationships among various positions and activities in the organi­zation and as because such positions are held by individuals it prescribes relationships among people in the organization. All organizations have a structure.


Organization structure will vary with the organization and the functions to be performed. The results will depend upon the goals and objectives established the resources available, the communications and working relationships of the individual participants, motivation and many other factors.

The organisation structure is the result of conscious planning process and is typically expressed in Organization Charts, manuals and position descriptions. Organization structure is designed by the management to achieve specific objectives.

Management Objectives:

Before a definite organization structure can be established, the applicable firm’s top manage­ment must first develop the overall goals and objectives for the firm so that there is compatibility between the organization structure and the management objectives.

Overall goals and objectives may be, for example, the following:


(i) What technology should the firm attempt to develop?

(ii) What product lines should be pursued?

(iii) What is the desired market position? Productivity? Profitability and growth? Product leader ship?

Overall goals may be stated both qualitatively and quantitatively and may include financial objectives, marketing objectives, research and engineering objectives and production objective.


A few characteristic examples are noted below:

(i) Achieve a 15% return on investment for the next fiscal year.

(ii) Reduce the yearly operating cost by 12%

(iii) Complete the design and development of a new prototype in 12 months within a cost of Rs. 600,000.


(iv) Develop three new product lines within the forthcoming fiscal year, with a forecasted sales of not less than Rs. 2,000,000.

(v) Increase the production yield of product Z by 10% in 3 months.

Initially, goals and objectives must be identified for the overall firm. Based upon the results it is possible to determine what activities need to be accomplished, which in turn leads to the grouping of these activities and the definition of an organization structure. Goals and objectives may be stated in rather general terms or in a specific manner.

Actually, to be meaningful, they should be as specific as possible and related in quantitative measures where appropriate, to allow for a realistic assessment of organisational status and trends. The process of establishing goals and objectives often is quite dynamic, since changes may occur as a result of economic and social conditions, technology advances, and so on.


Structuring the Organization:

Once overall goals and objectives have been initially established, the next step is to develop an organisation structure that will be compatible with the goals and objectives. The organization structure should be such that it will respond to the requirements and in accomplishing the goals and objectives set by the management.

The establishment of organization patterns, or the development of an organization structure, generally evolves from the following:

(i) The identification of work to be performed (e.g. research, preliminary system design, detailed design of a unit etc.) and the breakdown of this work into specific tasks are accomplished initially through product planning. These tasks are organised into work packages and the designed work packages are evaluated from the standpoint of task type, complexity, and the required comple­tion schedule.


(ii) The individual work packages are then grouped on the basis of similarity and homogeneous characteristics to determine positions.