11

THE NATURE OF ORGANIZATIONS AND TYPE

OF ORGANIZATIONS STRUCTURE

Module
ii
.

iii
For the learner:

Welcome to the Organization and Management – Grade 11 Modular Distance

Learning (MDL) Self-Learning Module on the Nature of Organizations and Types of
Organization Structure!

This module was designed to provide you with fun and meaningful opportunities
for guided and independent learning at your own pace and time. You will be
enabled to process the contents of the learning resource while being an active
learner.

This module has the following parts and corresponding icons:

What I Need to Know This will give you an idea of the skills or
competencies you are expected to learn in
the module.

What I Know This part includes an activity that aims to

check what you already know about the
lesson to take. If you get all the answers
correct (100%), you may decide to skip this
module.

What’s In This is a brief drill or review to help you link

the current lesson with the previous one.

What’s New In this portion, the new lesson will be

introduced to you in various ways; a story, a
song, a poem, a problem opener, an activity
or a situation.

What is It This section provides a brief discussion of

the lesson. This aims to help you discover
and understand new concepts and skills.

What’s More This comprises activities for independent

practice to solidify your understanding and
skills of the topic. You may check the
answers to the exercises using the Answer
Key at the end of the module.

What I Have Learned This includes questions or blank

sentence/paragraph to be filled into process
what you learned from the lesson.

What I Can Do This section provides an activity which will

help you transfer your new knowledge or
skill into real life situations or concerns.

Assessment This is a task which aims to evaluate your

level of mastery in achieving the learning
competency.

iv
 Additional Activities In this portion, another activity will be given
to you to enrich your knowledge or skill of
the lesson learned.

Answer Key This contains answers to all activities in the

module.

At the end of this module you will also find:

References This is a list of all sources used in

developing this module.

The following are some reminders in using this module:

1. Use the module with care. Do not put unnecessary mark/s on any part of
the module. Use a separate sheet of paper in answering the exercises.
2. Don’t forget to answer What I Know before moving on to the other activities
included in the module.
3. Read the instruction carefully before doing each task.
4. Observe honesty and integrity in doing the tasks and checking your
answers.
5. Finish the task at hand before proceeding to the next.
6. Return this module to your teacher/facilitator once you are through with it.
If you encounter any difficulty in answering the tasks in this module, do not
hesitate to consult your teacher or facilitator. Always bear in mind that you are
not alone.

We hope that through this material, you will experience meaningful learning
and gain deep understanding of the relevant competencies. You can do it!

v
 What I Need to Know

This module was designed and written with you in mind. It is here to help you
master the Nature of Organizations and Types of Organization Structure. The scope
of this module permits it to be used in many different learning situations. The
language used recognizes the diverse vocabulary level of students. The lessons are
arranged to follow the standard sequence of the course. But the order in which you
read them can be changed to correspond with the textbook you are now using.

The module is composed of one lesson, namely:

 Lesson 1 – Analyze the nature of organizations and types of Organization
Structure

After going through this module, you are expected to:

1. Discuss the concepts of organizations;
2. Distinguish the various types of organizational structures; and
3. Apply the concepts of organizing in analyzing the nature and structure of an
organization.

1
 What I Know
Directions: Read the questions carefully, select the correct answer and write it on a
separate sheet of paper.

1. It is the process that creates the structure of working relationships among

employees for efficient and effective achievement of organizational goals.
a. Organization c. Staffing
b. Planning d. Organizing

2. Which of the following pertains to a workplace for people working together to

achieve a common purpose?
a. Organization c. Organizing
b. Organizational Process d. Organizational structure

3. Which of the following relationship does NOT appear on the organizational

chart?
a. Formal relationships c. Informal relationships
b. Structured relationships d. Organizational chart

4. Which of the following is concerned with answering questions such as “Who

reports to whom?”, “Who does what?” and “Where is the work done???”
a. Organizing c. Organization
b. Organizational structure d. Organizational process

5. Organization is also known as what?

a. Organization c. Bank input
b. Output d. Enterprise

6. Which of the following is NOT a factor that affects departmentalization?

a. Task c. Customer
b. Product d. Nature

7. Which of the following is best for firms that produce only one or two
products especially if managers communicate across functions?
a. Functional departmentalization c. Product departmentalization
b. Geographical departmentalization d. Customer departmentalization

8. It pertains to the establishment of organization’s department that is based

on the type of customers they interact with.
a. Product departmentalization c. Customer departmentalization
b. Process departmentalization d. Functional departmentalization

9. This organizational structure works very well for small businesses in which
each department can support itself by relying on the talent and knowledge of
its workers.
a. Divisional organization c. Matrix organization
b. Functional organization d. Network organization

2
10. It defines the line of authority within the organization as links and
reminders of who the authority is.
a. Chain of command c. Authority
b. Span of management d. Division of labor

11. It pertains to empowering the lower levels of organization by giving

permission to make critical decisions.
a. Assignment of duties c. Grant of authority
b. Centralization d. Decentralization

12. Which of the following is being done when tasks are divided and grouped
according to specialization?
a. Differentiation c. Integration
b. Standardization d. Delegation

13. It pertains to the need to report and justify results or task outcomes to
those higher than them in the chain of command.
a. Responsibility c. Accountability
b. Delegation d. Authority

14. Which type of authority is a formal authority exercised by managers over

subordinates.
a. Line authority c. Direct authority
b. Staff authority d. Downward authority

15.It refers to the number of employees that are under the supervisor’s
jurisdiction.
a. Scalar relationship c. Division of labor
b. Chain of command d. Span of authority

3
 Lesson Analyze the nature of organizations and
types of Organization Structure
1
A manager designs and maintains a system of roles within which people in the
organization can work together to implement the strategic plan. Through an
organizational structure, employees are able to perform their work efficiently and
effectively. He identifies the responsibilities of each one’s job position and
relationship to these positions. In short, the manager organizes.

Organizing contains deploying organizational resources in an orderly manner to

achieve organizational goals. It focuses on identifying the responsibilities of
employees and how the performance of these roles should be coordinated and
combined to advance the attainment of organizational objectives. An organizational
structure is created in the process of organizing. It is a tool that a manager uses to
harness resources while getting things done.

This chapter looks at the way an organization uses fundamental concepts of

organizing. There are many ways to organize since there are a variety of organizing
principles and concepts a manager uses. The way managers design their structure
according to its unique situation will be discussed. Through the elements of
structure, this chapter also looks into how authority and responsibility is defined,
how accountability is promoted and most of all, how coordination is improved for
organizational success. It concludes a variety of ways by which an organization can
be structured to be responsive to change.

What’s In

Most of the companies in the Philippines are in the service sector. In fact over 40%
of the listed companies belong to the service sector. A manager oversees operations
of these business entities through the design of an organizational structure that
affects the quality of its services and efficiency which services are rendered by the
organization. The way organizations are structured by their managers, therefore
affects firm value.

In the past lesson, you found answers to how managers plan for successful events
and goals by understanding what plans are and how they can help a manager
enable his organization to meet changing conditions and achieve organizational
success.

4
In this lesson, you will begin to find the answers to the questions: how much
responsibility should a manager assign to the employees in the delivery of service
and what factors should a manager consider when determining how much
authority to assign to his/her employees by understanding the fundamental
concepts used to design organizations for success.

Notes to the Teacher

Begin the lesson by doing Activity 1. Let the students answer the
worksheet in a separate sheet of paper for them to familiarize
important terms in the lesson.

5
 What’s New

Below is an activity that will allow you to check how much you know about
Analyzing the Nature of Organizations and Types of Organization Structure:

Activity 1: Groufie!
Directions: Based on what you know about the nature of organizations and how the
terms are associated with organizations, group the terms found below according to
the nature of organizations. List the words that belong together. You can only use
the given term once.

Division of labor Formal relationship Authority

Standardization Functional Informal relationship

Divisional Centralization Networks Matrix

Relationship Mechanisms Structure

Notes to the Teacher

These terms are all found in the lesson proper. It is important
that the students have a prior knowledge of the importance of
knowing the nature of each term to fully understand them in the
lesson proper.

6
 What is It

By now, you will understand the milieus or environment that a business operates
and how a manager interacts with it.

Nature of Organization
Organizing is the process that creates the structure of working relationships among
employees for efficient and effective achievement of organizational goals. It takes
place in and for an organization based on the goals, major tasks and obligations to
perform in the organizing process, and the influence it used through a line of
authority and responsibility that allow an employee to carry out their tasks.

Organizations, also known as enterprise, are an open and social system that
transform input from the environment to product outputs. It is a workplace for
people working together to achieve a common purpose. It is a structure of roles
that are defined such that activities to accomplish the common purpose are done
efficiently and effectively.

Types of relationships inside an organization

1. Formal Relationships – is based on a structure of roles that aims to achieve
organizational goals consciously and deliberately. It performs tasks to
accomplish the common purpose as mandated by the management decree
2. Informal Relationships – is among people that extend beyond those relationships
established by management. It does not appear on the organizational chart.

Staffing versus Organizing?

In organizing, manager decides what job will have to be filled and what the people
who hold them must do. While in staffing, the manager attempts to find, train and
develop the right people for each job. It intends to provide the organization with the
right people in the right jobs.

Organizational Structure versus Organizational Process

Organizational Structure is the vertical and horizontal configuration of departments,
authority, and jobs within a company. It is concerned with questions such as “Who
reports to whom?” and “Who does what?” and “Where is the work done?” It is the
result of organizing which is a system of tasks and reporting relationships that
ensure effective coordination of task among individuals and department.

Organizational Process is the collection of activities that transform inputs into

outputs that customer’s value. It asks “How do things get done?”

7
Departmentalization is the act by which tasks and responsibilities are assigned to
departments. It is based on any of the following factors: Task, Product, Territory,
Customer, or Process. And it establishes departments as a way to institute formal
relationships among people and resources in an organization. The characteristics of
the business determine the best way to departmentalize.

Types of Departmentalization
1. Functional Departmentalization – an establishment of a department based on tasks.
They are grouped because of a similar skill or knowledge to carry out tasks. This
is best for firms that produce only one or two products especially if managers
communicate across functions.

2. Geographical Departmentalization – an establishment of a department based on

territory. This type works best for firms with different locations.

3. Product Departmentalization – an establishment of a department based on the product

line. This would be inefficient and high-cost for small or medium firms and best
for large firms because it shows the product line to be expanded.

4. Process Departmentalization – an establishment of a department anchored on

customer or product flow. This type works best for firms with different locations.

5. Customer Departmentalization – an establishment of a department base on the type

of customers they interact with, which can be further grouped according to their
specialized needs. This type works best for firms with different locations.

Types of Organizational Structure

1. Functional Organization, it is a set up wherein each department of the
organization is grouped according to its function or purpose. This type of
chart shows a functional organization where the jobs are grouped together in
departments with the specified skills and/or business functions. The
functional structure works very well for small businesses in which each
department can support itself by relying on the talent and knowledge of its
workers. However, one of the drawbacks in functional structure is the
restriction in coordination and communication between and among other
departments by the boundaries of the organization in which having the
various departments work separately and independently.
Sample of Chart of Functional Organization

Principal

Instruction Administration

Teachers Administrative Staff

8
 President

Human resources Operations Marketing Finance

2. Divisional Organization, when the products, customers, and/or geographical

locations of an enterprise grow and continue to diversify, a functional
structure may not serve its developmental need, a divisional organization
where the enterprise is grouped into products, customers, or geographical
locations, maybe a better structure. Typically, it is used in larger companies
or organizations with several branches or outlets that operate in a wide
geographic area or that have separate smaller organizations within the
umbrella group to cover different types of products or market areas.

Types/Focus Examples
Product
 Good or service produces

Geographical
 Location of activity

Customer
 Customer or client services

Process
 Component activities

Sample of Chart of Divisional Organization

Regional Director

Schools Division Schools Division Schools Division

Superintendent – SDO Superintendent – SDO Superintendent – SDO
Palawan Romblon Calapan

Assistant SDS Assistant SDS Assistant SDS

Teaching and non- Teaching and non- Teaching and non-

teaching Personnel teaching Personnel teaching Personnel

3. Matrix Organization, a dual reporting relationship occurs in matrix

organizations, as manager reports to both functional head and a product

9
 executive. Matrix structure is a hybrid functional and divisional structure.
The matrix organization utilizes the advantages and needs of the functional
and divisional organizations. However, this can create power struggle
because most areas of the company will have a dual management. Unlike
other structures, it does not follow the traditional hierarchical model;
instead, all employees have dual reporting relationships.
Sample of Chart of Matrix Organization

Principal

SPS/SPA STE Coordinator Gen Sec Cur

Head Teacher - Math Teacher Math Teacher Math Teacher

Head Teacher - Science Teacher Science Teacher Science Teacher

Science

4. A network organization is a collection of independent, mostly single function

enterprises that collaborate on a good or service. The key to the network
organization is electronic communication, where information is shared with
member enterprises with distinct competencies.
Sample of Chart of Network Organization

Tourism Industry

Hotel Travel & Tours Restaurant

Organizational Structure and coordination Mechanisms

1. Division of labor – the extent to which tasks are classified according to
specialization. Through this, the skill of the worker is increased, time is
maximized, and tasks are performed more easily and efficiently.
2. Span of Management – refers to the number of employees that are under the
supervisor’s jurisdiction. This number should be limited to the extent a
manager can exercise effective supervision.
3. Chain of commands or scalar relationships – refers to the positioning of individuals
within the organizational structure such as: job position, lines of authority, and
ones responsible for various tasks. It defines the line of authority within the
organization as links and reminders of who is the authority.

Authority – the right to perform or command. It is exercised by a manager over those

who reports to him in order to get things done. Authority is exercised in relation to
responsibility.
Types of authority:
1. Line Authority – formal authority exercised by managers over subordinates.

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 2. Staff authority – consists of the right authority to advise those who are in line
according to one’s area of expertise.

Responsibility – structure of roles that are defined such that activities one’s task.
Accountability – the need to report and justify results or task outcomes to those
higher than them in the chain of command.

Delegation – the process of assigning tasks and authority to specific individuals in the
organization. Delegation of Authority is the assignment of direct authority and
responsibility to a subordinate to complete tasks for which manager is normally
responsible. Delegation is an administrative process of getting things done by
others by giving them responsibility.
Elements of Delegation:
1. Assignment of duties – it is best done by entrusting employees with the
completion of whole tasks whenever possible.
2. Grant of Authority– means allowing employees to access all and little
authority resources necessary to complete the task.
3. Creation of obligation – is done by explaining the relevance of the delegated
tasks to the overall goal. Delegation practices obligation in various degrees
such as:
a. Decentralization – when much tasks and authority are delegated by the
manager to his subordinates. Also pertains to empowering the lower
levels of organization by giving permission to make critical decisions.
b. Centralization – when a few tasks and little authority is delegated by the
manager to his subordinates. The location of most authority at the
upper levels of the organization.

Standardization is solving problems by consistently applying the same rules,

procedures, and processes.

Differentiation means that the enterprise is involved in many tasks, with diverse
skills and methods. The tasks have to be divided, and groups specialized in parts of
the larger task.

Integration is achieved with coordination, communication, and collaboration, as it

involves linking parts of the enterprise into a whole.

Notes to the Teacher

The above information will provide students enough knowledge to
do the activities on the succeeding pages.

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 What’s More

Activity 2: Define your map

Directions: Using the definition map below, define the word ORGANIZING.

ORGANIZING

Write at least 3 synonyms

Choose one synonym

Write your definition Give an example

Rubrics in Rating
Score
10 7 5
Able to supply the Supplied the required Many of the supplied
required responses responses with at most responses are wrong
correctly. two errors

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Activity 3: Tell All

Directions: In your answer sheet, write your answers to the following questions
comprehensively.

1. What are the types of organization structures? Briefly explain each.

2. Summarize how authority works in functional structures.

3. Give the difference of line department and staff department.

4. Who, in your opinion has greater authority, managers of line department

or managers of staff department? Why?

5. What are the advantages of being in the CEO positions?

Rubrics in Rating
Score
3 2 1
Response is correct and Response is somewhat Response does not answer
well written correct the question

Activity 4: Charlotte’s Case - Organizing by function

Directions Read and analyze the case below and answer the guide questions.

Charlotte’s Designer and Tailoring Shop started with Php 300, 000 from her
savings and Php 100, 000 through a bank loan. She used the bank loan to
purchase sewing machines. She also used some money for the construction of her
tailoring shop. She bought sewing materials and supplies, which included: textiles,
threads, zippers, buttons, scissors, and tailor chalk. She also hired 2 sewers.
Charlotte did the following activities during the first year of operations of her
business:
- Define the target market.
- Set sales targets
- Set cost and expense targets
- Set profit targets
- Hire and train dressmakers.
- Set compensation of dressmakers.
- Set production quota for dressmakers.
- Assign machines and supplies for each of the dressmaker.
- Provide a commission scheme to sewers.

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 - Coordinate activities of dressmakers.
- Appraise performance of dressmakers to check alignment with organizational
goals.

For the first year, Charlotte was doing most of these tasks needed to deliver
services to her customers, except for sewing. Her friend, Regina, helps her through
advertising her services through Regina’s internet blogsite. Another friend, Vicky,
helps her manage her financial records and books.
The company’s performance for its first year of operations went beyond the
expectation of Charlotte to at least break-even. The firm’s strong performance is
mainly due to orders coming from Indo, Malay, Thai, and Singaporean mothers
requesting for Charlotte to design and sew dresses for their 2 – to – 4 year old
daughters.

Guide Questions:
1. Describe Charlotte’s designer and tailoring shop as an organization.

2. What are its main activities?

3. Will a functional structure work for charlotte’s designer and tailoring

shop? Why?

4. Prepare an organizational structure suited for Charlotte’s Designer

and Tailoring Shop

Rubrics in Rating
Score
3 2 1
Response is correct and Response is somewhat Response does not answer
well written; correct; the question;
Proposed organizational Organizational structure Organizational structure is
structure is correct is somewhat correct not incorrect

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 What I Have Learned

At this point, let us see how much you have gained from the discussions and
activities you have undergone.

Activity 5: Math is Rad!

Directions: Using the PMI chart below, indicate what you have learned in the plus
column, what you have failed to master in the minus column and what’s
interesting goes to the interesting column.

Plus Minus Interesting

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 What I Can Do

This activity will help you transfer into real-life situations the knowledge and skills
you have gained or learned from this module.

Activity 6: Practice
Directions: Below is an organizational chart. Identify the errors in it and redraw the
correct one. Explain the changes you made

Unit Head

Executive Assistant Program Manager

Program Analyst Program Assistant

Rubrics in Rating
Score
3 2 1
Error is properly Error is identified but Error and changes made
identified and the changes is incorrect are both incorrect.
explanation on the
changes made is clear

16
 Assessment

Directions: Read the questions carefully, select the correct answer and write it on a
separate sheet of paper.

1. It refers to the number of employees that are under the supervisor’s

jurisdiction.
a. Scalar relationship c. Division of labor
b. Chain of command d. Span of authority

2. Which of the following pertains to a workplace for people working together to

achieve a common purpose?
a. Organization c. Organizing
b. Organizational Process d. Organizational structure

3. It is the process that creates the structure of working relationships among

employees for efficient and effective achievement of organizational goals.
a. Organization c. Staffing
b. Planning d. Organizing

4. Which of the following is concerned with answering questions such as “Who

reports to whom?”, “Who does what?” and “Where is the work done???”
a. Organizing c. Organization
b. Organizational structure d. Organizational process

5. Which of the following is NOT a factor that affects departmentalization?

a. Task c. Customer
b. Product d. Nature

6. Which of the following is best for firms that produce only one or two
products especially if managers communicate across functions?
a. Functional departmentalization c. Product departmentalization
b. Geographical departmentalization d. Customer departmentalization

7. It pertains to the need to report and justify results or task outcomes to those
higher than them in the chain of command.
a. Responsibility c. Accountability
b. Delegation d. Authority

8. Which of the following relationship does NOT appear on the organizational

chart?
a. Formal relationships c. Informal relationships
b. Structured relationships d. Organizational chart

9. Which of the following is being done when tasks are divided and grouped
according to specialization?
a. Differentiation c. Integration

17
 b. Standardization d. Delegation
10. This organizational structure works very well for small businesses in
which each department can support itself by relying on the talent and
knowledge of its workers.
a. Divisional organization c. Matrix organization
b. Functional organization d. Network organization

11. It defines the line of authority within the organization as links and reminders
of who the authority is.
a. Chain of command c. Authority
b. Span of management d. Division of labor

12. It pertains to the establishment of organization’s department that is based

on the type of customers they interact with.
a. Product departmentalization c. Customer departmentalization
b. Process departmentalization d. Functional departmentalization

13. It pertains to empowering the lower levels of organization by giving

permission to make critical decisions.
a. Assignment of duties c. Grant of authority
b. Centralization d. Decentralization

14. Organization is also known as what?

a. Organization c. Bank input
b. Output d. Enterprise

15. Which type of authority is a formal authority exercised by managers over

subordinates.
a. Line authority c. Direct authority
b. Staff authority d. Downward authority

18
 Additional Activities
Let us reinforce the skills/knowledge that you have gained from this lesson by
doing the next activity.

Learn Fast
Directions Read and analyze the case below. Identify and discuss the reasons
behind Mr. Ramos’ lack of success.

Mr. Carlos Ramos founded a construction company after years of working

as an engineer in a large company. He has very good technical skills and had
contacts which gave him small contracts initially. He hired 5 employees initially
which included a bookkeeper, carpenter, and unskilled laborers. His company
remained small in the first 5 years and business growth was gradual. However,
on the 6th year, it began to grow to such an extent that he needed to delegate
some of his tasks to another skilled person. Contracts kept coming, large and
small alike, but he was spread too thinly in managing all these projects when he
has someone he could hire, the person was technically skilled but could not
coordinate all the activities to the projects assigned to him. There were also some
problems with service quality which he could not handle. In the end, the person
resigned and Mr. Ramos took over these projects as well. Mr. Ramos finished all
his projects but some were behind schedule. The company reputation was also
affected because of the service quality problems.

Rubrics in Rating
Score
3 2 1
Response is correct and Response is somewhat Response does not answer
well written correct the question

19
20
References
Cabrera, H.F; Altarejos, A.DC.; and Benjamin, R. Organization and Management.
Philippines: Vibal Group, Inc. 2016
Tibon, Ma.V.P and Rapatan, M.Q. Learning To Succeed In Business With
Management. Philippines: Phoenix Publishing House. 2016
Schermerhorn Jr., J.R., Management. Manhattan, USA: John Wiley and Sons, Inc.
2008. Reprinted: C&E Publishing, Inc. 2010

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For inquiries or feedback, please write or call:

Department of Education – SDO Palawan

Curriculum Implementation Division Office

2nd Floor Deped Palawan Building
Telephone no. (048) 433-6392

Learning Resources Management Section

LRMS Building, PEO Compound
Telephone no. (048) 434-0099