Benefits-Drawbacks

 What Is Matrix Organizational Structure ?

Matrix structure is practiced by large sized organizations to perform different projects. It is consist of dual authority (functional and project management), in which subordinates are responsible for both project and functional managers. It is highly specialized and advanced organizational structure practiced by modern large companies.

Benefits Or Advantages Of Matrix Organization

The main advantages of matrix organizational structure can be pointed out as follows:

1. Optimum Utilization Of Resources

One of the main advantages of matrix organization is that it ensures maximum utilization of resources. Available manpower , equipment and machinery are shared properly among different divisions, projects and functional departments. Therefore, it helps to improve the performance and output by using limited resources.

2. Collaboration And Teamwork

Employees and specialists from different functional areas are brought together to improve the performance. This structure combines functional and project management which helps to make collaboration between different projects and departments. It also promotes the sense of team spirit in the workplace.

3. Improves Employee Motivation

Matrix organization promotes specialization, provides opportunity to gain knowledge and develop new skills to the subordinates. It helps to increase motivation, morale and job satisfaction.

4. Less Burden To The Management

This organizational structure follows democratic leadership and decentralization. Project managers and functional managers have the authority to manage and monitor operational activities and to make decisions. So, top level management gets sufficient time to deal with other issues in the organizations.

5. Better Communication

Matrix structures allows the flow of information and open communication between different divisions and projects. Better communication between employees and departments helps to avoid misunderstandings and also helpful in solving problems.

6. Flexibility 

It is more flexible and dynamic than other types of organizations. Employees and other resources can be deployed as per the requirement and changes can be made to cope with the changing environment.

7. Suitable For

This organizational structure is suitable for large sized companies which work for multiple projects and construction works.

Drawbacks Or Disadvantages Of Matrix Organization

The main disadvantages of matrix organizational structure can be pointed out as follows: 

1. Complex Structure

It is the most complex form of organization. Because of dual authority and various functional divisions and projects, it is difficult to understand, manage and to control.

2. Poor Chain Of Command

Because of multiple authority, staffs are responsible for both project and functional management. They have to obey the instructions of two managers. It may result in poor chain of command in the organization.

        Also Read: 

Advantages And Disadvantages Of Committee Organization

Advantages And Disadvantages Of Line Organization

Advantages And Disadvantages Of Line And Staff Organization

3. Costlier Structure

Matrix structure is costlier than other traditional types of organizations. It requires more expenses and resources due to multiple authorities, more paper work and higher remuneration for specialists and experts. Therefore, it is not suitable for small organizations.

4. Confusion And Conflict

If the roles and responsibilities are not defined properly, it may create confusion and misunderstanding between two managers. There is also a chance of conflict between different teams in the workplace.

Project works are performed by the collective efforts of the team. So, it is difficult to measure the performance and efficiency of individual employee.

6. Slow Decision Making

Prompt decision making is not possible in matrix organization. Instructions and suggestions of both authorities, specialists and team members are required to take any decision. So, the decision making process is longer than other types of structures.

Pros:

- It encourages effective use of limited resources in the workstation 

- It promotes coordination and teamwork

- It provides learning opportunity to the employees

- It practices specialization, democratic leadership and specialization

- It is flexible and dynamic in nature

- It minimizes the workload of top level management

- It establishes better communication system in the organization

Cons:

- It is complex and costly structure

- It is not suitable for small sized organization having limited resources and limited operations

- It ignores the rule of unity of command

- It suffers from slow decision making process

- Individual performance cannot be measured

- There is a possibility of confusion, misunderstanding and conflict between the authorities and teams.

 What Is Functional Organization ?

Functional organization is highly specialized structure in which organizational functions are divided into smaller group and different departments (such as production department, sales department, IT department, human resource department, finance department, research and development department etc.) are created to perform different activities. Each department is managed, supervised and controlled by highly skilled and capable departmental head or manager.

Benefits Or Advantages Of Functional Organizational Structure

The main advantages of functional structure can be described as follows:

1. Proper Work Division

In this structure, organizational functions are divided into small groups and assigned to different units and departments. Highly skilled and qualified departmental heads and employees are selected to perform the tasks which helps to increase the performance and output.

2. Encourages Specialization

In functional organizational structure, various departments are created to bring specialization in the workplace. Each department consists or specialist and and expert manager and qualified subordinates. Specialization helps to increase efficiency and productivity.

3. Large Scale Production

Because of division of work and specialization, operational speed will be increased which facilitates mass production. Large scale production minimizes the cost of production.

4. More Profit

Specialization helps to minimize errors and wastage in the production process. Large scale production lowers the cost of production. Decrease in wastage and cost leads to increase in the earning of the organization.

5. No Duplication Of Work

Organizational tasks are segregated properly and allocated to the related departments or units which helps to eliminate the duplication of work.

6. Better Control And Supervision

Functional organizational structure follows decentralization in which supervision and controlling activities are done by both departmental managers and top manager. So, proper discipline can be maintained in the organization.

7. Relief To The Management

Operational activities are handled, supervised and monitored by the departmental heads. So, workload of top level management is reduced and they can utilize time in other important activities such as planning and policy making.

8. Flexibility

Functional structure is more flexible than other types of organizations. Changes can be made as per the requirement without disturbing other organizational activities.

Drawbacks Or Disadvantages Of Functional Organization

The main disadvantages of functional organization can be described as follows:

1. Complex And Expensive Structure

One of the main drawbacks of functional structure is that it is more complex and difficult to understand. It requires huge investment to form this type of organization. Higher remuneration for specialists and experts increases the operating expenses. Therefore, it is complex and costlier than line structure and line and staff organization.

      Also Read: 

Advantages And Disadvantages Of Line And Staff Organization

Advantages And Disadvantages Of Matrix Organization

Advantages And Disadvantages Of Committee Organization

2. Not Suitable 

Because of complexity and requirement of more investment, this design is not suitable for small and medium sized organization having less resources.

3. Possibility Of Conflict

There is a chance of conflict between departments because of the lack of proper communication and poor coordination. 

4. Poor Unity Of Command

Because of multiple command system, employees are accountable for number of supervisors which may lead to poor unity of command. In this situation, it is difficult to maintain proper control and discipline in the organization.

5. Delayed Decisions

In functional organization, quick decision is not possible because top management should consult with various departmental heads and specialists to make any decision. So , organization may have to face difficulties at the time of emergency when prompt decision is required.

Pros:

- It promotes specialization and division of work 

- Workload of top management is reduced

- It improves the performance, productivity and profitability

- There will be no duplication of works

- It reduces mistakes and errors

- It is flexible in nature

- There is a greater scope of expansion

- It is suitable for big manufacturing organizations

Cons:

- It is complex, expensive and resource consuming structure

- It is not suitable for small firms and non-manufacturing organizations

- Quick decisions cannot be made at the time of emergency

- High chance of conflict due to the lack of proper communication and coordination

- It ignores the principle of unity of command

What Is Line And Staff Organizational Structure ? 

Line and staff structure uses two layers of authorities in the organization (line authority and staff authority). Staff authority is responsible for policy making and planning, and line managers are responsible for the execution of daily organizational activities.  It includes the positive sides and eliminates the limitations of line structure and functional structure. Therefore, it is a modified version of line and functional organizational structure.

Merits Or Advantages Of Line And Staff Organization

The main advantages of line and staff organizational structure can be pointed out as follows:

1. Most Suitable Structure

line organization is very simple type of structure and it does not practice specialization in the workplace. On the other hand functional organization is more complicated because the relation between authorities is not properly defined. But line and staff organization accepts the positive sides and overcomes the drawbacks of line and functional structures. Therefore, it is the most suitable form of organizational structure.

2. Promotion Of Specialization

In line and staff organization, staff authority is concerned with planning function and line authority concentrates on the execution of tasks with the help of functional specialists. So, it promotes specialization which helps to increase efficiency and productivity.

3. Better Decision Making

Expert advice and suggestions are considered while taking decisions that helps the functional managers to make sound decision.

4. Reduced Workload

Because of dual authority and specialization, there will be a lesser burden to both line and staff officers. So, managers can perform their jobs more effectively.

5. More Flexible

Line and staff organization is flexible than line structure and functional structure. New departments or units can be created, subordinates can be hired and authority can be modified as per the requirement. Because of the flexibility, it facilitates growth and expansion opportunity.

6. Scope Of Advancement

Because of variety of jobs and regular conduction of training and development programs, it provides opportunity for advancement to the subordinates. It helps to increase their skills and specialty. It also increases employee motivation and job satisfaction.

7. Suitable For Big Organizations

Line and staff structure is suitable for big organizations and business firms which have more resources, employees and variety of operations.

Drawbacks Or Disadvantages Of Line And Staff Organization

The main disadvantages of line and staff organization can be pointed out as follows:

1. Expensive Structure

Line and staff organization requires more resources (infrastructure, finance and employees) that other forms of organizations. More remuneration should be paid to the specialists and experts. More training and development cost is required to improve the performance of staffs. So, it is expensive type of structure.

        Also Read: 

Advantages And Disadvantages Of Line Organization

Advantages And Disadvantages Of Functional Organization

Advantages And Disadvantages Of Committee Organization

2. Not Suitable For Small Organizations

Because of dual authority, requirement of more cost and complexity, it is not suitable for small and medium sized organizations having limited capital and resources.

3. Conflict Between The Authorities

Because of the improper division of roles and responsibility between line authority and staff authority, there may be a confusion and misunderstanding among the officers. Confusion and misunderstanding create conflict between two authorities. It may create burden for the top management to manage or settle this issue in the organization.

4. High Employee Turnover

Conflict between line and staff authority may discourage specialists , experts and subordinates working in the organization. So, if the top management fails to maintain better coordination and harmony in the workplace, employees may quit the job. Therefore, there is a chance of high employee turnover in line and staff organization than other types of structures.

5. Communication Problem

This type of design may create communication problem in the organization. Dual authority creates confusion to the subordinates and makes difficult for them to understand whose instructions to be followed and whom to report.

Pros:

- It brings specialization in the workplace

- It minimizes the work load of both authorities

- It is helpful in maintaining proper coordination

- It is more flexible than other types of structures

- It improves decision efficiency because of of experts advice and suggestions

- There is a scope for advancement

Cons:

- It requires more operational costs than other organizational structure

- Not suited for small firms having less resources and fewer activities

- There is a high possibility of conflict and misunderstanding

- It may increase the rate of staff turnover

What Is Line Organizational Structure ?

Line organization is the oldest and simplest structure which is mostly used by small organizations. It is also called vertical organizational structure because authority flows from top (superiors) to bottom (subordinates). In this type of organization authority remains with superiors (departmental heads, supervisors etc.) . They have the right to manage and control subordinates in the workplace. 

Benefits Or Advantages Of Line Organizational Structure

The main advantages of line organization can be pointed out as follows:

1. Simple To Operate

Line organization is the oldest , simplest and widely used structure. It is very easy to establish and operate because it requires less resources. Managers and employees can understand their duties, authority and responsibility clearly. 

2. Most Economical Structure

It is more economical than other form of organizations because it consumes less resources . It can be run smoothly with less expenses and less employees because it does not practice specialization.

Another notable advantage of line organizational structure is that authority and responsibility of each member in the workplace is properly defined . Jobs are assigned or fixed to each and every employees which helps to make them accountable for their performance.

4. Promotes Quick Decision

Manager or superior is a sole decision maker. He/she can make decision independently without consulting others. So, prompt decision making is possible in line organizational structure.

5. Better Supervision And Control

Because of defined responsibility, direct communication and unity of command, it is easy for the managers to supervise and control subordinates. So, good discipline can be maintained in the organization.

6. Opportunity For Development

A superior has the power to exercise authority in this form of structure. It helps them to develop managerial skills such as directing, supervising, motivating, controlling etc. So, line organization provides opportunity for executive development.

Drawbacks Or Disadvantages Of Line Organization

The main disadvantages of line organizational structure can be pointed out as follows:

1. Overload On Executives

One of the main drawbacks of line organization is that superiors are suffer from the burden of overloaded work. Because of single authority, they have to deal with various activities which increases their workload which may lead to decreases in their efficiency.

       Also Read: 

Advantages And Disadvantages Of Functional organization

Advantages And Disadvantages Of Line And Staff Organization

Advantages And Disadvantages Of Matrix Organization

2. Possibility Of Dictatorship

It follows autocratic leadership style in the organization because authority is vested with one superior. Autocracy may lead to dictatorship in the workplace. Possibility of favoritism and nepotism is also very high in this type of organization. 

3. It Discourages Specialization

Another demerit of this organization structure is that it lacks specialization. A single officer has to make various decisions, has to control different subordinates and has to supervise several activities in the organization. No one will be an expert in every fields. Therefore, superiors may not perform their duties efficiently.

4. Unstable Type Of Structure

Departmental head or superior is the key person to manage the whole organization. All the activities are conducted under his/her direction and supervision. If superior quits the job or dies, it is very difficult to run the organization.

5. Not Suitable For Big Organizations

Line organization is useful only for small organizations which have less resources, limited number of operations and less number of subordinates. This structure is not applicable for large organizations with more resources, various activities and employees. 

Pros:

- It is simple and requires less cost to operate

- Duties and responsibility are clearly defined for each employee

- Prompt decision is possible because of single authority

- Supervision and controlling is easy because of direct link between supervisor and employees and limited number of staffs.

- It is suitable for small organizations

- Better discipline can be maintained

Cons:

- It may promote favoritism, nepotism and dictatorship in the organization

- It increases the burden of work to the superiors 

- Performance may me reduced because of the lack of specialization

- Rigidity and inflexibility is one of the major drawbacks of this form of organization

- It is unsuitable for big organizations

What Is Hire Purchase System ?

It is a method of acquiring expensive assets under which buyer get the right to use products without making the whole payment. He/she obtains the asset by making the partial payment and the remaining amount is paid periodically in installments (interest is added in installment amount). The ownership of the asset remains with the seller and it will be transferred to the buyer after the payment of final installment. Hire purchase is beneficial for both sellers and buyers but it has some drawbacks also. In this post we discuss about the pros and cons of hire purchase system.

Benefits Or Advantages Of Hire Purchase System

The main advantages of hire purchase can be highlighted as follows:

Benefits Of Hire Purchase To The Sellers

1. Market Expansion

Hire purchase allows the customers to use expensive items or products without making the full payment. So, it attracts more potential customers which helps the seller to expand the market.

2. Increased Sales And Profit

It encourages the customers to buy more goods because the payment can be made in installment. So, it helps to increase sales which leads to increase in the profit of sellers.

3. Extra Income

Another benefit of hire purchase to the seller is that he/she can earn some extra income in the form of interest which is added in the installment amount.

4. Less Riskier

Hire purchase system is less riskier than installment system because ownership of the asset is not transferred to the buyer until the final payment. The seller can acquire the product or asset if the buyer fails to make regular payment.

Benefits Of Hire Purchase To The Buyers

1. Suitable For Small Traders

It reduces the financial burden of small traders because they can acquire expensive items such as plant, machinery, vehicle etc. by making periodic payments. It eliminates the complexities of borrowing fund from other sources to run the business.

2. Easier To Buy

In hire purchase system, buyers make payments in installment. So, Customers having lower income can buy required products easily.

3. Immediate Use

Buyers can use the products immediately after the first installment.

4. Tax Benefit

Interest payable is deducted from taxable income which provides tax benefits to the buyers.

Drawbacks Or Disadvantages Of Hire Purchase

The main disadvantages of hire purchase system can be highlighted as follows:

Disadvantages Of Hire Purchase To The Sellers

1. Huge Capital Required

Sellers require huge amount of investment to acquire expensive assets such as car, plant, machinery etc. to run hire purchase business.

2. It Involves Risk

Although the seller can take back the item in case of default payment, he cannot recover the actual cost of the product because value of second hand product is decreased.

3. Increased Bad Debt

If customers do not pay the installment in time, it may increase the amount of bad debt.

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Advantages And Disadvantages Of Leasing

Features Of Hire Purchase System

Difference Between Hire Purchase And Installment

4. Work Load

Hire purchase may increase the workload of the seller because more clerical and paper work is required to maintain sales accounts.

Disadvantages Of Hire Purchase To The Buyers

1. No Ownership Of Assets

Ownership of item is not transferred to the buyer until the final installment. So, seller can repossess the asset in case of default payment.

2. Higher Cost

Sellers add extra cost (interest) in the selling price of the asset. So, buyer has to pay more than the actual price of the item.

3. Larger Duration

It takes very long time to make full payment which may create frustration to the buyer.

4. Risk Of Overspending

It attracts more audience because of the periodical payment system. It may create artificial demand for the product in the market. Buyer may be tempted to buy unnecessary and expensive items. So, higher purchase may encourage overspending.

Pros:

- Sellers can attract more customers which helps to increase sales and profit

- Seller can earn extra income in the form of interest

- There is less risk for the seller because ownership of the good remains with him until the last installment.

- Buyer can obtain expensive item by making small initial down payment

- It may provide tax benefit to the buyer

- It is very beneficial to the small business firms to acquire valuable fixed assets

Cons:

- Large amount of capital is required to run hire purchase business

- There is a risk of default payment

- There exists a chance of increase in bad debts

- Because of the interest, buyers have to pay more than the actual amount

- It encourages overspending to the buyers