Q.You have seen the structure of ONGC as an illustration in this text. Browse the websites of other business organisations and study their organisational chart. Try to identify the structure they are using.

Let’s begin with something you already know. Think of a school. There is a principal, vice-principals, heads of departments, teachers, and students. If every teacher reported directly to the principal on every small matter, the principal would be overwhelmed and nothing would get done. So the school creates a chain: teachers report to their HOD, HODs to the vice-principal, and the vice-principal to the principal. That arrangement of who reports to whom, who takes decisions, and how work flows — that is an organisational structure.

In business, an organisational structure is the formal system of task and reporting relationships that coordinates and motivates employees so they work together to achieve company goals. It answers two basic questions: Who does what? and Who reports to whom?

Why does structure matter?

A good structure prevents confusion, duplication of work, and delays. It clarifies authority (the right to decide) and responsibility (the duty to perform). Without structure, a growing organisation becomes chaotic — people step on each other’s toes, decisions get stuck, and accountability vanishes.

The two fundamental types

Every organisational structure is a variation of two basic designs: functional and divisional. NCERT presents these as the primary types.

1. Functional Structure

Here, the organisation is divided into departments based on the functions or activities performed — marketing, finance, production, human resources, and so on. All marketing people sit together under one head; all finance people under another.

• Advantages: Specialisation improves efficiency. Each department develops deep expertise. Supervision is easier because the manager knows the work. Economies of scale are possible (e.g., one central purchasing department for the whole company).
• Disadvantages: Departments can become silos — they focus only on their own goals and lose sight of the overall company objective. Coordination across functions becomes slow. Decision-making gets centralised, which may delay responses to change.

2. Divisional Structure

Here, the organisation is divided into semi-autonomous units or divisions, each responsible for a product, a geographic region, or a customer group. Each division contains its own set of functions (its own marketing, its own finance, its own production). A large company like Hindustan Unilever has separate divisions for soaps, detergents, foods, and personal care.

• Advantages: Each division can focus completely on its product or market, leading to faster response to changes. It is easier to measure the performance of each division. Managers develop a broad, general management perspective.
• Disadvantages: Duplication of resources — each division has its own HR, its own accounts, etc., which raises costs. There can be unhealthy competition between divisions for company resources. Coordination across divisions becomes a challenge for top management.

A quick comparison …