Week2AL Edit Org Structure Ch10

8/2/2019 Week2AL Edit Org Structure Ch10

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Chapter 10: Organisational structure

Note: these slides are significantly edited from the material inthe chapter; read the chapter carefully for more detail.

Four main sections in this presentation:

1.Overview of organisational structure

2.Effects of strategy, environment and technology on structure3.Vertical structure and span of control4.Five types of organisational structure: functional, divisional,horizontal matrix, team-based and network structures.


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Definition of organisational

structure. The framework in which the organisation

defines how tasks are divided, resources aredeployed and departments are coordinatedand is therefore essentialto understandinghow the organisation works/doesnt work.

1. Set of formal tasks assigned to individuals anddepartments.

2. Formal reporting relationships: power structure.3. Design of systems to ensure effective coordination of

employees across departments.


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Structure follows strategy


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Structure should reflect the

operating environment Environmental uncertainty causes three things

to occur in an organisation. Examples: GFC;carbon tax; high AUD; US debt problems etc.

- Increased differences among departments.

- Increased coordination to keep departmentsworking together.

-Greater need for adaptation to change andinnovation.


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Structure should reflect the

operating environment Mechanistic structures:

Used in stable environments.

Have rigid, vertical, centralised structures with most decisions madeat the top.

Highly specialised, many rules and a clear hierarchy.

Extensive policies and procedures

Often slower/resistant to change and innovation.

Organic structures: Used in rapidly changing environments.

Have a looser, free flowing and adaptive structure.

Horizontal structure with decentralised decision making.

More fluid and adaptable to change.

More likely to result in innovation


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Structure should fit the technology Technology includes the knowledge, tools, techniques

and activities used to transform the organisations inputsinto outputs.

Service technology, eg: cafes, health services,supermarkets, banks etc.: Direct contact with customers.

Service firms tend to be flexible (?), informal (?) and centralisedin structure.

Digital technology: Characterised by the use of the internet and other digital

processes to conduct or support business online.

Organisations tend to be flexible and decentralised (?).


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Organising the vertical structure Organisational chart (see next slide for e.g.)

Work specialisation The degree to which organisational tasks are subdivided

into individual jobs, also called division of labour.

e.g. Automobile assembly line; McDonalds productionin the local franchise.

Specialisation results in efficiency (Taylor).

However, specialisation reduces motivation (?).

Scalar principle: Line of authority includes allemployees from bottom to top of the organisation


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Organisational chart (two examples shown below:functional and divisional. There are many good examples of various org charts

in the textbook, chapter 10)


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Organising the vertical structure Authority, responsibility and delegation

The formal and legitimate right of a manager tomake decision, issue orders and allocate resourcesto achieve organisationally desired outcomes.

1 Authority is vested in organisational positions, not people.2 Authority is accepted by employees.3 Authority flows down the vertical hierarchy.

These reasons are why structure is so important to understandinghow management works/doesnt work in an organisation.


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Organising the vertical structure Span of management:

The number of employees who report to a supervisor;also called the span of control.

Traditional: Seven employees per manager. Lean organisations: As high as 30

to 40.


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Factors that influence larger span of

management

1. Employees work is stable and routine.2. Employees perform similar work tasks.

3. Employees are concentrated in a single location.

4. Employees are highly trained (need little direction).

5. Rules and procedures defining task activities are available.

6. Little time is required in non-supervisory activities (e.g.coordination across other departments or planning).

7. Managers personal preferences and styles favour a larger span.

8. Attempt to decrease costs of middle/supervisory management

9. Attempt to up-skill those promoted into supervisory positions.


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Organising the vertical structureTall versus flat structures:

Tall structures Narrow spans

More hierarchical levels

Flat structures Wide span

Horizontally dispersed

Trend towards wider spans to delegate more work(authority and accountability)


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Organising the vertical structure Centralisation

The location of decision authority near top organisationallevels.

Decentralisation The location of decision authority near lower

organisational levels.

Trend toward greater decentralisation

Lowers burden on top managers. Utilises skills and ability of workers.

Allows rapid responses to external change.


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Organising the vertical structure Two factors influencing centralisation and

decentralisation

1 Greater change and uncertainty in the environment

Decentralisation? Or perhaps centralise?

2 The firms strategy

Should fit with need for centralisation or decentralisation,e.g. international expansion; e-commerce; need for

central warehouse? Costs of centralising/decentralising.3. Need or desire for executive management to have greater or

lesser control; reflective of management style? Theory Xor Theory Y?


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Organising the vertical structure Formalisation

The written documentation used to direct and controlemployees, i.e. policies and procedures.

Bureaucratic form of organisation (Weber).

Advantages in rationality and logical operation.

However, red tape can cause problems and resistance tochange and innovation.


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Different organisational structuresor type of departmentalisation - how Samson & Daft describe types of structure.

1 Functional structure2 Divisional structure

3 Horizontal matrix structure

4 Team-based structure5 Network structure

The basis on which individuals are grouped intodepartments and departments into total organisations.


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Functional structurestandard org chart structure see slide 2 for an example.

Advantages Economies of scale and

efficient resource use

Expertise (in-depthskills)

Internal career progress

Centralised chain ofcommand

Top manager directionand control

Excellent coordinationwithin functions

High-quality technicalproblem solving

Disadvantages Poor communication across

functional departments

Slow response to externalchanges

Decisions concentrated at topleading to delay

Responsibility for problemsdifficult to pinpoint

Limited view of organisational

goals by employees Limited general management

training for employees


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Divisional structure e.g. next slide An organisational structure in which departments are

grouped based on similar organisational outputs.

Sometimes called a product structure, program

structure or self-contained unit structure. Encourages decentralisation (to divisions).

Can group by geography.


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Example of divisional structure


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Divisional structureAdvantages Fast response, f lexible in

uncertain environment Focus on customer

Excellent coordinationacross functionaldepartments

Easy to pinpointresponsibility for productproblems

Emphasis on overallproduct and division goals

Develops generalmanagement skills

Disadvantages Duplication of resources

across divisions

Less technical depth and

specialisation Poor coordination across

divisions

Less top managementcontrol

Competition for corporateresources (amongdivisions)


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Horizontal matrix structure(e.g. next slide)

An organisation structure that utilises functional anddivisional chains of command simultaneously in the

same part of the organisation. Balances traditional control of functional

departments with horizontal coordination acrossdepartments.

Problem for two-boss employee.


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Horizontal matrix structure


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Horizontal matrix structureAdvantages More efficient use of

resources than single

hierarchy Flexible, adaptable to

changing environment

Develop generalists andspecialists

Interdisciplinarycooperation, expertiseavailable to all divisions

Enlarged tasks foremployees

Disadvantages Frustration and confusion

from dual chain of

command High conflict between two

sides of matrix

Many meetings, morediscussion than action

Human relations trainingneeded

Power dominance by oneside of matrix


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Team-based structure

Cross-functional team Group of employees (from various functional departments)

that report to both team and functional departments thatmeet as a team to resolve mutual problems.

Permanent team Participants from several functions who are permanently

assigned to solve ongoing problems of common interest.

Often used in business process re-engineering: a radical redesign

of business processes to achieve dramatic improvements incost, quality, service and speed. Eg. TQM


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Team-based structure

Advantages Some advantages of

functional structure

Reduced barriers amongdepartments

Quicker decisions

Involvement increasesmorale and enthusiasm

Reduced administrativeoverhead

Disadvantages

Dual loyalties and conflicts

Time and resources spent on

meetings Unplanned decentralisation

People simply get confusedabout whats going on and

how things work; cantherefore be a bit easier tohide not takeresponsibility for workdone/not done.


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Network structure e.g. on next slide An organisation structure that disaggregates

major functions into separate organisations thatare brokered by a small headquartersorganisation.

Can subcontract major functions to separateorganisations and control from a central hub.

Focus on what they do best, outsource the rest.


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Network structure


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Network stuctureAdvantages Global competitiveness

Workforceflexibility/challenge

Reduced administrativeoverhead

Disadvantages

No hands-on control

Can lose organisationalpart

Employee weakened (nocohesive corporate culture)


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Questions/comments? Read chapter 10 and consider how management

authority (organisational power) may change witheach of the structures.

Documents

Week2AL Edit Org Structure Ch10