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Capon: Understanding Organisational Context2nd edition Pearson Education 2004 1.1

Understanding

Organisational Context 2eSlides by Claire Capon

Chapter 1

Inside organisationsOrganisational structures

Handys cultures

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Organisational structures

The simple structure

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Figure 1.2 The simple structure

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Main features

Centralised

Organised around owner Small companies or small

companies in early stages of

development

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Advantages

Owner controls early growth

and development of thebusiness

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Disadvantages

Owner may lack specialist

knowledge in some areas Appropriate up to a certain

size only

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The functional structure

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Figure 1.3 The functional structure

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Main features

Centralised

Small company producinglimited range of products

Organised around tasks to be

carried out

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Advantages

Simple lines of control

Efficient lines ofcommunication and

information flow -

vertical and short

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Advantages (cont.)

Specialist managers heading

up each function Improved decision making

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Disadvantages

Functional managers

overburdened withoperational duties

Longer-term planning

may be neglected

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Disadvantages (cont.)

Becomes stretched by

growth and productdiversification

Difficult to co-ordinate and

manage across differentfunctions

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The divisional structure

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Figure 1.4 The divisional structure

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Main features

Product or geographical

divisions

Diverse range of products or

services offered, or

geographically-diversemarkets served

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Advantages

Divisions are profit centres in

their own right

Decentralised structure - easier

to manage diversity

Divisional managers responsiblefor short-term and medium-term

planning

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Advantages (cont.)

Top managers are free to

concentrate on longer-term

planning

Profitability is spread across

the divisions, products andmarkets

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Disadvantages

Potential conflict between

divisions over resource

allocation

Overall co-ordination of

divisions can be difficult

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The holding company structure

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Figure 1.5 The holding company structure

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Main features

Small head office - acts as an

investment company

Decentralised - operating

companies are largely

independent

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Main features (cont.)

Operating companies trade

under own name, rather than

holding companys name

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Main features (cont.)

Operating companies are

required to meet strict

financial targets

Financial and legal sections

support head office, not theoperating companies

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Advantages

Low central overheads

Risk and profit are spread Ease of divestment of

operating companies

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Disadvantages

Individual operating

companies under risk of

divestment by holding or

parent company - may feel

threatened No centralised skills

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Potential lack of overall

co-ordination and direction

of the whole organisation

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The matrix structure

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Figure 1.6 The matrix structure: multinational

company

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Main features

Double definition of profit

centres (two arms of the matrix)

Found in different types of

organisation:

- large multinationals- university departments

- sophisticated service companies

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Advantages

Decentralised and localised

decision making in the matrix

Growth and complexity

controlled by people in the

matrix

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Advantages

Direct contact between two

arms of the matrix replaces

bureaucracy

Quality decision making and

increased managerialmotivation

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Disadvantages

In the matrix, potentially:

- a high degree of conflict- a long time to make

decisions

- unclear job and task

responsibilities

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Difficult to implement

High overhead costs

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Handys cultures

The power cultureThe role culture

The task culture

The person culture

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Figure 1.9 The power cultureSource: Understanding Organizations by Charles Handy (Penguin Books 1976, Fourth Edition 1993). Copyright

Charles Handy 1976, 1981, 1985, 1993. Reproduced by kind permission of Penguin Books Ltd.

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The power culture

Usually found in small firms

with simple structure

Owners tend to recruit

employees similar in

character to themselves

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Capon: Understanding Organisational Context2nd edition Pearson Education 20041.38

The power culture

The culture is like that of a

club with all employees as

members

Power culture is very reliant

on the owner

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The power culture

Work is divided by function

or product

Lines radiating from the

centre represent functional

or product areas

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The power culture

Concentric circles represent

power and influence

The further away from the

centre, the weaker the power

and influence

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Figure 1.10 The role cultureSource: Understanding Organizations by Charles Handy (Penguin Books 1976, Fourth Edition 1993). Copyright


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The role culture

Often found in larger

organisations with functional

or divisional structure

Built around defined jobs,

roles and procedures

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The role culture

Strength of organisation is in

the pillars or departments

Designed for stability and

continuity

Not adaptive to change

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Figure 1.11 The task cultureSource: Understanding Organizations by Charles Handy (Penguin Books 1976, Fourth Edition 1993). Copyright


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The task culture

Often found in organisations

with the matrix structure

Problem-solving

organisations

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The task culture

People and resources drawn

together into a temporary team

for a specific project

Once the project is completed,

the team disbands and

individuals move on to other

projects

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Figure 1.12 The person cultureSource: Understanding Organizations by Charles Handy (Penguin Books 1976, Fourth Edition 1993). Copyright


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Capon: Understanding Organisational Context 2nd edition Pearson Education 2004 1.48

The person culture

Organisation exists to

support the individual

specialist and allow them to

practise their profession

Found in the professions, e.g.doctors, solicitors, dentists