Organisational

structures
Business and the Business
Environment

1 2

Organizing as a Management Function Organizing as a Management Function

• Organizing
• Arranges people and resources to work together to accomplish a goal

• Organization structure
• The system of tasks, reporting relationships, and communication linkages
• The purpose of an organizational structure is to order and coordinate the
actions of employees to achieve organizational goals.

3 4
 Objectives of structure Reasons
Organizing as a Management Function To link individuals in established network of => Authority, responsibility &
relationships communication can be controlled
To group together tasks required to fulfill => Being done on basis of functions,
objectives of org. as a whole, & to allocate geographic areas, product or product types
• An organization chart is a diagram describing reporting them to suitable ind. or groups=>
relationships and the formal arrangement of work positions departmentation
within an organization. It includes:
To allocate to ind. or groups the authority => Creates hierachy or chain of command,
required to perform their functions, as well as whereby authority flows down from senior
the responsibilities to account for their management to each level of org., &
performance to their superiors accountability flows back up
The
Supervisory Communicat Major Levels of To co-ordinate objectives & activities of => Overall aims are achieved without gaps or
division of relationships ion channels subunits management
work separate units overlaps in the flow of work

To enable flow of work, info, other resources => All the different parts of org. are able to
through org., via clear lines of co-operation & meet their objectives
communication

5 6

What influences the structure? Formal structure

• Its size. As org. get largers, its structure gets more complex=> • Controlled performance of collective goals  People
specialisation & subdivision required
achieve their goals in line with the organisational goals
• Its task – nature of its work. Structure is shaped by divisions of work into
functions & ind. tasks, & how these tasks related to each other • Deliberately constructed to fulfill specific goals
• Its staff. Skills and abilities of staff will determine how the work is • Characterised by planned division of responsibility and a
structure & the deegree of autonomy or supervision required well-defined structure of authority and communication
• Its legal, commercial, technical & social environment
• Organisation structure provides for consistent functions
• Its age: the time it’s had to develop and grow & roles, irrespective of changes in individual membership
• Its culture & management style : willing to delegate, teamwork

10/17/2021 8

7 8
 Formal structure Informal structures

• The set of unofficial relationships between

 Sales team organization members  loosely structured,
 Production flexible, spontaneous, fluctuating with its
department individual membership
 Plant of Biscuit • Always exist within formal organization
 Hanoi Branch of
• Made up of
ABN
• social groups, temporary networks
• informal customs & ways of getting things done
• informal channels of communication

10/17/2021 9

9 10

Informal structure Informal structures

• Loosely structured, flexible, spontaneous, fluctuating with its • Potential advantages

individual membership
• Helping people accomplish their work
Lunch together
• Overcoming limits of formal structure
Shopping • Gaining access to interpersonal networks
Tennis • Informal learning
Game online

10/17/2021 11

11 12
 Potential disadvantages of informal structures:

May work Diversion of

against best May carry May breed work efforts Feeling of
Susceptibility
interests of inaccurate resistance to from alienation by
to rumor
entire information change important outsiders
organization objectives

13 14

Traditional Organization Structures Functional structures

• Departmentalization • People with similar skills and performing similar tasks are grouped together
• Groups people with and jobs into work units or formal teams into formal work units
• These formal teams are linked to create three major types of traditional • Members work in their functional areas of expertise
organizational structures
• Are not limited to businesses
• Work well for small organizations producing few products or services

Functional Divisional Matrix

15 16
 Functional structure Functions - Bank

Commercial Bank
Managing © 1984-1994
T/Maker Co.
Director

Marketing Operations Finance/

Accounting
Production Marketing Engineerin Personnel Finance
Director Director g Director Director Director

Teller Check Transactions

Market Security
Advertisin Scheduling Clearing Processing
Sales Mgr Research Mgt Acc. Finan. Acc.
g Mgr
Mgr

17 18

Functions - Airline Functions - Manufacturer

Airline Manufacturing
© 1984-1994 T/Maker Co.

Finance/ Marketing Operations Finance/

Marketing Operations Accounting
Accounting

Flight Ground Facility Manufacturing Production Quality

Catering Purchasing
Operations Support Maintenance Control Control

19 20
 Functional structures Divisional structures

Advantages Disadvantages • Group together people who work on the same product or process, serve
• It is organisation by inputs & similar customers, and/or are located in the same area or geographical region
• Economies of scale
internal process, rather than by • Common in complex organizations
• Task assignments consistent with outputs & customer demands
expertise and training • Avoid problems associated with functional structures
• High-quality technical problem • Difficulties in pinpointing
solving responsibilities
• In-depth training and skill • Narrow view of performance
development objectives
• Clear career paths within
• Sense of cooperation and common
functions
purpose break down

• Excessive upward referral of

decisions

21 22

Divisional structures Divisional structures

By geography

Board of
Directors

Regional Regional Regional

Board A Board B Board C

Production Personnel MKT & Sales

Finance Dept.
Dept. Dept. Dept

23 24
 Divisional structure Divisional structures
By product/brand
BOD

Advantages Disadvantages
Data Processing • More flexibility in responding to • Duplication & possible loss of
R&D Dept Finance Dept HR Dept environmental changes economies of scale might arise
Dept
• Improved coordination • Inconsistency in standards may
• Clear points of responsibility develop from one area to another
• Expertise focused on specific • Increases overheadcosts &
Divisional Mgr Divisional Mgr Divisional Mgr customers, products, and regions managerial complexity
Brand A Brand B Product C • Greater ease in restructuring
• Competition and poor coordination
across divisions

Production MKT Sales Distribution • Emphasis on divisional goals at

expense of organizational goals

25 26

Matrix structure Matrix structure in a small, multi-project business firm

• Combines functional and divisional structures to gain advantages and

minimize disadvantages of each
• Used in:

Service Professional Non-profit Multi-national

Manufacturing
industries fields sector corporations

27 28
 Matrix structures Matrix Structures

• Potential advantages of matrix structures:

• Better cooperation across functions
• Improved decision making Potential disadvantages of matrix structures:
• Increased flexibility in restructuring
Two-boss
• Better customer service Two-boss
system can Team Increased costs
system is Team may
create task meetings are due to adding
• Better performance accountability susceptible to develop
confusion and time team leaders to
power “groupitis ”
• Improved strategic management conflict in consuming structure
struggles
work priorities

29 30

Team Structures

• Team structures
• Extensively use permanent and temporary teams to solve
problems, complete special projects, and accomplish day-to-day
tasks
• Often use cross-functional teams composed of members from
different functional departments
• Project teams are convened for a specific task or project and
disbanded once completed

31 32
 Team Structures Team Structures

• Potential advantages of team structures:

• Eliminates difficulties with communication and decision
making
• Eliminates barriers between operating departments
• Improved morale
• Greater sense of involvement and identification
• Increased enthusiasm for work
• Improved quality and speed of decision making

33 34

Team Structures Network structures

• Contemporary organisational structure that is founded on a set of alliances

Potential disadvantages of team structures: with other organisations that serve a wide variety of functions
• Uses information technologies to link with networks of outside suppliers
Effective use of time and service contractors
depends on quality of
Conflicting loyalties Excessive time spent in • Own only core components and use strategic alliances or outsourcing to
interpersonal relations,
among members meetings provide other components
group dynamics, and
team management

35 36
 Internal network Vertical or stable network
Profit
center  Consist of central Distributor Distributor
•Traditional organisations in organisation that outsource
Franchisee 1 Franchisee 2
much of their operations to
which divisions or units of the Profit Profit other companies
same firm are seen as separate center Broker/ center
 Include long-term
profit centres server relationships that often Core firm
• These profit centers are appear in mature
industries with largely
given freedom to buy & sell Profit Profit predictable market cycles
from each others & also from center center
=> Serve to spread risk Supplier 1 Supplier 2
others outside the firm. across a number of
separate layers &
=> Aims to inspire encourage the network to
entrepreneurship internally support product diversity
without using outsourcing & innovation Supplier 3

37 38

Dynamic network Network structure - example

 They are more

temporary alliances of Producer Designer
firms with key skills
usually around a lead or
a brokering firm
 Each of the units tends Core firm
to be independent &
collaborates on a specific
project or opportunity, &
then, disbands, later to
connect again, perhaps Distributor Marketer
with others, for another
project
=> in toys, fashion,
publishing industries Supplier

39 40
 Network structures Network Structures

Potential advantages
• Firms can operate with fewer full-time employees and less
complex internal systems Potential disadvantages of network structures:
• Reduced overhead costs and increased operating efficiency
Control and
• Permits operations across great distances coordination Potential loss of Potential lack of Excessively
problems may control over loyalty among aggressive
arise from outsourced infrequently outsourcing can
network activities used contractors be dangerous
complexity

41 42

Boundaryless Structures Boundaryless Structures

• Eliminate internal boundaries • Key requirements: Virtual organization

among subsystems and external • Absence of hierarchy
• A special form of
boundaries with the external • Empowerment of team boundaryless
environment members organization
• A combination of team and • Technology utilization
• Operates in a
network structures, with the • Acceptance of shifting network of
addition of “temporariness” impermanence external alliances
• Encourage creativity, quality, that are
timeliness, flexibility, and engaged as needed,
efficiency using IT and the
• Knowledge sharing is both a Internet
goal and essential component

43 44
 Organizational Designs

• Process of creating structures that accomplish mission and

objectives
• Environment determines the most appropriate design
• Mechanistic designs work in a stable environment
• Organic designs work in a rapidly changing and uncertain environment
• Adaptive organizations operate with a minimum of bureaucratic feature and
encourage worker empowerment and teamwork

45 46

Organizational Designs Organizational Designs

Mechanistic Designs Organic Designs

Bureaucracy
• Predictable goals • Adaptable goals • A form of organization based on logic, order, and the legitimate use
• Centralized authority • Decentralized authority of formal authority
• Many rules and • Few rules and procedures • Bureaucratic designs feature …
procedures • Wide spans of control • Clear-cut division of labor
• Narrow spans of control • Shared tasks • Strict hierarchy of authority
• Specialized tasks • Many teams and task • Formal rules and procedures
• Few teams and task forces forces • Promotion based on competency
• Formal and impersonal • Informal and personal
means of coordination means of coordination

47 48
 Organizational Designs Chain of command

The line of authority that vertically links all persons

with successively higher levels of management

Organizing trend:

• Organizations are being “streamlined” by cutting unnecessary

levels of management
• Flatter structures are viewed as a competitive advantage

49 50

Chain of Command Chain of command

The scalar chain of CEO
command: formal
organisation Unity of command
structure with
hierarchy from Director Director Director • Each person in an organization should report to one and
highest to lowest only one supervisor
ranks.
Mgr
Authority passes down Organizing trend:
the chain: superior
give orders & Teamleader • Organizations are using more cross-functional teams,
instructions to task forces, and horizontal structures
subbordinates, • Organizations are becoming more customer conscious
subordinates report W1
back up the chain to • Employees often find themselves working for more than
their superior one boss
W2

51 52
 Span of control Tall organisation
MD

Tall organisation is Division

The number of persons directly reporting to one which, in relation directors
a manager to its size, has a large Department
number of levels of mgr
management Section mgr
Organizing trend: hierarchy => narrow
span of control Assistant mgr
• Many organizations are shifting to wider spans of
control as levels of management are eliminated Supervisors

• Managers have responsibility for a larger number of

Team leaders
subordinates who operate with less direct supervision
Workers

53 54

Tall organisation Flat organisation

For Against
Flat organisation is
 Narrow span of control  Inhibit delegations one which, in relation MD
to its size, has a small
 Small group enable team  Rigid supervision can be number of levels of
members to participate in imposed, blocking initiative
management Department
making decisions  The same work passes hierarchy => wide
through many hands span of control
mgrs
 Large number of steps on
the promotional ladders –  Increase admin & overhead
assists management cost Supervisors
training
 Communication problems, as
decisions take time to filter
down
Workers

55 56
 Flat organisation Contrasting Spans of Control

For Against
 More opportunities  Implies that jobs can be delegated
for delegation
 Managers may only get a superficial
 Relatively cheap idea of what goes on. If they are
overworked they are more likely to
 In theory, speeds be involved in crisis mgt
up communication
between strategic  Sacrifies control
apex & operating
core  Middle mgrs are often necessary to
convert grand vision of strategic
apex into opreational terms

1–58

57 58

Arguments in favour of centralisation

Centralisation & decentralisation & decentralisation
Pro centralisation Pro decentralisation/delegation
1. Decisions are made at 1 1. Avoids overburdening top
Centralization is the point => easier to co- mgrs (workload & stress)
concentration of authority ordinate
for making most 2. Improves motivation of more
Decentralization is the
decisions at the top levels
dispersion of authority to 2. Senior mgrs can take a junior mgrs
of the organization
make decisions throughout all
levels of the organization
wider view of problems &
consequence
3. Greater awareness of local
3. Senior mgrs can keep a problems by decision
proper balance between makers. Geographically
 Centralisation also refers to the extents to which people have to refer different dept. & functions dispersed organisations
should often be decentralised
decisions upward to their superiors. on a regional/area basis
 Decentralisation implies delegation

59 60
 Arguments in favour of centralisation
& decentralisation (cont.) Centralisation & decentralisation
Pro centralisation Pro decentralisation/delegation
4. Quality of decisions is 4. Greater speed of decision making,
(theoritically) higher due to senior & response to changing events,
mgrs’ skills & experience since no need to refer decisson Decentralization with centralization
upwards
5. Possibly cheaper, by reducing • Centralization and decentralization not an “either/or”
number of mgrs needed => lower 5. Helps junior mgrs to develop & choice
overhead costs helps process of transition from

6. Crisis decisions are taken more

functional to general management Organizing trend:
quickly at the centre, without 6. Separate spheres of responsibility
need to refer back, get authority can be identified: controls, • Delegation, empowerment, and horizontal structures
etc performance measurement, contribute to more decentralization in organizations
accountability are better • Advances in information technology allow for the
7. Policies, procedures &
documentation can be 7. Communication technology allows retention of centralized control
standardised organisation-wide decisions made locally, with info &
input from head office if requied.

61 62

Centralisation & decentralisation Organizational Designs Trends

Contemporary organizing trends include:

Delegation and empowerment • Fewer levels of management
• Shorter chains of command
•A common management failure is unwillingness • Less unity of command
to delegate • Wider spans of control
•Delegation leads to empowerment • More delegation and empowerment
• Decentralization with centralization
Organizing trend: • Reduced use of staff
•Managers are delegating more and finding more
ways to empower people at all levels

63 64
 Trends of organisations today
• Flat structure => encourage communication and decision making,
more responsive
• Horizontal structures =>functional flexibility (through muti-functional
project teams and multi-skilling, eg)
• Chunked and unglued structures =>means team-working &
decentralisation, or empowerment, creating smaller and more flexible
units
• Output-focused structures=> focus on results & customers, instead of
internal process and functions for their own interest
• Jobless structures=> people need to have a portfolio of skills and
competencies which are valuable on open market,: they need to be
mobile, moving between org, rather than settling in to a particular job

65