iMBA MAN7039

Strategic Human Resource

Management
Week 9
Organisational Structure
Session objectives
• Outline why the structure of an organisation affects
performance
• Compare the features of mechanistic and organic
structures
• Examine the ‘contingencies’ that influence the choice
of structure
• Explain and illustrate the features of a learning
organisation

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Organisation structure
• Describes the formal allocation of work roles and administrative
mechanism to control and integrate work activities (the way work is
divided, supervised and coordinated) (Ghani et al. 2002; Robbins 1990) 
Organisation Chart: shows the structure as a picture
- the main departments and positions, with lines linking senior executives
to the departments or people for whose work they are responsible
- who people report to,
- clarifies the features of the formal structure: tasks, subdivisions, levels,
lines of authority
- Also, shows the chain of command, tasks of respective departments and
lines of authority
However, does not show informal structures
• what ‘informal structures’?

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Formal structure
Formal structure – is the official guidelines, documents
or procedures setting out how the organisation’s
activities are divided and coordinated
• Tasks – major tasks or activities
• Subdivisions – how major tasks are further divided
• Levels – the position of each post within the
management hierarchy
• Lines of authority – the lines linking the boxes show
who has formal authority over whom, and to whom
people report
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 Sample Organisation Chart
CEO

V i c e P re s id e n t V i c e P re s i d e n t D i r e c to r
F ia n a n c e M a n u fa c tu ri n g H u m a n R e s o u rc e s

C h ie f B udget P la n t M a i n te n a n c e T ra i n i n g B e n e fi t s
A c c o u n ta n t A n a ly s t S u p e ri n te n d e n t S u p e ri n te n d e n t S p e c ia lis t A d m i n i s tra to r
Daft, Organization Theory and Design 7/e

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Work specialisation
Job specialisation – an inherent part of every
organisation, every human activity (Mintzberg 1979:69)
• Work is divided into smaller tasks, with people or
departments specialising in one or more of these
• Expertise is developed
Point of Reflection: What problems might specialisation
have for the organisation and the employees?

• Vertical specialisation and horizontal specialisation

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Chain of Command
• Lines of authority – shows the links between people –
who they report to and who reports to them
• Lines of authority shows the allocation of formal
authority within the organisation- the right a person has
to make decisions, allocate resources or give instructions
• Based on position not the person
Other aspects to consider:
- responsibility
- accountability
- delegation
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Span of Control
• The number of subordinates reporting to a supervisor:
• Where staff are closely supervised – narrow span of
control
• If staff has more autonomy and responsibility with less
direct supervision – span of control is wider and
structure flatter

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Fundamental elements in control & coordination affecting
organisation structure
(Lee and Grover 2000)

Centralisatio Formalisatio
Complexity Integration
n n

Describes the
Refers to the degree to
degree to which the
Describes the Measures the
which activities of
degree to extent to
different separate
which the which an
functions are players in the
right to make organisation
distinguished organisation
decisions and uses rules and
with respect can be
evaluate procedures to
to goals, task coordinated
activities is prescribe
orientation, through
concentrated behaviour
and degree of formal
autonomy coordination
mechanisms

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Centralisation and
Decentralisation
• Decision making is taken by management at the top of
the organisation – centralisation
• Decentralisation – large number of decisions are taken
in the divisions or operating units

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 Benefits & limitations of centralisation
Factor Benefits Limitations
Response to Thorough debate of the issues Slower response to local conditions
change
Use of Concentration of expertise at the Less likely to take account of local
expertise centre – makes it easier to develop knowledge
new services and promote best
practice methods
Cost Economies of scale in purchasing. Local suppliers may be better value
Efficient administration if using than corporate suppliers
common systems
Policy Less risk of local managers breaching More risk of local managers
implications legal requirements breaching legal requirements
Staff Backing of centre ensures wide Staff motivated by greater local
commitment support responsibility
Consistency Provides consistent image to public – Local staff discouraged from taking
less variation in service standards responsibility – can blame centre

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Formalisation
The practice of using written or electronic documents to
direct and control employees
• Documents include – rule books, procedures,
instruction manuals, job descriptions – i.e. anything
that sets out what people must do

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 Structural design options for grouping
employees into departments
Functional
Grouping CEO

Engineering Marketing Manufacturing

Divisional
Grouping C E O

P ro d u c t P ro d u c t P ro d u c t
D iv is io n 1 D iv is io n 2 D iv is io n 3

Adapted from Nadler and Tushman (1988)

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Grouping jobs into functions and
divisions
Functional structure – managers group activities and staff
according to their profession or function – such as production,
finance, etc.
• Can be efficient as people with common expertise work
together, sharing and a seeing a career path
- However, may be a source of conflict (Nauta & Saunders
2001) if separate functions develop different perceptions of
organisational goals, as the business grows and diversifies
into a range of different products, markets, geographical
areas
- can lead to competition between business units
- Is this a limitation?
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Divisional structure
Divisional structure – tasks are grouped in relation to their outputs,
such as products or the needs of different types of customer
- each unit has the authority to design, produce and deliver product
or service
- functions within the division likely cooperate as they depend on
satisfying same set of customers
Product or Customer – enable staff to focus on a distinct group of
customers
Geographic divisions – tasks are grouped by geography
- allows people to focus on identifying and meeting different
customer requirements in the region
- divisional managers are able to monitor and control outlets

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 Strengths and weaknesses of
Divisional organisational structure
• STRENGTHS: • WEAKNESSES:
• Suited to fast change in unstable • Eliminates economies of scale
environment in functional departments
• Leads to client satisfaction because • Leads to poor coordination
product responsibility and contact across product lines
points are clear • Eliminates in-depth
• Involves high coordination across competence and technical
functions specialisation
• Allows units to adapt to differences • Makes integration and
in products, regions, clients standardisation across
• Best in large organisations with product lines difficult
several products
• Decentralises decision-making

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Types of organisations that relate
with organisational structures
Mechanistic Organic
Rigid and tightly controlled structure Highly flexible and adaptable structure

• High specialization • Cross-functional teams

• Rigid departmentalization • Cross-hierarchical teams
• Clear chain of command • Free flow of information
• Narrow spans of control • Wide spans of control
• Centralization • Decentralization
• High formalisation • Low formalization

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Organisational Structures are based
on the Organisational Design

(Schermerhorn and Wright 2007) 18

Structure and Environment
• Organisational structure is influenced and
determined by the organisational strategy

• What other contingencies can you identify that

determine the choice of organisational structure?
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 Contingencies that determine the
design of organisations

(Schermerhorn and Wright 2007)

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Knowledge Management &
Organisational Structure

Chechen, L., Shu-Hui, C., and Pui-Lai, T. (2011)

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Matrix structure
• Combines functional and divisional structures: function on
one axis of the matrix and products or projects on the other
• Functional staff work on one or more projects, moving
between them as required
• Staff report to two bosses – a functional head and a head of
the project

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Dual-Authority in a Matrix
organisation
President

Director Design Mfg Marketing Procure-

of Product Vice Vice Vice Controller ment
Operations President President President Manager

Product
Manager A

Product
Manager B

Product
Manager C

Product
Manager D

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 Strengths and weaknesses of
Matrix organisational structure
• STRENGTHS: • WEAKNESSES:
• Achieves coordination necessary to • Causes participants to experience dual
meet dual demands from customers authority, which can be frustrating and
• Flexible sharing of human resources confusing
across products • Means participants need good
• Suited to complex decisions and interpersonal skills and extensive
frequent changes in unstable training
environment • Is time consuming; involves frequent
• Provides opportunity for both meetings and conflict resolution
functional and product skill sessions
development • Will not work unless participants
• Best in medium-sized organizations understand it and adopt collegial rather
with multiple products than vertical-type relationships
• Requires great effort to maintain power
balance

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Network structures
• Refer to situations in which organisations remain
independent but agree to work together to deliver
products or services
• Can happen when managers arrange for other
companies to undertake certain non-core activities on
their behalf
• Remaining organisation concentrates on setting
strategy direction and managing core units

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Coordinating work
• Five ways to coordinate activities of people working on
different tasks:
• Direct supervision
• Hierarchy
• Standardising inputs and outputs
• Rules and procedures
• Information systems
• Direct personal contact

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Process-based organisations
(example) Corporation Is
centred around key
Financial processes that
Consultant define its work,
driven by Process
Owners.
Product Marketing
Teams manage
Expert Specialist
everything from task
execution to
Process
strategic planning
Owner
with team-based
rewards, customer
Logistics Technology oriented goals
Specialist Consultant

Consumer
Research
Analyst

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Process-based organisations
(example)

Source: https://www.slideshare.net/mubeena/org-design 28
‘Flatarchies’
• The tendency to apply lean structures with flat
hierarchies
• Communication between levels runs fast
• Decision-making becomes more flexible and
responsive

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Positive Deviance Hierarchy

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Holacracy
A new way of structuring and running organisations that replaces the
conventional management hierarchy. Instead of operating top-down,
power is distributed throughout the organisation, giving individuals and
teams more freedom to self-manage, while staying aligned to the
organization’s purpose.

Purpose-driven
• Holacracy-powered organizations focus on purpose at every level of
scale: Organizational purpose, team purpose, and individual purpose are
all explicit and aligned.
• The result: Every team member directs their energies in alignment with
the mission of your organization, unlocking the full potential of your
organization.
(holacracy.org)
https://youtu.be/YBMH4HLilSE

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Team Activity: Looking into the
future…
Medium, Zappos, Spotify, Valve, Github… New names
in the world of contemporary business
• Do your research to identify the types of
progressive organisational structure they adopt
• What is the common mindset they share?
• Do you see that mindset permeating the traditional
structures you learnt today? To what exent?
• Justify your positions by using valid, well stated
arguments

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References
• Chechen, L., Shu-Hui, C., and Pui-Lai, T. (2011) How
knowledge management mediates the relationship
between environment and organizational structure.
Journal of Business Research. 64(7), 726-736
• Nadler, D. and Tushman, M. (1988) Strategic
Organization Design. Glenview, IL: Scott Foresman
& Company

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