CHB 2 Structure

7/29/2019 CHB 2 Structure

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Organizational StructureMr. Iftikhar Ahmad, CEODynamique Business Consultants0300-4466062,


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Mintzbergs Structural ConfigurationMr. Iftikhar Ahmad, CEO,Dynamique Business Consultants,0300-4466062,

Mintzberg suggests that all organisations can be analysed into five

components, according to how they relate to the work of the organisation.


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Mintzbergs Structural ConfigurationMr. Iftikhar Ahmad, CEODynamique Business Consultants,0300-4466062

Strategic apex Ensures the organisation follows its mission. Manages theorganisation's relationship with the environment.

Operating corePeople directlyinvolved in the process ofobtaining inputs, and converting them intooutputs

Middle lineConveys the goals set by the strategic apex andcontrols the work of the operating core in pursuit ofthose goals: ie middle management.

Techno structure Analysers determine, and standardise work processes andtechniques and standardise outputs (eg goods must achieve

a specified level of quality)Personnel analysts standardiseskills (eg through training programmes)

Support staffAncillary services such as PR, legal counsel, thecafeteria and security staff. Support staff do not

plan or standardise production. They functionindependently of the operating core.


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Organizational StructureMr. Iftikhar Ahmad, CEODynamique Business Consultants,0300-4466062

Implementation a strategy successfullydepends on the selecting the right combinationof organizational structure, control system andculture.The main issue in designing organizationalstructure are how to group task, function, and

divisions; how to allocate authority andresponsibility; and how to use integratingmechanisms to improve coordination betweenfunctions.

Why Structure


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Organisation structure is formedby the grouping of people intodepartments or sections and the

allocation of responsibility andauthority.


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Organizational StructureMr. Iftikhar Ahmad, CEODynamique Business Consultants,0300-4466062Organisations can be departmentalised on afunctional basis (with separate departments forproduction, marketing, finance etc), a geographical

basis (by region, or country), a product basis (egworld wide divisions for product X, Y etc), a brandbasis, or a matrix basis (eg someone selling product Xin country A would report to both a product X manager

and a country A manager). Organisation structuresoften feature a variety of these types, as hybridstructures.


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Organisation structure implies a framework intended to:

(a) Link individuals in an established network of relationships so that

authority, responsibility and communications can be controlled

(b) Allocate the tasks required to fulfil the objective of the organisation to

suitable individuals or groups

(c) Give each individual or group the authority required to perform the

allocated tasks, while controlling their behaviour and use of resources in

the interests of the organisation as a whole(d) Co-ordinate the objectives and activities of separate units, so that overall

aims are achieved without gaps or overlaps in the flow of work

(e) Facilitate the flow of work, information and other resources through the

organisation.


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Structure follows the influence of the following:

Strategic Objective (coordination is required)

Environment volatility (product based or customers based) Diversity (specially in multinational)

Future Strategy (growth through merger & acquisition)

Technology ( reporting patterns, style and speed)

People ( skills, competences)

Mintzberg says structure follows strategy



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Entrepreneurial

A fluid structure with little or no formality.

Suitable for small start-up companies, theactivities and decisions are dominated bya key central figure (the owner/entrepreneur).



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Functional organisation involves grouping togetherpeople who do similar tasks. Primary functions in amanufacturing company might be production, sales, finance,

and general administration. Sub-departments of marketingmight be market research, advertising, PR and so on. ( fit forsmaller organization)



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Advantages ofFunctional structure include:

(a) Expertise is pooled thanks to the division of

work into specialist areas(b) It avoids duplication (eg one management

accounts department rather than several) andenables economies of scale.

(c) It facilitates the recruitment, managementand development of functional specialists.

(d) It suits centralised businesses.



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Disadvantages of functional structure include:(a) It focuses on internal processes and inputs, rather than the

customer and outputs, which are what ultimately drive a business.The customer is only interested in the product, and being referredfrom one functional department to another may not be the mostsatisfying experience for the customer.

(b) Communication problems may arise between different functions,who each have their own jargon.

(c) Poor co-ordination, especially if rooted in a tall organisationstructure. Decisions by one function/department involving anothermight have to be referred upwards, and dealt with at a higher level,thereby increasing the burdens on senior management.

(d) Functional structures create vertical barriers to information andwork flow. Management writer Tom Peters suggests that customerservice requires 'horizontal' flow between functions rather thanpassing the customer from one functional department to another.



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Geographic departmentation

Where the organisation is structured

according to geographic area, someauthority is retained at Head Office but day-to-day operations are handled on aterritorial basis (eg Southern region,

Western region). Many sales departmentsare organised territorially.

Geographic departmentation



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There are advantages of geographicdepartmentation.

(a) There is local decision-making at thepoint of contact between the organisation (ega salesperson) and its customers, suppliers orother stakeholders.

(b) It may be cheaper to establish areafactories/offices than to service markets fromone location (eg costs of transportation andtravelling may be reduced).



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But there are disadvantages too.(a) Duplication and possible loss of

economies of scale might arise. For example,

a national organisation divided into tenregions might have a customer liaisondepartment in each regional office. If theorganisation did all customer liaison work

from head office it might need fewermanagerial staff.(b) Inconsistency in methods or standards

may develop across different areas.



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Board ofDirectors

RegionalBoard

A

RegionalBoard

B

RegionalBoard

C

Productiondept

Financedept

Personneldept

Marketingand sales

dept

etc etc

etcetcetc

Geographic

organisation



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When organisations reach a certain size

it may be appropriate to structure it

into divisions or 'semi-autonomous

blocks. These divisions may focus on a

particular geographic area or aparticular product.

Divisionalisation


l


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Question

Role of head office in divisions

Divisions will normally report to head office on arange of performance-related matters. The level of

autonomy given to divisional heads is dependant on

the level of centralisation required. Centralised

organisations retain much of the power and decision-making at head office. Decentralised organisations

delegate more business decisions to divisional heads

Divisionalisation


O l S


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DivisionalisationEach dividion may be:

A subsidiary company under a holding company

A profit centre or investment centre with in a singlecountry

A STRATEGIC business unit (SBU) with its ownobjectives


O i i l S


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Successful divisionalisation requires certain key conditions.(a) Each division must have properly delegated authority, andmust be held properly accountable to head office (eg for profitsearned).

(b) Each unit must be large enough to support the quantity andquality of management it needs.(c) The unit must not rely on head office for excessivemanagement support.(d) Each unit must have a potential for growth in its own areaof operations.(e) There should be scope and challenge in the job for the

management of each unit.(f) If units deal with each other, it should be as an 'arm's length'transaction. There should be no insistence on preferential treatmentto be given to a 'fellow unit' by another unit of the overallorganisation

Divisionalisation



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Focuses the attention of management below 'top level' onbusiness performance. Reduces the likelihood of unprofitable products and activitiesbeing continued. Encourages a greater attention to efficiency, lower costs andhigher profits. Knowledge Gives more authority to junior managers, and so grooms them

for more senior positions in the future (planned managerialsuccession). Reduces the number of levels of management. The topexecutives in each division should be able to report directly to thechief executive of the holding company.

Advantages


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Disadvantages

In some businesses, it is impossible to identify completelyindependent products or markets for which separate divisionscan be set up.

Divisionalisation is only possible at a fairly seniormanagement level, because there is a limit to how muchdiscretion can be used in the division of work. For example,every product needs a manufacturing function and a sellingfunction.

There may be more resource problems. Many divisions gettheir resources from head office in competition with otherdivisions.

O i ti l St t


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Practice

Required

Suggest two benefits and two

drawbacks of both centralization and

decentralization


O

i ti l St t


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Organisation structures are rarely composed of only one type of

organisation, although an all-functional structure is theoretically

feasible. 'Hybrid' structures may involve a mix of functional

departmentation, ensuring specialised attention to key functions, with

elements of (for example):

Product organisation, to suit the requirements of brand marketing

or production technologies

Customer organisation, particularly in marketing departments, to

service key accounts

Territorial organisation, particularly of sales and distribution

departments, to service local requirements for marketing or

distribution in dispersed regions or countries

Hybridstructures


O

i ti l St t


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Matrix Organization


O i ti l St t


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Where hybrid organisation 'mixes' organisation types,

matrix organisation actually crosses functional and

product/customer/project organisation.

The employees presented by the dot in the abovediagram, for example, are responsible to the Finance

Manager for their work in accounting and finance for their

functional department and are responsible to the Project

Manager C for their work on the project team: budgeting,management reporting and payroll relevant to the

project, say.

Matrix and projectorganisation


Organizational Structure


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Advantages of matrix organisation(a) Greater flexibility of:

(i) People. Employees develop an attitude geared to accepting

change, and departmental monopolies are broken down.

(ii) Workflow and decision-making. Direct contact between staffencourages problem solving and big picture thinking.

(iii) Tasks and structure. The matrix structure may be readily

amended, where projects are completed.




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(b) Inter-disciplinary co-operation and a mixing of skills and

expertise, along with improved communication and co-

ordination.

(c) Motivation and employee development: providing

employees with greater participation in planning and control

decisions.

(d) Market awareness: the organisation tends to become morecustomer/quality focused.

(e) Horizontal workflow: Bureaucratic obstacles are removed,

and department specialisms become less powerful.

Advantages of matrix organisation




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(a) Dual authority threatens a conflict between

functional managers and product/ project areamanagers.

(b) An individual with two or more bosses maysuffer stress from conflicting demands orambiguous roles.

(c) Cost: product management posts are added,meetings have to be held, and so on.

(d) Slower decision making

Disadvantages of matrix

organisation




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Required

Which structure would suit these companies?

(a) A family run restaurant with 10 staff.(b) A small manufacturing company with 250

staff.

(c) Johnson and Johnson who have 197strategic business units.

(d) BPP Holdings plc

PRACTICE



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Some recent trends (identified by writers such as TomPeters) have emerged from the focus on flexibilityas a key organisational value.

Flat structures. The flattening of hierarchiesdoes away with levels of organisation whichlengthened lines of communication and decision

making and encouraged ever-increasing specialisation.Flat structures are more responsive, because there isa more direct relationship between the organisation'sstrategic centre and the operational units serving thecustomer.

The new organisation


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'Horizontal structures'. What Peters (LiberationManagement)calls 'going horizontal' is a recognitionthat functional versatility (through multi-functional

project teams and multi-skilling, for example) is thekey to flexibility. In the words (quoted by Peters) of aMotorola executive: 'The traditional job descriptionswere barriers. We needed an organisation soft

enough between the organisational disciplines so that people would run freely across functional barriersor organisational barriers with the common goal ofgetting the job done, rather than just making certainthat their specific part of the job was completed.'



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Chunked' and 'unglued' structures. Sofar, this has meant team working anddecentralisation, or empowerment, creatingsmaller and more flexible units within theoverall structure. Charles Handy's 'shamrockorganisation' (with a three-leafed structured

of core, subcontractor and flexible part-timelabour) is gaining ground as a workablemodel for a leaner and more flexibleworkforce, within a controlled framework.



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professionals., techniciansAnd managers for key competences

Temporary & part time workers paid weekly, hourly or for the time they work

Self-employedEmploysHired on contract



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The new organisationOutput-focused structures. The key to all the above trends isthe focus on results, and on the customer, instead of internalprocesses and functions for their own sake. Aprojectmanagement orientation and structure, for example, isbeing applied to the supply of services within the organisation(to internal customers) as well as to the external market, inorder to facilitate listening and responding to customerdemands.

(e)'Jobless' structures. Meanwhile, the employee becomes nota job-holder but the vendor of a portfolio of demonstratedoutputs and competencies (Bridges, Jobshift). However

daunting, this is a concrete expression of the concept ofemployability, which says that a person needs to have aportfolio of skills which are valuable on the open labourmarket: employees need to be mobile, moving betweenorganisations rather than settling in to a particular job.




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Acentralised organisation is one in which authority is concentratedin one place.We can look at centralisation in two ways.

(a) Geography. some functions may be centralised rather than'scattered' in different offices, departments or locations.So, for example, secretarial support, IT support and informationstorage (filing) may be centralised in specialist departments (whoseservices are shared by other functions) rather than carried out bystaff/equipment duplicated in each departmental office.

(b) Authority. Centralisation also refers to the extent to whichpeople have to refer decisions upwards to their superiors.Decentralisation therefore implies increased delegation, empowermentand autonomy at lower levels of the organisation.

Centralisation and decentralisation




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Advantages and disadvantages of centralisation

Pro centralisation Pro decentralisation/delegation

Decisions are made at one point and so are easier to co-

ordinate.

Avoids overburdening top managers, in terms of workload and

stress.

Senior managers can take a wider view of problems and

consequences.

Improves motivation of more junior managers who are given

responsibility.

Senior management can balance the interests of different

functions eg by deciding on the resources to allocate to each.

Greater awareness of local problems by decision makers.

(Geographically dispersed organisations are often decentralised

on a regional/area basis for this reason.)

Quality of decisions is (theoretically) higher due to senior

managers' skills and experience.

Greater speed of decision making, and response to changing

events, since no need to refer decisions upwards. This is

particularly important in rapidly changing markets.

Possibly cheaper, by reducing number of managers needed and

so lower costs of overheads.

Helps develop the skills of junior managers: supports

managerial succession.

Crisis decisions are taken more quickly at the centre, without

need to refer back.

Separate spheres of responsibility can be identified: controls,

performance measurement and accountability are better.

Policies, procedures and documentation can be standardised

organisation-wide.

Communication technology allows decisions to be made

locally, with information and input from head office if required.

Centralisation offers greater control and co-ordination;decentralisation offers greater flexibility.




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Planning & Control Processes

Span of ControlThe span of control refers to the number of subordinatesimmediately reporting to a superior official.

A number of factors influence the span of control.A manager's capabilities limit the span of control: there arephysical and mental limitations to any single manager's ability tocontrol people and activities. The nature of the manager's work load

The more non-supervisory work in a manager's workload:(i) The narrower the span of control(ii) The greater the delegation of authority to subordinates




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Planning & Control Processes

Span of Control The geographical dispersion of subordinates Subordinates' work: if all subordinates do similar tasks, a

wide span is possible The nature of problems that a supervisor might have to helpsubordinates with. Time consuming problems suggest a narrowspan of control. The degree ofinteraction between subordinates. If

subordinates can help each other, a wide span is possible. Ifclose group cohesion is desirable, a narrow span of controlmight be needed. The amount ofsupport that supervisors receive from otherparts of the organisation.




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Tall & Flat Organization

Recent trends have been towards delayeringorganisations of levels of management. In other

words, tall organisations (with manymanagement levels, and narrow spans of control)are turning into flat organisations (with fewermanagement levels, wider spans of control) as aresult of technological changes and the granting ofmore decision making power to front line employs




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Tall & Flat OrganizationKey termsScalar chain: the chain of command fromthe most senior to the most junior.

Atall organisation is one which, inrelation to its size, has a large number oflevels of management hierarchy. Thisimplies a narrowspan of control.

Aflat organisation is one which, inrelation to its size, has a small number ofhierarchical levels. This implies a widespanof control.




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Tall Organization

Tall organisation

FORAGAINST

Narrow control spans Inhibits delegation

Small groups enable team members to

participate in decisions

Rigid supervision can be imposed,

blocking initiative

A large number of steps on the

promotional ladders assists

management training

The same work passes through too

many hands

Increases administration and

overhead costs

Extra communication problems, as the

strategic apex is further away




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Flat Organization

FORAGAINST

More opportunity for delegation Requires that jobscan

bedelegated. Managers may only get

a superficial idea of what goes on.

If they are overworked they are

more likely to be involved in crisis

management

Relatively cheap Sacrifices control

In theory, speeds up

communication between strategic

apex and operating core

Middle managers are often

necessary to convert the grand

vision of the strategic apex intoo erational terms




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DelayeringDelayering is the reduction of the number ofmanagement levels from bottom to top.Many organisations are delayering. Middle line jobs are vanishing.

Organisations are increasing the average span of control, are

reducing management levels and are becoming flatter.

(a) Information technology reduces the need for middlemanagers to process information.

(b) Empowerment. Many organisations, especially service

businesses, are keen to delegate authority down the line to the lowest

possible level. Front-line workers in the operating core are allowed to

take decisions. This is because it is often the best way to satisfycustomers. This perhaps removes the needs for some middle

management jobs.

(c) Economy. Delayering reduces managerial/supervisory costs.

(d) Fashion. Delayering is fashionable: if senior managers

believe that tall structures are inherently inflexible, they might cut thenumbers of mana ement levels.




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Organisations achieve results which individuals cannot achieve by

themselves.

An organisation is a social arrangement which pursues

collective goals and controls its own performance.

Organisations differaccording to their: ownership, control,

activity, orientation, size, legal status, funding and technology.

Organisation structure is formed by the grouping of peopleinto departments or sections and the allocation of responsibility and

authority. Mintzberg suggests that all organisation structures have fivecomponents: strategic apex, middle line and operating core, plus

technostructure and support staff.

Summary




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Summary Classical organisations are based on the principle of hierarchy. There

is a line of decision making power from the top of the organisation to thebottom. This scalar chain is intimately connected to the concept ofspan ofcontrol, which is the number of individuals under the direct supervision ofany one person.

Modern management theory stresses flexibility as a key value,

and organisational measures such as matrix and horizontal structures, multi-skilling, empowerment and flexible labour deployment are currently beingexplored.

Contingency theory suggests that there is no one best way tostructure (or manage) an organisation. It all depends on a number ofvariables.

An organisation can be viewed as an open system, interacting

with its environment. Span of control or 'span of management' refers to the number ofsubordinates responsible to a superior.

Recent trends have been towards delayering organisations oflevels of management. In other words, tall organisations (with manymanagement levels, and narrow spans of control) are turning into flatorganisations (with fewer management levels, wider spans of control) as aresult of technological changes and the granting of more decision making

power to front line employees.




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summary In a divisional structure some activities are decentralised to business

units or regions. A centralised organisation is one in which authority is concentrated in

one place. Centralisation offers greater control and co-ordination;

decentralisation offers greater flexibility. Burns and Stalker noted that mechanistic (or bureaucratic)

organisations are stable and efficient in conditions of slow change, but thatorganic organisation is required for adaptation and responsiveness in fast-change environments.

Bureaucracy is a continuous organisation of official functions boundby rules (Weber). It is a form of mechanistic organisation.

Organic organisations are controlled by mechanisms such as

commitment and culture. Technology has a significant impact on the way work is organised. The organisation may be seen as a socio-technical system. The global explosion of ICT has also had a major impact on work

organisation.


Quiz Test Organizational Structure


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List List principles of organisation.

2 List Mintzberg's methods of co-ordination.

3 'Span of control' refers to the number of layers in the organisation

hierarchy. True or false?

4 What is de-layering?

5 What is functional organisation?

6 What is a matrix organisation?

7 Which of the following is not a type of legitimate authority identified

by Max Weber?

A Charismatic

B Technostructure

C Traditional

D Bureaucratic

8 'Horizontal' structures (Peters) would be an example of which type

of organisation?

A Mechanistic

B Organic

Mr. Iftikhar Ahmad, CEODynamique Business Consultants,0300-4466062

AnswersOrganizational Structure


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ofwork; authority and responsibility; discipline; unity of

command; unity of direction; subordination of individual

interests; remuneration; scalar chain.

2 Mutual adjustment, direct supervision; standardisation

(of work process, outputs, skills and knowledge).

3 False. It is the number of subordinates immediately

reporting to a given official.4 The reduction in the number of management levels.

5 People are grouped together as they do similar work.

6 A matrix organisation crosses functional boundaries

and involves overlapping chains of command.

7 B: 'Technostructure' is a term drawn from Mintzberg's

model of organisational components.

8 B: Organic. Horizontal structures aim at flexibility.

AnswersMr. Iftikhar Ahmad, CEODynamique Business Consultants,0300-4466062

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CHB 2 Structure

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