Organisation Structure The established pattern of relationships among the component parts of the organisation The features which serve to control or distinguish.

Organisation Structure

The established pattern of relationships among the component parts of the organisation

The features which serve to control or distinguish its parts

Formal Structure Often Described In Terms Of:

The pattern of formal relationships and duties - charts, job descriptions, etc.The way in which the various activities or tasks are assigned to differentiate departments and/or people - differentiationThe way in which separate activities or tasks are co-ordinated -integrationThe power, status, and hierarchical relationships within the organisation - the authority systemThe planned and formalised policies and procedures and controls that guide the activities and relationships of people in the organisation - the administrative system

DifferentiationThe state of segmentation of organisational systems into components.

– Vertical differentiation:- decision making and authority at different levels in the organisation

– Horizontal differentiation:- tasks; units, etc, differences at the same level of hierarchy

IntegrationThe degree of co-ordination and control which exists between the various levels and activities of the organisation.

Conventional integration mechanisms:- rules, policies, procedures, hierarchical referral– Non-conventional integration mechanisms -

management into-systems, integrator roles, cross functional teams, re-organisation into a matrix structure

Co-Ordination MechanismsMutual adjustmentDirect supervisionStandardisation:– work processes– outputs– skills and/or knowledge– norms or values

necessary because of differentiation and division of labour

Basic View Of "Strategy-Structure" Relationship

strategy structure

“fit”

Crucial Elements Of Chandlers Thesis

1. Organisation structure follows the growth strategies of the firm.

2. USA firms had followed a stage or stepwise process of development of strategies and structures.

3. Organisations do not change their structures until provoked by inefficiencies to do so.

4. Added later by Drucker and Miles and Snow:"structure constrains strategy".

Organisational Design VariablesProduct/market policies

Taskuncertainty

diversityinterdependence

Reward Systemscompensation

promotionleadership style

job design

Information & Decision Processesplanning & control

budgetingintegration mechanismsperformance measures

Peoplerecruitment, selectiontransfer & promotion

training & development

Structuredivision of labour

departmentalisationshape

distribution of power

Success

Approaches To Organisational Design

The One Best Way Approach– e.g. scientific management, bureaucracy, administrative management,

management by objectives, long range planning, organisational development and so on.

– All organisations should be of the same design.

The Contingency Approach– e.g. it all depends upon the situation facing the firm.

The situation determines the design.

The Configuration/Context Approach– e.g. design parameter and situational factors cluster together into internally

consistent groupings.

Design and situation relationship is symbiotic not deterministic.

Organisation Design (1)Individual positions

– job specialisation– behaviour formalisation– training– indoctrination

The skeletal structure– bases for establishing groupings

• function/activity– knowledge, skill, process, function

• market– output, client, place

• (time may be a sub category of either)– size of units

Organisation Design (2)

Design of lateral linking devices– liaison devices– planning and control systems

Design of decision making systems– centralised– decentralised

Basic Contingency Model

OrganisationDesign

OrganisationEffectiveness

OrganisationEnvironment

Situational Factors (1)Perception of environment Age– of industry

• different configurations favoured at different times.– of organisation

• increasing age increasing formalisation

Size of organisation– growth leads to increasing average unit size,

increasing formalisation, more elaborate configuration

Situational Factors (2)Technical system in operating core

– regulatory systems• formalisation and bureaucracy

– complexity• elaborate administrative system and selective decentralisation

– automation• organic administrative systems

Power– increasing external control, centralisation & formalisation– individuals favour centralisation– fashion overrides common sense

Why Do Configurations Exist?

The ”Darwinian" Perspective– survival of the fittest

The ”Harmony” Perspective– consistency, synergy, strategic fit

The ”Quantum Leap” Perspective– approach to strategic change

Six Basic Elements Of The Organisation

the strategic apexthe middle linethe technostructurethe support staffthe operating corethe ideology

Six Basic Elements Of The Organisation

Six Structural Configurationsthe simple structure

– pull to centralise

the machine bureaucracy– pull to standardise

the professional bureaucracy– pull to professionalise

the divisionalised form – pull to balkanise

the adhocracy– pull to collaborate

the missionary– pull to evangelise

The Simple Structure (1)

Key co-ordinating mechanism

direct supervision

Key element

strategic apex

The Simple Structure (2)

Design parametersSpecialisation - little

Training - little

Indoctrination - little

Formalisation of behaviour - little

Style - organic

Groupings - functional

Unit size - wide

Planning and control - no formal systems

Liaison devices - few

Decision making power - centralised

Situational factorsAge and size - young and small

Technical system - simple, not regulatory

Environment - simple, dynamic (hostile?)

Power source - Managing Director authority and control

The Entrepreneurial Context (1)

Dominated by a single individual, with clear and distinct mission, directing a responsive organisationnew organisationssmall organisationscrisis organisationsautocratic organisationscharismatic organisationsentrepreneurial organisations

The Simple Structure

The Entrepreneurial Context (2)

Environment tends to be:• simple• dynamic• nichés in existing fragmented mature industries

Advantages• centralisation• strong ideology• effective in some situations

Disadvantages• confusion• inefficient• vulnerable to loss of leader• narrow environment range• leader resists change• abuse of authority

The Machine Bureaucracy (1)

Key co-ordinating mechanism

standardisation of work

Key element

technostructure

The Machine Bureaucracy (2)Design parameters

Specialisation - high; vertical & horizontalTraining - littleIndoctrination - littleFormalisation of behaviour - highStyle - bureaucraticGroupings - functionalUnit size - wide in operating core, narrow elsewherePlanning and control - action planningLiaison devices - fewDecision making power - limited horizontal decentralisation

Situational factorsAge and size - old and large

Technical system - simple, not automated or sophisticated

Environment - simple, stable

Power source - technocratic and external

The Mature Context (1)An integrated set of simple, repetitive tasks must be performed precisely and consistently by human beingsFound in:- older mature organisations with regulatory technical systems.Strong external control by dominant stakeholderRegulatory functionsSafety conscious organisations

The Machine Bureaucracy

The Mature Context (2)Environment tends to be:• simple• stable• demanding mass provision of goods and services

Advantages• control / accuracy• certainty / precision• efficiency (?)

Disadvantages• boring, repetitive work• inflexibility• conflict• limited scope of personal development

The Professional Bureaucracy (1)

Key co-ordinating mechanism

standardisation of skillsKey element

operating core

The Professional Bureaucracy (2)Design parameters

Specialisation - high in horizontal plane

Training - high

Indoctrination - little

Formalisation of behaviour - little

Style - bureaucratic

Groupings - functional and market

Unit size - wide in operating core, narrow elsewhere

Planning and control - little

Liaison devices - roles in administration

Decision making power - horizontal decentralisation

Situational factorsAge and size - variable

Technical system - not regulatory or sophisticated

Environment - complex and stable

Power source - professional operator control

The Professional Context (1)Organisations designed to deal with stable yet high complex working patternsOrganisations tend to be:public servicepersonal service orientatedmissing regulatory, sophisticated or automated technical systemsstrong operating core & support staff bases

The Professional Bureaucracy

The Professional Context (2)Environment tends to be:• stable• complex

Advantages• Democratic• provides extensive

autonomy

Disadvantages• lack of control• co-ordination difficulties• discretion over use of standard programmes• innovation• inflexibility

The Divisionalised Form (1)

Key co-ordinating mechanism

standardisation of outputsKey element

middle line

The Divisionalised Form (2)Design parameters

Specialisation - high in horizontal and vertical planeTraining - littleIndoctrination - some in key rolesFormalisation of behaviour - highStyle - bureaucraticGroupings - marketUnit size - wide at topPlanning and control - high performance controlLiaison devices - fewDecision making power - limited vertical integration

Situational factorsAge and size - old and very large

Technical system - divisible, often mirroring machine bureaucracy

Environment - diverse

Power source - middle line control

The Diversified Context (1)A set of quasi-autonomous units coupled together by a central administrative structureOrganisations have diverse markets created by product/service or client or regional segmentation.Client and regional segmentation encourages superimposition of machine bureaucracy in operating coreTechnical system divisible into efficient units.Larger, older firms.

The Divisionalised Form

The Diversified Context (2)Environment tends to be:• multiple• simple• static

Advantages• strategic flexibility• efficient allocation

of capital• helps personal

development• spreads risk• responsiveness

Disadvantages• expensive duplication• lack of central control• extended shareholder

grouping• lack of synergy• quantitative

performance measures

The Adhocracy (1)

Key co-ordinating mechanism

mutual adjustmentKey element

support staff

The Adhocracy (2)Design parameters

Specialisation - high in horizontal plane

Training - high

Indoctrination - some

Formalisation of behaviour - little

Style - organic

Groupings - functional and market

Unit size - narrow

Planning and control - limited action planning

Liaison devices - many and various

Decision making power - selective decentralisation

Situational factorsAge and size - young

Technical system - sophisticated and automated or simple and non-regulatory

Environment - complex and dynamic

Power source - expert control

The Innovation Context (1)Organisations designed to deal with complex technologies and systems under conditions of severe dynamism.

Organisations tend to be:-

operating adhocracy

administrative adhocracy

entrepreneurial adhocracy

competitive adhocracy

temporary adhocracy

mammoth project adhocracy

automated adhocracy

Young organisations - age breeds standardisation

The Adhocracy

The Innovation Context (2)Environment tends to be:• dynamic• complex

Advantages• copes with difficult conditions• provides challenges• very effective

Disadvantages• confusion and ambiguity• inefficient• internal politics and conflict• group goals must dominate• unbalanced workloads• drift towards other configurations

The Missionary Organisation (1)

Key co-ordinating mechanism

standardisation of normsKey element

ideology

The Missionary Organisation (2)

Design parametersSpecialisation - littleTraining - littleIndoctrination - highFormalisation of behaviour - littleStyle - bureaucraticGroupings - marketUnit size - widePlanning and control - littleLiaison devices - fewDecision making power - decentralised

Situational factorsAge and size - middle range

Technical system - simple and non-regulatory

Environment - simple, usually stable

Power source - ideological control

Configurations as One SystemSimple Structure

Machine Bureaucracy Professional Bureaucracy

Divisionalised Form Adhocracy

Ageing

hostility

Professionalism

hostility

dynamism

complexity

rationalisation

dive

rsifi

catio

n

cons

olid

atio

n

complexity

complexity

hostility

fragmentation

automation

sophistication

success in one area

dyna

mis

m

Age

ing

/ su

cces

s

A Portfolio Of Configuration At The Business Level

Cash Cows

machine or

professional bureaucracies

R & D

adhocracies

Dogs

machine or

professional bureaucracies

Question Marks

adhocracies or

simple structures

Stars

simple structures