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MGT 321: WASIK ALI KHAN ‘FOUNDATIONS OF ORGANISATION STRUCTURE’

ORGANISATIONAL BEHAVIOUR

CHAPTER 15

‘FOUNDATIONS OF ORGANISATION STRUCTURE’


What is Organisation Structure

How jobs are formally divided, grouped and coordinated

Six key elements

1. Work Specialisation

2. Departmentalisation

3. Chain of Command

4. Span of Control

5. Centralisation and Decentralisation

6. Formalisation


Work Specialisation

• Degree to which activities in the organisation are sub-divided

into separate jobs

• Each step performed by separate individuals


Economies and Diseconomies of Work Specialisation


Departmentalisation

Basis by which jobs are group together

Different ways to departmentalise

1. Functions

2. Type of product or service

3. Geography

4. Process

5. Customer


Chain of Command

The unbroken line of authority that extends from the top of the

organisation to the lowest echelon and clarifies who reports to

whom

Authority refers to the rights inherent in a managerial position

to give orders and expect them to be obeyed

Unity of command refers to the idea that subordinates should

have only one superior to who he or she is directly responsible.


Span of Control

The number of subordinates a manager can efficiently and effectively direct

Determines the number of levels and managers an organisation has

Narrow or Small Span of Control

• Advantage - Control

• Disadvantages

– Expensive

– Slows down decision making

– Overly tight supervision and discourages employee independence


Span of Control

Wider Span of Control (SOC)

• Advantage

– Inexpensive

– speed in decisions

– flexibility

– Closer to customers

– employee empowerment

• Companies spend heavily on training for wider SOC


Centralisation and Decentralisation

Centralisation refers to the degree to which decision making is

concentrated at a single point in the organisation

Centralised Organisation – top managers make all the decisions and

lower-level managers merely carry out their directives

Decentralised Organisation – decision making is pushed down to

managers closer to the action

1) Act quickly, 2) solve more problems, 3) have more people provide

inputs to decisions, 4) make employees to feel less alienated


Formalisation

Degree to which jobs within the organisation are standardised

High formalisation

Employees have minimal amount of discretion

Consistent and Uniform

Lot of rules and procedures

Low Formalisation

Behaviours are un-programmed

Freedom to exercise discretion


COMMON ORGANISATIONAL DESIGN


The Simple Structure

Structure characterised by low degree of departmentalisation, wide spans

of control, authority centralised in a single person, and little formalisation

Flat organisation

Small businesses in which manager and owner are one and the same

In times crisis, large companies resort to Simple Structure

Strengths: Fast, flexible, inexpensive, clear accountability

Weakness: 1) inadequate as organisations grow, 2) risky-dependant on one


The Bureaucracy

Structure with highly routine operating tasks achieved through

specialisation, very formalised rules and regulations, tasks are grouped

into functional departments, centralised authority, narrow spans of

control, and decision making that follows the chain of command

Advantages: Efficient, economies of scale, can get by with less skilled

employees

Weaknesses: creates conflicts (page 524), difficult for unprogrammed

decisions


The Matrix Structure

Structure that creates dual lines of authority and combines functional and

product departmentalisation

Advantages of Functional Departmentalisation:

Putting like specialists together

Pooling and sharing specialised resources across products

Disadvantages of Functional Departmentalisation:

Difficult to coordinate the tasks of diverse functional specialists on time and

within budget

Product Departmentalisation has the exact opposite strengths and

weaknesses.


The Matrix Structure

Strengths of Matrix:

Facilitates coordination in complex and interdependent activities

Economies of scale

Best resources working

Weaknesses of Matrix:

Creates confusion

Tendency to foster power struggles

Stressful

Can create conflicts


NEW DESIGN OPTIONS

Fewer levels of hierarchy and more emphasis on opening the boundaries

of the organisation


The Virtual Organisation

• AKA Network or Modular Organisation

• Small/Core organisation that outsources its major business

functions

• Highly centralised, little/no departmentalisation

• No bureaucratic overhead as there is no lasting org. to maintain

• Lessens long-term risks and costs


Virtual Organisation

Executive Group

Independent R&D

consulting firm

Commissioned Sales Rep

Advertising Agency

Factories in China


Virtual Organisation

Advantages

• Flexibility, which allows them innovative ideas and little money to

compete with larger organisations

• Save more money by eliminating permanent offices and hierarchical roles

Drawbacks

• Unclear roles and goals (leading to political behaviour)

• No cultural alignment or shared goals due to lack of interaction

• Sharing of information and knowledge is difficult

• At times, less adaptable and innovative than org. with established comm.


The Boundary-less Organisation

An organisation that seeks to eliminate the chain of command, have limitless span

of control, and replace departments with empowered teams

• Flattens the hierarchy and minimizes the rank

• Cross-hierarchical team, participative DM+, and 3600 performance review

• No functional departments (creates horiz. Boundaries)

• Replace with cross-functional teams

• Rotate employees across function

• Breaks down geographical/cultural barriers

+DM – Decision Making


The Leaner Organisation: Downsizing

• Lean, focused and flexible

• Downsizing

– Systematic effort to make an organisation leaner by closing locations,

reducing staff or selling off business units that don’t add value

• Reduces bureaucracy and speeds up DM

• Negative impact of downsizing despite cost savings

– Less commitment

– Stress, absences, more turnover

– Lower concentration and creativity


Effective Strategies for Downsizing

• Investment

– Invest in high-involvement work practices

• Communication

– Communicate before downsizing

• Participation

– Voluntary early-retirement/severance packages

• Assistance

– Severance, extended healthcare, job search assistance


WHY DO STRUCTURES DIFFER?


Mechanistic Vs. Organic Models


Why do structures differ?

• Organisational Strategy

• Organisational Size

• Technology

• Environment


Organisational Strategy

Three dimensions

• Innovation

– Emphasizes the introduction of major new products and services

– Mechanistic model

• Cost minimisation

– Emphasizes tight cost controls, avoidance of unnecessary innovation or marketing

expenses and price cutting.

• Imitation

– Seeks to move into new products/markets only after viability has already been

proven


Strategy-Structure Relationship


Why do structures differ?

• Organisational Strategy

• Organisational Size

• Technology

– Degree of routineness

• Environment

– Capacity – degree to which env. can support growth

– Volatility – degree of instability in the env.

– Complexity – degree of heterogeneity


Three Dimensional Model


ORGANISATIONAL DESIGNS AND EMPLOYEE BEHAVIOUR


Organisational designs and employee behaviour

Work Specialisation

Span of Control

Centralisation

Conclusion: must take individual differences into account

National culture influences the preference for structure

• High power-distance

• Low power-distance


END OF CHAPTER

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