Chapter 10

Defining organisational structure and design Organisational structure
The formal arrangement of jobs within an organisation.

Organisational Structure and Design

Organisational design
A process involving decisions about six key elements:
Work specialization Departmentalization Chain of command Span of control centralisation and decentralisation Formalization

Robbins, Bergman, Stagg, Coulter: Management 4e © 2006 Pearson Education Australia Robbins, Bergman, Stagg, Coulter: Management 4e © 2006 Pearson Education Australia

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Organisational structure Work specialisation
The degree to which tasks in the organisation are divided into separate jobs with each step completed by a different person.
Overspecialization can result in human diseconomies from boredom, fatigue, stress, poor quality, increased absenteeism, and higher turnover.

Departmentalisation by type
Functional
Grouping jobs by functions performed

Process
Grouping jobs on the basis of product or customer flow

Product
Grouping jobs by product line

Customer
Grouping jobs by type of customer and needs

Geographic
Grouping jobs on the basis of territory or geography

Robbins, Bergman, Stagg, Coulter: Management 4e © 2006 Pearson Education Australia

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Robbins, Bergman, Stagg, Coulter: Management 4e © 2006 Pearson Education Australia

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2d 8 2 . of organisational goals Robbins. Bergman. Coulter: Management 4e © 2006 Pearson Education Australia – Can only be used with certain types of products Figure 10.2b 6 Product departmentalisation Process departmentalisation + More efficient flow of work activities + Allows specialisation in particular products and services + Managers can become experts in their industry + Closer to customers – Duplication of functions – Limited view Source: Bombardier Annual Report. Stagg.2a 5 Robbins.Functional departmentalisation Geographical departmentalisation • Advantages • Efficiencies from putting together similar specialties and people with common skills.2c 7 Robbins. Stagg. Coulter: Management 4e © 2006 Pearson Education Australia Figure 10. Coulter: Management 4e © 2006 Pearson Education Australia Figure 10. Coulter: Management 4e © 2006 Pearson Education Australia Figure 10. Stagg. knowledge. and orientations • Coordination within functional area • In-depth specialization • Disadvantages • Poor communication across functional areas • Limited view of organisational goals • Advantages • More effective and efficient handling of specific regional issues that arise • Serve needs of unique geographic markets better • Disadvantages • Duplication of functions • Can feel isolated from other organisational areas Robbins. Bergman. Bergman. Stagg. Bergman.

Limited view of organisational goals Robbins. Stagg. Coulter: Management 4e © 2006 Pearson Education Australia 12 3 .Customer departmentalisation Organisation structure (cont’d) Chain of command The continuous line of authority that extends from upper levels of an organisation to the lowest levels of the organisation and clarifies who reports to who. Bergman. Coulter: Management 4e © 2006 Pearson Education Australia 11 Robbins.Duplication of functions .2e 9 Robbins. Stagg. Bergman. Stagg. Coulter: Management 4e © 2006 Pearson Education Australia Figure 10. Robbins. Organisation structure (cont’d) Span of control The number of employees who can be effectively and efficiently supervised by a manager. Bergman. + Customers’ needs and problems can be met by specialists . Unity of command The concept that a person should have one boss and should report only to that person. Coulter: Management 4e © 2006 Pearson Education Australia 10 Organisation structure (cont’d) Authority The rights inherent in a managerial position to tell people what to do and to expect them to do it. Width of span is affected by: Skills and abilities of the manager Employee characteristics Characteristics of the work being done Similarity of tasks Complexity of tasks Physical proximity of subordinates Standardization of tasks Responsibility The obligation or expectation to perform. Bergman. Stagg.

Lower-level managers do not want to have a say in decisions. Stagg. Lower-level managers are not as capable or experienced at making decisions as upper-level managers. Stagg. Coulter: Management 4e © 2006 Pearson Education Australia 16 4 . uncertain. Bergman. Bergman. Stagg. Robbins. Lower-level managers are capable and experienced at making decisions. Factors that influence the amount of decentralisation More decentralisation Environment is complex. Employee Empowerment Increasing the decision-making. Decisions are relatively minor.Contrasting spans of control Organisation structure (cont’d) Centralisation The degree to which decision-making is concentrated at a single point in the organisations. Bergman. Company is large. Coulter: Management 4e © 2006 Pearson Education Australia 15 Robbins. Effective implementation of company strategies depends on managers retaining say over what happens. organisations in which top managers make all the decisions and lower-level employees simply carry out those orders. Stagg. Coulter: Management 4e © 2006 Pearson Education Australia Figure 10. Company is geographically dispersed. Coulter: Management 4e © 2006 Pearson Education Australia 14 Factors that influence the amount of centralisation More Centralisation Environment is stable. Bergman. organisation is facing a crisis or the risk of company failure. Robbins.3 13 Robbins. Effective implementation of company strategies depends on managers having involvement and flexibility to make decisions. Lower-level managers want a voice in decisions. Decentralisation organisations in which decision-making is pushed down to the managers who are closest to the action. Corporate culture is open to allowing managers to have a say in what happens. Decisions are significant.

Stagg. Mechanistic versus organic organisation Robbins. Size of the organisation Firms change from organic to mechanistic organisations as they grow in size. Technology use by the organisation Firms adapt their structure to the technology they use. Robbins. and rules and regulations. departmentalization. centralisation. Structural contingency factors (cont’d) Strategy and structure Achievement of strategic goals is facilitated by changes in organisational structure that accommodate and support change. Coulter: Management 4e © 2006 Pearson Education Australia 17 Robbins. Coulter: Management 4e © 2006 Pearson Education Australia 20 5 . Stagg. Stagg.Organisation structure (cont’d) Formalisation The degree to which jobs within the organisation are standardized and the extent to which employee behavior is guided by rules and procedures. Bergman. Coulter: Management 4e © 2006 Pearson Education Australia Table 10. mechanistic structures need stable environments. Degree of environmental uncertainty Dynamic environments require organic structures.2 18 Structural contingency factors Structural decisions are influenced by: Overall strategy of the organisation organisational structure follows strategy. Size and structure As an organisation grows larger. its structure tends to change from organic to mechanistic with increased specialization. Coulter: Management 4e © 2006 Pearson Education Australia 19 Robbins. Low formalization means fewer constraints on how employees do their work. Highly formalized jobs offer little discretion over what is to be done. Bergman. Bergman. Stagg. Bergman.

Common organisational designs Traditional designs Simple structure Low departmentalization.Structural contingency factors (cont’d) Technology and structure organisations adapt their structures to their technology. and effectiveness Routine technology = mechanistic organisations Non-routine technology = organic organisations Robbins. Stagg. Coulter: Management 4e © 2006 Pearson Education Australia 23 Robbins. Coulter: Management 4e © 2006 Pearson Education Australia 21 Robbins. Coulter: Management 4e © 2006 Pearson Education Australia 24 6 . human resources. Robbins. Woodward’s classification of firms based on the complexity of the technology employed: Unit production of single units or small batches Mass production of large batches of output Process production in continuous process of outputs Woodward’s findings on technology. structure. Bergman.3 22 Structural contingency factors (cont’d) Environmental uncertainty and structure Mechanistic organisational structures tend to be most effective in stable and simple environments. finance. Stagg. Stagg. The flexibility of organic organisational structures is better suited for dynamic and complex environments. centralised authority. Bergman. Bergman. Bergman. Stagg. little formalization Functional structure Departmentalization by function Operations. Coulter: Management 4e © 2006 Pearson Education Australia Table 10. wide spans of control. and product research and development Divisional structure Composed of separate business units or divisions with limited autonomy under the coordination and control the parent corporation.

Bergman. Bergman. Stagg. and modular organisational structures to get closer to stakeholders. Stagg. Robbins. Coulter: Management 4e © 2006 Pearson Education Australia 28 7 . Bergman. Bergman. Coulter: Management 4e © 2006 Pearson Education Australia Figure 10.Strengths and weaknesses of common traditional organisational designs Organisational designs (cont’d) Contemporary organisational designs Team structures The entire organisation is made up of work groups or selfmanaged teams of empowered employees. Coulter: Management 4e © 2006 Pearson Education Australia Figure 10.4 25 Robbins.6 27 Robbins. Coulter: Management 4e © 2006 Pearson Education Australia 26 A Matrix organisation in an aerospace firm Organisational designs (cont’d) Contemporary organisational designs (cont’d) Boundaryless organisation An flexible and unstructured organisational design that is intended to break down external barriers between the organisation and its customers and suppliers. Stagg. moving on to another project as each project is completed. Robbins. network. Project structures Employees work continuously on projects. Stagg. Matrix and project structures Specialists for different functional departments are assigned to work on projects led by project managers. Matrix participants have two managers. Removes internal (horizontal) boundaries: Eliminates the chain of command Has limitless spans of control Uses empowered teams rather than departments Eliminates external boundaries: Uses virtual.

Modular organisation A manufacturing organisation that uses outside suppliers to provide product components for its final assembly operations.. Coulter: Management 4e © 2006 Pearson Education Australia Figure 10. manufacturing) in order to concentrate what it does best. and change through the practice of knowledge management by employees. Bergman.7 31 8 . Network organisation A small core organisation that outsources its major business functions (e. adapt. trust. Stagg. Coulter: Management 4e © 2006 Pearson Education Australia 30 Characteristics of a learning organisation Robbins. Robbins.g. support and encouragement A strong culture of shared values.Removing boundaries Virtual organisation An organisation that consists of a small core of full-time employees and that temporarily hires specialists to work on opportunities that arise. Characteristics of a learning organisation: An open team-based organisation design that empowers employees Extensive and open information sharing Leadership that provides a shared vision of the organisation’s future. Stagg. Organisational designs (cont’d) The learning organisation An organisation that has developed the capacity to continuously learn. Bergman. openness. Stagg. Coulter: Management 4e © 2006 Pearson Education Australia 29 Robbins. Bergman. and a sense of community.

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