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Introduction to Organisational Structures Organisational structure is an avoidable topic when we discuss organisational design.

Basically, organisational structure refers to the development of an organisations functions that are grouped and coordinated formally. Organising consist of a carefully worked out and applied process. This process involves determining what work is needed to accomplish the goal, assigning those tasks to individuals and arranging them in a decision-making framework or organisational structure. The end result of this process plays a vital part in creating unified parts acting in harmony to execute tasks, achieve goals, both effectively and efficiently. It is important to have proper implementation of the organising process because this would result in a conducive work environment where all team members are aware of their responsibilities. If the organising process is not well conducted, the results may yield confusion, frustration, loss of efficiency and limited effectiveness. An organisation structure usually displays a graphical form that is called an organisation chart. It is a guideline which clearly illustrates individuals at the top of the hierarchy having higher authority and responsibilities compared to the individuals who are placed at the lower levels. 1.1 Factors Influencing Organisational Structure Choice

Structural choice is important as it helps us to focus attention to particular areas. It also determines how the available resources will be used. Furthermore, it directs communication flows. It defines the management control and other vital processes related. Lastly, it helps to illustrate peoples roles relative to others roles. Not only does a business's organisational structure help determine how well its employees make decisions, but it also reflects how well they respond to problems. These responses, over time, can make or break an organisation. In addition, the organisational structure influences employees' attitudes toward their work. A suitable organisational structure can minimize a business's costs, as well as maximize its efficiency, which increases its ability to compete in a global economy. For these reasons, many businesses have tinkered with their organisational structures in recent years in efforts to enhance their profits and competitive edge.

Basically, there are four factors that influence an organisation. These are strategies, size, technology and environmental factors. Firstly, we look at the organisational strategy. The main thing that we should focus on is the structure chosen. How an organization is going to position itself in the market in terms of its product is considered its strategy. Structures that are accurate do not only guarantee success but it will increase the probability of success rates. This means the organisational structure can assist the management team to achieve the objectives. Both objectives and strategies have to be interrelated. A company may decide to be always the first on the market with the newest and best product (differentiation strategy), or it may decide that it will produce a product already on the market more efficiently and more cost effectively (cost-leadership strategy). Each of these strategies requires a structure that helps the organisation reach its objectives. In other words, the structure must fit the strategy. Companies that want to be the first on the market with the newest and best product probably are organic, because organic structures permit organisations to respond quickly to changes. Companies that elect to produce the same products more efficiently and effectively will probably be mechanistic. Any changes in the organisational structure will help to facilitate and support the changes in organisational strategy. The process to match the structure with the strategy is complex and must be made through in depth understanding of the history of current structure and other factors. Secondly, we have to consider the size of the organisation. The larger an organisation becomes, the more complicated its structure. When an organisation is small such as a single retail store, a two-person consulting firm, or a restaurant its structure can be simple. In reality, if the organisation is very small, it may not even have a formal structure. Instead of following an organisational chart or specified job functions, individuals simply perform tasks based on their likes, dislikes, ability, and/or need. Rules and guidelines are not prevalent and may exist only to provide the parameters within which organisational members can make decisions. Small organisations are very often organic systems. As an organisation grows, however, it becomes increasingly difficult to manage without more formal work assignments and some delegation of authority. Therefore, large organisations develop formal structures. Tasks are highly specialised and detailed rules and guidelines dictate work procedures. Inter-organisational communication flows primarily from superior to subordinate, and hierarchical relationships serve as the foundation for authority, responsibility, and control. The type of structure that develops will be one that provides the organisation with the

ability to operate effectively. That's one reason larger organisations are often mechanistic; mechanistic systems are usually designed to maximize specialisation and improve efficiency. Thirdly, we should also consider the technology available to an organisation. Technology refers to how an organisation changes its inputs to become outputs. Each organisation will have at least one technology that changes its financial, manpower and physical resources into products or services. The routine level is an aspect that will differentiate technology. Non-routine activities are something specific like the production operations of products and services that are consumer-needs specific, such as those practised by tailors, cooks and barbers. The relationship between structure and technology actually lies on the routines. Routine tasks normally have a tendency towards departmentalisation structures that are much larger. Therefore, it creates structure that are more centralised. On the other hand, non-routine activities depend largely on the expertise of individuals. Lastly, every organisation will definitely face external influences which should affect the survival of an organisation. We call this environmental influences or factors that are specific or general. The environment is the world in which the organisation operates, and includes conditions that influence the organisation such as economic, social-cultural, legalpolitical, technological, and natural environment conditions. Environments are often described as either stable or dynamic. In a stable environment, the customers' desires are well understood and probably will remain consistent for a relatively long time. Examples of organizations that face relatively stable environments include manufacturers of staple items such as detergent, cleaning supplies, and paper products. In a dynamic environment, the customers' desires are continuously changing. This condition is often thought of as turbulent. In addition, the technology that a company uses while in this environment may need to be continuously improved and updated. An example of an industry functioning in a dynamic environment is electronics. Technology changes create competitive pressures for all electronics industries, because as technology changes, so do the desires of consumers. Environmental influences have an impact on the structure of an organisation because changes in the environment cannot be determined. Some organisations will face static environments, while some will face dynamic environment. There are uncertainties in the environment that can threaten the effectiveness of organisations; therefore, the management should try their best to reduce the threats. One of the ways of reducing uncertainties in the environment is by making changes to the organisational structure. In general, organisations that operate in stable external environments find mechanistic structures to be advantageous. This system provides a level of efficiency that enhances the long-term performances of organisations that enjoy

relatively stable operating environments. In contrast, organisations that operate in volatile and frequently changing environments are more likely to find that an organic structure provides the greatest benefits. This structure allows the organisation to respond to environment change more proactively. 2.0 Types of Organisational Structures Organisational structure is established based on the types of departmentalisation. Departmentalisation means employees would be grouped according to division of work and then attached to different organisational units that are responsible to carry out the tasks given. Each member in these different units will work and all the work output will be aimed towards the objectives that have been determined. There are five types of basic organisational structures which can be adapted to an organisations needs. The structures are widely known as Functional, Geographic, Matrix, Product and Customer. Only four types of structures would be highlighted in this assignment. 2.1 The Functional Structure

The functional structure groups positions into different work units based on similar activities, skills, expertise area and resources. For example, production, marketing, finance and human resource department are common groupings or departmentalisation within a functional structure. In fact, departmentalisation based on functions is widely used by organisations. Figure 2.1 shows the functional structure more clearly.

Marketing

Accounts

Human Resource

Finance

Operation

Planning

Figure 2.1: Example of Functional Structure Departmentalisation This type of departmentalisation has several advantages. First, it encourages efficiency as it allows work to be carried out by groups of people in different work units with the same required knowledge, skills and resources. It also promotes the development of better expertise. Secondly, as one of the simplest approach, a functional structure features welldefined channels of communication and authority as well as responsibility relationships. Next, it reduces cost by reducing work duplication of personnel and equipment so that

productivity is better improved. Lastly, each individual in the same department will acquire the same work experiences or training, communication and co-ordination, thereby reducing problems for management. However, the functional structure has many downsides which make it inappropriate for some organisations. Firstly, it can result in narrowed perspectives because of the separateness of different department work groups. Managers may have difficulties related to marketing for example, which is often in an entirely different grouping. As a result, anticipating or reacting to changing consumer needs may be difficult. Besides that, reduced cooperation and communication may happen. Secondly, functional departments can cause delays in decision making and produce managers and employees, who are restricted in expertise and experience, which results in less innovation. 2.2 The Geographic Structure

The geographic structure is organised as the name implies, by geographic area or region. Geographic departmentalisation co-ordinates the work and employees of different units that is responsible for conducting business activities in certain geographical locations. Each region is its own complete entity; its goals are tied up to the overall goals of the business. There is usually a regional manager overseeing the entire operation, which will report to head office, but will otherwise have complete responsibility for the regional unit. Figure 2.2 shows the geographic structure more clearly.

Northern Region

Southern Region

Central Region

Sabah & Sarawak

Figure 2.2: Example of Geographic Structure Departmentalisation The above chart shows the geographical structure and it can be applied internationally, where regions are split up by continents or subcontinents. Multinational fast-food chains often follow thus business organisation structure. In some cases, products will remain the same across all regions, while in other cases, a product may be slightly modified or a new product introduced to meet local needs.

There are several advantages of this structure. Firstly, it allows the companies to use local, experienced individuals to run the companys operations. Next, organisations using this structure have the abilities to react with speed and efficiency to the requirements of specific markets within the scope of responsibilities of a department. Besides that, it also helps to reduce costs by positioning the organisational resources nearer to the targeted consumers. Its disadvantage is that it creates duplication of work and the use of the organisations resources. Besides this, companies may find it difficult to run a geographic organisational structure because it does not allow for centralized decision-making. Furthermore, difficulties will arise in coordinating between departments as the departments are located in different geographical areas. 2.3 The Matrix Structure

The matrix structure combines functional specialization with the focus of divisional or product structure. This type of structure combines two or more types of departmentalisation at the same time. This structure uses permanent cross-functional teams to integrate functional expertise with a divisional focus. Employees in a matrix structure belong to at least two formal groups at the same time, i.e. a functional group and a product, program or project team. Employees also report to two bosses, one within the functional group and the other within the team. Apart from that, it also leads to cross interactive functions that cannot be done in other types of departmentalisation. Figure 2.3 shows the matrix structure more clearly.

Figure 2.3: Example of Matrix Structure Departmentalisation

This matrix structure has several advantages. Firstly, it allows the organisation to manage efficiently the projects or activities that are large scale and complex. Secondly, this structure not only increases employee motivation, but it also allows technical and general management training across functional areas as well. Potential advantages include better cooperation and problem solving, increased flexibility, better customer service, enhanced performance accountability and improved strategic management. However, the matrix structure also has potential disadvantages. Firstly, this structure requires a higher level of coordination to manage the complexity involved in order to conduct big projects which have phases to be completed. This situation often causes members of the matrix structure to focus on the conflict of authority and confusion among employees who have to report to more than one supervisor or manager. Members of the matrix structure may suffer task confusion when taking orders from more than one boss. Secondly, the two-boss system is susceptible to power struggles, as functional supervisors and team leaders vie with one another to exercise authority. Furthermore, teams may develop strong team loyalties that cause a loss of focus on larger organisation goals. Lastly, the matrix department also requires higher-level management skills compared to other types of departmentalisation. Adding the team leaders which is a crucial component to a matrix structure can also result in increased cost. 2.4 The Product Structure

The product structure is the departmentalisation based on organising employees and work on the basis of the different types of products. If the company produces three different types of products, they will have three different divisions for these products. This structure usually consists of several parallel teams focusing on a single product or service line. Though small businesses rarely use this structure, it can work for such firms as advertising agencies which have dedicated staff and budgets that focus on major clients or industries. Figure 2.4 shows the product structure more clearly.

Fragrances

Skin Care Products

Hair Care Products

Other Products

Figure 2.4: Example of Product Structure Departmentalisation Based on figure 2.4, each department represents one type of organisational output. An organisation that practises this type of departmentalisation output has several advantages. One of the main advantages is to allow managers and employees to expand their experience and expertise that are related to the overall activity of the product or service produced. Besides that, the product department structure allows management to evaluate the work performance of each work unit. There are several disadvantages with the use of this structure. Managers may focus on their products and might overlook the rest of the organisation. Other than that, they might also be an increased administration cost due to each product having its own functional-area experts. 3.0 Conclusion In conclusion, organisations need to be structured and have a sound structure choice. It is the best possible way to promote efficiency and effectiveness of activities and productivity. The organisational design needs to be adapted with the factors that influence the effectiveness of the strategies for example organisational strategy, size, technology used and also environmental influences. Not only that, organisational strategies will influence the organisational structures as strategy will determine the types of duties that are undertaken by employees. There four basic structures discussed namely, the functional structure, geographic, matrix and product structure. Each structure follow different departmentalisation types along with varying advantages and disadvantages. Organisations need to be flexible with their structures in order to face the constant change in business trends, and other factors such as manpower, or environmental influences.

References :
http://smallbusiness.chron.com/advantages-disadvantages-divisional-organizational-structure http://www.cliffsnotes.com/study_guide/Principles-of-Management http://www.slideshare.net/thadeshvar/principles-of-management-presentation-731212 http://www.managementstudyguide.com/management_principles http://www.ehow.com/facts_7241368_geographic-organization-structure http://www.referenceforbusiness.com/management/Ob-Or/Organizational-Structure http://www.the-business-plan.com/business-organization-structure