CHAPTER 5

ORGANISING
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Learning Outcomes
At the end of the lesson, students should be able to:

 Define organisational design and explain its importance as a management function.

 Explain the properties and potential advantages and disadvantages of the traditional and
the development structures.

 Explain how classical management principles are being refined by organisational trends.
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A. What is organizing as a management function?
 Organizing and organisation structure
– Organizing
• The process of arranging people and other resources to work together to
accomplish a goal.
– Organisation structure
• The system of tasks, workflows, reporting relationships, and
communication channels that link together diverse individuals and groups.
 Organisation chart
– A diagram describing reporting relationships and the formal arrangement of work
positions within an organisation.

– An organisation chart identifies …

• The division of work
• Supervisory relationships
• Communication channels
• Major subunits
• Levels of management
 Formal and informal structures
 – Formal structure
• The structure of the organisation in its official state.
– Informal structure
• A “shadow” organisation made up of the unofficial working relationships
between organisation members.
 Advantages of informal structures …
– Helping people accomplish their work.
– Overcoming limits of formal structure.
– Gaining access to interpersonal networks.
– Connecting with people who can assist in task performance.
 Disadvantages of informal structures …
– May work against best interests of entire organisation.
– Susceptibility to rumor.
– May carry inaccurate information.
– Resistance to change.

B. What are the major types of organisation structures?

1. Functional structures

 People with similar skills and performing similar tasks are grouped together into
work units.

 Are not limited to businesses.

 Work well for small organisations producing few products or services.

 Advantages of functional structures

o Economies of scale.

o Task assignments consistent with expertise and training.

o High-quality technical problem solving,

o In-depth training and skill development.

o Clear career paths within functions.

  Disadvantages of functional structures
o Difficulties in pinpointing responsibilities.

o Functional chimneys problem.

o Sense of cooperation and common purpose break down.

o Narrow view of performance objectives.

o Excessive upward referral of decisions.

2. Divisional structures

 Group together people who work on the same product or process, serve similar
customers, and/or are located in the same area or geographical region.

 Common in complex organisations.

 Avoid problems associated with functional structures.

 Advantages of divisional structures

o More flexibility in responding to environmental changes.

o Improved coordination.

o Clear points of responsibility.

o Expertise focused on specific customers, products, and regions.

o Greater ease in restructuring.

 Disadvantages of divisional structures

o Duplication of resources and efforts across divisions.

o Competition and poor coordination across divisions.

o Emphasis on divisional goals at expense of organisational goals.

3. Types of divisional structures and how they group job and activities:

 Product structures focus on a single product or service.

 Geographical structures focus on the same location or geographical region.

 Customer structures focus on the same customers or clients.

 Process structures focus on the same processes.

 4. Matrix structure

 Combines functional and divisional structures to gain advantages and minimize

disadvantages of each.

 Used in:
 Manufacturing
 Service industries
 Professional fields
 Non-profit sector
 Multi-national corporations
 Organisations pursuing growth strategies in dynamic and complex environments

 Advantages of matrix structures

o Better interfunctional cooperation.

o Increased flexibility in restructuring.

o Better customer service.

o Better performance accountability.

o Improved decision making.

o Improved strategic management.

 Disadvantages of matrix structures

o Two-boss system is susceptible to power struggles.
o Two-boss system can create task confusion and conflict in work priorities.
o Team meetings are time consuming.
o Team loyalties may cause loss of focus on organisational goals.

C. What are the new developments in organisation structures?

 Guidelines for horizontal structures:

– Focus the organisation around processes, not functions.
– Put people in charge of core processes.
– Decrease hierarchy and increase the use of teams.
– Empower people to make decisions critical to performance.
– Utilize information technology.
 – Emphasize multiskilling and multiple competencies.
– Teach people how to work in partnership with others.
– Build a culture of openness, collaboration, and performance commitment.
1. Team structures
– Extensively use permanent and temporary teams to solve problems, complete
special projects, and accomplish day-to-day tasks.
– Often use cross-functional teams.
– Advantages of team structures
 Eliminates barriers between operating departments.
 Improved morale due to cross-functional interaction.
 Improved quality and speed of decision making.
 Increased enthusiasm for work.
– Disadvantages of team structures
 Conflicting loyalties among members.
 Excessive time spent in meetings.
 Effective use of time depends on quality of interpersonal relations, group
dynamics, and team management.
2. Network structures
– A central core that is linked through networks of relationships with contractors
and outside suppliers of essential services.
– Use communications and information technology to support shifting strategic
alliances and strategic contracts.
– Advantages of network structures
 Firms can operate with fewer full-time employees and less complex
internal systems.
 Reduced overhead costs and increased operating efficiency.
 Permits operations across great distances.
– Disadvantages of network structures
 Control and coordination problems may arise from network complexity.
 Potential loss of control over outsourced activities.
 Potential lack of loyalty among infrequently used contractors.
3. Boundary-less organisations
– Organisations in which teamwork and intense communication take the place of
formal lines of authority.
– Break down internal boundaries.
– Key requirements:
– Absence of hierarchy
– Empowerment of team members
– Acceptance of impermanence