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Session Objectives

Topic 2  Describe the different ways in which


organisations may be structured
Organisational Structure  Explain basic organisational structure
concepts
 Explain centralisation and
decentralisation and list their advantages
and disadvantages

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Types of Organisational
Session Objectives
Structure
 Explain the informal organisation and its  Entrepreneurial
relationship with the formal organisation  Functional
 Describe the impact of the informal  Product / Division / department
organisation on the business  Geographically structured
 Matrix structure

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Structure on Entrepreneurial Centralised Entrepreneurial
Basis Structure

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Entrepreneurial Structure: Entrepreneurial Structure:


Advantages Disadvantages
 Quicker decisions  No defined career structure
 Quick in response to changes in market  Success depends on the capabilities of
 Goal congruence the manager / owner
 Effective control  Difficult to diversify / grow
 Bonding with workforce

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Structure on Functional Basis Functional Structure:
Advantages
 Can avail economies of scale
 Leads to standardisation
 Provides career advancement
opportunities
 Specialists fit into the structure easily

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Functional Structure: Structure on the Basis of Product /


Disadvantages Division / Department
 Results in empire building
 Slower decisions BOD
 Intra-function conflicts
 Limited diversification possible

Garments Shoes and Bags


Accessories
Division Division

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Product / Division / Department: Product / Division / Department:
Advantages Disadvantages
 Provides growth opportunities  Results in potential loss of control
 Gives top management sufficient time to  May lead to duplication
focus on more strategic matters  May lead to isolation of specialists
 Provides a training ground for future  May result in lack of goal congruence
general managers  Difficulties arise in allocation of central
 Facilitates further diversification cost
 There is clear responsibility for products
/divisions

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Structure on Geographical Structure on Geographical


Basis Basis: Advantages
 Facilitates the organisation’s
geographical growth
 Provides a training ground for future
general managers
 Gives top management sufficient time to
focus on more strategic matters
 The responsibilities are clearly defined
on a geographical basis

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Structure on Geographical
Matrix Structure
Basis: Disadvantages
 Results in potential loss of control
 May lead to duplication
 May lead to isolation of specialists
 May result in lack of goal congruence
 Difficulties arise in allocation of central
cost

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Matrix Structure:
Matrix Structure: Advantages
Disadvantages
 Provides advantages of both divisional  Results in a dual command and conflict
and functional structures  Leads to a dilution of functional authority
 Other advantages include:  Dual command results in time
 The structure provides flexibility consuming meetings
 Provides customer orientation  Involves additional administration costs
 Supports and encourages teamwork

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Basic Organisational Structure
Scalar Chain
Concepts
 Scalar chain  The number of different levels of
 Span of control authority through which decisions are
 Centralisation and decentralisation passed in the organisation.
 It indicates the line of authority

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Span of control Wide Span of control

 Number of subordinate employees  Prevalent in the case of a flat structure


directly accountable to a manager. where there are few managerial levels

 The larger the number of employees a


manager controls the wider is his span of
control.
 It can be:
 Wide
 Tall

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Factors Influencing Span of
Tall Span of control
Control
 Prevalent in the case of a tall structure has  Nature of work
many levels  Repetitive work may result in wider the
span of control
 Type of personnel
 Better quality and skill sets of personnel
may result in wider the control
 Location of personnel
 If the personnel are widely spread,
there will be a narrow span of control

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Centralisation and Factors Affecting


Decentralisation Decentralisation
 Centralised structure  Style of management
 It is a structure which results in  Abilities of personnel
relatively large number of decisions
being taken by management at the top  Location of organisation’s branches
of the organisation and personnel
 Decentralised structure  Size of organisation
 It is a structure which results in a  Scale of activities
dispersal of decision-making
responsibility to operational managers

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Advantages of Disadvantages of
Decentralisation Decentralisation
 Gives top management sufficient time to  Leads to loss of control by the head
focus on more strategic matters office
 The resulting decisions are of better  May result in incorrect or
quality as these are taken by people dysfunctional decisions
having local expertise
 Poor managerial decisions may
 Leads to greater motivation due to result if these are taken by
increased training and career path
inexperienced managers
 Leads to a smaller chain of command.
This facilitates quicker responses and
 There is a duplication of roles within
flexibility
the same organisation

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Advantages / Disadvantages of
Informal Organisations
Informal Organisations
 It is a network of relationships that exist  Advantages
within an organisation. • Results in higher levels of motivation
• Results in better interdivisional
 They arise due to common interests or communication
friendships.  Disadvantages
• May lead to increased inefficiencies if
such informal structures are in conflict
with the formal structure
• May lead to more opposition to
change
• May result in excessive gossip and
rumour.

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