Chapter 10,15 / Topic 7 Organising

Organisational Structure and Design

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

LEARNING OUTLINE
Follow this Learning Outline as you read and study this chapter.
G

Defining organisational structure
• Explain why organising is important • Identify the six key elements used in designing an • • • • • •

organisation’s structure Discuss the traditional and contemporary view of work specialization. Describe each of the five forms of departmentalization. Explain cross-functional teams. Differentiate chain of command, authority, responsibility, and unity of command. Discuss the traditional and contemporary views of chain of command. Discuss the traditional and contemporary views of span of control.
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Robbins, Bergman, Stagg, Coulter: Management 4e © 2006 Pearson Education Australia

L E A R N I N G O U T L I N E (cont’d)
Follow this Learning Outline as you read and study this chapter.

G Defining organisational structure (cont’d)

Describe the factors influence the amount of centralisation and decentralisation. Explain how formalisation is used in organisational design.

G Organisational design decisions
• • • •

Contrast mechanistic and organic organisations. Explain the relationship between strategy and structure. Tell how organisational size affects organisational design. Discuss Woodward’s findings on the relationship of technology and structure. Explain how environmental uncertainty affects organisational design.
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Robbins, Bergman, Stagg, Coulter: Management 4e © 2006 Pearson Education Australia

L E A R N I N G O U T L I N E (cont’d)
Follow this Learning Outline as you read and study this chapter.

G Common organisational designs
• Contrast the three traditional organisational designs. • Explain team-based, matrix, and project structures. • Discuss the design of virtual, network, and modular

organisations.
• Describe the characteristics of a learning organisation.

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Defining organisational structure and design
G G

Organisational structure
H

The formal arrangement of jobs within an organisation. A process involving decisions about six key elements:
I I I I I I

Organisational design
H

Work specialization Departmentalization Chain of command Span of control centralisation and decentralisation Formalization Next Week: Please ensure you have covered Reading 8.1
J

I

“Right away and all at Once. How we saved Continental”

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Plan your work and work your plan!
G

G G G G

Major part of implementing plans (doing) involves the arrangement and assignment (organising) of tasks, roles and responsibilities to achieve objectives S.M.A.R.T. Objectives Drives the course of action Coordinates multiple efforts What is the relationship between structure and design? Could a manager create an organisational structure without taking design into account, and the consequences?
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Robbins, Bergman, Stagg, Coulter: Management 4e © 2006 Pearson Education Australia

Formal framework having 4 elements
G

G

G

G

Assignment of tasks and responsibilities Clustering of individual positions and these into work units Mechanisms to ensure vertical coordination (individuals reporting) Mechanisms fostering horizontal coordination such as task forces (e.g. Corporate Social Responsibility)

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Organisational structure/design
G

Work specialisation
H

The degree to which tasks in the organisation are divided into separate jobs with each step completed by a different person.
I

Overspecialization can result in human diseconomies from boredom, fatigue, stress, poor quality, increased absenteeism, and higher turnover.

Inherited from Scientific management!

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

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Departmentalisation by type
G

Functional
H

G

Process
H

Grouping jobs by functions performed

G

Product
H

Grouping jobs on the basis of product or customer flow

Grouping jobs by product line

G

Customer
H

G

Geographic
H

Grouping jobs by type of customer and needs

Grouping jobs on the basis of territory or geography

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Functional departmentalisation

• Advantages • Efficiencies from putting together similar specialties and people with common skills, knowledge, and orientations • Coordination within functional area • In-depth specialization • Disadvantages • Poor communication across functional areas • Limited view of organisational goals

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

Figure 10.2a

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Geographical departmentalisation

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

Figure 10.2b

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Product departmentalisation

+ 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. of organisational goals
Robbins, Bergman, Stagg, Coulter: Management 4e © 2006 Pearson Education Australia

Figure 10.2c

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Process departmentalisation

+ More efficient flow of work activities – Can only be used with certain types of products

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

Figure 10.2d

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Customer departmentalisation

+ Customers’ needs and problems can be met by specialists - Duplication of functions - Limited view of organisational goals

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

Figure 10.2e

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Organisation structure (cont’d)
G

Chain of command
H

H

H

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. Classical writers arguing for subordinates to have one boss never envisaged the complexity of today. Contemporary writers recognise that more highly trained workers need more flexibility by being able to respond to multiple bosses

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Organisation structure (cont’d)
G G

Cannot discuss chain of command without discussing 3 analogous concepts Authority
H

The rights inherent in a managerial position to tell people what to do and to expect them to do it. The obligation or expectation to perform. The concept that a person should have one boss and should report only to that person. How does the classical theorists argument for subordinates having only one boss fit with 21st Century organisation structure?

G G

Responsibility
H

Unity of command
H

H

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Organisation structure (cont’d)
G

Span of control
H H

The number of employees who can be effectively and efficiently supervised by a manager. Width of span is affected by:
I I I I I I I

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

Classical versus contemporary theorists? Why are wider spans Control currently favoured? Could that situation change?
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Contrasting spans of control

What do you see as the relationships between levels, spans and efficiency
Robbins, Bergman, Stagg, Coulter: Management 4e © 2006 Pearson Education Australia

Figure 10.3

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Organisation structure (cont’d)
G

Centralisation
H

The degree to which decision-making is concentrated at a single point in the organisations.
I

organisations in which top managers make all the decisions and lower-level employees simply carry out those orders.

G

Decentralisation
H

organisations in which decision-making is pushed down to the managers who are closest to the action.

G

Employee Empowerment
Increasing the decision-making discretion and power of individuals. What do you consider are the advantages and disadvantages for each in organisations today?
H

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Factors that influence the amount of centralisation
G

More Centralisation
H H

H H H H H

Environment is stable. Lower-level managers are not as capable or experienced at making decisions as upper-level managers. Lower-level managers do not want to have a say in decisions. Decisions are significant. organisation is facing a crisis or the risk of company failure. Company is large. Effective implementation of company strategies depends on managers retaining say over what happens.

G

Discuss the technological imperative for centralisation of information. For example efforts to track finances and employee communications are increasingly enabled by information technology. Could be the beginning of a real trend back to centralisation of all organisational activities?
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Robbins, Bergman, Stagg, Coulter: Management 4e © 2006 Pearson Education Australia

Factors that influence the amount of decentralisation
G

More decentralisation
H H H H H

Environment is complex, uncertain. Lower-level managers are capable and experienced at making decisions. Lower-level managers want a voice in decisions. Decisions are relatively minor. Corporate culture is open to allowing managers to have a say in what happens. Company is geographically dispersed. Effective implementation of company strategies depends on managers having involvement and flexibility to make decisions.

H H

G

Discuss the idealistic aspects of decentralisation. For example with regard to decision makers, and corporate culture?

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Organisation structure (cont’d)
G

Formalisation
H

The degree to which jobs within the organisation are standardized and the extent to which employee behavior is guided by rules and procedures.
I

I

Highly formalized jobs offer little discretion over what is to be done. Low formalization means fewer constraints on how employees do their work.

The more rules and procedures the more formalised the organisation

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

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Mechanistic versus organic organisation

Examples of each?

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

Table 10.2

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Structural contingency factors
G

Structural decisions are influenced by:
H

Overall strategy of the organisation
I

organisational structure follows strategy. Firms change from organic to mechanistic organisations as they grow in size. Firms adapt their structure to the technology they use. Dynamic environments require organic structures; mechanistic structures need stable environments.

H

Size of the organisation
I

H

Technology use by the organisation
I

H

Degree of environmental uncertainty
I

I

What works for one organisation does not necessarily work for another What that appropriate structure looks like depends on the 4 contingency variables

I

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Structural contingency factors (cont’d)
G

Strategy and structure
H

Achievement of strategic goals is facilitated by changes in organisational structure that accommodate and support change.

G

Strategy provides the reasoning behind structure.
H

Strategy drives Structure (Alfred Chandler)
I

“restructuring” is based upon a change of plans or strategies

G

Size and structure
H

As an organisation grows larger, its structure tends to change from organic to mechanistic with increased specialization, departmentalization, centralisation, and rules and regulations. Size affects structure at decreasing rate (not linear)
I

H

>2000 employees has little effect – additional members have minimal impact
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Robbins, Bergman, Stagg, Coulter: Management 4e © 2006 Pearson Education Australia

Structural contingency factors (cont’d)
G

Technology and structure
H H

organisations adapt their structures to their technology. Woodward’s classification of firms based on the complexity of the technology employed:
I I I

Unit production of single units or small batches Mass production of large batches of output Process production in continuous process of outputs

H H

Routine technology = mechanistic organisations Non-routine technology = organic organisations

Adapt to the best use of necessary industry technologies!

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Woodward’s findings on technology, structure, and effectiveness

What that appropriate structure looks like depends on 4 contingency variables She found there was no one best way to organise a manufacturing firm S h e f
Robbins, Bergman, Stagg, Coulter: Management 4e © 2006 Pearson Education Australia

Table 10.3

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Structural contingency factors (cont’d)
G

Environmental uncertainty and structure
H

Mechanistic organisational structures tend to be most effective in stable and simple environments. The flexibility of organic organisational structures is better suited for dynamic and complex environments.
I

H

The scarcer the resources

H

Cultural values of the country the organisation is based
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Designing motivating jobs
G

Job design
H H

The way into which tasks can be combined to form complete jobs. Factors influencing job design:
I I I

Changing organisational environment/structure The organisation’s technology Employees’ skill, abilities, and preferences Increasing the scope (number of tasks) in a job. Increasing responsibility and autonomy (depth) in a job. Powerful Motivator/De-motivator: Carefully consider!

H

Job enlargement - Horizontal
I

H

Job enrichment - Vertical
I

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Goal-setting theory

•Cornerstone of MBO •Intention: Specific, Challenging •Participation: Accept/Assigned? Mixed •Feedback: Guides Behaviour
Robbins, Bergman, Stagg, Coulter: Management 4e © 2006 Pearson Education Australia

Figure 15.7

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Designing motivating jobs (cont’d)
G

Job characteristics model (JCM)
H

H

A conceptual framework for designing motivating jobs that create meaningful work experiences that satisfy employees’ growth needs. Five primary job characteristics:
I I I I I

Skill variety: how many skills and talents are needed? Task identity: does the job produce a complete work? Task significance: how important is the job? Autonomy: how much independence does the jobholder have? Feedback: do workers know how well they are doing?

How does the JCM work to motivate e.g. early starters, Tireless, goal driven team leaders?
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Job characteristics model

Source: J.R. Hackman and J.L. Suttle (eds.). Improving Life at Work (Glenview, IL: Scott, Foresman, 1977). With permission of the authors.

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

Figure 15.8

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Guidelines for job redesign

Source: J.R. Hackman and J.L. Suttle (eds.). Improving Life at Work (Glenview, IL: Scott, Foresman, 1977). With permission of the authors.

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

Figure 15.9

33

Designing motivating jobs (cont’d)
G

Suggestions for using the JCM
H H

H

H

H

Combine tasks (job enlargement) to create more meaningful work. (multi-tasking) Create natural work units to make employees’ work important and whole. (self-directed teams) Establish external and internal client relationships to provide feedback. (Stakeholders) Expand jobs vertically (job enrichment) by giving employees more autonomy. Open feedback channels to let employees know how well they are doing.

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From theory to practice
Recognise individual differences Don’t ignore money Match people to jobs

Check the system for equity

Suggestions for Motivating Employees

Use goals

Ensure goals are perceived as attainable

Link rewards to performance

Individualise rewards
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Current issues in motivation (cont’d)
G

Flexible work/job schedules
H

Compressed work week
I

Longer daily hours, but fewer days Specific weekly hours with varying arrival, departure, lunch and break times around certain core hours during which all employees must be present. Two or more people split a full-time job. Employees work from home using computer links. What do you think might be the disadvantages to such working arrangements?

H

Flexible work hours (flextime)
I

H

Job Sharing
I

H

Telecommuting
I

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Current issues in motivation (cont’d)
G

Motivating professionals
H

Characteristics of professionals
I I I I

Strong and long-term commitment to their field of expertise. Loyalty is to their profession, not to the employer. Have the need to regularly update their knowledge. Don’t define their workweek as 8:00 am to 5:00 pm. Job challenge organisational support of their work

H

Motivators for professionals
I I

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Current issues in motivation (cont’d)
G

Motivating contingent Workers
H H H

Opportunity to become a permanent employee Opportunity for training Equity in compensation and benefits

G

Motivating low-skilled, minimum-wage employees
H H

Employee recognition programs Provision of sincere praise Video: Radisson Kestrel Hotel: Organisational S.W.O.T. Fixing what is broken: H-P’s structural change p.368

H H

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Integrating contemporary theories of motivation

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Figure 15.11

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Common organisational designs
G

Traditional designs
H

Simple structure
I

Low departmentalization, wide spans of control, centralised authority, little formalization Departmentalization by function
J

H

Functional structure
I

Operations, finance, human resources, and product research and development

H

Divisional structure
I

Composed of separate business units or divisions with limited autonomy under the coordination and control the parent corporation.

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Strengths and weaknesses of common traditional organisational designs

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Figure 10.4

41

Organisational designs (cont’d)
G

Contemporary organisational designs
H

Team structures
I

The entire organisation is made up of work groups or selfmanaged teams of empowered employees. Specialists for different functional departments are assigned to work on projects led by project managers. Matrix participants have two managers. Employees work continuously on projects; moving on to another project as each project is completed.

H

Matrix and project structures
I

I H

Project structures
I

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A Matrix organisation in an aerospace firm

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

Figure 10.6

43

Organisational designs (cont’d)
G

Contemporary organisational designs (cont’d)
H

Boundaryless organisation (not rigid and pre-defined)
I

I

An flexible and unstructured organisational design that is intended to break down external barriers between the organisation and its customers and suppliers. Removes internal (horizontal) boundaries:
Eliminates the chain of command J Has limitless spans of control J Uses empowered teams rather than departments
J

I

Eliminates external boundaries:
J

Uses virtual, network, and modular organisational structures to get closer to stakeholders.

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Removing boundaries
G Virtual
H

organisation

An organisation that consists of a small core of full-time employees and that temporarily hires specialists to work on opportunities that arise.

G Network
H

organisation

A small core organisation that outsources its major business functions (e.g., manufacturing) in order to concentrate on what it does best.

G Modular
H

organisation

A manufacturing organisation that uses outside suppliers to provide product components for its final assembly operations.
Examples??
45

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Organisational designs (cont’d)
G

The learning organisation
H

H

An organisation that has developed the capacity to continuously learn, adapt, and change through the practice of knowledge management by employees. Characteristics of a learning organisation:
I

I I

I

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, support and encouragement A strong culture of shared values, trust, openness, and a sense of community.

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Characteristics of a learning organisation

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

Figure 10.7

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Knowledge Management & The Learning Organisation ( adapted from Young, G: 2008)

Knowledge Management & The Learning Organisation: Traditional Organisat ions Attitude towards knowledge
If it is working, don’t change it

Learning Organisations
If you are not changing , it wont be working for long

Attitude towards new ideas

If not invented here, reject it

If it was invented or reinvented here, accept it Everyone in the organisation

Who’s responsible for innovation Main Fear Competitive Advantage

Traditional areas such as R & D

Making mistakes Products and Service

Not learning, not adapting Ability to learn, knowledge and expertise To enable others

Managers Job

To control others

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Things to think about in 21st Century Organisational Design?
G G

G

G

20th Century Legacy models obsolete Professional workers (knowledge workers) create value through brands and networks (Intangible assets) Productive professionals generate competitive advantage What are organisations doing to improve this intangible productivity?

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Things to think about in 21st Century Organisational Design?
G

G

Vertical design structures (Heirarchies) with matrix & ad hoc overlays increase complexity and inefficiencies for professionals Opportunities in the 21st century economy unleashed through dramatic transformation of organisational structures to unleash the power of professionals

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