Module No: 4HR018

Organisation Structures
for Effective Management

Module Leader: Kevin Willmore

Lecture 7
Module Learning Outcomes
• LO 1: Discuss the historical and theoretical basis of
organisation structure
• LO2: Analyse the relationship between organisational
structure and business strategy
• LO3: Examine the key factors to be considered in the design
of the structure of organisations
• LO4: Evaluate the implications of organisational structure for
the management and development of people and resources
Lecture Learning Outcomes
• LO3: Examine the key factors to be considered in the design of the
structure of organisations
 
Factors affecting development of formal
structure

• Type of workforce

• Handy’s three significant workforces:

Professional core
Contractual fringe
Flexible labour force

• Culture
Type of Workforce
The need for organisations to have the right people, in the right place, with
the right skills at the right time, is one that is frequently extolled in the HR
community. In practice, planning to ensure you have the people resources
in place to deliver the short- and long-term objectives of your organisation
is challenging.

Senior managers need to carefully examine their workforce needs in

relation to the overall short, medium and long term objectives of the
organisation, in order to ensure that they can be achieved
Over the last 20 years the term ‘workforce planning’ fell out of favour.
However, the need for strategic planning is once again on the agenda.
(CIPD,2010).
Workforce Planning
There are a range of definitions of workforce planning, including those
that were related to the operational needs of the organisation:
“Workforce planning is ensuring labour is correctly allocated to each
project in order to achieve our customer’s delivery schedule.” (CIPD.
2010).

“Workforce planning: A core process of human resource management

that is shaped by the organisational strategy and ensures the right
number of people with the right skills, in the right place at the right time
to deliver short- and long-term organisation objectives.” (CIPD 2010).
Workforce Planning – Key Questions

• What is driving workforce planning in your organisation?

• Is there a balance between its short- and longer-term objectives?
• Which people requirements have the ability to derail your business
plan, for example which critical skills may be in short supply?
• Have you analysed your external environment?
• Are you looking beyond your organisational boundaries when
planning your future resourcing needs – for example partnership
working, use of agencies, outsourcing and offshoring?
Workforce Planning – other considerations
Organisations need to consider their requirements in relation to their
workforce in terms of:

• Unskilled

• Semi-skilled

• Skilled
Employees Types in the UK
An individual doing paid work in the UK falls into one of three main categories:
• Employees; a person is classed as an employee if they work under a ‘contract of employment’
which can be created in writing or verbally or by a mixture of both
• Workers (which has a distinct legal meaning; is any individual who undertakes to do or
perform personally any work or service for another party, whether under a contract of
employment or any other contract. It does not matter if the contract is express or implied, or
whether oral or in writing
• Self-employed and contractor; A person is self-employed if they run their business for
themselves and take responsibility for its success or failure. Self-employed workers aren’t paid
through PAYE, and they don’t have the employment rights and responsibilities of employees
• Employee shareholders; someone who works under an employment contract and owns at
least £2,000 worth of shares in the employer’s company or parent company. Employee
shareholders have most of the same employment rights as workers and employees.
https://www.gov.uk/employment-status/employee-shareholders - Accessed04/08/17
Zero Hours Contracts
There are a number of employee/employer relationships which are now different
from the traditional 9-5 job. A person's employment status will determine their
rights and their employer's responsibilities.
A zero hours contract is generally understood to be a contract between an
employer and a worker where:
• the employer is not obliged to provide any minimum working hours
• the worker is not obliged to accept any work offered.
• On 26 May 2015, new regulations about zero hours contracts were brought in.
The law prevents employers from enforcing 'exclusivity clauses' in a zero hours
contract.  An exclusivity clause would be where an employer restricts workers
from working for other employers.
ACAS - http://www.acas.org.uk/index.aspx?articleid=4468- Accessed 04/08/17
Agency Workers
An agency worker is supplied by a temporary work agency to a client/hirer to work normally for a
temporary period. Agency workers may be used to cover a period of maternity leave, or to carry
out work for a particular task.
Key points
• Agency workers are entitled to certain employment rights such as National Minimum Wage.
• Employers should be aware of the Agency Worker Regulations.
• Agency staff are classed as workers rather than employees.
• The Agency workers directive gives equal treatment to those who have been with the hirer for
12 continuous weeks in a given job.
• To establish the rights in the regulations the agency worker needs to be able to identify a
comparator.
• Agency workers are classed as "workers" rather than as employees. All workers, including agency
workers, are entitled to certain rights which include: paid annual leave
http://www.acas.org.uk/index.aspx?articleid=1873 – Accessed 04/08/17.
Workforce planning and Organisational
Structure
We have seen the importance for organisations to have the right
people, in the right place, with the right skills at the right time.In
practice, planning to ensure you have the people resources in place to
deliver the short and long-term objectives of your organisation is
challenging.

Part of the planning process will be to ensure that the structure of the
organisation is designed effectively to allow the workforce to achieve
the objectives. We will now look at some theories that support this
process.
Organisational Structure – Charles Handy
Throughout the last 30 years, the organisational structure most appropriate for the future has
been widely discussed.

The British management thinker Charles Handy has been one of the most respected
participants in this debate. He anticipated that certain forms of organisation would become
dominant. These were the type of organisation most readily associated with service industries.
Organisational Structure – Charles Handy
In 1989, Handy published a book  The Age of Unreason  in which he described the
organisation and cultures of companies of the future.  He called these 'Shamrock'
Organisations because they have three segments, like the leaves of a shamrock.
Today, we would call these Virtual Companies.

A Virtual Business conducts all or most of its business via the internet and does
not have physical premises to interact with customers face-to-face. A purely virtual
company may outsource nearly all of their business functions such as product
development, marketing, sales, shipping, etc. However, most virtual businesses
retain some of these activities in-house and may still require a physical presence in
the form of headquarters, warehouses, shipping and delivery hubs.
https://www.thebalance.com/a-definition-of-virtual-business-2948416 Accessed 02/08/17
Handy’s three significant workforces
Management theory - Handy's Shamrock Organisation
The advantage of a flexible organisation is that it can react quickly to a
change in its external environment.
• Since the 1990s, firms have examined their value chain and tried to
reduce their workforce to a multi-skilled core, which is concerned
with the creation or delivery of a product or service.
• All other supporting, non-central functions are outsourced wherever
possible to the periphery.
Handy's Shamrock Organisation
http://textbook.stpauls.br/human_resources_student/page_21.htm - Accessed 02/08/17
Handy's Shamrock Organisation

• The first leaf of the shamrock represents the multi-skilled core of professional

technicians and managers, essential to the continuity of the business

• The second leaf Handy calls the contractual fringe, because non central

activities are contracted out to firms specialising in activities such as
marketing, computing, communications and research

• The third leaf consists of a flexible workforce made up of part-time,

temporary and seasonal workers
Shamrock Organisation
• In 1989, Handy published another book  The Age of Unreason  in which he
described the organisation and cultures of companies of the future.  He
called these 'Shamrock' Organizations because they have three segments,
like the leaves of a shamrock.  Today, we would call these Virtual
Companies:
• A core of qualified professionals working in a Task Culture
• Contracted specialists in non-core areas like advertising, human resources,
information technology, etc., operating in a Person or Role Culture
• Part-time, seasonal and temporary workers to fill the gaps working in Role
Cultures
Shamrock Organisation – an example

A software company might have a core of technical software architects and

marketing people.
 
• Outsource the actual coding to India or Eastern Europe  
• Hire an online advertising agency
• Get website design and hosting from Amazon
• HR and payroll functions could be outsourced  

Lots of companies that produce things use the same model and have the
manufacturing done outside the UK. 
Shamrock Organisation
Handy suggests that the Shamrock organisation is always aiming to reduce the size
of the core.
• If an employee is in the core and they to leave for the second leaf, the contractual
fringe, that benefits the organisation
• This also means is that getting into the core is pretty difficult and
• Even if you’re in the core, the organisation is incentivised to push you into another
leaf
• Handy thought that the lack of security experienced by people in the second leaf
would be balanced by their “Portfolio Careers”.
• Many of Handy’s examples of these Portfolio Workers are of people like him:
mature upper-middle class professionals who’ve already had well developed
“core” careers
Culture and the importance of understanding it in
relation to organisational success
Every organisation has its unique style of working which often
contributes to its culture. The beliefs, ideologies, principles and values
of an organisation form its culture. The culture of the workplace
controls the way employees behave amongst themselves as well as
with people outside the organisation.

Culture can be classified in two ways:

• Societal Culture
• Organisational Culture
Meaning of Culture (Societal)
Culture consists of patterned ways of thinking, feeling and reacting,
acquired and transmitted by symbols, constituting the distinctive
achievements of human groups, including their embodiment of
artefacts. The essential core of culture consists of traditions (i.e.
historically derived and selected) ideas and especially their attached
values.
Meaning of Culture (Organisational)
The deeper level of basic assumptions and beliefs that are shared by
members of an organisation, that operate unconsciously and define in a
basic ‘taken for granted’ fashion an organisation’s views of its self and
its environment.
Culture - Definitions
• What an organisation has learned as a total social unit over the course of its
history. (Schein, 1985)

• Best described as a feeling which a number of people share about situations in

the organisation. (Kakabadse, Ludlow, Vinniccombe, 1988)

• Culture is elusive, intangible, implicit and taken-for–granted, but every

organisation develops a core set of assumptions understandings and implicit rules
that govern day-to day behaviour in the workplace. (Deal & Kennedy 1983).

To put it simply…………
“The way we do things around here!”
So therefore………
The term “Organisation culture” refers to:
• The values and beliefs of an organisation.
• The principles, ideologies as well as policies followed by an organisation
form its culture
• the culture of the workplace which decides the way individuals interact
with each other and behave with people outside the company
• Employees must respect their organisation’s culture for them to deliver
their level best and enjoy their work
• Problems crop up when individuals are unable to adjust to a new work
culture and thus feel demotivated and reluctant to perform
EDGAR SCHEIN
Society of Sloan Fellows Professor of Management Emeritus

According to Edgar Schein:

• Organisations do not adopt a culture in a single day, instead it is formed
in due course of time as the employees go through various changes,
adapt to the external environment and solve problems
• They gain from their past experiences and start practicing it everyday
thus forming the culture of the workplace
• New employees also strive hard to adjust to the new culture and enjoy
a stress free life
Culture and its’ impact on organisations
and their structure
According to Schein (1985), the primary mechanisms in organisations that
define its culture are:

• What the leader pays most attention to

• How leaders react in a crisis and critical incidents
• Role modeling, teaching and coaching by leaders
• Criteria for allocating rewards and determining status
• Criteria for selection, promotion and termination
Schein, E. H. (1985) Organisational Culture and leadership, San Francisco: Jossey-Brass
Culture and its’ impact on organisations
and their structure
Schein’s secondary mechanisms are:

• The organisation’s structure

• System and procedures
• Space, buildings and facades
• Stories and legends about important events and people
• Formal statements of philosophy and policy
Culture - Handy’s four types of organisational cultures

A model of culture, popularised by Charles Handy (1999) – and

following work by Harrison (1972) – also presents organisational
cultures as classified into four major types:
• Power culture
• Role culture
• Task culture
• Person or Support culture
Handy’s approach may helps us understand why people are more
comfortable in some organisations than others
Power Culture
Handy illustrates the power culture as a spider’s web with the all-
important spider sitting in the centre ‘… because the key to the whole
organisation sits in the centre, surrounded by ever-widening circles of
intimates and influence. The closer you are to the spider, the more
influence you have’ (Handy, 1999).
Power Culture

Organisations with this type of culture can respond quickly to events,

but they are heavily dependent for their continued success on the
abilities of the people at the centre; succession is a critical issue.

• They will tend to attract people who are power orientated and
politically minded, who take risks and do not rate security highly.
• Control of resources is the main power base in this culture
• Some elements of personal power at the centre
• Position is the main power source in the role culture.
Role Culture

The role culture can be illustrated as a building supported by columns

and beams: each column and beam has a specific role to playing
keeping up the building; individuals are role occupants but the role
continues even if the individual leaves. This culture shares a number of
factors in common with Weber’s description of the ‘ideal-type’
bureaucracy.
Role Culture
This type of organisation is characterised by:

• Strong functional or specialised areas coordinated by a narrow band of

senior management at the top

• A high degree of formalisation and standardisation

• The work of the functional areas and the interactions between them are
controlled by rules and procedures defining the job, the authority that
goes with it, the mode of communication and the settlement of disputes.
Task Culture
Task culture is job-or project-oriented, and its accompanying structure
can be best represented as a net.

Some of the strands of the net are thicker or stronger than others, and
much of the power and influence is located at the interstices of the net,
at the knots. Task cultures are often associated with organisations that
adopt matrix or project-based structural designs.
Task Culture
The emphasis is on getting the job done, and the culture seeks to bring
together the appropriate resources and the right people at the right
level in order to assemble the relevant resources for the completion of
a particular project.
• Task culture depends on the unifying power of the group to improve
efficiency and to help the individual identify with the objectives of the
organisation.
• Influence is based more on expert power than on position or personal
power, and influence is more widely dispersed than in other cultures.
• Task culture depends on teamwork to produce results
Person Culture
Person culture is an unusual culture, not found in many organisations,
yet many people some of its values. This type of culture is illustrated by
a loose cluster or a constellation of stars. In this culture the individual is
the focal point; if there is a structure or an organisation, it exists only to
serve and assist the individuals within it, to further their own interests
without any overriding objective.
Person Culture
Not many organisations can exist with this sort of culture, or produce it,
since organisations tend to have some form of corporate objective over
and above the personal objectives of those who comprise them.
Furthermore, control mechanisms, and even management hierarchies,
are impossible in these cultures except by mutual consent.
The Impact of Culture on Organisational Structure

In the early stages a corporation’s existence a conscious decision is made as to what the
organisational culture is going to be. The structure is then built with that in mind.
The concept of what will be the culture has an enormous influence on the structure as it is
developed. The decisions about organisational cultural themselves may be influenced heavily by
external events.
• A company that is heavily regulated by the government has to have certain procedures in place to
be compliant with the law. This is especially true of financial institutions, and while they made
appear extremely formal to the outsider be defined structure is necessary for financial reporting
and compliance purposes.
• Other cultures have to respond immediately to changes e.g. The software and mobile application
industries need to have cultures that can react quickly to any technological change. This means the
structure;
1. May have an orientation towards teams as opposed to departments, or only three levels
of staff, with executives not that distant from the workforce in the hierarchy.
2. Communication flow within the organisation may have to be formal or informal,
depending on what is demanded by external factors.
Implications for Organisational Design
Handy (1193) suggests that organisations gradually change their
dominant cultures. Most start as Power Cultures ad the founder sees
the organisation as an extension of themselves.
However…
• Time and success lead to growth, this in turn leads to specialisation
and formalisation
• Represents first signs of organisational maturity (no longer dependent
on the founder)
• These are also hallmarks of Role Culture
Implications for Organisational Design
The next cultural shift arises when the organisation is faced with the
need for greater flexibility…
• The market may start to change more quickly, or move in different
directions
• Technology may develop requiring new work procedures, skills, new
levels of labour, and new skills
• At this stage formalisation and specialisation are no longer suitable to
control the diversity of the problems
• A range of cultures may be required to meet the demands of the
business (cultural diversity)
Approaching Cultural Diversity
One approach can be to look at each part of the organisation and to
identify the type of activity that primarily characterises each part of the
organisation, There are 4 principal activity types:
• Steady State – Activities which can be programmed, they are routine
(often involves 80% of an organisation’s staff)
• Innovation – Activities directed at changing things, in terms of what it
does or how it does it
• Crisis – When the organisation has to deal with the unexpected
• Policy – Overall guidance and direction of activities. Setting of
priorities, standards, direction and allocation of resources etc.
Approaching Cultural Diversity
Power

Policy
Power Task
Crisis Innovation

Steady State

Role
Mintzberg – Five Types of Organisation
http://smallbusiness.chron.com/mintzbergs-five-types-organizational-structure-60119.html - Accessed 03/08/17

Henry Mintzberg is a renowned management theorist who developed a

list of five basic organizational types. He identified the various
organisations as a result of their blend of strategy, environmental forces
and the organisational structure. 
• Entrepreneurial company - has a loose organisational structure and is
typically driven by entrepreneurial-minded or creative types of
leaders. Start-up companies managed by their founders commonly
exemplify this organisational type. Forward-thinking ideals, energy
and enthusiasm are common strengths. Limited structure, poor task
discipline, inefficiency and controlling management are potential
drawbacks or risks if emphasis isn't placed on defined work processes.
Mintzberg – Five Types of Organisation

• Machine - a highly bureaucratic organisation as being like a "machine."

Government agencies and other types of large, set-in-their-ways
corporations epitomize this style. While structure, consistency and
longevity are strengths, limited openness to new perspectives and
inefficiencies resulting from bureaucratic processes are common
deficiencies.
• Professional - a similar level of bureaucracy to the machine type. However,
it is characterized by a high degree of professional, competent knowledge
workers who drive the economic engine. These technically skilled workers
usually have specialized skills and autonomy in their work, making for
more decentralized decision making than is prevalent in the machine type.
Mintzberg – Five Types of Organisation

• Divisional structure - most common in large corporations with multiple

business units and product lines. In some cases, companies divide their
businesses and products into divisions to promote specific management of
each division. Centralised control is common in this format with divisional vice
presidents overseeing all facets of the work within their respective divisions.
• Innovative - An organisational type that allows for cutting-edge leadership is
the innovative type. This is common in new industries or with companies that
want to become innovative leaders. Decentralised decision making is a key
trait as talent leaders are allowed to make judgments with efficiency in mind.
The potential for leadership conflict and uncertainty over authority are
drawbacks.
Any Questions?
Essential Reading
Bhattacharyya, D. K. (2009) Organisational Systems, Design, Structure
and Management, 1st ed), Himalaya, Mumbai.

Buchanan, D. A. & Huczynski, A.A. (2013) Organisational Behaviour:

An Introductory Text (8th ed), Prentice Hall, Hemel Hempstead.

Handy, C. (1993) Understanding Organisations, (4th ed) Penguin,

London.
Recommended Reading
Boddy, D. (2011) Management: An Introduction. (5th.ed), Prentice
Hall, Hemel Hempstead.

Galbraith, J. (2014) Designing Organisations: An Executive Briefing

Based on Strategy, Structure and Process, (3rd ed), Jossey-Bass.

Mullins, L. J. (2016) Management and Organisational Behaviour. (11th

ed), Pearson, Cambridge.