Post on 14-Apr-2018
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Organizational StructureMr. Iftikhar Ahmad, CEODynamique Business Consultants0300-4466062,
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Mintzbergs Structural ConfigurationMr. Iftikhar Ahmad, CEO,Dynamique Business Consultants,0300-4466062,
Mintzberg suggests that all organisations can be analysed into five
components, according to how they relate to the work of the organisation.
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Mintzbergs Structural ConfigurationMr. Iftikhar Ahmad, CEODynamique Business Consultants,0300-4466062
Strategic apex Ensures the organisation follows its mission. Manages theorganisation's relationship with the environment.
Operating corePeople directlyinvolved in the process ofobtaining inputs, and converting them intooutputs
Middle lineConveys the goals set by the strategic apex andcontrols the work of the operating core in pursuit ofthose goals: ie middle management.
Techno structure Analysers determine, and standardise work processes andtechniques and standardise outputs (eg goods must achieve
a specified level of quality)Personnel analysts standardiseskills (eg through training programmes)
Support staffAncillary services such as PR, legal counsel, thecafeteria and security staff. Support staff do not
plan or standardise production. They functionindependently of the operating core.
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Organizational StructureMr. Iftikhar Ahmad, CEODynamique Business Consultants,0300-4466062
Implementation a strategy successfullydepends on the selecting the right combinationof organizational structure, control system andculture.The main issue in designing organizationalstructure are how to group task, function, and
divisions; how to allocate authority andresponsibility; and how to use integratingmechanisms to improve coordination betweenfunctions.
Why Structure
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Organizational StructureMr. Iftikhar Ahmad, CEODynamique Business Consultants,0300-4466062
Organisation structure is formedby the grouping of people intodepartments or sections and the
allocation of responsibility andauthority.
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Organizational StructureMr. Iftikhar Ahmad, CEODynamique Business Consultants,0300-4466062Organisations can be departmentalised on afunctional basis (with separate departments forproduction, marketing, finance etc), a geographical
basis (by region, or country), a product basis (egworld wide divisions for product X, Y etc), a brandbasis, or a matrix basis (eg someone selling product Xin country A would report to both a product X manager
and a country A manager). Organisation structuresoften feature a variety of these types, as hybridstructures.
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Organizational StructureMr. Iftikhar Ahmad, CEODynamique Business Consultants,0300-4466062
Organisation structure implies a framework intended to:
(a) Link individuals in an established network of relationships so that
authority, responsibility and communications can be controlled
(b) Allocate the tasks required to fulfil the objective of the organisation to
suitable individuals or groups
(c) Give each individual or group the authority required to perform the
allocated tasks, while controlling their behaviour and use of resources in
the interests of the organisation as a whole(d) Co-ordinate the objectives and activities of separate units, so that overall
aims are achieved without gaps or overlaps in the flow of work
(e) Facilitate the flow of work, information and other resources through the
organisation.
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Structure follows the influence of the following:
Strategic Objective (coordination is required)
Environment volatility (product based or customers based) Diversity (specially in multinational)
Future Strategy (growth through merger & acquisition)
Technology ( reporting patterns, style and speed)
People ( skills, competences)
Mintzberg says structure follows strategy
Organizational StructureMr. Iftikhar Ahmad, CEODynamique Business Consultants,0300-4466062
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Entrepreneurial
A fluid structure with little or no formality.
Suitable for small start-up companies, theactivities and decisions are dominated bya key central figure (the owner/entrepreneur).
Organizational StructureMr. Iftikhar Ahmad, CEODynamique Business Consultants,0300-4466062
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Functional organisation involves grouping togetherpeople who do similar tasks. Primary functions in amanufacturing company might be production, sales, finance,
and general administration. Sub-departments of marketingmight be market research, advertising, PR and so on. ( fit forsmaller organization)
Organizational StructureMr. Iftikhar Ahmad, CEODynamique Business Consultants,0300-4466062
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Advantages ofFunctional structure include:
(a) Expertise is pooled thanks to the division of
work into specialist areas(b) It avoids duplication (eg one management
accounts department rather than several) andenables economies of scale.
(c) It facilitates the recruitment, managementand development of functional specialists.
(d) It suits centralised businesses.
Organizational StructureMr. Iftikhar Ahmad, CEODynamique Business Consultants,0300-4466062
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Disadvantages of functional structure include:(a) It focuses on internal processes and inputs, rather than the
customer and outputs, which are what ultimately drive a business.The customer is only interested in the product, and being referredfrom one functional department to another may not be the mostsatisfying experience for the customer.
(b) Communication problems may arise between different functions,who each have their own jargon.
(c) Poor co-ordination, especially if rooted in a tall organisationstructure. Decisions by one function/department involving anothermight have to be referred upwards, and dealt with at a higher level,thereby increasing the burdens on senior management.
(d) Functional structures create vertical barriers to information andwork flow. Management writer Tom Peters suggests that customerservice requires 'horizontal' flow between functions rather thanpassing the customer from one functional department to another.
Organizational StructureMr. Iftikhar Ahmad, CEODynamique Business Consultants,0300-4466062
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Geographic departmentation
Where the organisation is structured
according to geographic area, someauthority is retained at Head Office but day-to-day operations are handled on aterritorial basis (eg Southern region,
Western region). Many sales departmentsare organised territorially.
Geographic departmentation
Organizational StructureMr. Iftikhar Ahmad, CEODynamique Business Consultants,0300-4466062
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There are advantages of geographicdepartmentation.
(a) There is local decision-making at thepoint of contact between the organisation (ega salesperson) and its customers, suppliers orother stakeholders.
(b) It may be cheaper to establish areafactories/offices than to service markets fromone location (eg costs of transportation andtravelling may be reduced).
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But there are disadvantages too.(a) Duplication and possible loss of
economies of scale might arise. For example,
a national organisation divided into tenregions might have a customer liaisondepartment in each regional office. If theorganisation did all customer liaison work
from head office it might need fewermanagerial staff.(b) Inconsistency in methods or standards
may develop across different areas.
Organizational StructureMr. Iftikhar Ahmad, CEODynamique Business Consultants,0300-4466062
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Board ofDirectors
RegionalBoard
A
RegionalBoard
B
RegionalBoard
C
Productiondept
Financedept
Personneldept
Marketingand sales
dept
etc etc
etcetcetc
Geographic
organisation
Organizational StructureMr. Iftikhar Ahmad, CEODynamique Business Consultants,0300-4466062
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When organisations reach a certain size
it may be appropriate to structure it
into divisions or 'semi-autonomous
blocks. These divisions may focus on a
particular geographic area or aparticular product.
Divisionalisation
Organizational StructureMr. Iftikhar Ahmad, CEODynamique Business Consultants,0300-4466062
l
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Question
Role of head office in divisions
Divisions will normally report to head office on arange of performance-related matters. The level of
autonomy given to divisional heads is dependant on
the level of centralisation required. Centralised
organisations retain much of the power and decision-making at head office. Decentralised organisations
delegate more business decisions to divisional heads
Divisionalisation
Organizational StructureMr. Iftikhar Ahmad, CEODynamique Business Consultants,0300-4466062
O l S
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DivisionalisationEach dividion may be:
A subsidiary company under a holding company
A profit centre or investment centre with in a singlecountry
A STRATEGIC business unit (SBU) with its ownobjectives
Organizational StructureMr. Iftikhar Ahmad, CEODynamique Business Consultants,0300-4466062
O i i l S
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Successful divisionalisation requires certain key conditions.(a) Each division must have properly delegated authority, andmust be held properly accountable to head office (eg for profitsearned).
(b) Each unit must be large enough to support the quantity andquality of management it needs.(c) The unit must not rely on head office for excessivemanagement support.(d) Each unit must have a potential for growth in its own areaof operations.(e) There should be scope and challenge in the job for the
management of each unit.(f) If units deal with each other, it should be as an 'arm's length'transaction. There should be no insistence on preferential treatmentto be given to a 'fellow unit' by another unit of the overallorganisation
Divisionalisation
Organizational StructureMr. Iftikhar Ahmad, CEODynamique Business Consultants,0300-4466062
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Focuses the attention of management below 'top level' onbusiness performance. Reduces the likelihood of unprofitable products and activitiesbeing continued. Encourages a greater attention to efficiency, lower costs andhigher profits. Knowledge Gives more authority to junior managers, and so grooms them
for more senior positions in the future (planned managerialsuccession). Reduces the number of levels of management. The topexecutives in each division should be able to report directly to thechief executive of the holding company.
Advantages
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Disadvantages
In some businesses, it is impossible to identify completelyindependent products or markets for which separate divisionscan be set up.
Divisionalisation is only possible at a fairly seniormanagement level, because there is a limit to how muchdiscretion can be used in the division of work. For example,every product needs a manufacturing function and a sellingfunction.
There may be more resource problems. Many divisions gettheir resources from head office in competition with otherdivisions.
O i ti l St t
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Practice
Required
Suggest two benefits and two
drawbacks of both centralization and
decentralization
Organizational StructureMr. Iftikhar Ahmad, CEODynamique Business Consultants,0300-4466062
O
i ti l St t
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Organisation structures are rarely composed of only one type of
organisation, although an all-functional structure is theoretically
feasible. 'Hybrid' structures may involve a mix of functional
departmentation, ensuring specialised attention to key functions, with
elements of (for example):
Product organisation, to suit the requirements of brand marketing
or production technologies
Customer organisation, particularly in marketing departments, to
service key accounts
Territorial organisation, particularly of sales and distribution
departments, to service local requirements for marketing or
distribution in dispersed regions or countries
Hybridstructures
Organizational StructureMr. Iftikhar Ahmad, CEODynamique Business Consultants,0300-4466062
O
i ti l St t
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Matrix Organization
Organizational StructureMr. Iftikhar Ahmad, CEODynamique Business Consultants,0300-4466062
O i ti l St t
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Where hybrid organisation 'mixes' organisation types,
matrix organisation actually crosses functional and
product/customer/project organisation.
The employees presented by the dot in the abovediagram, for example, are responsible to the Finance
Manager for their work in accounting and finance for their
functional department and are responsible to the Project
Manager C for their work on the project team: budgeting,management reporting and payroll relevant to the
project, say.
Matrix and projectorganisation
Organizational StructureMr. Iftikhar Ahmad, CEODynamique Business Consultants,0300-4466062
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Advantages of matrix organisation(a) Greater flexibility of:
(i) People. Employees develop an attitude geared to accepting
change, and departmental monopolies are broken down.
(ii) Workflow and decision-making. Direct contact between staffencourages problem solving and big picture thinking.
(iii) Tasks and structure. The matrix structure may be readily
amended, where projects are completed.
Organizational StructureMr. Iftikhar Ahmad, CEODynamique Business Consultants,0300-4466062
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(b) Inter-disciplinary co-operation and a mixing of skills and
expertise, along with improved communication and co-
ordination.
(c) Motivation and employee development: providing
employees with greater participation in planning and control
decisions.
(d) Market awareness: the organisation tends to become morecustomer/quality focused.
(e) Horizontal workflow: Bureaucratic obstacles are removed,
and department specialisms become less powerful.
Advantages of matrix organisation
Organizational StructureMr. Iftikhar Ahmad, CEODynamique Business Consultants,0300-4466062
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(a) Dual authority threatens a conflict between
functional managers and product/ project areamanagers.
(b) An individual with two or more bosses maysuffer stress from conflicting demands orambiguous roles.
(c) Cost: product management posts are added,meetings have to be held, and so on.
(d) Slower decision making
Disadvantages of matrix
organisation
Organizational StructureMr. Iftikhar Ahmad, CEODynamique Business Consultants,0300-4466062
Organizational Structure
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Required
Which structure would suit these companies?
(a) A family run restaurant with 10 staff.(b) A small manufacturing company with 250
staff.
(c) Johnson and Johnson who have 197strategic business units.
(d) BPP Holdings plc
PRACTICE
Organizational StructureMr. Iftikhar Ahmad, CEODynamique Business Consultants,0300-4466062
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Some recent trends (identified by writers such as TomPeters) have emerged from the focus on flexibilityas a key organisational value.
Flat structures. The flattening of hierarchiesdoes away with levels of organisation whichlengthened lines of communication and decision
making and encouraged ever-increasing specialisation.Flat structures are more responsive, because there isa more direct relationship between the organisation'sstrategic centre and the operational units serving thecustomer.
The new organisation
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'Horizontal structures'. What Peters (LiberationManagement)calls 'going horizontal' is a recognitionthat functional versatility (through multi-functional
project teams and multi-skilling, for example) is thekey to flexibility. In the words (quoted by Peters) of aMotorola executive: 'The traditional job descriptionswere barriers. We needed an organisation soft
enough between the organisational disciplines so that people would run freely across functional barriersor organisational barriers with the common goal ofgetting the job done, rather than just making certainthat their specific part of the job was completed.'
The new organisation
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Chunked' and 'unglued' structures. Sofar, this has meant team working anddecentralisation, or empowerment, creatingsmaller and more flexible units within theoverall structure. Charles Handy's 'shamrockorganisation' (with a three-leafed structured
of core, subcontractor and flexible part-timelabour) is gaining ground as a workablemodel for a leaner and more flexibleworkforce, within a controlled framework.
The new organisation
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The new organisation
professionals., techniciansAnd managers for key competences
Temporary & part time workers paid weekly, hourly or for the time they work
Self-employedEmploysHired on contract
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The new organisationOutput-focused structures. The key to all the above trends isthe focus on results, and on the customer, instead of internalprocesses and functions for their own sake. Aprojectmanagement orientation and structure, for example, isbeing applied to the supply of services within the organisation(to internal customers) as well as to the external market, inorder to facilitate listening and responding to customerdemands.
(e)'Jobless' structures. Meanwhile, the employee becomes nota job-holder but the vendor of a portfolio of demonstratedoutputs and competencies (Bridges, Jobshift). However
daunting, this is a concrete expression of the concept ofemployability, which says that a person needs to have aportfolio of skills which are valuable on the open labourmarket: employees need to be mobile, moving betweenorganisations rather than settling in to a particular job.
Organizational StructureMr. Iftikhar Ahmad, CEODynamique Business Consultants,0300-4466062
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Acentralised organisation is one in which authority is concentratedin one place.We can look at centralisation in two ways.
(a) Geography. some functions may be centralised rather than'scattered' in different offices, departments or locations.So, for example, secretarial support, IT support and informationstorage (filing) may be centralised in specialist departments (whoseservices are shared by other functions) rather than carried out bystaff/equipment duplicated in each departmental office.
(b) Authority. Centralisation also refers to the extent to whichpeople have to refer decisions upwards to their superiors.Decentralisation therefore implies increased delegation, empowermentand autonomy at lower levels of the organisation.
Centralisation and decentralisation
Organizational StructureMr. Iftikhar Ahmad, CEODynamique Business Consultants,0300-4466062
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Advantages and disadvantages of centralisation
Pro centralisation Pro decentralisation/delegation
Decisions are made at one point and so are easier to co-
ordinate.
Avoids overburdening top managers, in terms of workload and
stress.
Senior managers can take a wider view of problems and
consequences.
Improves motivation of more junior managers who are given
responsibility.
Senior management can balance the interests of different
functions eg by deciding on the resources to allocate to each.
Greater awareness of local problems by decision makers.
(Geographically dispersed organisations are often decentralised
on a regional/area basis for this reason.)
Quality of decisions is (theoretically) higher due to senior
managers' skills and experience.
Greater speed of decision making, and response to changing
events, since no need to refer decisions upwards. This is
particularly important in rapidly changing markets.
Possibly cheaper, by reducing number of managers needed and
so lower costs of overheads.
Helps develop the skills of junior managers: supports
managerial succession.
Crisis decisions are taken more quickly at the centre, without
need to refer back.
Separate spheres of responsibility can be identified: controls,
performance measurement and accountability are better.
Policies, procedures and documentation can be standardised
organisation-wide.
Communication technology allows decisions to be made
locally, with information and input from head office if required.
Centralisation offers greater control and co-ordination;decentralisation offers greater flexibility.
Organizational StructureMr. Iftikhar Ahmad, CEODynamique Business Consultants,0300-4466062
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Planning & Control Processes
Span of ControlThe span of control refers to the number of subordinatesimmediately reporting to a superior official.
A number of factors influence the span of control.A manager's capabilities limit the span of control: there arephysical and mental limitations to any single manager's ability tocontrol people and activities. The nature of the manager's work load
The more non-supervisory work in a manager's workload:(i) The narrower the span of control(ii) The greater the delegation of authority to subordinates
Organizational StructureMr. Iftikhar Ahmad, CEODynamique Business Consultants,0300-4466062
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Planning & Control Processes
Span of Control The geographical dispersion of subordinates Subordinates' work: if all subordinates do similar tasks, a
wide span is possible The nature of problems that a supervisor might have to helpsubordinates with. Time consuming problems suggest a narrowspan of control. The degree ofinteraction between subordinates. If
subordinates can help each other, a wide span is possible. Ifclose group cohesion is desirable, a narrow span of controlmight be needed. The amount ofsupport that supervisors receive from otherparts of the organisation.
Organizational StructureMr. Iftikhar Ahmad, CEODynamique Business Consultants,0300-4466062
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Tall & Flat Organization
Recent trends have been towards delayeringorganisations of levels of management. In other
words, tall organisations (with manymanagement levels, and narrow spans of control)are turning into flat organisations (with fewermanagement levels, wider spans of control) as aresult of technological changes and the granting ofmore decision making power to front line employs
Organizational StructureMr. Iftikhar Ahmad, CEODynamique Business Consultants,0300-4466062
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Tall & Flat OrganizationKey termsScalar chain: the chain of command fromthe most senior to the most junior.
Atall organisation is one which, inrelation to its size, has a large number oflevels of management hierarchy. Thisimplies a narrowspan of control.
Aflat organisation is one which, inrelation to its size, has a small number ofhierarchical levels. This implies a widespanof control.
Organizational StructureMr. Iftikhar Ahmad, CEODynamique Business Consultants,0300-4466062
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Tall Organization
Tall organisation
FORAGAINST
Narrow control spans Inhibits delegation
Small groups enable team members to
participate in decisions
Rigid supervision can be imposed,
blocking initiative
A large number of steps on the
promotional ladders assists
management training
The same work passes through too
many hands
Increases administration and
overhead costs
Extra communication problems, as the
strategic apex is further away
Organizational StructureMr. Iftikhar Ahmad, CEODynamique Business Consultants,0300-4466062
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Flat Organization
FORAGAINST
More opportunity for delegation Requires that jobscan
bedelegated. Managers may only get
a superficial idea of what goes on.
If they are overworked they are
more likely to be involved in crisis
management
Relatively cheap Sacrifices control
In theory, speeds up
communication between strategic
apex and operating core
Middle managers are often
necessary to convert the grand
vision of the strategic apex intoo erational terms
Organizational StructureMr. Iftikhar Ahmad, CEODynamique Business Consultants,0300-4466062
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DelayeringDelayering is the reduction of the number ofmanagement levels from bottom to top.Many organisations are delayering. Middle line jobs are vanishing.
Organisations are increasing the average span of control, are
reducing management levels and are becoming flatter.
(a) Information technology reduces the need for middlemanagers to process information.
(b) Empowerment. Many organisations, especially service
businesses, are keen to delegate authority down the line to the lowest
possible level. Front-line workers in the operating core are allowed to
take decisions. This is because it is often the best way to satisfycustomers. This perhaps removes the needs for some middle
management jobs.
(c) Economy. Delayering reduces managerial/supervisory costs.
(d) Fashion. Delayering is fashionable: if senior managers
believe that tall structures are inherently inflexible, they might cut thenumbers of mana ement levels.
Organizational StructureMr. Iftikhar Ahmad, CEODynamique Business Consultants,0300-4466062
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Organisations achieve results which individuals cannot achieve by
themselves.
An organisation is a social arrangement which pursues
collective goals and controls its own performance.
Organisations differaccording to their: ownership, control,
activity, orientation, size, legal status, funding and technology.
Organisation structure is formed by the grouping of peopleinto departments or sections and the allocation of responsibility and
authority. Mintzberg suggests that all organisation structures have fivecomponents: strategic apex, middle line and operating core, plus
technostructure and support staff.
Summary
Organizational StructureMr. Iftikhar Ahmad, CEODynamique Business Consultants,0300-4466062
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Summary Classical organisations are based on the principle of hierarchy. There
is a line of decision making power from the top of the organisation to thebottom. This scalar chain is intimately connected to the concept ofspan ofcontrol, which is the number of individuals under the direct supervision ofany one person.
Modern management theory stresses flexibility as a key value,
and organisational measures such as matrix and horizontal structures, multi-skilling, empowerment and flexible labour deployment are currently beingexplored.
Contingency theory suggests that there is no one best way tostructure (or manage) an organisation. It all depends on a number ofvariables.
An organisation can be viewed as an open system, interacting
with its environment. Span of control or 'span of management' refers to the number ofsubordinates responsible to a superior.
Recent trends have been towards delayering organisations oflevels of management. In other words, tall organisations (with manymanagement levels, and narrow spans of control) are turning into flatorganisations (with fewer management levels, wider spans of control) as aresult of technological changes and the granting of more decision making
power to front line employees.
Organizational StructureMr. Iftikhar Ahmad, CEODynamique Business Consultants,0300-4466062
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summary In a divisional structure some activities are decentralised to business
units or regions. A centralised organisation is one in which authority is concentrated in
one place. Centralisation offers greater control and co-ordination;
decentralisation offers greater flexibility. Burns and Stalker noted that mechanistic (or bureaucratic)
organisations are stable and efficient in conditions of slow change, but thatorganic organisation is required for adaptation and responsiveness in fast-change environments.
Bureaucracy is a continuous organisation of official functions boundby rules (Weber). It is a form of mechanistic organisation.
Organic organisations are controlled by mechanisms such as
commitment and culture. Technology has a significant impact on the way work is organised. The organisation may be seen as a socio-technical system. The global explosion of ICT has also had a major impact on work
organisation.
Organizational StructureMr. Iftikhar Ahmad, CEODynamique Business Consultants,0300-4466062
Quiz Test Organizational Structure
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List List principles of organisation.
2 List Mintzberg's methods of co-ordination.
3 'Span of control' refers to the number of layers in the organisation
hierarchy. True or false?
4 What is de-layering?
5 What is functional organisation?
6 What is a matrix organisation?
7 Which of the following is not a type of legitimate authority identified
by Max Weber?
A Charismatic
B Technostructure
C Traditional
D Bureaucratic
8 'Horizontal' structures (Peters) would be an example of which type
of organisation?
A Mechanistic
B Organic
Mr. Iftikhar Ahmad, CEODynamique Business Consultants,0300-4466062
AnswersOrganizational Structure
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ofwork; authority and responsibility; discipline; unity of
command; unity of direction; subordination of individual
interests; remuneration; scalar chain.
2 Mutual adjustment, direct supervision; standardisation
(of work process, outputs, skills and knowledge).
3 False. It is the number of subordinates immediately
reporting to a given official.4 The reduction in the number of management levels.
5 People are grouped together as they do similar work.
6 A matrix organisation crosses functional boundaries
and involves overlapping chains of command.
7 B: 'Technostructure' is a term drawn from Mintzberg's
model of organisational components.
8 B: Organic. Horizontal structures aim at flexibility.
AnswersMr. Iftikhar Ahmad, CEODynamique Business Consultants,0300-4466062