Lecture 2 Organisational Structure Final

8/3/2019 Lecture 2 Organisational Structure Final

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Fundamentals of Organization

Structure

Fundamentals of Organization

Structure


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Think of some words that might describe

Structure

and some words that might describeCulture

Define Structure - The way in which people work together ?

Define Culture - The way in which people work together ?

So what is the difference ?


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Structure Vs Culture

Structure Culture

Firm Soft

Clear Intangible

Distribution of

Authority that helps

define how people

work together

Norms and Values

that help define

how people work

together


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Organization Structure

Three key components

Vertical aspect of organizing

- Formal Reporting Relationships including the number oflevels and the span of control.

- Grouping of Individuals into departments and ofdepartments into the total organization

Horizontal aspect of organizing

- Design of Systems to ensure effective communication,coordination and integration of efforts


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A Sample Organization Chart


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Formal Organisational Structures

Grouping of activities

Responsibilities of individuals

Reporting relationships

Levels of authority

Span of control - (Flatter Structures)

Systems of communication

Degree of delegation of authority

But also

Underlying activities and processes


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Information-Processing Perspective

on Structure

Provide Vertical and horizontal information flow

Traditional organization vs. Learning organization

- Traditional organization design emphasizes vertical

communication and control.

- Learning organization which emphasizes communication andcollaboration

Centralized vs. Decentralized decision making

- Centralized authority focused on top level decision-making

- Decentralized authority focused on shared tasks anddecisions


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Efficiency versus

Learning Outcomes


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Effect of Structure on People

- (R. Stewart - The reality of management)

People modify the working of the formalorganisation, but their behaviour is also

influenced by it. The method of workorganisation can determine how people relateto one another, which may affect both theirproductivity and morale. Managers, therefore,

need to be conscious of the ways in whichmethods of work organisation, may influencepeoples attitude and action.


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Vertical Information Sharing

Vertical linkages coordinate activities between the top and

the bottom of the organization

Hierarchical referralare the vertical lines which identify

the chain of command

Rules and Plans- Rules enabling employees to be coordinated

- Plans provides standing information for employees.

Vertical information systems is a strategy for increasing

vertical information capacity. It includes reports,

computer-based communication and written

information


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Horizontal Information Linkages

Horizontal linkage refers to the amount of communication

and coordinate activities across organizational departments.

Information Systems enable information exchange

throughout the organization

Direct Contactis a higher level of horizontal linkage (i.e.

liaison role)

Task Forces is a temporary committee composed of

representative from each department involved.

Full-Time Integratorresponsible for coordination.

Teams is the strongest horizontal linkage.


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Ladder of Mechanisms for

Horizontal Linkages


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OrganizationDesign Alternatives

Three keys indicators of organization design Required work activities

Reporting relationships

Departmental grouping options

- Functional grouping

- Divisional grouping

- Multi-focused grouping

- Horizontal grouping

- Virtual network grouping


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Departmental Grouping Options

Functional

Grouping

Divisional

Grouping

Multifocused

Grouping

HorizontalGrouping

Virtual NetworkGrouping


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Functional Structure

Allows economies of scales

within functional

departments

Enables in-depth knowledgeand skill development

Enables organizations to

accomplish functional goals

Is best with only one or a

few products

Slow response time to

environmental changes

May cause decisions to pile

on top, hierarchy overload Leads to poor horizontal

coordination

Results in less

innovation

Involves restricted

view of goals

Strengths Weaknesses


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Divisional Structure

Suited to fast change inunstable environment

Leads to customersatisfaction

Involves high coordination Allows units to adapt to

differences Best in large organizations

with several products Decentralizes decision

making

Eliminates economies of

scale in functional

departments

Leads to poor coordination Eliminates in-depth

competence and technical

specialization

Makes integration and

standardization across

product lines difficult



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Functional vs. Divisional Structure -Example


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Geographic Structure

Organizing to meet needs of users/customers by geography

It is particular common in large nonprofit organizations

Many multinational corporations are organized by country

Focuses managers and employees on specific geographic

regions

Strengths and weaknesses similar to divisional organization


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Sample Geographic Structure


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Matrix Structure

Conditions for Matrix:

- Condition 1: Share resources across the organization

- Condition 2: Two or more critical outputs required:

products and technical knowledge

- Condition 3: Environment is complex and uncertain

Two variations of matrix structure

-functional matrix

- product matrix

A dual-authority structure can help to ensure a

balance between vertical and horizontal aspects oforganizations.


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Matrix Structure

Achieves coordination tomeet dual demands

Flexible sharing of humanresources across products

Suited to complex decisionsand unstable environment

Promote functional andproduct skill development

Best in medium-sizedorganizations with multipleproducts

Dual authority causeconfusion

Need good interpersonalskills and extensive training

Time consuming

Need commonunderstanding amongparticipants

Requires great effort tomaintain power balance



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Sample Matrix Organization


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Matrix structure of ULYSSES

http://ec.europa.eu/research/transport/projects/items/ulysses_en.htm

To ensure the optimal use of the results beyond the participants, the partnership is an

open structure allowing other partners to join the meetings/activities depending on the

interests represented by new projects.


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Horizontal Structure

Organization around core processes.

Key characteristics:

- Structure is created around cross-functional processes- Self-directed teams are the basis of organization design

and performance

- Process owners are responsible for entire process- People on the team are given authority for decisions

- Can increase organizations flexibility

- Customers drive the horizontal corporation.

- The culture promotes openness, trust and

collaboration.


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Horizontal Structure

Promote flexibility and rapid

response to changes

Focus on the production

and delivery of value

Each employee has a

broader view of

organization goals

Promotes a focus on

teamwork and collaboration Improves quality of life for

employees

Determining core processes

is difficult and time

consuming

Requires many changes

Traditional managers may

baulk when they have to

give up power and authority

Requires significant training

of employees Can limit in-depth skill

development



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Sample Horizontal Structure


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Virtual Networks and Outsourcing

It extends the concept of horizontal coordination andcollaboration beyond the boundaries of the organization

Most common strategy is outsourcing

- Contract out certain tasks/functions

Virtual or modular structures subcontract most of its majorfunctions to separate companies

The virtual network organization serves as a central hub withcontracted experts


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Virtual Network Structure

Enables organizations to

obtain talent and resources

worldwide

Gives a company immediate

scale and reach without

huge investments

Enables the organization to

be highly flexible and

responsive to changingneeds

Reduces administrative cost

Managers do not have

hands-on control over many

activities and employees

Requires a great deal of

time to manage

relationships

Risk of organizational failure

Employee loyalty and

corporate culture might beweak



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Hybrid Structure

Organizations often use a hybrid structure that combines

characteristics of various structure approaches tailored to

specific needs

One common type is the combination of the functional and

divisional structures.

Often used in rapidly changing environments

Greater flexibility


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Application of Structural Design

Each type of structure is applied in different situations and isintended to meet different needs.

Structural alignmentaligns structure with organizational goal

Symptoms of StructuralDeficiency:

Decision making is delayed or lacking quality

Organization does not respond innovatively to a changingenvironment

Employee performance declines, goals are not being meet

Too much conflict


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Application of Structural Design


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Summary and Interpretation

Structure must provide a framework, linking organization

into whole

Provide vertical and horizontal linkages

Variety of alternatives for grouping

Virtual network extends horizontal coordination

Matrix structure attempts to achieve balance between the

vertical and horizontal dimensions of structure.

Managers must find right balance

The purpose of the organization chart is to encourage and

direct activities


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AQUARIUS Advertising Agency

Analyze Aquarius with respect to the fivecontextual variables. How would you describethe environment, goals, culture, size, and

technology for Aquarius? Design a new organization structure that takes

into consideration the contextual variables inthe case and the information flows.

Would a matrix structure be feasible forAquarius? Why or why not?


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The Learning Organisation

Collective

Policy Operations

Ideas ActionIndividual

Ideas, thoughts, plans Actions, doing, behaviour

Reproduced from J. Burgoynes article Feeding minds to grow the business People management 21 Sep. 1995


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Collective

Policy Operations

Ideas ActionIndividual



Is it this way round ?

Ideas produce action which

eventually becomes

operations which thenbecomes policy which

generates ideas etc?


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Collective

Policy Operations

Ideas

ActionIndividual



Or is it this way round ?

Ideas produce policy which

determines operations which

drive actions which generateideas etc.

Lecture 2 Organisational Structure Final

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