Organisational structure, week 2 module 1

what is organisational structure

the organisation of a company’s resources

What are resources

Internal assets: machinery, equipment, human capital, technology, financial capital, physical space. And how we fit it all together 

List the 4 things organisations must do when deciding on the most appropriate structure? 

• Identify the work which must be completed in order to achieve objectives 

• Group the work into related areas (departments e.g, marketing finance) 

• Define and allocate responsibility and authority (chain of command) 

• Establish relationships between positions and units to allow for teamwork 

Formalisation

high levels = rules and regulations, usually occur in a public sector, it needs a stable environment. Everything is documented and formal communication throughout the business. Stable environment= no change, all want the same thing, has high levels of formalisation: NHS, Education sector

Specialisation/Division of labour

work is broken down into specialised parts, labour is divided up into groups

With high levels of specialisation, this means

• Jobs have been broken down into component parts 

• Each individual has one clearly defined part of the process in which they complete 

• Individuals therefore develop expertise, but are only skilled and experienced in 1 job. 

• They make less mistakes, highly experienced in 1 part as they have done it all day 

• Ford motor cars, wilson sporting goods, mcdonalds 

• Graph: what happens when people who are specialised are off, productivity drops as other people can't fill their place. 

• Staff morale, productivity drops, people get bored, human related issues, human dis-economies of scale. Overall effect on the end result. 

Standardisation

• mostly formal franchises 

• High degree of standardisation= rules to describe how every job should be carried out 

• Ikea: anywhere in the world has the same products, layout, uniforms etc, the service is consistent. It's a standardised process 

• Starbucks: same process, name asking, same uniform, same drinks and products etc. Makes customers feel special 

• However, this can lead to demotivation, feeling like a number, not being valued, not allowed to express themselves, can lead to low staff morale as people leave, high labour turnover, no room for new ideas for improvement as it does not allow room for employee creativity. 

Centralisation

• Centralisation: ability to make decisions at different polars 

• Centralised organisations: power and authority is concentrated, people are the top of the hierarchy are making decisions for the lower levels 

• Benefits of centralisation: greater control, decision making comes from a global perspective, balance, experienced decision makers, better decisions for the economy 

Decentralisation

• ability to make decisions is widely distributed between different managers 

• Decentralisation therefore: reduces stress, gives job satisfaction and motivation to employees as it gives staff more power, allows for flexibility, gives management training, the organisation will be more responsive to change and most likely won't resist it. 

Stakeholders, Line and staff functions

• This involves any employees that are directly involved in the main line actions/ activity to make a product 

• Staff functions: support the main line of production, people like canteen workers, cleaners etc 

Narrow span of control: Tall structure

more management, 1-10 subordinates

Benefits of having a narrow span of control

Facilitates team working, fertile training ground, opportunity for promotions, motivational

Limitations of having a narrow span of control

increased overheads as more managers, communication problems, planning + coordination problems, duplication of management effort, less responsive to change. EG nokia couldn't change fast so lost out

Flat structure, wide span of control

less management 11+ subordinates under each management

Benefits of having a flat structure or wide span of control

Motivational as of delegation, facilitates communication, clarifies management hierarchies, meaningful progression, cost reduction as of less management salaries, easy for employees to communicate with higher levels, feeling like they are part of the decision making process, in turn boosting morale therefore maintaining a low labour turnover. 

Limitations of a flat structure or wide span of control

Pressure on lower level staff, horizontal communication is more difficult, difficulty getting advice from superiors when needed. 

The span of control is influenced by:

• Managers ability 

• subordinates' ability 

• geographical dispersion (where are they, can't manage 30 people in 30 different places) 

• similarity of subordinate's work( if similar, span of control can be wider as one support fits all) 

• nature of potential problem 

• amount of ‘self help’ available to subordinates 

• degree of control needed: if mistakes are not allowed, then high degree of control, life or death will have a narrow span of control eg hospital, fire service. 

• Wider environment: what the company is

4 key features found in a bureaucratic system

Standardisation, centralisation, specialisation, formalisation 

Mintzberg’s 5 constitute parts of the organisation

• Strategic Apex

• Middle Line

• Operating core

• Techno-Structure

• Support staff

Strategic apex

senior management team, hold the most power and authority, have overall responsibility for objectives

Middle line

Connect strategic apex to the operating core, link between senior management and employees. Department heads, supervisors etc

Operating core

stakeholders, involvement in line of production.

Technostructure

analyses, overlook the operating core and analyse the best ways the be efficient and to perform tasks, they have direct impact on how work is carried out. Production analysts

Support staff

all people that support main line staff on a day-to-day basis, Payroll, research and development, canteen staff. Have no direct involvement in how the company runs.

Mintzberg’s structure in 5 describes the organisation in terms of

component (basic) parts;
co-ordinating mechanisms; and
structural configurations.

what is the coordinating mechanism

How the different parts of an organisation are
managed and controlled.

what are the 5 coordinating mechanisms

Mutual adjustment
Direct supervision
Standardisation of work processes
Standardisation of outputs
Standardisation of knowledge and skills

What are the 5 structural configurations

• Adhocracy

• Simple structure

• Machine Bureaucracy

• Professional bureaucracy

• Divisionalised form

What is Adhocracy

Based on mutual adjustment; key component continually evolves / changes
This type of structure is normally found only in very small firms, often made up of skilled
craftsmen.

What is Simple Structure

Based on direct supervision
Strategic apex key component.
Again, this is often found in small, owner managed businesses. One person – usually
the owner – makes all the decisions and directs all operations (so, the strategic apex
is the key part of the structure).

What is Machine Bureaucracy

Based on standardisation of work processes; technostructure key component
The organisation functions in a predictable, machine-like fashion.
As firms become larger, it is often the case that the owners can no longer take direct
responsibility for everything so to maintain control, they start to look for standardisation
(in processes, skills or outputs).
High degree of formalisation, specialisation and centralisation.

what is professional bureaucracy

Based on standardisation of skills
Operating core is the key component (those individuals with the standardised skills or
knowledge)
Consistency and predictability within the organisation is brought about by the fact
that all employees are following the same professional standards.
Employees essentially operate as self-employed individuals

What is Divisionalised form

Based on standardisation of outputs and middle line is the key component
This structure is often found in very large firms, who operate in different markets and
produce a range of products.
All activities to do with one particular product are put into a separate division and
each product group is free to structure themselves as best suits its operating conditions