Chapter 13 - Organisational Structure

Advantages of functional structure

• Employees often display a high level of department loyalty and pride in department’s work ( which can enhance teamwork and communication within the department. Additionally, specialization in tasks can lead to increased efficiency and productivity.)

• Employees encouraged to be specialists => increase efficiency and productivity

• Departments are led by managers who are specialists in the functional area => provides clear career paths within departments and fosters deep expertise in specific fields. This structure facilitates better coordination and resource allocation within departments.

Disadvantages of functional structure

• vertical structure - reducing quality connections between departments. therefore, difficult coordination when developing new major projects

• communication flows through the department heads to the top management, so employees may feel remote (xa cách) from senior management.

• Unhealthy competition between departments

Functional structure

A functional structure splits an organization into departments based on their major area of responsibility.

hierarchical structure

A hierarchical structure is an organizational format in which employees are grouped and assigned specific duties based on levels of authority, creating a chain of command from top management to lower-level employees.

• main features: levels of hierarchy, chain of command and span of control

Levels of hierarchy

Narrow organizational structure → many levels of hierarchy:

• communication through the organization become slow, with messages becoming distorted or filtered

• narrow span of control

• those on lower levels can feel remote from decision-making power at the top

Flat organizational structure → fewer levels of hierarchy → wider span of control

Chain of command

The route through which authority from the top is passed down through organization

• Narrow organizational structure → longer chain of command → slow communication

Spans of control

Wide - a manager directly responsible for many subordinates

Benefits of wide spans of control:

• each worker is delegated more authority as there is less direct control from a manager → motivation → encourage innovation and creativity

• Employee empowerment → motivation

• short chain of command → better communication → clear and undistorted messages

• fewer middle managers needed → reducing business cost

Narrow - a manager directly responsible for few subordinates

Structure by product or geographical area

Structure based on the different rages of products that it makes or areas that it operates in

Benefits of Structure by product or geographical area

• Focus on specific market segments → expertise and better innovation

• respond to consumer needs and market changes more quickly → better consumer satisfaction

• measure the performance and profitability of each division separately → clear and increase accuracy

Disadvantages of Structure by product or geographical area

• Duplication of roles → increase operational costs

• Different departments compete for company resources → creating conflict

• Loss of overall central control over each division → inefficiency → Harder to maintain brand consistency.

Matrix structure

an organizational structure that creates project team that cut across traditional functional departments

Advantages of a matrix structure

• allows good communication between all members of the team

• cut across traditional boundaries between departments in a hierarchy

• there is less chance of people focusing on just what is good for their department as the aim is to focus on the project and the business as whole

• crossover of ideas between people with specialist knowledge in different areas → create more successful and innovation solutions

• new project teams can be created quickly → respond faster to changing markets of technological innovation

Disadvantages of matrix structure

• less direct control from senior managers

• The advantage of faster responses to new situations comes at the cost of reduced bureaucratic control, which senior managers may resist.

• If the business keeps department hierarchies but allows cross-department teams, team members may end up with two leaders, which could lead to conflicts of interest.

Delegation

passing authority down the organizational hierarchy

• the wider span of control, the greater the degree of delegation

Advantage of delegation

• delegation gives senior managers more time to focus on important strategic roles

• show trust in subordinates → can motivate and challenge them

• It develops and trains employees for more senior position

• it helps employees to achieve fulfilment through their work → motivate

Disadvantages of delegation

• if the task is not well-defined or if inadequate training is given → delegation is unlikely to succeed

• insufficient authority is given to the subordinates → delegation will be unsuccessful

• Managers may only delegate the boring jobs that they do not want to do → may not be motivating

Centralization

Keeping all the important decision-making power within head office or the centre of the organization

Decentralization

Decision making powers are passed down the hierarchy to empowered subordinates and area or product managers

• allows employees to be empowered and demonstrates trust in them

• decisions are taken closer to the action → more aware of local factors or consumers’ preferences

Advantages of centralization

• There are set rules and less discussion → rapid decision making

• Consistent policies across the organization reduce confusion and keep things uniform.

• Senior managers make decisions for the benefit of the entire business, not just one area.

• Centralized purchasing can save money by buying in bulk.

• Experienced managers at the central office handle key decisions.

Advantages of decentralization

• Local managers can make decisions that better fit their area and customer needs.

• Junior managers gain experience and prepare for bigger roles.

• Delegation boosts motivation, as employees feel trusted and empowered.

• Decisions can be faster and more adaptable to local market changes since head office isn’t always involved.