• Organisational structure: the formal arrangement of jobs within an organisation

• Organisation design: a process involving decision about six key elements:

- Work specialisation

- Departmentalisation

- Chain of command

- Span of control

- Centralisation and decentralisation

- Formalisation

Purpose of Organising:

• Divides work into specific jobs and departments

• Assigns tasks and responsibilities

• Coordinates diverse organisational tasks

• Clusters jobs into units

• Establishes relationships among individuals, groups and departments

• Establishes line of authority Allocates and deployed organisational resources

Organisation Structure:

1. Work Specialisation: When tasks in the organisation are divided into separate jobs with each step completed by a different person

→ Over-specialisation can result in human diseconomies from boredom, fatigue, stress, high turnover…

2. Departmentalisation: Grouping different tasks based on different criteria

• Functional: grouping jobs by functions performed

→ Advantages: efficient, coordination within functional area

→ Disadvantages: poor communication, limited view of organisational goals

• Process: grouping jobs based on the product or customer flow

→ Adv: more efficient flow of work activities

→ Disadv: can only be used with certain products

• Product: grouping by product line

→ Adv: allows specialisation in particular products and services, Managers can become experts in their industry, closer to customers

→ Disadv: duplication of functions, limited view of organisational goals

• Customer: grouping by type of customer and needs

→ Adv: customers’ needs and problems can be met by specialists

→ Disadv: duplication of functions, Limited view of organisational goals

• Geographical: grouping based on territory or geography

→ Adv: more effective and efficient handling of specific regional issues that arise

→ Disadv: isolation from other organisational areas, duplication of functions

3. Chain of Command: Continuous line of authority that extends from upper levels of an organisation to the lowest levels of the organisation to the lowest levels of the organisation and clarifies who reports to who

→ Authority: rights inherent in a managerial position to tell people what to do and to expect them to do it →Responsibility: obligation or expectation to perform

→Unity of Command: concept that a person should have one boss and should report only to that person

4. Span of Control: Number of employees who can be effectively and efficiently supervised by a manager → Affected by: skills & abilities of the manager, employee characteristics, similarity of tasks, complexity of tasks, physical proximity of tasks

5. Centralization: The degree to which decision-making is concentrated at a single point in the organisations Top managers make all the decisions and lower level employees carry out these orders

→ Stable environment

→ Large company

→ Effective implementation of company strategies

6. Decentralisation: Organisations in which decision-making is pushed down to the managers who are closest to the action

→Complex environment

→ Decisions are significant

→Lower level managers have a voice in decisions

→ Company is geographically dispersed

→ Effective implementation of company strategies

7. Formalisation: Degree to which jobs within the organisation are standardised and the extent to which employee behaviour is guided by rules and procedures.

→ Highly formalised jobs offer little discretion over what is to be done

→Low formalisation = fewer constraints on how employees do their work

• Employee Empowerment: Increasing the decision making authority of employees

Organisational Design Decisions:

1. Mechanistic Organisation: a rigid and tightly controlled structure (usually for large businesses)

• High specialisation

• Rigid departmentalisation

• Narrow spans of control

• High formalisation

• Limited information network

• Low decision participation

2. Organic Organisation: highly flexible and adaptable structure (usually for small businesses)

• Non-standardized jobs

• Fluid team based structure

• Little direct structure

• Minimal formal rules

• Open communication network Empowered employees

• Contingency Factors: Structural decisions are influenced by: Overall strategy of the organisation: organisational structure follows strategy

→ Size of the organisation: firms change from organic to mechanistic organisation as they grow in size →Technology used by the organisation: firms adapt their structure to the technology they use

→ Degree of environmental uncertainty: dynamic environments require organic structures; mechanistic structures need stable environments

Strategy Frameworks:

• Innovation: pursuing competitive advantage through meaningful and unique innovations favours an organic structuring

• Cost minimization: focusing on tightly controlling costs requires a mechanistic structure for the organisation

• Imitation: minimising risks and maximising profitability by copying market leaders requires both organic and mechanistic elements in the organisation’s structure

• Strategy and structure: achievement of strategic goals is facilitated by changed in organisational structure that accommodate and support change

• Size and structure: as an organisation grows larger, its structure tends to change from organic to mechanistic with increased specialisation, departmentalisation, centralisation, and rules and regulations

• Technology and Structure: organisations adapt their structures to their technology Organisations adapt their structures to their technology

Classification of firms:

1. Unit production: of single units or small batches

2. Mass production: of large batches of outputs

3. Process production: continuous process of outputs

4. Routine technology: mechanistic organisations Non-routine technology: organic organisations

• Environmental Uncertainty and Structure: mechanistic organisational structures tend to be the most effective in stable and simple environments The flexibility of organic organisational structures is better suited for dynamic and complex environments

Common organisational Design Traditional design

• Simple structure: low departmentalisation, wide spans of control, centralised authority, little formalisation

• Functional structure: departmentalisation by function

→ Operations, finance, human resources, and product research and development

• Divisional structure: composed of separate business units or divisions with limited autonomy under the coordination and control with parent corporation

Contemporary Organisational Designs

• Team structures: the entire organisation is made up of work groups or self managed teams of empowered employees

• Matrix and project structures: Specialists from different functional departments are assigned to work on projects led by project managers

→ Have two managers

→ Employees work continuously on projects

1. Boundaryless Organisation: A flexible and unstructured organisational design that is intended to break down external barriers between the organisation and its customers and suppliers Removes internal (horizontal) organisation:

• eliminates the chain of command

• has limitless spans of control

• uses empowered teams rather than departments - Eliminates external boundaries: uses virtual, network, and modular organisational structures to get closer to stakeholders

Removing External Boundaries:

• Virtual organisation: an organisation that consists of small core of full-time employees and that temporarily hires specialists to work on opportunities that arise

• Network organisation: small core organisation that outsources its major business functions in order to concentrate what it does best

• Modular organisation: a manufacturing organisation that uses outside suppliers to provide product components for its final assembly operations

• The Leading Organisation: An organisation that has developed the capacity to continuously learn, adapt, and change through the practice of knowledge management by employees

→ Characteristics of a learning organisation:

1. Open team-based organisation design that empowers employees

2. Extensive and open information sharing

3. Leadership that provides a shared vision of the organisation’s future, support, and encouragement

4. A strong culture of shared values, trust, openness, and a sense of community