Chapter 10 Designing Organisation Structure

Chapter 10: Designing Organization Structure

Introduction to Organization Structure

  • Management is concerned with the arrangement of resources to achieve strategic goals.

  • Organizing: Deployment of organizational resources to achieve said strategic goals.

  • Critical to follow strategy, as strategy defines what needs to be done while organizing defines how to do it.

Organizing the Vertical Structure

Organization Structure Components

  • Formal tasks: Responsibilities assigned to individuals and departments.

  • Formal Reporting Relationships: How employees are linked within the hierarchy.

  • Coordination Systems: Mechanisms designed to enhance employee coordination across departments.

  • Organization Chart: Visual representation of the organization’s structure.

Division of Labor and Chain of Command

  • Division of Labor: The degree of task subdivision into jobs; trends indicate reduced popularity due to potential employee isolation and boredom.

  • Chain of Command: The unbroken line of authority showing reporting relationships within the organization.

Authority, Responsibility, and Delegation

Authority

  • Formal right of managers to make decisions and command resources; vested in positions, not individuals.

  • Flows down the hierarchy and is accepted by subordinates.

Responsibility and Accountability

  • Responsibility: Duty to perform assigned tasks.

  • Accountability: Mechanism aligning authority with responsibility.

  • Delegation: Process of transferring authority and responsibility down the organizational hierarchy.

Line and Staff Authority

Line Authority

  • Managers wield formal authority to direct their immediate subordinates.

  • Line departments perform core operations that align with the organization's mission.

Staff Authority

  • Limited authority to advise and support line departments based on specialized expertise.

Span of Management

Definitions

  • Span of Management: Number of employees directly reporting to a supervisor.

  • Narrow Span: More supervision needed, typical in unstable environments.

  • Wide Span: Less supervision, preferable when conditions are stable and employees are trained.

Organizational Structures

  • Tall Structure: Many hierarchical levels and narrow spans of control.

  • Flat Structure: Few levels and wide spans, can cause resource allocation issues.

Centralization vs. Decentralization

  • Centralization: Decision authority located near the top of the organization.

  • Decentralization: Authority pushed down to lower levels, ideally suited to dynamic environments.

Influencing Factors

  • Environmental uncertainty and change favor decentralization.

  • Crisis situations may require a centralized approach.

Departmentalization

  • Departmentalization: Method of grouping positions into departments; establishes organizational clarity.

  • Five Approaches:

    • Functional

    • Divisional

    • Matrix

    • Team

    • Virtual Network

Structural Design Approaches

Functional Structure

  • Tasks grouped by common functions across the organization.

Divisional Structure

  • Departments organized based on products, customers, or geography focusing on local market conditions.

Matrix Structure

Definitions

  • Combines functional and divisional approaches for improved coordination.

  • Each employee may report to multiple supervisors, leading to dual lines of authority.

Team Approach

  • Cross-functional Teams: Employees from various departments work collaboratively.

  • Team-Based Structure: The organization consists largely of horizontal teams, directly engaging with customers.

Virtual Network Approach

  • Involves outsourcing significant organizational functions while maintaining overall managerial coordination from a smaller core team.

Coordination Needs

  • Coordination: Collaborative efforts across departments to achieve common goals.

  • Collaboration: Joint efforts produce superior outcomes compared to individual work efforts.

  • Re-engineering: Redesigning business processes to achieve large-scale improvement.

Factors Affecting Organizational Structure

  • The alignment of organizational structure with strategy and environmental demands is crucial for performance.

  • Mechanistic Organizations: Efficient operations in stable environments.

  • Organic Organizations: Emphasis on innovation in rapidly changing markets.

Technology and Structure

Woodward’s Manufacturing Technology Categories

  • Small-batch Production: Customized production.

  • Mass Production: Large volume of identical products.

  • Continuous Process: Streamlined production without interruptions.

  • Technical Complexity: Degree of mechanization in production processes.

Service Technology Requirements

  • Characteristics include intangibility, perishability, simultaneous production and consumption, and the necessity for close customer relationships.