05 Structure and Organization _ 2425_ A. Organisational structure

Chapter 5: Structure and Organization

A. Organizational Structures

  • Defines how job tasks are formally divided, grouped, and coordinated.

Chapter 5: Learning Objectives

  • Students will:

    • Describe, recognize, and evaluate:

      • Organizational structures

      • Management styles and motivation theories

      • Management tools introduction

1. Organizational Structures

  • Structure follows strategy: Structure is a tool, not a goal.

  • Organizations must define their mission, vision, and strategy before establishing an organizational structure.

  • Balance between stability and flexibility is essential for effectiveness.

A. Relation to Business Processes

  • Standard business processes:

    1. Core (Primary) Processes

      • Main activities such as marketing, sales, production, distribution, and customer service aimed at generating revenues and customer value.

    2. Support Processes

      • Assist core processes, providing resources and infrastructure.

    3. Management Processes

      • Include planning, measuring, monitoring, and controlling business activities.

B. Importance of Organizational Structure

  • Designing the organization:

    • Core management task to ensure efficiency and effectiveness.

    • Good organizational structures lead to employee satisfaction and achievement of objectives.

    • Must regularly review and update structures.

Design Decisions in Organizational Structure

1. Division of Labor

  • How to effectively divide work among employees?

  • Determine functions and tasks, optimize staffing levels for efficiency.

2. Division of Decision-Making Powers

  • Ruling, controlling, commanding:

    • Centralized decision-making may stifle creativity, while more distributed decision-making enhances flexibility but may lead to a loss of focus.

3. Span of Control

  • Measures how many employees report to a manager.

  • Optimal span varies based on job type; excessive span can lead to managerial stress.

  • Depth of control: Refers to the number of management levels in an organization.

Basic Forms of Organizational Structures

A. Functional Structure

  • Organizes based on functions or departments:

    • CEO oversees specialized managers (e.g., Production, Marketing, R&D).

    • Pros: Efficiency in specialized areas.

    • Cons: Potential for silo mentality, reduced inter-departmental communication.

B. Divisional Structure

  • Organized around products, projects, or markets.

    • Each division operates relatively autonomously with its own functional specialists.

    • Common in diversified corporations structured into Strategic Business Units (SBU).

    • Pros: Tailored to local markets or product lines.

    • Cons: Risk of fragmentation in expertise across departments.

C. Matrix Structure

  • Combines functional and divisional structures.

  • Employees report to multiple managers as part of project teams.

    • Facilitates collaboration across functions for project-based work.

D. Network Organization

  • Formed by teams that are project-based and flexible.

  • Promotes adaptability and collaboration while minimizing traditional hierarchical structures.

Summary of Differences in Structures

  • Functional Structure:

    • Specialization benefits but may hinder alignment across functions.

  • Divisional Structure:

    • Enhanced customization but can lead to fragmentation.

  • Matrix Structure:

    • Balances multiple reporting lines for project efficiency but may confuse employees.

  • Network Organization:

    • Flexible and team-oriented but requires trust and coordination without rigid hierarchies.