INTERNAL ORGANISATION
How organisations sort
themselves..and why.
Options. Business can
organise by:Function
Place
Customer
Structures
Technology
Product/Service
FUNCTIONAL GROUPING
• Very common in most organisations
• Where the business is sorted into
departments based on skills:• Marketing
• Finance
• Human Resources
• Operations
• Research and Development ……
Details
• Usually a centralised decisionmaking structure
• Decisions made at the top
• Traditional
PRODUCT OR SERVICE
• Organised into divisions
• Each division will have its own
functions – self contained
• Used by large organisations
• Many merged conglomerates use
this structure
• Cadbury Schweppes – 2 divisions
CUSTOMER GROUPING
• Organisations that are structured
around customers or groups of
clients
• Usually found in the service sector
• Medical practice
• Solicitors
• Bank
PLACE/TERRITORY
• Designed around geographical
factors
• Used by companies selling over a
large area
• Multinationals eg Shell
• Meet the needs of the customers in
the different countries
• Locals can be employed
TECHNOLOGY
• Used when production can be broken
down into obvious stages
• Many manufacturing firms use this:
• Cutting
• Assembly
• Packing
Allows specialisation
• Transportation
But ….
• Many firms may use a combination
of these methods
• A business with a main functional
structure may have a secondary
technological structure in
Operations and a customer grouping
in marketing
FORMS OF
ORGANISATION STRUCTURE
In brief
Hierarchical
Flat
Matrix
Entrepreneurial
Centralised
Decentralised
Hierarchical Structure
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•
•
•
•
•
•
•
•
Traditional
Organised in levels
Called the pyramid structure
Decisions made at the top and passed down
Shown in the form of an organisation chart
Clearly defined roles
Usually organised in functions
Criticised for lack of flexibility
Going through major restructuring
HIERARCHICAL STRUCTURE
Rector
Depute Rector
PTs
Senior Teachers
Teachers
Details…
• Fayol said that an organisation with
more than 5 levels will suffer from
communication problems
• Chinese Whispers Effect
• Them –v- Us scenario
• Cannot react to changes in the
business environment (market)
• Can be stagnant and overstaffed
• Is inefficient
Features of a Hierarchical
Structure
• A Hierarchical structure will be
made up of
• A NARROW SPAN OF CONTROL
• A LONG CHAIN OF COMMAND
Span of control
• If the organisation is to work
effectively there must be a suitable
span of control
• THE NUMBER OF PEOPLE IN THE
BUSINESS THAT A MANAGER HAS
DIRECT CONTROL OF
SPAN OF CONTROL WILL
DEPEND ON:• How good the manager is at their
job
• The type of work the business does
• The kinds of decisions that have to
be made
This manager has a span of control of 5
CHAIN OF COMMAND
• The Chain of Command runs right
the way down an organisation from
the top – the chairman through the
managers to the workers at the
bottom
• It is another way of describing the
levels of an organisation
This
organisation
chart has 8
levels
CHAIN OF COMMAND
• An organisation should not have too
many links in the Chain of Command
as this leads to poor
communications
• CHINESE WHISPERS EFFECT
• Short – 3 to 4
Long – 6 to 7
Problems with Hierarchical
structures
• Designed for close control – no
room for initiative
• Decision-making can take a long
time
• Inability to change quickly
What can be done?
RESTRUCTURING/DELAYERING
• The removal of layers from the
organisation can reduce these
problems
• Middle management have often been
found to be carriers of information
• Not effective in the running of the
business
Delayering
Remove middle management
The length of
the Chain of
Command is 8.
This may be
too long and
the business
could
encounter
communication
problems.
Delayering
could help.
EMPOWERMENT
Delayering leads to:• Workers being more responsible
• Workers being more productive
• Empowerment
• Motivation improves if staff are
given more responsibility
DOWNSIZING
• This is also a method of reducing the
size of your business and cutting costs
• If a particular area of your business is
not profit making or can be contracted
out then it can be removed
• THIS IS KNOWN AS DOWNSIZING:-
DOWNSIZING
Remove department
This example has 6
departments and
could downsize if
it had to cut costs.
THE FLAT STRUCTURE
A product of Delayering
• Caused by the need to respond to
the market
• This structure has fewer levels of
management:
• Shown as a flat pyramid
• No problems with communication
• Decisions are made more quickly
• Many large organisations have gone
through the delayering process
The Matrix Structure
• Based around specialist skills and
getting groups of people working
together
• Individuals within a team have their
own responsibility
• Gives scope for people lower down
the organisation to use their skills
• Encourages initiative
Matrix Structure
The Entrepreneurial Structure
Decisionmaker
Features:• All decisions are made centrally
• Few collective decisions and a great
reliance on key workers
• Most small businesses have this type of
structure
• Decisions can be made quickly
• Subordinates know who is in charge
• Little consultation required
• Not effective for large businesses
Centralised Structure
• Where all decisions are made
centrally (like entrepreneurial)
• Rely heavily on a number of key
workers
• Advantages
–
–
–
–
Senior management have full control
Procedures can be standardised
Senior managers have holistic view
Senior managers are experienced
Decentralised Structure
• Subordinates have authority to take
some decisions
• Delegation is freely used
• Advantages
– Empowerment of workers
– Reduces stress on senior management
– Provides greater job satisfaction for
subordinates
– Allows flexibility and quick response to
change
In practice….
• It is unlikely that any organisation
will use one of these structures
completely
• There is usually a mix of both
• Quality and staff selection could be
decentralised
• Finance is centralised