Organizational structure and design ?
Organization
An organization is a collection of people working
together in a coordinated and structured fashion
to achieve one or more goals.
A consciously coordinated social unit, composed
of two or more people, that functions on a
relatively continuous basis to achieve a common
goal or set of goals
A social arrangement for the
performance of the collective goals
controlled
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Organizational structure and design ?
Organization
Social
arrangements:
Organizations
are
collection of peoples and machines in a
structured way
Collective goals: Existence of organizations
depend up achievement of common goals
Controlled performance: Controlled performance
means deliberate allocated on resource between
organization members which includes:
•Resource allocation
•Control function
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Organizational structure and design ?
Organization and people
•Organizations are strongly influenced by the
people that form part of them.
•Organizations can take in part of the personality
of the people within them and their attitudes,
perceptions and behaviors affect how an
organization will operate.
Organization’s Role in Society
•Organizations exist to allow accomplishment of
work that could not be achieved by people alone.
•As long as the goals of an organization are
appropriate, society will allow them to exist and
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they can contribute to society
Organizational structure and design ?
Why organizations exist?
•Together they
individually
achieve
what
cannot
achieve
•Overcome environmental and biological limitations
•Increase productively due to:
•Work specialization / division of labour
•Exchange
•Synergy: Together we grow better
•Increased
knowledge
enhancement
•Transaction – cost
organization:
•Saving in time
•Reduce cost
development
economies
approach
and
to
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Organizational structure and design ?
Images and perception of organizations
Our lives become, for better and for worse, a society of organizations.
We are born in organizations and are educated in organizations that we
can later work in organizations. At the same time, organizations supply
us and entertain us, they govern us and harass us. Finally we are buried
by organizations (Henry Mintzberg).
Images/Metaphors of 0rganizations: Gereth Morgan
1.
Organizations are machines
2.
Organizations are biological organism
3.
Organizations are human brains
4.
Organizations are cultures or subcultures
5.
Organizations are sub systems
6.
Organizations are political systems
7.
Organizations are psychic prisons
8.
Organizations are systems of change and transformation
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9.
Organizations are instruments of domination
Organizational structure and design ?
Classification of organizations
•By ownership:
•By control:
•Activity:
•Legal structure:
•Objective:
•Accountability
•Source of finance:
•Region:
Private, private
Managers, trustees
Retailer, manufactures, hospital
Partnership, company
Commercial, non commercial
Debt, equity
National or international
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Organizational structure and design ?
Basic Classification of organizations
•Business organizations
•Non business organizations
Business organizations
•Definition:
•Legal
•Capital
•Profit objective
•Types :
•Sole - proprietorship
•Partnership
•Company
•Activities:
•Manufacturing
•Mining
•Energy
•Retailing
•Services
•Services are intangible
•Services are inseparable
•Services are heterogeneous
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•Intellectual production
Organizational structure and design ?
Basic Classification of organizations
Non business organization
•Public organizations
•Non profit organizations
Public organizations
•Definition:
•Run by government
•Capital
•Non-profit objective
•Diverse nature
•Characteristics
•Accountable to parliament
•Command resources
•Base on fairness
•Equality
•Resource based not price based
•Types :
•Regulatory bodies
•Health institutions
•Educational institutions
•Policy making bodies
•Etc
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Organizational structure and design ?
Basic Classification of organizations
Non business organization
•Public organizations
•Non profit organizations
Non profit organizations
•Definition:
•Formed for purpose
•Capital
•Non-profit objective
•Public service
•Types :
•Clubs
•Trade unions
•Associations
•Charities
•Professional association
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What is Organizational Structure ?
Bringing the functional units of an organization into a well-conceived structure
Assigning authority and responsibility to individuals
Organizational structure:
•Divides the jobs
•Group the jobs into functional units
•Coordinate the jobs
•Assign authority
•Assign responsibility
•Ensure accountability
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Elements of Organizational Structure ?
1 - What is Work Specialization ?
•A component of organization structure that involves having each discrete step
of a job done by a different individual rather than having one individual do the
whole job
•It is division of labour
Objectives:
•Availability of experts
•Efficient use of skills
•Specialization in training
•Specialized use of equipment and infrastructure
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Elements of Organizational Structure ?
2 – Departmentalization
•Systematic way of grouping the jobs under a specific head / function which were
indentified during work specialization process
•It is the basis for grouping the jobs
Basis for departmentalization:
•Function
•Product
•Process
•Customer
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Elements of Organizational Structure ?
3- What is Chain of Command ?
Chain of Command
The continuous line of authority that extends from the highest levels in an
organization to the lowest levels and clarifies who reports to whom
•Authority : The rights inherent in a managerial position to give orders and
expect them to be obeyed
•Responsibility: An obligation to perform assigned activities
4- Unity of command
Unity of Commend
The management principle that no person should report to more than one boss
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What are the Elements of Organizational Structure ?
5-What is the span of control ?
The number of subordinates a manger can direct efficiently and effectively
Factors affecting span of control:
•Managerial capability
•Nature of employees group
•Nature of work
•Task complexity
•Standardisation of work
Wide span of control:
•Reduces cost
•Speedup decision making
•Gives flexibility
•Empowers manager
Narrow span of control:
•Expensive as add more levels of management
•Lead to difficulty in communication
•Slow decision making
•Long vertical structure that might lead to bureaucratic behaviour
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What are the Elements of Organizational Structure ?
6- Centralization and Decentralization
Centralization
A function when decision-making authority is placed higher level
Decentralization
The pushing down of decision-making authority to the lowest levels of an
organization
Situations of centralisation :
•Normality in environment
•Incapable lower managers
•Non willingness of lower
management to participate
•Importance of decision
•Risky situation
•Keeping uniformity
•Large company
•Uniform implementation of
strategy
Situations of decentralisation :
•Complex environment
•Capable lower managers
•Willingness to participate
•Minor decision
•Geographical dislocation
•Required
for
effective
implementation of strategy
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What are the Elements of Organizational Structure ?
6- Centralization and Decentralization
Merits of centralisation :
•Better coordination
•Overall solution
•Balanced
allocation
of
resources
•Better and reliable decision
as they made at top by
experienced managers
•Low cost as less managers
are engaged
•Quick
and
centralized
decision in crises
•Standardised polices
Situations of decentralisation :
•Less load at top management
•Motivates lower management
•Speedy decision are made locally
•Decision in view of local context
•Develops lower management
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What are the Elements of Organizational Structure ?
7- Formalization
The degree to which jobs within organization are standardized and
extent to which employees is guided by rules and procedures
Situations of centralisation :
•Normality in environment
•Incapable lower managers
•Non willingness of lower
management to participate
•Importance of decision
•Risky situation
•Keeping uniformity
•Large company
•Uniform implementation of
strategy
Situations of decentralisation :
•Complex environment
•Capable lower managers
•Willingness to participate
•Minor decision
•Geographical dislocation
•Required
for
effective
implementation of strategy
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What are the Elements of Organizational Structure ?
8- Flat or tall
Tall structure
An organization with large number of management levels and
low span of control
CEO
Divisional head
Departmental head
Section head
Assistant manager
Supervisor
Team leader
Worker
Merits :
•Narrow span of control
•Small groups with more
participation from each team
member
•Better career planning
•Quick promotion
Demerits :
•Low delegation
•Control over innovation
•Long channel
•High costs
•Slow decision making
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What are the Elements of Organizational Structure ?
8- Flat or tall
Flat structure
An organization with small number of management levels and
high span of control
CEO
Departmental head
Supervisor
Worker
Merits :
•High delegation
•Low cost
•Speedy communication
•Small channel
Demerits :
•Overworked managers
•Non specialised managers
•Low morale
•Low coordination
•Less time for planning and
more
involvement
in
supervision
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Various types of organizational structures
Two basic Categories of Organizational Structures
Mechanistic Organization
The bureaucracy; a structure that is high in specialization, formulization,
and centralization
Organic Organization
A structure that is low in specialization, formulization, and centralization
Mechanistic organization:
•High work specialization
•Rigid departmentalization
•Narrow span of control due
to tall structure
•High formulization
•Centralization
Organic organization :
•Low work specialization
•flexible departmentalization
•Low direct supervision
•Less formulization
•Decentralization
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Types of organizational structure ?
Simple Structure
•An organization that is low in specialization and formulization but high in
centralization
•This Organization reflects the owner as president with all employees directly
reporting to him
Employee 1
Employee2
President
Employee 4
Employee 3
Employee 5
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Types of organizational structure ?
Functional Structure
•An organization in which similar and related occupational specialties are grouped together
•Process of grouping the activities by functions
Plant Manager
Manager
Engineering
Manager
Accounting
ADVANTAGES
•Allows the division of labor / work
specialization
•Avoids duplication of tasks
•Suitable for centralized or one activity
•Helps top management in coordinating and
controlling the entire organization
•Clarifies the roles/responsibilities of
departments and employees
•Provides clear accountability at both the
departmental and individual level
Manager
MIS
Manager
Human Resources
Manager
Purchasing
DISADVANTAGES
•Creates a rigid and slow moving organization
•Leads to a loss of innovation and innovation
thinking as employee focus on following correct
procedures and protocol
•Does not allow for sharing of information / ideas
across departmental lines (which is viewed as
being especially important in today’s knowledge
economy)
•Focus on internal rather external side of the
department
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Types of organizational structure ?
Process based Structure
•An organization in which activities reflect a process and so departmentalized
in form of a process
Plant manager
Milling
Marketing
Assembling
Personnel
ADVANTAGES
Sanding
Finising
Purchasing
Inspection
Finance
DISADVANTAGES
•Clear distinction of technical and support •Coordination due to various process is difficult
divisions
•Conflict may arise
•Clear distinction of specialized functions •Use is possible in only process oriented
and common functions
organizations
•Help in better hr managements based on
specific departmental need
•Economies from processes are possible
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Types of organizational structure ?
Product based or Divisional Structure
•An organization made up of self-contained units on the basis of products with
With each has its own departments to perform the related tasks
President
Vice President
Fuels
Vice President
Lubricants And Waxes
Vice President
Chemicals
Marketing
Marketing
Marketing
Planning and Economics
Planning and Economics
Planning and Economics
Supply and Distribution
Supply and Distribution
Supply and Distribution
Manufacturing
Manufacturing
Manufacturing
ADVANTAGES
DISADVANTAGES
•Product based specialization is possible
•Specialized HR can be developed
•Coordination and integration between various
functional units of different products is possible
•Economies based on mass scale production of
each product is possible
•Economies by better coordination are possible
•Increases in costs
•Increase in complexity
•Failure to share resources sometimes due to complex
nature
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Types of organizational structure ?
------------------Geographical
Structure
•An organization in which activities in a given area or territory be grouped and
assigned to a manager
President
Marketing
Western Region
Personnel
Personnel
Southwest Region
Engineering
Purchasing
Central Region
Production
Finance
Southeast Region
Accounting
Eastern Region
Sales
ADVANTAGES
DISADVANTAGES
•Places responsibility at a lower level
•Places emphasis on local markets, customers,
stakeholders and problems
•Improves coordination in a region
•Takes advantage of economies of local operations
•Better face-to-face communication with local
interests
•Furnishes measurable training ground for general
managers
•Requires more persons with general manager abilities
•Tends to make maintenance of economical central
services difficult and may require services such as
personnel or purchasing at the regional level
•Increases problem of top management control
•Inconsistency in standard
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Types of organizational structure ?
Customer based Product Structure
An organization in which activities reflect a primary interest in customers
President
Community-City
Banking
Real Estate &
Mortgage loans
ADVANTAGES
Corporate
Banking
Agricultural
Banking
Institutional
Banking
DISADVANTAGES
•Enables an organization to be more aligned •Individual departments can become too
with the needs of its customers
autonomous which makes setting and
•Promotes innovation and innovative coordinating a single strategic direction to be
thinking as the organizational culture followed difficult
becomes more focused on problem solving •It limits the sharing of information / ideas across
/ meeting customer needs than following the organization lines (which is viewed as being
processes and protocol
especially important in today’s knowledge
•Customer based work specialization is economy)
possible
•Under utilisation of resources
•Duplication of activities and cost
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Types of organizational structure ?
Modern Organization Designs
Strategic Business Units (SBUs)
Team structures
Project Structure
Matrix Structure
Modular structure
Virtual Structure
Learning organization
Emerging trends in modern Organization Designs
Trend
•Flat structures with the view to decentralize and increase delegation
•Increase in responsibilities
•Multidisciplinary teams i.e. matrix structures
•Flexible structures
•Hybrid structures in terms of combination and communication
•Multi-tasking employees
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Modern Organization Designs
Strategic Business Units (SBUs) / Divisional structure
The SBU structure groups similar division into business units and delegates
authority and responsibility for each unit to a senior executive who reports
directly to CEO
Chief Executive Officer
Chief Strategy
Officer (CSO)
Chief Finance
Officer (CFO)
Chief Operating
Officer (COO)
Industrial Products SBU
Adhesive
Packaging
Division
Tubes /
Cores
Division
Paper
Division
Chief
Information
Officer (CIO)
VP of Human
Resources
VP of
Marketing
Consumer Products SBU
Reels
Division
Flexible
High
Packaging Density Film
Division
Division
Metal
Ends
Division
Rigid
Division
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Modern Organization Designs
SBU / Divisional structure
ADVANTAGES
•Building block structure -- accommodates
growth
•Better coordination in diverse markets
DISADVANTAGES
•Duplication, inefficient use of resources
•Specializations are dispersed, creating silos of
knowledge
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Modern Organization Designs
Team structure
Teams is a situation when two or more people who interact dynamically,
interdependently, and adaptively toward a common and valued goal,
have specific roles or functions, and have a time-limited membership. Teams
based structure consist of self-directed work teams organized around work
Processes with flat hierarchy, few management levels, Very little formalization
Usually found within divisional structure
Multi-Team System (MTS) for
Patient Care
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Modern Organization Designs
Team structure
ADVANTAGES
•Responsive, flexible
•Lower admin costs
•More informed decisions
DISADVANTAGES
•Interpersonal training costs
•Slower during team development
•Stress due to ambiguous roles
•Problems with supervisor role changes
•Duplication of resources
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Modern Organization Designs
Project Structure
An organization in which activities require a great deal of planning,
research and coordination
General
Manager
Project A
Quality
Control
Engineering
R&D
Project B
Contract
Scheduling
Administration
Manufacturing
Purchasing
Quality
Control
Engineering
R&D
Contract
Scheduling
Administration
Manufacturing
Purchasing
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Modern Organization Designs
Project structure
ADVANTAGES
•Simple
•Fast
•Cohesive
•Cross-Functional Integration
DISADVANTAGES
•Expensive
•Internal Strife
•Limited Technological Expertise
•Difficult Post-Project Transition
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Modern Organization Designs
Matrix Structure
An organization in which specialists from functional departments are assigned
to work on one or more projects led by a project manager. Employees are
temporarily assigned to a specific project team and have a permanent
functional unit
CEO
Engineering
Marketing
Design
Project A
Manager
Project B
Manager
Project C
Manager
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Modern Organization Designs
Matrix structure
ADVANTAGES
DISADVANTAGES
•Uses resources and expertise effectively
•Improves communication, flexibility,
innovation
•Focuses specialists on clients and products
•Supports knowledge sharing within
specialty across groups
•Solution when two divisions have equal
importance
•Increases goal conflict and ambiguity
•Two bosses dilutes accountability
•More conflict, organizational politics, and stress
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Modern Organization Designs
Virtual Structure
•An organization in which a very few activities are carried out and as much as
possible work is carried out by other organizations
•continually evolving network of independent companies that
are linked together to share skills, costs, and access to one
another’s markets.
Design Company
Logistics Company
Core Company
Sales and Marketing Company
Manufacturing Company
Finance Company
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Modern Organization Designs
Virtual structure
ADVANTAGES
DISADVANTAGES
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Modern Organization Designs
Modular Structure
An organization in which non-vital functions are outsourced, which uses the
knowledge and expertise of outside suppliers while retaining strategic control.
ADVANTAGES
DISADVANTAGES
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Modern Organization Designs
Learning organization
Organizational design
•Boundary-less
•Teams
•empowerment
Organizational culture
•Strong mutual relationships
•Sense of community
•Caring
•Trust
Learning organization
Information sharing
•Open
•timely
•Accurate
Leadership
•Shared vision
•Collaboration
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Modern Organization Designs
Learning organization
•Change in structure on the basis of new knowledge
•Awareness of vision at all levels
•Open communication at all levels
•High priority to organizational goals
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Emerging trends in modern organization designs
Trend
•Flat structures with the view to decentralize and increase delegation
•Increase in responsibilities
•Multidisciplinary teams i.e. matrix structures
•Flexible structures
•Hybrid structures in terms of combination and communication
•Multi-tasking employees
Emerging issues in modern organization designs
Issue / problem
•Low motivation and morale
•Delays and inappropriate decisions
•Conflicts
•Lack of coordination
•High costs
•Non alignment with environment
•Non alignment with business model
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Assignment: read chapter 17 from
pbp in relation with these slides.
There will be small test. We will
also work on paper questions next
time.
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