Organisational
Behaviour
Chapter 7
Structuring the Organisation
Objectives:
• Describe the principal organisational
structure types found in work organisations.
• Discuss the strengths, weaknesses and
applicability of each structure type.
• Contrast organic and mechanistic
structures.
• Discuss the importance of the informal
structure.
• Examine the development of modern
structures supported by new technologies.
© Mike Maughan, Organisational
Behaviour, Palgrave (2014)
Structuring the Organisation
• When we want to understand the key relationships and functions of an
organisation, we study its structure. Structure serves a number of
purposes:
• It shows the authority relationships in the organisation.
• It shows how resources are allocated across the organisation.
• It highlights the key functions and the supporting functions.
• It provides a formal communication system.
• It sets out group and individual responsibilities.
• It can give clear guidelines on career progression
© Mike Maughan, Organisational
Behaviour, Palgrave (2014)
Organic vs. mechanistic structures:
© Mike Maughan, Organisational
Behaviour, Palgrave (2014)
The hierarchical structure
A hierarchy is a series of levels of authority and task. It structure has to
incorporate several key features:
• Ownership (or the main controlling body in the case of public sector
or not for profit organisations)
• Top management, often in the form of a CEO and board of
directors,
• Various levels of management responsible for the implementation
of policy and day to day operations and functions,
• The operational level.
© Mike Maughan, Organisational
Behaviour, Palgrave (2014)
A typical hierarchical structure
© Mike Maughan, Organisational
Behaviour, Palgrave (2014)
Key relationships in a hierarchy
• Line relationships: This is the relationship between a senior and a
subordinate who reports directly to them. A line manager allocates work,
evaluates performance, is entitled to exercise authority and discipline over
direct subordinates and others further down the same line of command.
• Functional relationships: which describe the relationship between a
particular function, such as training and development or HRM, and other
functions in the hierarchy. There is no line relationship between a training
manager, for example, and the staff of another function, even though the
trainers have a responsibility to ensure that everyone is trained to do their
job effectively.
• Staff relationships: Many organisations have a small pool of staff who
provide assistance and services directly to senior managers. They often
carry out special projects, or need information from other parts of the
organisation. Again, they have no line responsibility over staff in other
functions, although being the assistant to the CEO is likely to carry a
significant degree of influence!
© Mike Maughan, Organisational
Behaviour, Palgrave (2014)
Types of hierarchical organisation
Any hierarchical structure needs to strike the right balance
between differentiation (separating tasks so that they can be
carried out more efficiently) and integration (ensuring that all
parts of the structure contribute to the overall goals of the
organisation)
© Mike Maughan, Organisational
Behaviour, Palgrave (2014)
Forms of differentiation
Hierarchies can be differentiated in several ways:
– Function – the typical department structure
– Product – If the organisation produces several goods or
services, then it is often more efficient to structure it
around those outputs
– Client group - The users of an organisation’s services may
be very varied
– Geographical location – If an organisation is geographically
very dispersed then it is more efficient to structure it
according to where it operates
© Mike Maughan, Organisational
Behaviour, Palgrave (2014)
Centralisation vs decentralisation
Centralisation - A highly centralised organisation will have all its decisionmaking carried out by senior staff at the top of the hierarchy. This will include
the strategic direction of the organisation, operational policies such as
budget allocation, staffing levels, management of human resources, control of
sales. It will make decisions as to financial incentives and pay structures
which will apply across the whole organisation. No key decisions will be left
to local managers.
Decentralisation - At the other extreme is the highly decentralised
organisation, in which many key decisions are left to local managers. The
centre decides overarching policy and strategy and trusts local managers to
implement it using their discretion knowledge of local conditions
© Mike Maughan, Organisational
Behaviour, Palgrave (2014)
Some problems with hierarchies
• It can become too rule-bound
• The communication channels in hierarchies tend to run
vertically, that is, from managers to subordinates and back
within the same department. There is often little lateral
communication between staff in different departments at the
same level of the organisation
• Hierarchies respond slowly to change. It is in the nature of a
hierarchy to discuss and evaluate potential changes at various
levels before arriving at a decision
• Human systems are complex and it is not possible to regulate
absolutely every thing without the regulatory system
becoming untenable
© Mike Maughan, Organisational
Behaviour, Palgrave (2014)
‘Flattening’ the hierarchy
This means reducing the number of levels in the
hierarchy (the scalar chain). This meant:
• Greater need for and use of management
information systems
• Greater need for teamwork and selfmanagement
• Greater devolution of decision making
• Greater decentralisation
© Mike Maughan, Organisational
Behaviour, Palgrave (2014)
The matrix organisation
This is a way of combining skills through the
development of cross-functional teams.
Staff still report to their functional line manager,
but are also part of a team for certain projects.
© Mike Maughan, Organisational
Behaviour, Palgrave (2014)
The matrix organisation
The advantages of a matrix are:
• It enables staff from different functional areas to work together
outside of the functional structure without having to continuously
refer to the functional line manager.
• It allows individuals to develop their skills and knowledge and to
contribute to a larger project.
• It improves the speed and accuracy of inter-functional
communication.
• It can be more cost effective by effective deployment of resources.
© Mike Maughan, Organisational
Behaviour, Palgrave (2014)
The matrix organisation
However, there are also some potential disadvantages:
• Fayol’s principle of Unity of Command is broken because an
individual reports to both a functional line manager in the normal
way, but also to one or more project leaders. This can lead to
friction between functional managers and project leaders, leaving
the staff member uncertain as to their responsibilities.
• Sometimes the matrix structure will coexist with the traditional
functional structure. This can cause tensions with divided loyalties.
• Staff accustomed to a traditional structure may find the relative
uncertainties of working in a matrix difficult.
© Mike Maughan, Organisational
Behaviour, Palgrave (2014)
Core-Periphery structures
Most organisations have always had contracts with external suppliers for
many things, but, as a response to the spirit of the times, many more
organisations began to outsource more and more services. The central
purpose of the business is referred to as the core. The outsourced activities
are called the periphery.
The core of the organisation is a relatively permanent entity, offering longterm, permanent employment to staff involved in the delivery of the goods
and services the organisation was set up to run. The periphery element of
the model contains several kinds of organisation and individual supplier who
were taken on to fulfill specific contractual purposes.
© Mike Maughan, Organisational
Behaviour, Palgrave (2014)
Core-Periphery structures
© Mike Maughan, Organisational
Behaviour, Palgrave (2014)
Core-Periphery structures
• The degree to which the core-periphery model has been a success
is disputed. Legge identifies three major flaws with the theory:
• ‘Sloppiness in conceptual specification’. There is a lack of rigour in
the qualitative and quantitive advantages proposed for the model
• We cannot use the model as a description of what is going on in the
workplace because it lacks empirical support.
• The model serves a covert ideological agenda. That is, the benefits
of such a model accrue principally to the owners and controllers of
capital at the expense of wage levels and job security to labour.
© Mike Maughan, Organisational
Behaviour, Palgrave (2014)
The network organisation
Networks came about because:
• Organisations needed knowledge to innovate to be
competitive
• Traditional organisations were very bad at finding and
exploiting the knowledge of their workforce, much of which is
passed on informally
• New social and communicative media mean that people can
bypass the traditional structure of organisations
• Networks need not be geographically restricted
© Mike Maughan, Organisational
Behaviour, Palgrave (2014)
The network organisation
Contrast between the formal and informal communication systems (Rob Cross et al.)
© Mike Maughan, Organisational
Behaviour, Palgrave (2014)
The Virtual Organisation
A virtual organisation is one which uses internet technologies to
form online alliances and collaborations with other,
geographically dispersed, individuals, groups and organisations.
Such an organisation can be very fluid, changing its alliances
rapidly in response to market changes. Although we can argue
that organisations have always done this with travelling
salesmen, subcontracting and so on, using modern technology
means that we no longer have the barriers of time, travel,
distance or availability of personnel to contend with
© Mike Maughan, Organisational
Behaviour, Palgrave (2014)
The Virtual Organisation
The advantages of virtuality are:
• More expertise: There is a much wider pool of expertise available.
• Greater flexibility: Changes can be made more rapidly by
developing new collaborations. Staff can operate at times and in
ways more convenient to them. Quality of life issues can be
addressed more flexibly.
• Cost reduction: Outsourcing functions and having fewer buildings
and other sites can reduce cost. An organisation can reduce its
exposure to financial risk by outsourcing production and setting up
franchises for sales.
© Mike Maughan, Organisational
Behaviour, Palgrave (2014)
The Virtual Organisation
However, there are also problems with such a structure, often brought
on by the same features which give advantages:
• Expertise: Individuals or organisations which provide expertise can
just as easily change partners as any one else in the network. This
can make an organisation vulnerable unless they have
comprehensive contracts enforceable in whatever jurisdiction is
being used
• Flexible staff: flexibility does not always improve quality of life for
staff. The social advantages of working with others are not fulfilled
for staff whose contact with each other is restricted to online
communication. Moreover, working in the virtual organisation is
only as secure as the length of the contract, making it difficult for
workers to make long term plans.
© Mike Maughan, Organisational
Behaviour, Palgrave (2014)