lec 02 - organisational structures

8/8/2019 Lec 02 - Organisational Structures

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M40ISIS/IT ChangeManagement, DrRK Bali

Organisational Structures

Dr Rajeev K Bali

THE GODFATHER (1972) M40ISIS/ITChangeManagement, DrRK Bali

Historical development of organisational structures

Different structural types

Key strategic principles of organisational structure

Centralisation -v- Devolution organisation control

Organisational configurations in practice

Introduction


Simple Structures

Run by the personal control of an individual

Traditional owner managed firm of Adam Smiths day,eg. Joe Bloggs and Son plumbers

Little formal demarcation of functional activities

Number of employees is small as the organisation

structure can only operate effectively with a low numberof employees

M40ISIS/ITChangeManagement, DrRK Bali

Functional Structures

Based on the primary activities that have to be carriedout (production, finance, marketing etc)



Advantages

Chief Executive is able to keep in touch with alloperations

Simple/reduced control mechanisms

Clear definition of responsibilities (goals and tasks)

Specialists at senior and middlemanagement levels



Disadvantages

Senior managers may become overburdenedwith routine matters

Senior managers may neglect strategicissues

Organisational form does not cope well withdiversity

Co-ordination between functions may bedifficult to achieve

Failure to adapt because individualsconcentrate on their specialist functions


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Multidivisional Structure

Subdivided into units (divisions) on the basis ofproducts, services, geographical areas or the process ofthe enterprise



Advantages

Concentration on the business area (eg.product/market)

Opportunity for focus and specialisation

Performance of each division can bemeasured

Ease of acquisition of different divisions

Senior managers attention towardsstrategy



Disadvantages

Possible confusion over locus of responsibility(centralisation/devolution)

Duplication of effort across divisions

Sacrifice of opportunities for synergy

Lack of co-operation between divisions Tension between centre and lower tiers?

Complexity of co-operation in too manydivisions


Matrix Structure

Combination of structures which often take the formof product and geographical divisions or functionaland divisional structure operating in tandem


Matrix Structure

Advantages

Quality decision making where there are conflicts ofinterest

Direct contact replaces bureaucracy

Increased managerial motivation through increasedinvolvement in decisions


Matrix Structure

Disadvantages

High risk of dilution of priorities, not allmatters are equal

Longer time-spans in making decisions

Where does responsibility lie, whoseaccountable for profitability?

High degrees of conflict

Creeping bureaucracy


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Small organisations tend to have limited resourcesbut an informal structure, allowing flexibility inresponse, but giving unclear lines of responsibility

The functional (unified) organisation has been usedmainly in small to medium-sized organisations withone main product range.

As firms develop further ranges of products, it isoften necessary to divisionalise them.Each division will then have its own functionalstructure

Key Principles


If an organisations product ranges becomes highlydiverse the centre may become a holding company

The matrix organisation is an alternative structurefor companies with several product ranges, wherejoint responsibility is held by two differentstructures, eg. between product divisions andanother organisational structure such asgeographical or functional divisions

The locus of strategy development in anorganisation depends on organisationalstructure

Key Principles


Devolution: extent to which the centre of an organisationdelegates decision making to units and managers lowerdown the hierarchy

Reasons for the drive towards devolution

Financial pressure on public/private organisations

Centralisation may lead to top managers becomingdetached from the sharp-end of business

Overcentralisation results in organisations becomingtoo concerned with internal matters

A response to historical overcentralisation?

Centralisation -v- Devolution


Improving efficiency (economies of scale etc)

Providing expertise in specific functions (egpersonnel)

Providing investment (finance and competencebuilding)

Fostering innovation (coaching of people/managers)

Risk reduction (large scale of combined operations)Provision of strong external image through size

Encouragement of collaboration of effort

Setting standards by which individualsand units may be assessed

Adding Value


Most organisations are a hybrid of different organisationalstructures

Has been a trend towards devolution of decision-making,the centre still has an important role to play

Costs associated with structural change:

?Loss of control

?Damage to employee motivation

?Lack of clarity in communication

Legacy problems of organisational culture(cant change the way people think overnight)

In Practice...


Summary

Major organisational structures

Key principles

Centralisation -v- Devolution organisation control

Adding Value

lec 02 - organisational structures

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