CHB 2 Structure

Organizational Structure
Mr. Iftikhar Ahmad, CEO Dynamique Business Consultants 0300-4466062,
Mintzbergs Structural Configuration

Mr. Iftikhar Ahmad, CEO, Dynamique Business Consultants, 0300-4466062,
Mintzberg suggests that all organisations can be analysed into five components, according to how they relate to the work of the organisation.
Mintzbergs Structural Configuration

Mr. Iftikhar Ahmad, CEO Dynamique Business Consultants, 0300-4466062
Strategic apex
Ensures the organisation follows its mission. Manages the organisation's relationship with the environment.
Techno structure
Analysers determine, and standardise work processes and techniques and standardise outputs (eg goods must achieve a specified level of quality)Personnel analysts standardise skills (eg through training programmes)
Conveys the goals set by the strategic apex and controls the work of the operating core in pursuit of those goals: ie middle management. People directly involved in the process of obtaining inputs, and converting them into outputs Ancillary services such as PR, legal counsel, the cafeteria and security staff. Support staff do not plan or standardise production. They function independently of the operating core.
Middle line
Operating core
Support staff
Why Structure
Implementation a strategy successfully depends on the selecting the right combination of organizational structure, control system and culture. The main issue in designing organizational structure are how to group task, function, and divisions; how to allocate authority and responsibility; and how to use integrating mechanisms to improve coordination between functions.
Organisation structure is formed by the grouping of people into departments or sections and the allocation of responsibility and authority.
Organisations can be departmentalised on a functional basis (with separate departments for production, marketing, finance etc), a geographical basis (by region, or country), a product basis (eg world wide divisions for product X, Y etc), a brand basis, or a matrix basis (eg someone selling product X in country A would report to both a product X manager and a country A manager). Organisation structures often feature a variety of these types, as hybrid structures.
Organisation structure implies a framework intended to:
(a) Link individuals in an established network of relationships so that authority, responsibility and communications can be controlled (b) Allocate the tasks required to fulfil the objective of the organisation to suitable individuals or groups (c) Give each individual or group the authority required to perform the allocated tasks, while controlling their behaviour and use of resources in the interests of the organisation as a whole (d) Co-ordinate the objectives and activities of separate units, so that overall aims are achieved without gaps or overlaps in the flow of work (e) Facilitate the flow of work, information and other resources through the organisation.
Structure follows the influence of the following: Strategic Objective (coordination is required) Environment volatility (product based or customers based) Diversity (specially in multinational) Future Strategy (growth through merger & acquisition) Technology ( reporting patterns, style and speed) People ( skills, competences)
Mintzberg says structure follows strategy
Entrepreneurial A fluid structure with little or no formality. Suitable for small start-up companies, the activities and decisions are dominated by a key central figure (the owner/entrepreneur).
Functional organisation
involves grouping together people who do similar tasks. Primary functions in a manufacturing company might be production, sales, finance, and general administration. Sub-departments of marketing might be market research, advertising, PR and so on. ( fit for smaller organization)
Advantages of Functional structure include:
(a) Expertise is pooled thanks to the division of work into specialist areas (b) It avoids duplication (eg one management accounts department rather than several) and enables economies of scale. (c) It facilitates the recruitment, management and development of functional specialists. (d) It suits centralised businesses.
Disadvantages of functional structure include: (a) It focuses on internal processes and inputs, rather than the customer and outputs, which are what ultimately drive a business. The customer is only interested in the product, and being referred from one functional department to another may not be the most satisfying experience for the customer. (b) Communication problems may arise between different functions, who each have their own jargon. (c) Poor co-ordination, especially if rooted in a tall organisation structure. Decisions by one function/department involving another might have to be referred upwards, and dealt with at a higher level, thereby increasing the burdens on senior management. (d) Functional structures create vertical barriers to information and work flow. Management writer Tom Peters suggests that customer service requires 'horizontal' flow between functions rather than passing the customer from one functional department to another.
Geographic departmentation
Geographic departmentation Where the organisation is structured according to geographic area, some authority is retained at Head Office but dayto-day operations are handled on a territorial basis (eg Southern region, Western region). Many sales departments are organised territorially.
There are advantages of geographic departmentation. (a) There is local decision-making at the point of contact between the organisation (eg a salesperson) and its customers, suppliers or other stakeholders. (b) It may be cheaper to establish area factories/offices than to service markets from one location (eg costs of transportation and travelling may be reduced).
But there are disadvantages too. (a) Duplication and possible loss of economies of scale might arise. For example, a national organisation divided into ten regions might have a customer liaison department in each regional office. If the organisation did all customer liaison work from head office it might need fewer managerial staff. (b) Inconsistency in methods or standards may develop across different areas.
Board of Directors
Geographic organisation
Regional Board A etc Production dept etc Finance dept
Regional Board B
Regional Board C etc Personnel dept etc Marketing and sales dept etc
Divisionalisation
When organisations reach a certain size it may be appropriate to structure it into divisions or 'semi-autonomous blocks. These divisions may focus on a particular geographic area or a particular product.
Divisionalisation
Question Role of head office in divisions

Divisions will normally report to head office on a range of performance-related matters. The level of autonomy given to divisional heads is dependant on the level of centralisation required. Centralised organisations retain much of the power and decisionmaking at head office. Decentralised organisations delegate more business decisions to divisional heads
Divisionalisation
Each dividion may be:

A subsidiary company under a holding company
A profit centre or investment centre with in a single country A STRATEGIC business unit (SBU) with its own objectives
Divisionalisation
Successful divisionalisation requires certain key conditions.
(a) Each division must have properly delegated authority, and must be held properly accountable to head office (eg for profits earned). (b) Each unit must be large enough to support the quantity and quality of management it needs. (c) The unit must not rely on head office for excessive management support. (d) Each unit must have a potential for growth in its own area of operations. (e) There should be scope and challenge in the job for the management of each unit. (f) If units deal with each other, it should be as an 'arm's length' transaction. There should be no insistence on preferential treatment to be given to a 'fellow unit' by another unit of the overall organisation
Advantages
Focuses the attention of management below 'top level' on
business performance. Reduces the likelihood of unprofitable products and activities being continued. Encourages a greater attention to efficiency, lower costs and higher profits. Knowledge Gives more authority to junior managers, and so grooms them for more senior positions in the future (planned managerial succession). Reduces the number of levels of management. The top executives in each division should be able to report directly to the chief executive of the holding company.
Disadvantages
In some businesses, it is impossible to identify completely independent products or markets for which separate divisions can be set up. Divisionalisation is only possible at a fairly senior management level, because there is a limit to how much discretion can be used in the division of work. For example, every product needs a manufacturing function and a selling function. There may be more resource problems. Many divisions get their resources from head office in competition with other divisions.
Practice
Required
Suggest two benefits and two drawbacks of both centralization and decentralization
Hybrid Organisation structures are rarely composed of only one type of structures organisation, although an all-functional structure is theoretically
feasible. 'Hybrid' structures may involve a mix of functional departmentation, ensuring specialised attention to key functions, with elements of (for example): Product organisation, to suit the requirements of brand marketing or production technologies Customer organisation, particularly in marketing departments, to service key accounts Territorial organisation, particularly of sales and distribution departments, to service local requirements for marketing or distribution in dispersed regions or countries
Matrix Organization
Matrix and project organisation Where hybrid organisation 'mixes' organisation types,
matrix organisation actually crosses functional and product/customer/project organisation. The employees presented by the dot in the above diagram, for example, are responsible to the Finance Manager for their work in accounting and finance for their functional department and are responsible to the Project Manager C for their work on the project team: budgeting, management reporting and payroll relevant to the project, say.
Advantages of matrix organisation

(a) Greater flexibility of:
(i) People. Employees develop an attitude geared to accepting change, and departmental monopolies are broken down. (ii) Workflow and decision-making. Direct contact between staff encourages problem solving and big picture thinking. (iii) Tasks and structure. The matrix structure may be readily amended, where projects are completed.
Advantages of matrix organisation

(b) Inter-disciplinary co-operation and a mixing of skills and expertise, along with improved communication and coordination.
(c) Motivation and employee development: providing employees with greater participation in planning and control decisions. (d) Market awareness: the organisation tends to become more customer/quality focused.
(e) Horizontal workflow: Bureaucratic obstacles are removed, and department specialisms become less powerful.
Disadvantages of matrix organisation

(a) Dual authority threatens a conflict between functional managers and product/ project area managers. (b) An individual with two or more bosses may suffer stress from conflicting demands or ambiguous roles. (c) Cost: product management posts are added, meetings have to be held, and so on. (d) Slower decision making
PRACTICE
Required
Which structure would suit these companies? (a) A family run restaurant with 10 staff. (b) A small manufacturing company with 250 staff. (c) Johnson and Johnson who have 197 strategic business units. (d) BPP Holdings plc
The new organisation

Some recent trends (identified by writers such as Tom Peters) have emerged from the focus on flexibility as a key organisational value.
Flat structures. The flattening of hierarchies does away with levels of organisation which lengthened lines of communication and decision making and encouraged ever-increasing specialisation. Flat structures are more responsive, because there is a more direct relationship between the organisation's strategic centre and the operational units serving the customer.

'Horizontal structures'. What Peters (Liberation Management) calls 'going horizontal' is a recognition that functional versatility (through multi-functional project teams and multi-skilling, for example) is the key to flexibility. In the words (quoted by Peters) of a Motorola executive: 'The traditional job descriptions were barriers. We needed an organisation soft enough between the organisational disciplines so that people would run freely across functional barriers or organisational barriers with the common goal of getting the job done, rather than just making certain that their specific part of the job was completed.'

Chunked' and 'unglued' structures. So far, this has meant team working and decentralisation, or empowerment, creating smaller and more flexible units within the overall structure. Charles Handy's 'shamrock organisation' (with a three-leafed structured of core, subcontractor and flexible part-time labour) is gaining ground as a workable model for a leaner and more flexible workforce, within a controlled framework.

professionals., technicians And managers for key competences
Temporary & part time workers paid weekly, hourly or for the time they work
Self-employed Employs Hired on contract

Output-focused structures. The key to all the above trends is the focus on results, and on the customer, instead of internal processes and functions for their own sake. A project management orientation and structure, for example, is being applied to the supply of services within the organisation (to internal customers) as well as to the external market, in order to facilitate listening and responding to customer demands. (e) 'Jobless' structures. Meanwhile, the employee becomes not a job-holder but the vendor of a portfolio of demonstrated outputs and competencies (Bridges, Jobshift). However daunting, this is a concrete expression of the concept of employability, which says that a person needs to have a portfolio of skills which are valuable on the open labour market: employees need to be mobile, moving between organisations rather than settling in to a particular job.
Centralisation and decentralisation

A centralised organisation is one in which authority is concentrated in one place. We can look at centralisation in two ways. (a) Geography. some functions may be centralised rather than 'scattered' in different offices, departments or locations. So, for example, secretarial support, IT support and information storage (filing) may be centralised in specialist departments (whose services are shared by other functions) rather than carried out by staff/equipment duplicated in each departmental office. (b) Authority. Centralisation also refers to the extent to which people have to refer decisions upwards to their superiors. Decentralisation therefore implies increased delegation, empowerment and autonomy at lower levels of the organisation.
Organizational Structure Advantages and disadvantages of centralisation

Centralisation offers greater control and co-ordination; decentralisation offers greater flexibility.
Pro centralisation Decisions are made at one point and so are easier to coordinate. Senior managers can take a wider view of problems and consequences. Senior management can balance the interests of different functions eg by deciding on the resources to allocate to each. Pro decentralisation/delegation Avoids overburdening top managers, in terms of workload and stress. Improves motivation of more junior managers who are given responsibility. Greater awareness of local problems by decision makers. (Geographically dispersed organisations are often decentralised on a regional/area basis for this reason.) Greater speed of decision making, and response to changing events, since no need to refer decisions upwards. This is particularly important in rapidly changing markets. Helps develop the skills of junior managers: supports managerial succession.
Quality of decisions is (theoretically) higher due to senior managers' skills and experience.
Possibly cheaper, by reducing number of managers needed and so lower costs of overheads.
Crisis decisions are taken more quickly at the centre, without need to refer back.
Separate spheres of responsibility can be identified: controls, performance measurement and accountability are better.
Policies, procedures and documentation can be standardised organisation-wide.
Communication technology allows decisions to be made locally, with information and input from head office if required.
Planning & Control Processes
Span of Control
The span of control refers to the number of subordinates immediately reporting to a superior official. A number of factors influence the span of control. A manager's capabilities limit the span of control: there are physical and mental limitations to any single manager's ability to control people and activities. The nature of the manager's work load The more non-supervisory work in a manager's workload: (i) The narrower the span of control (ii) The greater the delegation of authority to subordinates
Planning & Control Processes
Span of Control
The geographical dispersion of subordinates Subordinates' work: if all subordinates do similar tasks, a wide span is possible The nature of problems that a supervisor might have to help subordinates with. Time consuming problems suggest a narrow span of control. The degree of interaction between subordinates. If subordinates can help each other, a wide span is possible. If close group cohesion is desirable, a narrow span of control might be needed. The amount of support that supervisors receive from other parts of the organisation.
Tall & Flat Organization

Recent trends have been towards delayering organisations of levels of management. In other words, tall organisations (with many management levels, and narrow spans of control) are turning into flat organisations (with fewer management levels, wider spans of control) as a result of technological changes and the granting of more decision making power to front line employs
Key terms Scalar chain: the chain of command from the most senior to the most junior. A tall organisation is one which, in relation to its size, has a large number of levels of management hierarchy. This implies a narrow span of control. A flat organisation is one which, in relation to its size, has a small number of hierarchical levels. This implies a wide span of control.
Tall & Flat Organization
Tall Organization
FOR
Narrow control spans
AGAINST
Tall organisation
Inhibits delegation
Small groups enable team members to Rigid supervision can be imposed, participate in decisions blocking initiative A large number of steps on the promotional ladders assists management training The same work passes through too many hands Increases administration and overhead costs Extra communication problems, as the strategic apex is further away
Flat Organization
FOR
More opportunity for delegation
AGAINST
Requires that jobs can be delegated. Managers may only get a superficial idea of what goes on. If they are overworked they are more likely to be involved in crisis management Sacrifices control Middle managers are often necessary to convert the grand vision of the strategic apex into operational terms
Relatively cheap In theory, speeds up communication between strategic apex and operating core
Delayering
Delayering is the reduction of the number of management levels from bottom to top.
Many organisations are delayering. Middle line jobs are vanishing. Organisations are increasing the average span of control, are reducing management levels and are becoming flatter. (a) Information technology reduces the need for middle managers to process information. (b) Empowerment. Many organisations, especially service businesses, are keen to delegate authority down the line to the lowest possible level. Front-line workers in the operating core are allowed to take decisions. This is because it is often the best way to satisfy customers. This perhaps removes the needs for some middle management jobs. (c) Economy. Delayering reduces managerial/supervisory costs. (d) Fashion. Delayering is fashionable: if senior managers believe that tall structures are inherently inflexible, they might cut the numbers of management levels.
Summary
Organisations achieve results which individuals cannot achieve by themselves. An organisation is a social arrangement which pursues collective goals and controls its own performance. Organisations differ according to their: ownership, control, activity, orientation, size, legal status, funding and technology. Organisation structure is formed by the grouping of people into departments or sections and the allocation of responsibility and authority. Mintzberg suggests that all organisation structures have five components: strategic apex, middle line and operating core, plus technostructure and support staff.
Summary

Classical organisations are based on the principle of hierarchy. There is a line of decision making power from the top of the organisation to the bottom. This scalar chain is intimately connected to the concept of span of control, which is the number of individuals under the direct supervision of any one person. Modern management theory stresses flexibility as a key value, and organisational measures such as matrix and horizontal structures, multiskilling, empowerment and flexible labour deployment are currently being explored. Contingency theory suggests that there is no one best way to structure (or manage) an organisation. It all depends on a number of variables. An organisation can be viewed as an open system, interacting with its environment. Span of control or 'span of management' refers to the number of subordinates responsible to a superior. Recent trends have been towards delayering organisations of levels of management. In other words, tall organisations (with many management levels, and narrow spans of control) are turning into flat organisations (with fewer management levels, wider spans of control) as a result of technological changes and the granting of more decision making power to front line employees.
summary

In a divisional structure some activities are decentralised to business units or regions. A centralised organisation is one in which authority is concentrated in one place. Centralisation offers greater control and co-ordination; decentralisation offers greater flexibility. Burns and Stalker noted that mechanistic (or bureaucratic) organisations are stable and efficient in conditions of slow change, but that organic organisation is required for adaptation and responsiveness in fastchange environments. Bureaucracy is a continuous organisation of official functions bound by rules (Weber). It is a form of mechanistic organisation. Organic organisations are controlled by mechanisms such as commitment and culture. Technology has a significant impact on the way work is organised. The organisation may be seen as a socio-technical system. The global explosion of ICT has also had a major impact on work organisation.
Quiz Test
List List principles of organisation.
2 List Mintzberg's methods of co-ordination.
3 'Span of control' refers to the number of layers in the organisation hierarchy. True or false? 4 5 6 What is de-layering? What is functional organisation? What is a matrix organisation?
7 Which of the following is not a type of legitimate authority identified by Max Weber? A B C D Charismatic Technostructure Traditional Bureaucratic
8 'Horizontal' structures (Peters) would be an example of which type of organisation? A B Mechanistic Organic
Answers
work; authority and responsibility; discipline; unity of command; unity of direction; subordination of individual interests; remuneration; scalar chain.
of
2 Mutual adjustment, direct supervision; standardisation (of work process, outputs, skills and knowledge). 3 False. It is the number of subordinates immediately reporting to a given official. 4 The reduction in the number of management levels.
People are grouped together as they do similar work.
6 A matrix organisation crosses functional boundaries and involves overlapping chains of command. 7 B: 'Technostructure' is a term drawn from Mintzberg's model of organisational components. 8 B: Organic. Horizontal structures aim at flexibility.

CHB 2 Structure

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CHB 2 Structure

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Organizational Structure

Mr. Iftikhar Ahmad, CEO Dynamique Business Consultants 0300-4466062,

Mintzbergs Structural Configuration

Mintzbergs Structural Configuration

Organisation structure implies a framework intended to:

Advantages of Functional structure include:

Mr. Iftikhar Ahmad, CEO Dynamique Business Consultants, 0300-4466062

Regional Board A etc Production dept etc Finance dept

Mr. Iftikhar Ahmad, CEO Dynamique Business Consultants, 0300-4466062

Mr. Iftikhar Ahmad, CEO Dynamique Business Consultants, 0300-4466062

Question Role of head office in divisions

Mr. Iftikhar Ahmad, CEO Dynamique Business Consultants, 0300-4466062

Each dividion may be:

Mr. Iftikhar Ahmad, CEO Dynamique Business Consultants, 0300-4466062

Successful divisionalisation requires certain key conditions.

Mr. Iftikhar Ahmad, CEO Dynamique Business Consultants, 0300-4466062

Mr. Iftikhar Ahmad, CEO Dynamique Business Consultants, 0300-4466062

Advantages of matrix organisation

Advantages of matrix organisation

Disadvantages of matrix organisation

Mr. Iftikhar Ahmad, CEO Dynamique Business Consultants, 0300-4466062

The new organisation

The new organisation

The new organisation

The new organisation

Self-employed Employs Hired on contract

The new organisation

Mr. Iftikhar Ahmad, CEO Dynamique Business Consultants, 0300-4466062

Centralisation and decentralisation

Organizational Structure Advantages and disadvantages of centralisation

Mr. Iftikhar Ahmad, CEO Dynamique Business Consultants, 0300-4466062

Policies, procedures and documentation can be standardised organisation-wide.

Planning & Control Processes

Planning & Control Processes

Tall & Flat Organization

Tall & Flat Organization

Mr. Iftikhar Ahmad, CEO Dynamique Business Consultants, 0300-4466062

Mr. Iftikhar Ahmad, CEO Dynamique Business Consultants, 0300-4466062

Mr. Iftikhar Ahmad, CEO Dynamique Business Consultants, 0300-4466062

People are grouped together as they do similar work.

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