UBO - Lecture 02 - Organisational Structures

Lecture 2 Organisational Structures Understanding Business Organisations
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UnderstandingBusiness
NCC Education Limited V1.0
Understanding Business
Organisations
Lecture 2:
Organisational Structures
Organisational Structures Lecture 2 - 2.2
This topic will cover:
The role of the organisation chart in illustrating the
organisation structure
The purpose of lines of authority and delegation
Scope and Coverage
The purpose of lines of authority and delegation
The benefits and drawbacks of a centralised
hierarchy
The five alternative forms of organisation structure
The importance of co-ordinating work activities
By the end of this topic, students will be able to:
Describe the main purposes of an organisation
chart
Understandthe five alternative forms of
Learning Outcomes
Understand the five alternative forms of
organisation structure
Understand the advantages and disadvantages of
functional, divisional and matrix forms
Explain the division of tasks from a vertical and
horizontal perspective
Describes the way tasks are
divided, supervised and co-
ordinated within an
organisation
Organisation Structure
This is shown in picture
form by an organisation
chart
Diagram that shows the main departments and
positions within an organisation
Shows who each department or division reports to
Clarifies four features of the formal structure:
Organisation Chart
Tasks
Sub-divisions
Levels
Lines of authority
Managing Director
Operations Department Sales and Marketing
Operations Manager Marketing Manager
Lines of Authority
Event Assistant Operations Account Account Account
Manager Manager Manager Manager Manager Manager
Admin Storeman Admin
Assistant Assistant
Responsibility a
persons duty to perform a
task assigned to them
Delegation process by
Responsibility and Delegation
which people transfer
responsibility and authority
for work to staff below
them in chain of command
The number of subordinates reporting to a
supervisor
Narrow span of control staff are closely
supervised
Span of Control
Wider span of control more autonomy and team
work resulting in a flatter organisation structure
Example of Wide Span of Control
As a business grows the hierarchy becomes more
complex
Results in three different levels:
Corporate
Designing the Vertical Hierarchy
Divisional
Operating
Agreement is needed on where decisions are taken
centralised versus decentralised
Factor Advantages Disadvantages
Response to
change
Can ensure thorough debate Slower response to local variations
Use of
expertise
Concentration of expertise makes it
easier to develop new services
Less likely to take account of local
knowledge
Cost Economies of scale in purchasing, Centralised systems may be wasteful
Advantages and Disadvantages
of Centralisation
less admin cost if using common
systems
when applied locally local suppliers
may offer better value
Policy
implications
Local managers less likely to breach
legal requirements
Local managers more likely to breach
legal requirements
Consistency Provides consistent image to public
less variation in service standards
Common measures may not be
appropriate locally
An organisations work can be divided into smaller
units or departments
Five commonly used approaches to creating a
horizontal structure:
Creating a Horizontal Structure
Functional
Divisional
Matrix
Teams
Networks
Functional Structure
Board
Production Purchasing Human
Resources
Staff careers Clear career paths and
professional development
Isolation from wider issues
damages promotion prospects
of Functional Structure
Resources Specialisation leads to high
standards and efficiency
Conflict over priorities
Working
relations
Common professional
interests support good internal
relations
Lack of wider awareness
damages external relations
Product Division A Product Division B
Divisional Approach
Board
Purchasing Purchasing
Production Human
resources
Production Human
resources
Staff focus Functional staff focus on
product and customer needs
Isolation from wider
professional and technical
developments
Resources Dedicated facilities meet Cost of duplication across the
of Divisional Structure
Resources Dedicated facilities meet
customer needs quickly
Cost of duplication across the
organisation
Working
relations
Common customer focus
supports good internal relations
Potential conflicts with other
divisions over priorities
Control Regional divisions use
autonomy to meet local needs
Develop policies independently
of wider organisational interests
Matrix Structure
Board
Product
Division A
Product
Division B
resources
Staff focus Staff gain a variety of work
experience and understanding
of customer needs
Functions develop professional
ti
Isolation from wider
professional developments
Conflicting demands of project
and functional boss
of Matrix Structure
expertise
Resources Dedicated facilities can be
arranged to meet customer
needs as required
Costs of duplication across the
organisation as demands vary
Working
relations
Project focus supports good
internal relations
Potential conflict with functional
divisions over priorities
Team Structure
Board
Team
A
Team
B
Team
C
Management delegates significant responsibility
and authority to an identifiable team
The team is then mutually accountable for the
results
Working With Teams
Members of a team can come from across
functions, or from a single business area
Less hierarchical than a department
One possible drawback is spending time in debate
rather than action
Purchasing Manufacturing
agencies companies
Network Approach
E t
Human resources Distribution
agency companies
Entrepreneur
Management breaks non-core functions into
separate companies
Remaining organisation focuses upon the strategic
direction of the business
Network Structures
All other services are contracted in on an as
required basis
Network approach enables small firms to grow
rapidly with limited capital expenditure
Division of work must be co-ordinated to achieve
intended results
Considerations for organisations of all sizes
include:
Direct supervision by management
Co-ordinating Work
Direct supervision by management
Standardising inputs and outputs
Developing rules and procedures to act as guidelines
Using information systems to ensure information and
knowledge is shared
Encouraging direct personal contact
A structure describes the way tasks are divided,
supervised and co-ordinated within an organisation
A span of control shows the number of
subordinates reporting to a supervisor
Structure can be vertical or horizontal both have
advantages and disadvantages
Summary
advantages and disadvantages
Key factor in a vertical structure is whether to opt
for centralised or decentralised control
Five common approaches to creating a horizontal
structure functional, divisional, matrix, teams and
networks
References
Boddy, D. (2005), Management: An Introduction,
3rd edition, Prentice Hall, Chapter 10
Boddy, D. (2007), Management: An Introduction,
4th edition, Prentice Hall, Chapter 10
Campbell and Craig (2005), Organisations and the
Business Environment, 2nd edition. Butterworth-
Heinemann, Chapter 21
Lecture 2 Organisational Structures
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Lecture 2 Organisational Structures Understanding Business Organisations

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