Understanding Organisational Context 2e

Slides by Claire Capon

Chapter 1 Inside organisations

Organisational structures Handys cultures

Capon: Understanding Organisational Context 2nd edition Pearson Education 2004

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Organisational structures

The simple structure

Capon: Understanding Organisational Context 2nd edition Pearson Education 2004

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Figure 1.2 The simple structure

Capon: Understanding Organisational Context 2nd edition Pearson Education 2004

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Main features
Centralised Organised around owner Small companies or small companies in early stages of development
Capon: Understanding Organisational Context 2nd edition Pearson Education 2004

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Advantages
Owner controls early growth and development of the business

Capon: Understanding Organisational Context 2nd edition Pearson Education 2004

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Disadvantages
Owner may lack specialist knowledge in some areas Appropriate up to a certain size only

Capon: Understanding Organisational Context 2nd edition Pearson Education 2004

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Organisational structures

The functional structure

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Figure 1.3 The functional structure

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Main features
Centralised Small company producing limited range of products Organised around tasks to be carried out
Capon: Understanding Organisational Context 2nd edition Pearson Education 2004

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Advantages
Simple lines of control Efficient lines of communication and information flow vertical and short
Capon: Understanding Organisational Context 2nd edition Pearson Education 2004

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Advantages (cont.)
Specialist managers heading up each function Improved decision making

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Disadvantages
Functional managers overburdened with operational duties Longer-term planning may be neglected
Capon: Understanding Organisational Context 2nd edition Pearson Education 2004

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Disadvantages (cont.)
Becomes stretched by growth and product diversification Difficult to co-ordinate and manage across different functions
Capon: Understanding Organisational Context 2nd edition Pearson Education 2004

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Organisational structures

The divisional structure

Capon: Understanding Organisational Context 2nd edition Pearson Education 2004

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Figure 1.4 The divisional structure

Capon: Understanding Organisational Context 2nd edition Pearson Education 2004

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Main features
Product or geographical divisions Diverse range of products or services offered, or geographically-diverse markets served
Capon: Understanding Organisational Context 2nd edition Pearson Education 2004

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Advantages
Divisions are profit centres in their own right Decentralised structure - easier to manage diversity Divisional managers responsible for short-term and medium-term planning
Capon: Understanding Organisational Context 2nd edition Pearson Education 2004

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Advantages (cont.)
Top managers are free to concentrate on longer-term planning Profitability is spread across the divisions, products and markets
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Disadvantages
Potential conflict between divisions over resource allocation Overall co-ordination of divisions can be difficult
Capon: Understanding Organisational Context 2nd edition Pearson Education 2004

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Organisational structures

The holding company structure

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Figure 1.5 The holding company structure

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Main features
Small head office - acts as an investment company Decentralised - operating companies are largely independent
Capon: Understanding Organisational Context 2nd edition Pearson Education 2004

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Main features (cont.)

Operating companies trade under own name, rather than holding companys name

Capon: Understanding Organisational Context 2nd edition Pearson Education 2004

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Main features (cont.)

Operating companies are required to meet strict financial targets Financial and legal sections support head office, not the operating companies
Capon: Understanding Organisational Context 2nd edition Pearson Education 2004

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Advantages
Low central overheads Risk and profit are spread Ease of divestment of operating companies

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Disadvantages
Individual operating companies under risk of divestment by holding or parent company - may feel threatened No centralised skills
Capon: Understanding Organisational Context 2nd edition Pearson Education 2004

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Disadvantages (cont.)
Potential lack of overall co-ordination and direction of the whole organisation

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Organisational structures

The matrix structure

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Figure 1.6 The matrix structure: multinational company

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Main features
Double definition of profit centres (two arms of the matrix) Found in different types of organisation:
- large multinationals - university departments - sophisticated service companies
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Advantages
Decentralised and localised decision making in the matrix Growth and complexity controlled by people in the matrix
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Advantages
Direct contact between two arms of the matrix replaces bureaucracy Quality decision making and increased managerial motivation
Capon: Understanding Organisational Context 2nd edition Pearson Education 2004

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Disadvantages
In the matrix, potentially: - a high degree of conflict - a long time to make decisions - unclear job and task responsibilities
Capon: Understanding Organisational Context 2nd edition Pearson Education 2004

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Disadvantages (cont.)
Difficult to implement High overhead costs

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Handys cultures
The power culture The role culture The task culture The person culture
Capon: Understanding Organisational Context 2nd edition Pearson Education 2004

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Figure 1.9 The power culture

Source: Understanding Organizations by Charles Handy (Penguin Books 1976, Fourth Edition 1993). Copyright Charles Handy 1976, 1981, 1985, 1993. Reproduced by kind permission of Penguin Books Ltd. Capon: Understanding Organisational Context 2nd edition Pearson Education 2004

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The power culture

Usually found in small firms with simple structure Owners tend to recruit employees similar in character to themselves
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The power culture

The culture is like that of a club with all employees as members Power culture is very reliant on the owner
Capon: Understanding Organisational Context 2nd edition Pearson Education 2004

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The power culture

Work is divided by function or product Lines radiating from the centre represent functional or product areas
Capon: Understanding Organisational Context 2nd edition Pearson Education 2004

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The power culture

Concentric circles represent power and influence The further away from the centre, the weaker the power and influence
Capon: Understanding Organisational Context 2nd edition Pearson Education 2004

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Figure 1.10 The role culture

Source: Understanding Organizations by Charles Handy (Penguin Books 1976, Fourth Edition 1993). Copyright Charles Handy 1976, 1981, 1985, 1993. Reproduced by kind permission of Penguin Books Ltd. Capon: Understanding Organisational Context 2nd edition Pearson Education 2004

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The role culture

Often found in larger organisations with functional or divisional structure Built around defined jobs, roles and procedures
Capon: Understanding Organisational Context 2nd edition Pearson Education 2004

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The role culture

Strength of organisation is in the pillars or departments Designed for stability and continuity Not adaptive to change
Capon: Understanding Organisational Context 2nd edition Pearson Education 2004

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Figure 1.11 The task culture

Source: Understanding Organizations by Charles Handy (Penguin Books 1976, Fourth Edition 1993). Copyright Charles Handy 1976, 1981, 1985, 1993. Reproduced by kind permission of Penguin Books Ltd. Capon: Understanding Organisational Context 2nd edition Pearson Education 2004

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The task culture

Often found in organisations with the matrix structure Problem-solving organisations

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The task culture

People and resources drawn together into a temporary team for a specific project Once the project is completed, the team disbands and individuals move on to other projects
Capon: Understanding Organisational Context 2nd edition Pearson Education 2004

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Figure 1.12 The person culture

Source: Understanding Organizations by Charles Handy (Penguin Books 1976, Fourth Edition 1993). Copyright Charles Handy 1976, 1981, 1985, 1993. Reproduced by kind permission of Penguin Books Ltd. Capon: Understanding Organisational Context 2nd edition Pearson Education 2004

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The person culture

Organisation exists to support the individual specialist and allow them to practise their profession Found in the professions, e.g. doctors, solicitors, dentists
Capon: Understanding Organisational Context 2nd edition Pearson Education 2004

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