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Chapter 15 Organisational Structure

This document discusses organizational structure and its key elements. It covers the seven main elements that make up an organization's structure: work specialization, departmentalization, chain of command, span of control, centralization and decentralization, formalization, and boundary spanning. It also examines the determinants of organizational structure, including size, technology, environment, and institutions. Finally, it explores the effects of structure on members and employee behavior.

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206 views35 pages

Chapter 15 Organisational Structure

This document discusses organizational structure and its key elements. It covers the seven main elements that make up an organization's structure: work specialization, departmentalization, chain of command, span of control, centralization and decentralization, formalization, and boundary spanning. It also examines the determinants of organizational structure, including size, technology, environment, and institutions. Finally, it explores the effects of structure on members and employee behavior.

Uploaded by

Shardul
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Chapter 15:

Foundations of
Organisation Structure
Prof Clement Cabral
Assistant Professor
Human Resource Management and Organisational Behaviour
Adani Institute of Infrastructure Management
Organisational Structure
• The way in which job tasks are formally divided, grouped and
coordinated.
Seven Elements of an
Organisation’s Structure
Work specialisation
• Work specialisation: the division of labour into separate activities.
– Repetition of work.
– Training for specialisation.
– Increasing efficiency through invention.
– Henry Ford
Economies and Diseconomies of Work Specialisation
Departmentalisation
• Grouping jobs together so common tasks can be coordinated is called
departmentalisation.
• By functions performed.
• By type of product or service the organisation produces.
• By geography or territory.
• By process differences.
• By type of customer.

You Don’t Need an “India Strategy” — You Need


a Strategy for Each State in India
Chain of command
• Chain of command: an unbroken line of authority that extends from the top of
the organisation to the lowest echelon and clarifies who reports to whom.
• Once a basic cornerstone in organisation design.
• Two complementary concepts:
 Unity of command (one superior)
 Authority (give orders and oblige)
• The chain of command is less relevant today because of technology and the trend
of empowering people.
• Operating employees make decisions once reserved for management.
• Increased popularity of self-managed and cross-functional teams.
• Many organisations still find that enforcing the chain of command is productive.
Span of Control

The number of subordinates a


manager can efficiently and effectively
direct.
Centralisation and Decentralisation
• Centralisation and Decentralisation
• Centralisation refers to the degree to which decision making is concentrated
at a single point in the organisation.
• Advantages of a decentralised organisation:
• Can act more quickly to solve problems.
• More people provide input into decisions.
• Employees are less likely to feel alienated from
those who make decisions that affect their work lives.
Formalisation
• Formalisation: the degree to which jobs within the organisation are standardized.
• A highly formalised job means a minimum amount of discretion.
• Low formalisation – job behaviours are relatively non-programmed, and
employees have a great deal of freedom to exercise discretion in their work.
Boundary spanning
• Boundary spanning occurs when individuals form relationships with people
outside their formally assigned groups.
• Positive results are especially strong in organisations that encourage
extensive internal communication; in other words, external boundary
spanning is most effective when it is followed up with internal boundary
spanning.
Simple structure
• Simple structure: the manager and the owner are one and the same.
• Strengths:
• Simple, fast, and flexible.
• Inexpensive to maintain.
• Accountability is clear.
• Weaknesses:
• Difficult to maintain in anything other than small organizations.
• Risky—everything depends on one person.
Bureaucracy
• A bureaucracy is characterised by standardisation.
• Highly routine operating tasks.
• Very formalised rules and regulations.
• Tasks grouped into functional departments.
• Centralised authority.
• Narrow spans of control.
• Decision making that follows
the chain of command.
• Strengths of bureaucracy:
– Ability to perform standardised activities in a highly efficient manner.
• Weaknesses of bureaucracy:
– Subunit conflicts.
– Unit goals dominate.
– Obsessive behaviour.
– Covering weak management.
• Two aspects of bureaucracies:
• Functional structure: groups employees by their similar specialties, roles, or
tasks.
• Divisional structure: groups employees into units by product, service,
customer, or geographical market area.
• The matrix structure combines two forms of departmentalization—functional and
product:
• The strength of functional is putting specialists together.
• Product departmentalisation facilitates coordination.
• It provides clear responsibility for all activities related to a product, but with
duplication of activities and costs.
Virtual Organisation
The essence of the virtual organisation is that it is typically a small, core
organisation that outsources major business functions.
• Also referred to as a modular or network organisation.
• It is highly centralised, with little or no departmentalisation.
Franchise form: Managers, systems, and other experts in the central mode
(i.e., executive group), and customer sales and services are carried out by
franchise units.

Starbust form: Parent fir splits off one of its functions into a spinoff firm.
[A spinoff is the creation of an independent company through the sale or
distribution of new shares of an existing business or division of a parent
company.]
Virtual Structure
• The team structure: eliminates the chain of command and replaces departments
with empowered teams.
• Removes vertical and horizontal boundaries.
• Breaks down external barriers.
– Flattens the hierarchy and minimises status and rank.
• When fully operational, the team structure may break down geographic barriers.
• In the circular structure: in the center are the executives, and radiating outward
in rings grouped by function are the managers, then the specialists, then the
workers.
– Has intuitive appeal for creative entrepreneur.
– However, employees may be unclear about whom they report to and who is
running the show.
• We are still likely to see the popularity of the circular structure spread.
• The Leaner Organisation: Downsizing
• The goal of the new organizational forms we’ve described is to improve
agility by creating a lean, focused, and flexible organisation.
• Downsizing is a systematic effort to make an organisation leaner by selling off
business units, closing locations, or reducing staff.
• Strategies for downsizing include:
• Investment
• Communication
• Participation
• Assistance
• Make cuts carefully and help employees through the process.
Mechanistic vs. Organic Structural
Models
• An organisation’s structure is a means to help management achieve its
objectives.
• Most current strategy frameworks focus on three dimensions:
• Innovation strategy: introduction of new products and services
• Cost Minimisation strategy: tight cost control, avoidance of unnecessary
innovation, and price cutting
• Imitation strategy: move into new products or new markets only after their
viability has already been proven
• Organisational Size
• Large organisations—employing 2,000 or more people—tend to have more
specialisation, more departmentalisation, more vertical levels, and more
rules and regulations than do small organisations.
• The impact of size becomes less important as an organisation expands.
• Technology: the way an organisation transfers its inputs into outputs.
• Numerous studies have examined the technology-structure relationship.
• Organisational structures adapt to their technology.
• Degree of routineness
• An organisation’s environment includes outside institutions or forces that can
affect its performance.
• Dynamic environments create significantly more uncertainty for managers
than do static ones.
• To minimise uncertainty:
• Broaden structure to sense and respond to threats.
• Form strategic alliances.

1. Capacity: degree to support growth


2. Volatility: degree of instability
3. Complexity: degree of heterogeneity and concentration
Three-Dimensional Model of the
Environment
• Another factor that shapes organisational structure is institutions.
– Regulatory pressures.
– Simple inertia.
– Culture.
– Fads or trends.
• Institutional pressures are often difficult to see specifically because we take them
for granted, but that doesn’t mean they aren’t powerful.
• An organisation’s structure can have significant effects on its members.
• It’s impossible to generalise!
• Not everyone prefers the freedom and flexibility of organic structures.
• Some people are most productive and satisfied when work tasks are
standardised and ambiguity minimised.
• Organisational Designs and Employee Behavior
• Work specialisation contributes to higher employee productivity.
• No evidence supports a relationship between span of control and employee
satisfaction or performance.
• Fairly strong evidence links centralisation and job satisfaction, meaning that
less centralization is associated with higher satisfaction.
• National culture influences the preference for structure.
Organisational Structure: Its
Determinants and Outcomes

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