Slide 10.

Organisational Structures

FBM - Week 2 – Lecture 1

David Boddy, Management: An Introduction, 5th Edition, © Pearson Education Limited 2011
Slide 10.2

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Slide 10.3

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David Boddy, Management: An Introduction, 5th Edition, © Pearson Education Limited 2011
Slide 10.7

Learning outcomes
• Understanding organisation structure
• Elements in structure: the design options

• Dividing work into functions and divisions

• Coordinating work: alternative ways
• Mechanistic and organic structures

David Boddy, Management: An Introduction, 5th Edition, © Pearson Education Limited 2011
Slide 10.8

Designing a structure
• Structure is how work is divided, supervised and
coordinated.
• It defines the responsibilities of divisions,
departments and people. What they are expected to
do.
• When an organisation is not performing well,
managers often change the structure. This reflects
the belief that structure affects performance.

David Boddy, Management: An Introduction, 5th Edition, © Pearson Education Limited 2011
Slide 10.9

Why study orgnisation structure?

Rank Company 2010 Number of Employees
1 Wal-Mart Stores 2,100,000
2 China National Petroleum 1,674,541
3 State Grid 1,564,000
7 U.S. Postal Service 627,798
9 Carrefour 471,755
12 IBM 426,751
13 Deutsche Post 418,946
15 Siemens 402,700
17 McDonald's 400,000
18 Volkswagen 399,381
21 Tesco 384,389

Source: CNN.com (2011) - Biggest employers

David Boddy, Management: An Introduction, 5th Edition, © Pearson Education Limited 2011
Slide 10.10

Structure of a unit in a large business

Figure 10.2 The structure within a BAE aircraft factory (www.baesystems.com)

David Boddy, Management: An Introduction, 5th Edition, © Pearson Education Limited 2011
Slide 10.11

Developing structure in a small business

Figure 10.3 The organisation structure at Multi-show Events

David Boddy, Management: An Introduction, 5th Edition, © Pearson Education Limited 2011
Slide 10.12

Vertical structure – how centralised?

Centralisation is when those at the

top make most decisions, with
managers at divisional level ensuring
those at operating level follow the
policy.

David Boddy, Management: An Introduction, 5th Edition, © Pearson Education Limited 2011
Slide 10.13

Centralisation Pros and Cons

Table 10.1 Advantages and disadvantages of centralisation

David Boddy, Management: An Introduction, 5th Edition, © Pearson Education Limited 2011
Slide 10.14

Exercise
Company A produces refrigerators, washing
machines and vacuum cleaners.
The company does all functions in house, i.e. R&D,
manufacturing, sales, marketing, HRM and supply
chain management.
It has sales in the home market, the UK, and in
international markets, France and Germany.
How would you structure this company? Can you
draw an organisation chart?

David Boddy, Management: An Introduction, 5th Edition, © Pearson Education Limited 2011
Slide 10.16

Germany HRM
R&D
France
Marketing
Sales
UK

SCM
Manufacturing

Vacuum
cleaners Refrigerators

Washing Exercise
machines

David Boddy, Management: An Introduction, 5th Edition, © Pearson Education Limited 2011
Slide 10.17

Board

R&D Manufacturing Sales Marketing HRM SCM

David Boddy, Management: An Introduction, 5th Edition, © Pearson Education Limited 2011
Slide 10.18

Board

Vacuum Washing
Refrigerators
cleaners machines

Various Various Various

Functions Functions Functions

David Boddy, Management: An Introduction, 5th Edition, © Pearson Education Limited 2011
Slide 10.19

Board

France UK Germany

Various Various Various

Functions Functions Functions

David Boddy, Management: An Introduction, 5th Edition, © Pearson Education Limited 2011
Slide 10.20

Board

Vacuum Washing
Refrigerators
cleaners machines

R&D

Manufacturing

Sales

Marketing

HRM

SCM
David Boddy, Management: An Introduction, 5th Edition, © Pearson Education Limited 2011
Slide 10.21

Functional Structure

Pros:
• concentrations of functional
expertise
Cons:
• ‘functional silos’
• Difficult to cope with product or
geographical diversity.

Figure 10.5 types of structure

David Boddy, Management: An Introduction, 5th Edition, © Pearson Education Limited 2011
Slide 10.22

Divisional Structure

Pros:
• Focus on needs of certain
products customers or markets
• Pursue different strategies
Cons:
• Duplication of functions.
• Potential loss of central control
• Potential non cooperation

Figure 10.5 types of structure

David Boddy, Management: An Introduction, 5th Edition, © Pearson Education Limited 2011
Slide 10.23

Matrix Structure

Pros:
• Knowledge integration across
organisation
Cons:
• Longer to reach decisions.
• Potential conflict between the
two managers.

Figure 10.5 types of structure

David Boddy, Management: An Introduction, 5th Edition, © Pearson Education Limited 2011
Slide 10.24

Team Structure

Pros:
• Flexibility, faster response
Cons:
• Difficult to establish
accountability.

Figure 10.5 types of structure

David Boddy, Management: An Introduction, 5th Edition, © Pearson Education Limited 2011
Slide 10.25

Contrasting structures in nursing

Figure 10.7 Task and named-nurse structures

David Boddy, Management: An Introduction, 5th Edition, © Pearson Education Limited 2011
Slide 10.26

Coordinating work
If divide work, then need to coordinate it by:
• Direct supervision
• Hierarchy
• Standard inputs or outputs
• Rules and procedures
• Information systems (see Siemens)
• Direct personal contact

David Boddy, Management: An Introduction, 5th Edition, © Pearson Education Limited 2011
Slide 10.27

Mechanistic and organic structures

Table 10.4 Characteristics of mechanistic and organic systems

Source: Based on Burns and Stalker (1961)

David Boddy, Management: An Introduction, 5th Edition, © Pearson Education Limited 2011
Slide 10.28

Contrasting forms
• Is there something like the best structure?
• The contingency paradigm suggests that organizational
effectiveness results from fitting characteristics of the
organization, such as its structure, to contingencies that
reflect the situation of the organization
• Fit with conditions (e.g. strategy, technology, size/life
cycle and environmental uncertainty) led to high
performance

David Boddy, Management: An Introduction, 5th Edition, © Pearson Education Limited 2011
Slide 10.29

Contingencies – strategy
– For example, cost leadership or differentiation
– what structure to encourage relevant
behaviour?
• Cost leadership requires efficiency – a functional
structure?
• Differentiation needs innovation – matrix or team-
based?

David Boddy, Management: An Introduction, 5th Edition, © Pearson Education Limited 2011
Slide 10.31

Contingencies – technology
High tech company or a manufacturing plant?

Source: Telegraph.co.uk Source: Imaginechina/Corbis - Guardian.co.uk

For more photos from Google London headquarters: http://www.telegraph.co.uk/technology/picture-galleries/9461561/Inside-

Googles-quirky-new-London-headquarters.html?frame=2303567

David Boddy, Management: An Introduction, 5th Edition, © Pearson Education Limited 2011
Slide 10.32

Contingencies – business environment

What structure best supports people as they cope with

different environments?
• Burns and Stalker (1961) contrasted
– Rayon plant (stable market, few changes) with
– Small electronics companies (volatile, uncertain
market, many changes)

David Boddy, Management: An Introduction, 5th Edition, © Pearson Education Limited 2011
Slide 10.33

Environment and structure

Figure 10.9 Relationship between environment and structure

David Boddy, Management: An Introduction, 5th Edition, © Pearson Education Limited 2011
Slide 10.37

Conclusion
• We examined different organisation structures

• We looked at centralisation.
• We examined different ways of coordinating work.
• We examined mechanistic and organic structures
• We highlighted the need for fit between structure and
organisation context.

David Boddy, Management: An Introduction, 5th Edition, © Pearson Education Limited 2011
Slide 10.38

*References
• Boddy, D. (2011), Management, An
Introduction. 5th ed. Pearson Education.
Chapter 10.
• CNN.com (2011), Top companies:
Biggest employers. Available at:
http://money.cnn.com/magazines/fortune/
global500/2011/performers/companies/bi
ggest/
Accessed 20 Jan 2013.
David Boddy, Management: An Introduction, 5th Edition, © Pearson Education Limited 2011