Chapter 6 Organisation structure and design Chapter 6 is the first chapter in Part 3 titled ‘Organising’. See page 170 for the Chapter Outline and page 171 for the Learning Objectives. © 2008 McGraw-Hill Australia Pty Ltd. Power Points t/a Management Foundations: A Pacific Rim Focus 2e by Bartol et al Slides prepared by Rob Lawrence, Victoria University (Australia)

Lecture outline The nature of organisation structure Job design Types of departmentalisation Methods of vertical co-ordination Promoting innovation: Methods of horizontal co-ordination Weighing contingency factors See page 170 for a detailed Chapter Outline. © 2008 McGraw-Hill Australia Pty Ltd. Power Points t/a Management Foundations: A Pacific Rim Focus 2e by Bartol et al Slides prepared by Rob Lawrence, Victoria University (Australia)

The nature of organisation structure The four elements: Assignment of tasks and responsibilities to individuals and units Clustering: positions > units > departments > larger units Mechanisms facilitating vertical (top-to-bottom) co-ordination Mechanisms facilitating horizontal (across departments) co-ordination See page 175 for more details. © 2008 McGraw-Hill Australia Pty Ltd. Power Points t/a Management Foundations: A Pacific Rim Focus 2e by Bartol et al Slides prepared by Rob Lawrence, Victoria University (Australia)

Organisation structure: Formal definition Formal pattern of interactions and coordination designed by management to link the tasks of individuals and groups in achieving organisational goals. See page 175 for this definition. © 2008 McGraw-Hill Australia Pty Ltd. Power Points t/a Management Foundations: A Pacific Rim Focus 2e by Bartol et al Slides prepared by Rob Lawrence, Victoria University (Australia)

Organisation design The process of developing an organisation structure See page 175. © 2008 McGraw-Hill Australia Pty Ltd. Power Points t/a Management Foundations: A Pacific Rim Focus 2e by Bartol et al Slides prepared by Rob Lawrence, Victoria University (Australia)

The organisation chart A line diagram showing organisation structure in broad outline. It maps the chain of command. Chain of command is the unbroken authority line linking each person to the top of the organisation through a managerial position in each layer. See pages 175-176. The organisation chart is an aid to visualise organisation structure. Before I discuss the four elements of an organisational structure, let me explain the organisation chart. © 2008 McGraw-Hill Australia Pty Ltd. Power Points t/a Management Foundations: A Pacific Rim Focus 2e by Bartol et al Slides prepared by Rob Lawrence, Victoria University (Australia)

Work specialisation Degree to which work necessary to achieve organisational goals is broken down into various jobs. Job design is an element of an organisation’s structure. In understanding what is job design, it’s important to know the term ‘work specialisation’. See pages 176-177 for more details. © 2008 McGraw-Hill Australia Pty Ltd. Power Points t/a Management Foundations: A Pacific Rim Focus 2e by Bartol et al Slides prepared by Rob Lawrence, Victoria University (Australia)

Job design Specification of task activities associated with a particular job. As I mentioned before, job design is an element of an organisation’s structure. What any job includes depends on job design, or specified task activities associated with a particular job. See page 177 for more details. © 2008 McGraw-Hill Australia Pty Ltd. Power Points t/a Management Foundations: A Pacific Rim Focus 2e by Bartol et al Slides prepared by Rob Lawrence, Victoria University (Australia)

Job design and motivation The four approaches to job design that foster motivation: Job simplification Job rotation Job enlargement Job enrichment Job design also influences employee motivation. As we’ve seen in Chapter 9, motivation is an important concept in leading an organisation. Mangers must include these four aspects or approaches while working on job design. See pages 177-180. © 2008 McGraw-Hill Australia Pty Ltd. Power Points t/a Management Foundations: A Pacific Rim Focus 2e by Bartol et al Slides prepared by Rob Lawrence, Victoria University (Australia)

Job simplification The design of a job to minimise the range of tasks it entails This concept draws on research by Adam Smith and Frederick Taylor. We’ve discussed about these management pioneers in Chapter 1. Some examples may assist student understanding. What’s about a critique of this concept? See page 177. © 2008 McGraw-Hill Australia Pty Ltd. Power Points t/a Management Foundations: A Pacific Rim Focus 2e by Bartol et al Slides prepared by Rob Lawrence, Victoria University (Australia)

Job rotation Practice of periodically shifting workers through a set of jobs in a planned sequence. It tries to cut boredom of job simplification! How this approach enhances motivation? See page 178 for an explanation of this point. © 2008 McGraw-Hill Australia Pty Ltd. Power Points t/a Management Foundations: A Pacific Rim Focus 2e by Bartol et al Slides prepared by Rob Lawrence, Victoria University (Australia)

Job enlargement It is the allocation of a wider range of similar tasks to a job, to increase the challenge to employees. Enlargement increases job scope—the number of tasks an employee performs in a particular job. Again, it’s important to understand how job enlargement makes jobs more interesting? See page 179. © 2008 McGraw-Hill Australia Pty Ltd. Power Points t/a Management Foundations: A Pacific Rim Focus 2e by Bartol et al Slides prepared by Rob Lawrence, Victoria University (Australia)

Job enrichment Process of upgrading the job-task mix in order to significantly increase its potential for growth, achievement, responsibility and recognition. Hackman and Oldham (1980)’s job characteristics model is a guide to achieve job enrichment. Its components are: Core job characteristics Critical psychological states Outcomes Moderators Here also the purpose is to create a potential for growth, achievement, responsibility, and recognition—all drawn from motivation theories. See page 180. Hackman and Oldham(1980)’s ‘Job Characteristic Model’ is a significant framework in understanding and applying the job enrichment approach in job design. © 2008 McGraw-Hill Australia Pty Ltd. Power Points t/a Management Foundations: A Pacific Rim Focus 2e by Bartol et al Slides prepared by Rob Lawrence, Victoria University (Australia)

Job characteristics model The core job characteristics: Skill variety Task identity Task significance Feedback from job See page 180 for an explanation of each characteristic. It’s interesting to note that the more these core characteristics are incorporated in jobs, the more motivating the workers are likely to be. It’s equally true in ‘learning’. © 2008 McGraw-Hill Australia Pty Ltd. Power Points t/a Management Foundations: A Pacific Rim Focus 2e by Bartol et al Slides prepared by Rob Lawrence, Victoria University (Australia)

Job characteristics model The critical psychological states: A worker must experience Meaningfulness of the work Responsibility for outcomes of the work Knows the actual results of the work activities The motivational value of the core job characteristics comes from workers experiencing the above three critical psychological states. See page 180. © 2008 McGraw-Hill Australia Pty Ltd. Power Points t/a Management Foundations: A Pacific Rim Focus 2e by Bartol et al Slides prepared by Rob Lawrence, Victoria University (Australia)

Job characteristics model Outcomes: High internal work motivation High ‘growth’ satisfaction High general job satisfaction High work effectiveness These are the outcomes a manager looks forward to achieve in his/her work unit. See page 180. © 2008 McGraw-Hill Australia Pty Ltd. Power Points t/a Management Foundations: A Pacific Rim Focus 2e by Bartol et al Slides prepared by Rob Lawrence, Victoria University (Australia)

Job characteristics model Moderators: Knowledge and skill Growth-need strength (how much a worker needs personal growth and development on the job) ‘Context’ satisfaction Moderators must be understood well here. What happens, if these moderators were absent? Why and how they moderate? See page 180. © 2008 McGraw-Hill Australia Pty Ltd. Power Points t/a Management Foundations: A Pacific Rim Focus 2e by Bartol et al Slides prepared by Rob Lawrence, Victoria University (Australia)

Types of departmentalisation It clusters individuals into units, and units into departments and larger units in order to achieve organisational goals. Two common departmentalisation types: Functional Divisional This topic relates to the 2nd of the four elements that makes organisation structure. See page 175. More details on types of departmentalisation can be found on page 181. Functional and divisional are the most basic departmentalisation types. © 2008 McGraw-Hill Australia Pty Ltd. Power Points t/a Management Foundations: A Pacific Rim Focus 2e by Bartol et al Slides prepared by Rob Lawrence, Victoria University (Australia)

Functional structure A type of departmentalisation in which positions are grouped into functional areas. See page 181. Show also the Figure placed in the next slide. Also discuss advantages and disadvantages of this structure. See Table 6.1 on page 182. For example, the advantages are i) allows in-depth development of expertise, and ii) efficient use of resources. On the other hand, disadvantages are i) slow response time on multifunctional problems, and ii) backlog of decisions at top of hierarchy. It’s critical to explain where this structure is useful. © 2008 McGraw-Hill Australia Pty Ltd. Power Points t/a Management Foundations: A Pacific Rim Focus 2e by Bartol et al Slides prepared by Rob Lawrence, Victoria University (Australia)

Functional structure See Figure 6.5 on page 182. © 2008 McGraw-Hill Australia Pty Ltd. Power Points t/a Management Foundations: A Pacific Rim Focus 2e by Bartol et al Slides prepared by Rob Lawrence, Victoria University (Australia)

Divisional structure A departmentalisation type in which positions are grouped according to similarity of products, services or markets. See pages 182-184 for more details. In the next slide, a figure illustrating a divisional structure is shown. Show this to your students. Also discuss few advantages and disadvantages of this structure. See Table 6.2 on page 184 for a comprehensive list. Why these advantages and disadvantages are inherent of this structure? © 2008 McGraw-Hill Australia Pty Ltd. Power Points t/a Management Foundations: A Pacific Rim Focus 2e by Bartol et al Slides prepared by Rob Lawrence, Victoria University (Australia)

Divisional structure See Figure 6.5 on page 182. It’s actually a geographic divisional structure. There are also other two divisional structures. They are i) product divisions, and ii) customer divisions. © 2008 McGraw-Hill Australia Pty Ltd. Power Points t/a Management Foundations: A Pacific Rim Focus 2e by Bartol et al Slides prepared by Rob Lawrence, Victoria University (Australia)

Hybrid structure A departmentalisation form with both functional and divisional structure elements at the same management level. Fast response to environmental change, which is met by its divisional structure. Has functional expertise and efficiency, which is met by its functional structure See pages 184-185. It’s important to note that this structure combines advantages of both functional and divisional structures. That’s ingenious! But is it having any disadvantages? There is good list in Table 6.3 on page 186. They are i) conflicts between corporate departments and divisions, ii) excessive administrative overhead, and iii) slow response to exceptional situations. Where the hybrid structure is useful? See page 186. © 2008 McGraw-Hill Australia Pty Ltd. Power Points t/a Management Foundations: A Pacific Rim Focus 2e by Bartol et al Slides prepared by Rob Lawrence, Victoria University (Australia)

Matrix structure A departmentalisation form that superimposes divisional horizontal reporting relationships onto a hierarchical functional structure. Both functional and divisional at once. Two command chains—one vertical and one horizontal. A staff member reports to two matrix bosses. See pages 186-188. Also show the next slide that has a Figure of matrix structure. It’s interesting note the advantages and disadvantages of this structure. See Table 6.4 on page 187 for a summarised list. When to consider a matrix structure? See page 188. © 2008 McGraw-Hill Australia Pty Ltd. Power Points t/a Management Foundations: A Pacific Rim Focus 2e by Bartol et al Slides prepared by Rob Lawrence, Victoria University (Australia)

Matrix structure See Figure 6.8 on page 187. This figure illustrates the salient features of a matrix structure. © 2008 McGraw-Hill Australia Pty Ltd. Power Points t/a Management Foundations: A Pacific Rim Focus 2e by Bartol et al Slides prepared by Rob Lawrence, Victoria University (Australia)

Emerging structures Product team structure Networked structure Structure where people are organised into permanent cross-functional teams. Networked structure Form of organising where many functions are contracted out to other independent firms and co-ordinated by use of information technology networks so that they operate as if they were within a single corporation. Faced by challenges posed by knowledge based economy, globalisation, fast paced competition, business organisations must reinvent themselves by forming creative organisational structures. Discuss the benefits of having these structures. See page 188. © 2008 McGraw-Hill Australia Pty Ltd. Power Points t/a Management Foundations: A Pacific Rim Focus 2e by Bartol et al Slides prepared by Rob Lawrence, Victoria University (Australia)

Methods of vertical co-ordination Linking of activities at the top of the organisation with those at the middle and lower levels to achieve organisational goals. See page 188. Without co-ordination, the parts of an organisation cannot work together. © 2008 McGraw-Hill Australia Pty Ltd. Power Points t/a Management Foundations: A Pacific Rim Focus 2e by Bartol et al Slides prepared by Rob Lawrence, Victoria University (Australia)

Four methods of vertical co-ordination Formalisation Span of management (span of control) Centralisation v decentralisation Line and staff positions See page 188. © 2008 McGraw-Hill Australia Pty Ltd. Power Points t/a Management Foundations: A Pacific Rim Focus 2e by Bartol et al Slides prepared by Rob Lawrence, Victoria University (Australia)

Formalisation Degree to which written policies, rules, procedures, job descriptions and other documents specify what actions are (or are not) to be taken under a given set of circumstances. See page 189. When organisations are small, they can be informal, with few written policies and procedures. As they grow, organisations must increase formalisation in order to co-ordinate growing numbers. © 2008 McGraw-Hill Australia Pty Ltd. Power Points t/a Management Foundations: A Pacific Rim Focus 2e by Bartol et al Slides prepared by Rob Lawrence, Victoria University (Australia)

Span of management (span of control) Number of subordinates who report directly to a specific manager. Factors influencing span of control: Low interaction High competence Work similarity Low problem frequency Physical proximity Highly motivational work Few non-supervisory duties See page 189. Can you suggest a number? © 2008 McGraw-Hill Australia Pty Ltd. Power Points t/a Management Foundations: A Pacific Rim Focus 2e by Bartol et al Slides prepared by Rob Lawrence, Victoria University (Australia)

Tall and flat structures Tall structures Structure with many hierarchical levels and narrow spans of control. Flat structures Structures with few hierarchical levels and wide spans of control Span of management directly influences the number of levels in an organisation’s hierarchy levels. See page 190. What are the drawbacks of very tall organisations? See page 190. © 2008 McGraw-Hill Australia Pty Ltd. Power Points t/a Management Foundations: A Pacific Rim Focus 2e by Bartol et al Slides prepared by Rob Lawrence, Victoria University (Australia)

Downsizing Process of significantly reducing middle-management layers, increasing spans of control and shrinking workforce size. See page 190. ‘Downsizing’ is synonymous with ‘restructuring’. © 2008 McGraw-Hill Australia Pty Ltd. Power Points t/a Management Foundations: A Pacific Rim Focus 2e by Bartol et al Slides prepared by Rob Lawrence, Victoria University (Australia)

Restructuring Process of making a major change in organisation structure. See pages 190-191. What are the different methods to accomplish restructuring? © 2008 McGraw-Hill Australia Pty Ltd. Power Points t/a Management Foundations: A Pacific Rim Focus 2e by Bartol et al Slides prepared by Rob Lawrence, Victoria University (Australia)

Centralisation v Decentralisation Extent to which power and authority are retained at the top organisational levels Decentralisation Extent to which power and authority are delegated to lower levels See page 191. What is delegation? Delegation means assigning to others the responsibility and authority—but not the accountability—to perform managerial tasks. © 2008 McGraw-Hill Australia Pty Ltd. Power Points t/a Management Foundations: A Pacific Rim Focus 2e by Bartol et al Slides prepared by Rob Lawrence, Victoria University (Australia)

Line and staff positions Line position It has authority and is responsible for reaching an organisation’s major goals. Staff position It gives line positions specialised expertise and assistance. See page 191 © 2008 McGraw-Hill Australia Pty Ltd. Power Points t/a Management Foundations: A Pacific Rim Focus 2e by Bartol et al Slides prepared by Rob Lawrence, Victoria University (Australia)

Promoting innovation: Methods of horizontal co-ordination Linking of activities across departments at similar levels. Means to promote horizontal co-ordination Slack resources Information systems Lateral relations Direct contact Liaison roles Task forces and teams Managerial integrators See pages 192-194. If all problems were handled vertically, organisations would be paralysed due to inordinate delays. See page 192 for a complete discussion. To get around this problem, organisations facilitate ‘horizontal co-ordination’. We must emphasise here that horizontal co-ordination mechanism augment the basic hierarchy and other vertical co-ordination methods by aiding information exchange across units at similar levels. Slack resources are a cushion of resources that allow adaptation to internal and external pressures, as well as the initiation of change. Information systems: A growing horizontal co-ordination method is the use of information systems to co-ordinate company parts. Lateral relations: Instead of referring issues up the hierarchy for resolution, lateral relations is the co-ordination of efforts by communicating and problem solving with peers in other departments or units. Direct contact: It is communication between two or more staff in different work units at similar levels, to co-ordinate tasks and solve problems. Liaison roles: It is a role to which someone is appointed to facilitate communication and resolution of issues between two or more areas. Task forces and teams: A taskforce is a temporary interdepartmental group formed to recommend on an issue. Teams or groups, temporary or permanent, set up to solve problems and apply solutions on an issue or area. Managerial integrator: A separate manager who co-ordinates related work across several functional departments. © 2008 McGraw-Hill Australia Pty Ltd. Power Points t/a Management Foundations: A Pacific Rim Focus 2e by Bartol et al Slides prepared by Rob Lawrence, Victoria University (Australia)

Weighing contingency factors The best organisation structure relies on contingency factors. The contingency factors: Strategy Technology Size Environment See pages 194-197. © 2008 McGraw-Hill Australia Pty Ltd. Power Points t/a Management Foundations: A Pacific Rim Focus 2e by Bartol et al Slides prepared by Rob Lawrence, Victoria University (Australia)

Strategy Design structures to support organisation strategy See pages 194-195 and Table 6.5 on page 195. The above Table provides major matches between structure and strategy. © 2008 McGraw-Hill Australia Pty Ltd. Power Points t/a Management Foundations: A Pacific Rim Focus 2e by Bartol et al Slides prepared by Rob Lawrence, Victoria University (Australia)

Technology Higher technological complexity and interdependence between levels need more horizontal co-ordination. See pages195-196. © 2008 McGraw-Hill Australia Pty Ltd. Power Points t/a Management Foundations: A Pacific Rim Focus 2e by Bartol et al Slides prepared by Rob Lawrence, Victoria University (Australia)

Size As organisations grow: Departments and levels are added, and structures grow more complex. Require more rules and regulations. Decentralisation increases. Staff positions increase. See page 196. © 2008 McGraw-Hill Australia Pty Ltd. Power Points t/a Management Foundations: A Pacific Rim Focus 2e by Bartol et al Slides prepared by Rob Lawrence, Victoria University (Australia)

Environment Stable environments foster Unstable environments foster fairly mechanistic characteristics, highly centralised decision-making, many rules and regulations, hierarchical communication channels. Unstable environments foster more organic characteristics, highly de-centralised decision-making, few rules and regulations, lateral communication channels. See pages 196-197. © 2008 McGraw-Hill Australia Pty Ltd. Power Points t/a Management Foundations: A Pacific Rim Focus 2e by Bartol et al Slides prepared by Rob Lawrence, Victoria University (Australia)

Lecture summary In this session, we are able to understand The nature of organisational structure Job design Different types of departmentalisation Methods of vertical co-ordination Methods of horizontal co-ordination How can the contingency factors influence organisational structure See page 198 for the Chapter Summary. © 2008 McGraw-Hill Australia Pty Ltd. Power Points t/a Management Foundations: A Pacific Rim Focus 2e by Bartol et al Slides prepared by Rob Lawrence, Victoria University (Australia)