Organisational structures

Aim of the organisation - OSCAR O – objective S – specialization C – coordination A – authority R – responsibility What does organising mean? deciding, WHO WILL DO tasks that must be performed and WHO WILL BE RESPONSIBLE for seeing, that tasks were done properly.

Organisation chart = diagram that shows how work is divided and where the authority lies The aim of organisation is: To define and effectively use planned activities of people to achieve objectives and other needs of the company. Form of coordinating of activities to achieve objectives of organisations is organisational structure.

Forms of organisational structures Formal – are specified by organisation systems and charts Informal – spontaneus existence in the group of people with schared interest, friendship, sympathy, unofficial channels of communication

Grouping Jobs into Functions Once tasks are grouped into jobs, managers must decide how to group jobs together. Function: people working together with similar skills, tools or techniques to perform their jobs. Functional structure consists of departments such as marketing, production, and finance. Workers can learn from others doing similar tasks. Easy for managers to monitor and evaluate workers. Hard for one department to communicate with others. Managers can become preoccupied with their department and forget the firm + -

A Sample of Functional Structure

Divisional Structures A division is a collection of functions working together to produce a product. Divisions create smaller, manageable parts of a firm. Divisions develop a business-level strategy to compete. A division has marketing, finance, and other functions. Functional managers report to divisional managers who then report to corporate management. Product structure: divisions created according to the type of product or service. Geographic structure: divisions based on the area of a country or world served. Market structure: divisions based on the types of customers served.

Product Structure

Geographic Structure

Market Structure Figure 8.4c

Global Structures When managers find different problems or demands across the globe, global solutions are needed. Global geographic structure: different divisions serve each world region. For customer needs that vary between regions. Global product structure: Customers in different regions buy similar products so firms keep most functional work at home and set up a division to market product abroad.

Matrix & Product Teams Matrix structure: managers group people by function and product teams simultaneously. Results in a complex network of reporting relationships. Very flexible and can respond rapidly to change. Each employee has two bosses which can cause problems. Functional manager gives different directions than product manager and employee cannot satisfy both. Product Team Structure: no 2-way reporting and the members are permanently assigned to the team and empowered to bring a product to market.

Matrix Structure Team Managers = two boss employee CEO Func. Managers Sales Design Production Product team A Team Managers Product team B Product Team Product team C = two boss employee

Organisation structures according to shape or span of control flat structures – wide span structures, tall structures – narrow span structures.

Flat structures Enterprise has got less organisation levels with more subordinates. There is more decentralised management with higher requirements for independence, self-reliance and higher quality of labour.

Tall structures The enterprise has got more organisation levels with less subordinated departments. Generally there is a centralized management.

Organisation structures based on time duration Temporary structures (with limited duration) –existence of structural organisation and configuration has got time limited duration (e.g. team work), With unlimited duration – expected long term duration of these structures There is a tendency to use more temporary structures to achieve more flexible enterprises (team work, project teams)

Tendences of development of organisation structures Hole structures, Network structures, Virtual enterprises, Intra-entrepreneurship.

Hole structures What is outsourcing?

Definition of outsourcing Outsourcing is work done for a company by another company or people other than the original company's employees.  Outsourcing entails purchasing a product or process from an outside supplier rather than producing this product or process in-house. The business that is outsourcing will train outsourcing provider to form a supply chain partnership

The enterprise dispose of all activities, which it can buy in expected quality, but cheaper from external suppliers. (outsourcing). Hole structures keep the activities with the highest value added, as research, construction, design, technology, marketing, production, sale, but other activities and services rent from some other firm.

What you can do by outsourcing? Examples: Security Transport Accounting Auditing Cleaning

„Hole“ enterprise for production of track

When to use outsourcing? the price is lower than the internal costs, it is not possible to transport and store the products, the supplier is able to ensure a higher quality, the production rights are not available or are too expansive, internal production is associated with various risks (safety etc.) there is no experience with management of a similar type of production.

When is not outsourcing advantageous? the price is higher than the internal supply, it is not possible to transport and store the products free manufacturing capacities are available, capital is available and is not used sufficently, know-how and patents are available, nobody react to the demand

Network structures The enterprises are connected together and participate on individual stages – preproduction, production and after production stage. From outside they figure as independent, but the product can be made only with the cooperation.

Network structure

Virtual organisation Flexible variante of network organisatin. It does not have a fixed structure, it changes according to objective and activity. It is a free organisation of firms for limited time on some purpose for realisation of specific purchuase order. Virtual enterprise works, deliver, even if it does not exist as independent. It is a form of firm cooperation (consorcium), when firms enter to the alliance to combine their limited possibilities and connected their research, production, sale or other potenctial.

Intra-entrepreneurship Simulation of market situation and business conditions inside the firm. Firm is divided in SBU = Strategic Business Units with high autonomy. There is „firm in the firm“. SBU behaves as independent, sovereign firms with defined customers, competitors, mission, objectives, plans and have self-management, resources. They are responsible for their business results (profit, loss) but they are also limited with central management and its strategy.

Organisation structure - SBU

Process organisation PROCESS – system connection of activities. Example – material orders. ACTION – system connection of individual activities. Example – material orders. ACTIVITY – basic element of business process, which is possible to clasify from the point of view of costs, which are spent for this activity. Example – discharge of pallets with material by the fort-lift track