1. Chapter 6 Organisation design and structure
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2. Lecture outline Nature of organisation structure Job design
Types of departmentalisation
Vertical and horizontal coordination
Communication channels
Contingency factors
Promoting innovation using structure
Page 186
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3. The nature of organisation structure
The formal pattern of interactions and coordination designed by management to link the tasks of individuals and groups in achieving organisational goals.
Organising is important to managers because it is how they match work with resources so organisational plans and decisions can be made and effectively changed. However, an organising approach effective in one situation may be less so if the situation changes. As a result, organising is a constant management activity.
Further discussion can be found on page 189.
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4. The nature of organisation structure
The organisation chart
Line diagram depicting broad outlines of an organisation’s structure
The chain of command
Unbroken line of command ultimately linking each individual with the top organisational position
The organisation chart is a line diagram showing organisation structure in broad outline. Details differ but charts show major positions or departments. They also indicate their grouping into specific units, reporting relationships from lower to higher levels, and official communication channels. (See Figure 6.1 on page 191 of text.)
Further discussion can be found on page 190.
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5. The nature of organisation structure
ABC Inc.
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6. Job design Work specialisation
Degree to which work is broken down into various jobs
Logical grouping of tasks
Design of jobs affects employee motivation
Different job types can involve very different activities. Most organisations could not operate without specialisation because without it, all members would need every skill to run an effective organisation.
Further discussion can be found on page 190.
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7. Approaches to job design
Job simplification
Job rotation
Job enlargement
Job enrichment
Jobs involved in simplification are simple and repetitive, so workers are easy to train. However, there may be negative effects such as boredom, low job satisfaction, absenteeism, turnover, sabotage and inflexible customer service.
Further discussion can be found on page
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8. Job design Job enrichment The job characteristics model (Hackman
and Oldham, 1980) was developed to guide job
enrichment efforts.
3 main elements:
Core job characteristics
Critical psychological states
Outcomes
Page 194
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9. Critical Core job psychological Outcomes characteristics → → states
skill variety experienced meaningfulness
task identity of the work high internal work
task significance work motivation
high ‘growth’
autonomy experienced responsibility satisfaction
for work outcomes
high work
feedback from knowledge of results from effectiveness
job work activities
Core job
characteristics
Critical
psychological
states
Outcomes → →
Page 194
Moderators:
1. Knowledge & skill
2. Growth-need strength
3. ’Context’ satisfactions
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10. Managing diversity: alternative work schedules
Balancing work and personal life
Flexitime:
core hours to be worked;
more
at employee
discretion
Job sharing:
two or
more people
sharing
a full-time job
Compressed work-
week:
longer hours worked
per day; shorter
working week
Related to job design is setting alternative work schedules, based on adjusting work schedules instead of content or activities. The approach increases worker’s job satisfaction and motivation by setting schedules favouring workforce flexibility by balancing work and personal life. Alternative work schedules help workers juggle work and family responsibilities.
Further discussion can be found on pages
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11. Departmentalisation
Clustering individuals into units, and units into departments and larger units, to achieve organisational goals.
Page 196
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12. Types of departmentalisation
Functional structure
Divisional structure
Hybrid structure
Matrix structure
Emerging structures
Pages
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13. Functional structure
A structure in which positions are grouped according to their main functional (or specialised) area.
CEO
Functional structure is where positions are grouped according to their main functional (or specialised) area. In other words, positions are combined on the basis of similarity of expertise, skill and work activity. (See Figure 6.5 on page 197.)
Further discussion may be found on pages
Manager,
Manufacturing
Manager,
Distribution
Manager,
Administration
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14. Functional structure Advantages: In-depth expertise development
Clear career path within function
Efficient use of resources
Possible economies of scale
Ease of coordination within function
Potential technical advantage over competitors
Page 198
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15. Functional structure Disadvantages:
Slow response to multifunction problems
Decision backlog at top of hierarchy
Bottlenecks due to sequential tasks
Inexact measures of performance
Narrow training of future managers
Page 198
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16. Divisional structure
A structure in which positions are grouped according to similarity of products, services or markets.
In a divisional structure, each division has major functional resources to pursue its own goals without depending on other divisions. Divisional structures are also called self-contained structures, with each division containing all major functions.
Further discussion may be found on pages
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17. Divisional structure Advantages: Fast response to environmental change
Simplified coordination across functions
Simultaneous emphasis on organisational goals
Strong customer orientation
Accurate measurement of performance
Broad training in management skills
Page 201
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18. Divisional structure Disadvantages:
Resource duplication in each division
Reduction of in-depth expertise
Competition amongst divisions
Limited sharing of expertise between divisions
Innovation restricted to each division
Neglect of overall goals
Pages
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19. Hybrid structure
A structure adopting both functional and divisional structures at the same management levels.
The hybrid structure seeks to combine the advantages of both the divisional and functional structure types. Thus, many large firms have both functional and divisional departments. In a hybrid design, functional departments are known as corporate departments as they generally have staff authority relative to divisional departments, and authority from the organisation’s corporate level.
Further discussion may be found on page 202.
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20. Hybrid structure Advantages:
Alignment of corporate and divisional goals
Functional expertise and/or efficiency
Adaptability and flexibility in divisions
Page 202
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21. Hybrid structure Disadvantages:
Conflicts between corporate departments and divisions
Excessive administration overhead
Slow response to exceptional situations
Pages 202-3
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22. Matrix structure
A structure superimposing a horizontal set of divisional reporting relationships onto a hierarchical functional structure.
Appropriate when:
need a strong focus on both functional and divisional dimensions.
need to quickly process information and coordinate activities.
pressure for shared resources.
Since the matrix structure superimposes divisional horizontal reporting relationships onto a hierarchical functional structure, it can be seen that it is both a functional and divisional structure at the same time.
Further discussion may be found on pages
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23. Matrix structure GM, Transport Sales HRM Finance Manager, Business A
matrix bosses
Manager,
Business A
Business B
Business C
Business D
Business E
Transport,
Business A
Business B
Business C
Business D
Business E
Sales,
Business A
Business B
Business E
HRM,
Business C
Business D
Finance,
See also Figure 6.10 on page 204.
two-boss employees
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24. Matrix structure Advantages: Decentralised decision-making
Strong product coordination
Improved environmental monitoring
Flexible use of human resources
Efficient use of support systems
Fast response to change
Page 206
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25. Matrix structure Disadvantages: High administrative costs
Confusion over authority and responsibility (potential)
Excessive focus on internal relations
Overemphasis on group decision-making
Slow response to change (possible)
Page 206
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26. Emerging structures Process structure Networked structure
A type of departmentalisation where positions are grouped by a complete flow of work.
Networked structure
A form of organising where many functions are contracted out to other independent firms and coordinated by use of information technology networks to operate as if they were within a single corporation.
Pages 206-7
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27. Methods of vertical coordination
Linking of activities at the top of the
organisation with those at the middle and
lower levels to achieve organisational goals.
Formalisation
Span of management
Centralisation vs. decentralisation
Delegation
Line and staff positions
Without coordination, organisation parts cannot work together. For all designs, managers must focus on vertical and horizontal coordination to make the structure effective. Five major methods for vertical coordination are shown in this slide.
Further discussion can be found on pages
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28. Methods of vertical coordination
Formalisation
Degree to which written policies, rules, procedures, job descriptions and other documents specify what actions are/are not to be taken under a given set of circumstances
Extent of formalisation tends to grow with age and size
Page 209
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29. Methods of vertical coordination
Factors influencing span of management:
High competence levels
Low interaction requirements
Work similarity (between organisational peers)
Low problem frequency and seriousness
Physical proximity
Few non-supervisory duties of managers
Considerable available assistance
High motivational work possibilities
Figure 6.11 on page 210 shows the effect of changing the spans of control in reducing middle management positions.
Further discussion can be found on pages
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30. Methods of vertical coordination
Centralisation
The extent to which power and authority are retained at the top organisational levels.
Decentralisation
The extent to which power and authority are delegated to lower levels.
Factors favouring centralisation:
Large organisational size
Geographic dispersion
Technological complexity
Environmental uncertainty
To improve vertical coordination, managers must consider the appropriate level of vertical centralisation, the extent to which power and authority will be kept at upper levels. The reverse of centralisation is decentralisation. Centralisation and decentralisation are a continuum, with degrees of delegation.
Further discussion can be found on page 211.
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31. Centralisation vs. decentralisation
Extent to which power and authority will be retained at upper levels. Influenced by:
Large size:
larger organisations
likely to be more
decentralised.
Geographic dispersion:
more dispersed likely to be
decentralised, to enable
control at a number of sites.
Page 211
Environmental uncertainty:
with rapid change, need for
more employees to be involved
in responding to challenges.
Technological complexity:
with more complex
technology, need to devolve
authority to lower levels.
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32. Methods of vertical coordination
Delegation
The assignment of part of a manager’s work to others, along with both responsibility and authority necessary to achieve expected results.
Factors restraining delegation:
Fear of subordinate failure
Time to train subordinates
Enjoy doing tasks
Release of authority
Concern for task performance
Fear subordinate competence
Another vertical coordination method closely related to centralisation–decentralisation is delegation. Along with delegation come authority, responsibility and accountability. Even within a centralised structure managers must do some delegating since they cannot do all the work themselves.
Further discussion can be found on page 212.
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33. Methods of vertical coordination
Line and staff positions
Line authority
- The authority following the chain of command established by the formal hierarchy.
Functional authority
- The authority of staff over others in the organisation in matters related directly to their respective functions (e.g. HRM dept).
Another issue related to vertical coordination is the configuration of line and staff positions. A line position has authority and is responsible for reaching an organisation’s major goals. A staff position’s primary purpose is giving line positions specialised expertise and assistance. (See Figure 6.12 on page 213.)
Further discussion can be found on pages
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34. Methods of horizontal coordination
Linking of activities across departments at similar levels
Need for information processing across the organisation
Promotes innovation through dissemination of ideas and information
If all problems were handled vertically, organisations would be paralysed. Organisations facilitate horizontal coordination, which involves linking activities across departments at similar levels. Horizontal coordination helps organisations process information and organisations must process more information when facing complex and/or changing technology, uncertainty and increased size.
Further discussion can be found on page 214.
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35. Methods of horizontal coordination
Horizontal coordination promoted by:
Slack resources
Cushion of resources that facilitates adaptations to internal/external pressures, as well as initiation of changes
Information systems
One information source for many users
Lateral relations
Direct contact, liaison roles, task forces, teams
Pages 215-6
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36. Organisational communication channels
Vertical communication
Downward communication
- Can be distorted by faulty message due to sender error
- Managers overuse downward communication
- Filtering (deliberate or accidental)
Upward communication
- Can be distorted by ‘only’ favourable messages going up
- Managers don’t encourage upward flow
Pages 216-8
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37. Organisational communication channels
Horizontal communication
Lateral or diagonal message exchange within work-unit boundaries, involving peers reporting to the same supervisor, or across work-unit boundaries, involving individuals who report to different supervisors.
Impeding factors:
- Rivalry
- Indifference to work of others
- Low motivation due to discouragement of horizontal communication
Page 218
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38. Organisational communication channels
Informal communication (grapevine)
Communication which takes place without regard
to hierarchical or task requirements.
Problems:
- Can carry gossip/distorted information
Benefits:
- Valuable tool for continuation/propagation of culture
Vertical and horizontal communication patterns are formal patterns that follow hierarchy and structure. In contrast, informal communication, or the grapevine, occurs without reference to hierarchy or task requirements, that is, it relates to personal, not positional, issues. All organisations have grapevines and the patterns can be both vertical and horizontal. Overall, grapevines are fast, carry large amounts of information, and yield data that is between 50 and 90 per cent accurate.
Further discussion can be found on page 219.
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39. Weighing contingency factors
The best structure for an organisation
depends on contingency factors, such
as:
Strategy
Technology
Environment
Early in the study of management, classical theorists tried to describe an ideal organisation structure. Instead, they found that a structural configuration that was effective for one organisation was less so for another. Contingency theory resulted. This viewpoint argues that appropriate managerial action depends on a situation’s parameters. The best structure for a firm was seen to depend on contingency factors such as technology, size and environment.
Further discussion may be found on pages
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40. Weighing contingency factors
Strategy
Niche
differentiation:
narrow target market
Cost leadership:
organisational
efficiency,
lower prices
Innovative
differentiation:
complex product
or service innovations
Market differentiation:
advertising, prestige
pricing and
market segmentation
Remembering contingency issues, managers must match strategy with structure in achieving effectiveness.
Further discussion may be found on pages
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41. Weighing contingency factors
Technology
Technological complexity (Woodward)
Unit and small-batch production
Large-batch and mass production
Continuous-process production
Overall, Woodward’s research showed structural characteristics of successful firms close to the median for their particular technology.
Pages
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42. Weighing contingency factors
Technology
Technological interdependence (Thompson)
Pooled interdependence
Sequential interdependence
Reciprocal interdependence
In designing organisation structure, technological interdependence and complexity must be considered. Organisational size may be relevant too.
Further discussion may be found on page 222.
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43. Weighing contingency factors
Stable environments, mechanistic
narrow tasks
prescribed tasks
hierarchical control
decision-making levels
communication vertical
instructions by superiors
loyalty to organisation
obedience to superiors
Unstable/uncertain environments, organic
general tasks, subject to continuous negotiation
network control
decision making rests with those with knowledge
communication across and between levels
‘supervision’ is information and advice
commitment to organisational goals, possession of expertise
Page 223
Lawrence & Lorsch: Balance of differentiation & integration
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44. Promoting innovation
Structure’s ability to support strategy can be enhanced by using structural means to encourage innovation.
Innovation is critical to various differentiation strategies.
Structure’s support of strategy can be reinforced to encourage innovation. Innovation is critical to different differentiation strategies—especially an innovative differentiation strategy.
Further discussion may be found on page 224.
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45. Promoting innovation Four major means of using
Organisation structure to facilitate
innovation:
Vital roles
- Idea champion, sponsor, orchestrator
Reservations
- Organisation units devoted to the generation of innovative ideas
Differential paradox
- Separating innovation process decreases chance of implementation
Transfer process
- The difficulty of translating ideas into products/services
Pages
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46. Lecture summary Structure: part of the organising function
Job design approaches: simplification, rotation, enlargement and enrichment–JCM model
Departmentalisation: functional, divisional, hybrid and matrix
Page 230
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47. Lecture summary
Vertical coordination: formalisation, span, centralisation, delegation, line and staff positions
Horizontal coordination: slack resources, information systems, lateral relations
Page 230
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48. Lecture summary
Contingency factors: strategy, technology, size and environment
Structural mechanisms can enhance innovation: idea champions, sponsors, orchestrators and reservations
Page 230
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