1. Boddy, Management: An Introduction PowerPoints on the Web, 6 th edition © Pearson Education Limited 2014 Slide 10.1 Part 4 ORGANISING Chapter 10 ORGANISATION STRUCTURE

2. Slide 10.2 Boddy, Management: An Introduction PowerPoints on the Web, 6 th edition © Pearson Education Limited 2014 Strategy, organisation and performance Designing a structure: the components Dividing work internally and externally Co-ordinating work Mechanistic and organic forms Learning organisations Cases and examples –GSK, Multi-show, BAE, Roche, Arm Holdings, Pixar

3. Slide 10.3 Boddy, Management: An Introduction PowerPoints on the Web, 6 th edition © Pearson Education Limited 2014 Structure and performance Figure 10.1 Alternative structures and performance

4. Slide 10.4 Boddy, Management: An Introduction PowerPoints on the Web, 6 th edition © Pearson Education Limited 2014 Why does structure matter? Evidence that a company’s structure affects whether it adds value to resources. Current structure reflects assumptions about how to divide and co-ordinate tasks – Table 10.1. Knowledge enables us to question: –assumptions in a structure, and its context –alternatives available –limitations of any structure.

5. Slide 10.5 Boddy, Management: An Introduction PowerPoints on the Web, 6 th edition © Pearson Education Limited 2014 Structure and performance (Continued) As a business grows, those running it divide the work and co-ordinate the parts – they create a structure within which people work. When an organisation is not performing well, managers often change the structure. Structure affects performance since: –it clarifies expectations and enables monitoring –avoids confusion and waste of poor design. What kind of structure works best?

6. Slide 10.6 Boddy, Management: An Introduction PowerPoints on the Web, 6 th edition © Pearson Education Limited 2014 Designing a structure Structure is how work is divided, supervised and co-ordinated It defines the responsibilities of divisions, departments and people –What they are expected to do Summarised in an organisation chart: compare Multi-show Events and BAE factory.

7. Slide 10.7 Boddy, Management: An Introduction PowerPoints on the Web, 6 th edition © Pearson Education Limited 2014 Structure of a unit in a large business Figure 10.2 The structure within a BAE aircraft factory (www.baesystems.com)

8. Slide 10.8 Boddy, Management: An Introduction PowerPoints on the Web, 6 th edition © Pearson Education Limited 2014 Developing structure in a small business Figure 10.3 The organisation structure at Multi-show Events

9. Slide 10.9 Boddy, Management: An Introduction PowerPoints on the Web, 6 th edition © Pearson Education Limited 2014 Vertical structure – how centralised? What decisions can people at different levels in the vertical hierarchy take? Centralisation (those at the centre make most decisions) and its opposite, both have advantages and disadvantages (Table 10.2). A shifting balance, reflecting –Attempts at rational analysis –Managers’ career interests –External forces – regulators’ rules. What degree of centralisation works best?

10. Slide 10.10 Boddy, Management: An Introduction PowerPoints on the Web, 6 th edition © Pearson Education Limited 2014 Grouping work into functions and divisions Figure 10.5 Four types of structure

11. Slide 10.11 Boddy, Management: An Introduction PowerPoints on the Web, 6 th edition © Pearson Education Limited 2014 Horizontal structure – three ways Functional (see BAE Systems) –Common professional or other expertise (Figure 10.2) Divisional –Products, customers (Figure 10.7) or geography Matrix –In functional groups, work on divisional tasks.

12. Slide 10.12 Boddy, Management: An Introduction PowerPoints on the Web, 6 th edition © Pearson Education Limited 2014 Contrasting structures in nursing Figure 10.7 Task and named-nurse structures

13. Slide 10.13 Boddy, Management: An Introduction PowerPoints on the Web, 6 th edition © Pearson Education Limited 2014 Dividing work externally Outsourcing –When managers delegate activities to external providers – innocent drinks (Chapter 2 case) outsourced all manufacturing to save investment and to grow more quickly. Collaborative networks –Independent organisations agree to work together on some parts of a larger task – Arm Holdings is an example from a high-tech sector; GSK will source more drugs in this way.

14. Slide 10.14 Boddy, Management: An Introduction PowerPoints on the Web, 6 th edition © Pearson Education Limited 2014 Co-ordinating work If divide work, then need to co-ordinate it by: Direct supervision Hierarchy Standardising inputs and outputs Rules and procedures Information systems Direct personal contact. What method of co-ordination works best?

15. Slide 10.15 Boddy, Management: An Introduction PowerPoints on the Web, 6 th edition © Pearson Education Limited 2014 Mechanistic and organic structures Table 10.4 Characteristics of mechanistic and organic systems Source: Based on Burns and Stalker (1961).

16. Slide 10.16 Boddy, Management: An Introduction PowerPoints on the Web, 6 th edition © Pearson Education Limited 2014 Contrasting forms Burns and Stalker identified alternative forms Each appropriate to certain conditions –Mechanistic – stable –Organic – unstable Fit with conditions led to high performance Later work (Lawrence and Lorsch, 1967) focused on differences between units within the same organisation Related differences to contingencies.

17. Slide 10.17 Boddy, Management: An Introduction PowerPoints on the Web, 6 th edition © Pearson Education Limited 2014 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 teams? –Pixar is an example of a company whose innovative business is supported by a highly organic structure.

18. Slide 10.18 Boddy, Management: An Introduction PowerPoints on the Web, 6 th edition © Pearson Education Limited 2014 Strategies and structures Figure 10.8 Relationship between strategies and structural types

19. Slide 10.19 Boddy, Management: An Introduction PowerPoints on the Web, 6 th edition © Pearson Education Limited 2014 Contingencies – technology What structure best supports technologies used to transform inputs, in manufacturing or services? For example, production line or custom-made? For example, information systems enable different ways of delivering services, and prompt a search for new structures to support relevant behaviour? Chapter 18 (Managing Operations and Quality) shows other ways of designing transformation processes using different technologies.

20. Slide 10.20 Boddy, Management: An Introduction PowerPoints on the Web, 6 th edition © Pearson Education Limited 2014 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). Lawrence and Lorsch (1967) showed that firms face many environments with different needs –How to link differently structured departments?

21. Slide 10.21 Boddy, Management: An Introduction PowerPoints on the Web, 6 th edition © Pearson Education Limited 2014 Environment and structure Figure 10.9 Relationship between environment and structure

22. Slide 10.22 Boddy, Management: An Introduction PowerPoints on the Web, 6 th edition © Pearson Education Limited 2014 Contingencies – size and life cycle What structure best supports an organisation as it grows (number of staff)? Birth – informal, little division of labour, organic Youth – decisions shared more widely, specialists employed Mid-life – extensive division of responsibility, with rules for co-ordination Maturity – mechanistic, perhaps divisions, rules for co-ordination. Problem of managing the transitions.

23. Slide 10.23 Boddy, Management: An Introduction PowerPoints on the Web, 6 th edition © Pearson Education Limited 2014 Contingencies or management choice? Contingency –Effective performance depends on managers adopting a structure suited to the key contingencies of the environment in which it is operating. Management choice –Managers have greater degree of choice over the structures they adopt Standards of performance not always rigorous Preferred choices may have limited effect on performance Political interests and ambitions shape choice. Implications for role of managers?

24. Slide 10.24 Boddy, Management: An Introduction PowerPoints on the Web, 6 th edition © Pearson Education Limited 2014 Integrating themes Entrepreneurship New venture evolution may be analysed by their timely focus on aspiration, market and capability. Sustainability Structure can support this aim in a business if, (e.g.) it exposes more people to external context. Internationalisation Bartlett and Ghoshal (2002) show the dilemmas firms face in designing international structures. Governance Financial crisis routine lead to calls for tougher controls – but most failing companies have them.

25. Slide 10.25 Boddy, Management: An Introduction PowerPoints on the Web, 6 th edition © Pearson Education Limited 2014 Summary The chapter outlined the main components which managers use to create an organisation. The way they design these elements combine to create relatively mechanistic or organic forms, which affect performance. There is strong evidence that a form which fits the strategy will add more value than a misfit. Large organisations usually have both mechanistic and organic units, and need to ensure they work together.