1.1Capon: Understanding Organisational Context 2nd edition © Pearson Education 2004

Understanding Organisational Context 2e

Slides by Claire Capon

Chapter 1

Inside organisations Organisational structures

Handy’s cultures

1.2Capon: Understanding Organisational Context 2nd edition © Pearson Education 2004

Organisational structures

The simple structure

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Figure 1.2 The simple structure

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Main features

• Centralised

• Organised around owner

• Small companies or small companies in early stages of development

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Advantages

• Owner controls early growth and development of the business

1.6Capon: Understanding Organisational Context 2nd edition © Pearson Education 2004

Disadvantages

• Owner may lack specialist knowledge in some areas

• Appropriate up to a certain size only

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Organisational structures

The functional structure

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Figure 1.3 The functional structure

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Main features

• Centralised

• Small company producing limited range of products

• Organised around tasks to be carried out

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Advantages

• Simple lines of control

• Efficient lines of communication and information flow - vertical and short

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Advantages (cont.)

• Specialist managers heading up each function

• Improved decision making

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Disadvantages

• Functional managers overburdened with operational duties

• Longer-term planning may be neglected

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Disadvantages (cont.)

• Becomes stretched by growth and product diversification

• Difficult to co-ordinate and manage across different functions

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Organisational structures

The divisional structure

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Figure 1.4 The divisional structure

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Main features

• Product or geographical divisions

• Diverse range of products or services offered, or geographically-diverse markets served

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Advantages

• Divisions are profit centres in their own right

• Decentralised structure - easier to manage diversity

• Divisional managers responsible for short-term and medium-term planning

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Advantages (cont.)

• Top managers are free to concentrate on longer-term planning

• Profitability is spread across the divisions, products and markets

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Disadvantages

• Potential conflict between divisions over resource allocation

• Overall co-ordination of divisions can be difficult

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Organisational structures

The holding company structure

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Figure 1.5 The holding company structure

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Main features

• Small head office - acts as an investment company

• Decentralised - operating companies are largely independent

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Main features (cont.)

• Operating companies trade under own name, rather than holding company’s name

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Main features (cont.)

• Operating companies are required to meet strict financial targets

• Financial and legal sections support head office, not the operating companies

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Advantages

• Low central overheads

• Risk and profit are spread

• Ease of divestment of operating companies

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Disadvantages

• Individual operating companies under risk of divestment by holding or parent company - may feel threatened

• No centralised skills

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Disadvantages (cont.)

• Potential lack of overall co-ordination and direction of the whole organisation

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Organisational structures

The matrix structure

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Figure 1.6 The matrix structure: multinational company

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Main features

• Double definition of profit centres (two arms of the matrix)

• Found in different types of organisation:- large multinationals

- university departments

- sophisticated service companies

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Advantages

• Decentralised and localised decision making in the matrix

• Growth and complexity controlled by people in the matrix

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Advantages

• Direct contact between two arms of the matrix replaces bureaucracy

• Quality decision making and increased managerial motivation

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Disadvantages

• In the matrix, potentially:

- a high degree of conflict

- a long time to make decisions

- unclear job and task responsibilities

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Disadvantages (cont.)

• Difficult to implement

• High overhead costs

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Handy’s cultures

The power culture

The role culture

The task culture

The person culture

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Figure 1.9 The power cultureSource: Understanding Organizations by Charles Handy (Penguin Books 1976, Fourth Edition 1993). Copyright Charles Handy 1976, 1981, 1985, 1993. Reproduced by kind permission of Penguin Books Ltd.

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The power culture

• Usually found in small firms with simple structure

• Owners tend to recruit employees similar in character to themselves

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The power culture

• The culture is like that of a club with all employees as members

• Power culture is very reliant on the owner

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The power culture

• Work is divided by function or product

• Lines radiating from the centre represent functional or product areas

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The power culture

• Concentric circles represent power and influence

• The further away from the centre, the weaker the power and influence

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Figure 1.10 The role cultureSource: Understanding Organizations by Charles Handy (Penguin Books 1976, Fourth Edition 1993). Copyright Charles Handy 1976, 1981, 1985, 1993. Reproduced by kind permission of Penguin Books Ltd.

1.42Capon: Understanding Organisational Context 2nd edition © Pearson Education 2004

The role culture

• Often found in larger organisations with functional or divisional structure

• Built around defined jobs, roles and procedures

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The role culture

• Strength of organisation is in the pillars or departments

• Designed for stability and continuity

• Not adaptive to change

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Figure 1.11 The task cultureSource: Understanding Organizations by Charles Handy (Penguin Books 1976, Fourth Edition 1993). Copyright Charles Handy 1976, 1981, 1985, 1993. Reproduced by kind permission of Penguin Books Ltd.

1.45Capon: Understanding Organisational Context 2nd edition © Pearson Education 2004

The task culture

• Often found in organisations with the matrix structure

• Problem-solving organisations

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The task culture

• People and resources drawn together into a temporary team for a specific project

• Once the project is completed, the team disbands and individuals move on to other projects

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Figure 1.12 The person cultureSource: Understanding Organizations by Charles Handy (Penguin Books 1976, Fourth Edition 1993). Copyright Charles Handy 1976, 1981, 1985, 1993. Reproduced by kind permission of Penguin Books Ltd.

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The person culture

• Organisation exists to support the individual specialist and allow them to practise their profession

• Found in the professions, e.g. doctors, solicitors, dentists