Chap3 Organisation Structure

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Copyright 2004 Asia Pacific Institute of Information Technology

Introduction to ManagementBM007-3-1

Lecture 3 Organisation Structure

Module Code and Module Title Title of Slides

Learning Outcomes

At the end of this chapter, YOU should be able to know:

• How differentiation and integration influence an organisation structure

• How authority operates• How Span of Control affects structure and managerial

effectiveness• The difference between centralised and decentralised

organisation.• How to allocate jobs to work units• How to manage the unique challenges of the matrix

structure.


Key Terms you must be able to use

If you have mastered this topic, you should be able to use the following terms correctly in your assignments and exams:

•Authority•Responsibility•Span of Control•Delegation•Centralisation and decentralisation


Introduction

• A formal pattern of interactions and coordination designed by management to link the tasks of individuals and group in achieving organisational goals

• A formal framework by which jobs tasks are divided, grouped and coordinated.

• When managers develop or change an organisation’s structure thy engage in Organisational Design


Organisational Structure

• How job tasks are formally divided, grouped and coordinated.

(Robbins, 1996).

• The established pattern of relationships between the component parts of an organisation, outlining both communication, control and authority patterns.

(Wilson and Rosenfeld, 1990).


Organisational Structure

• The formal pattern of interactions and co-ordination designed by management to link the tasks of individuals and groups in achieving organisational goals.

(Bartol and Martin, 1994).


Organisation Structure consist mainly of;• The assignment of tasks and responsibilities that define

the jobs of individuals and units• Clustering individuals units departments• Top to bottom coordination, number of individuals

reporting, degree of delegation and authority• Horizontal coordination

Org. design

Departmentalisation

Work Specialisation

Chain of CommandCentralisation & Decentralisation

Span of Control

Formalisation


Why Do Businesses Need to be Organised?

• Small businesses (particularly sole traders) have an informal organisational structure

• As a business gets bigger then it starts to form some kind of organisation

• An organisation structure is required as soon as there are several people working in the business

• The structure determines:– Who is responsible for what job and– Who is responsible to whom.


• Responsibility – Area of work for a person or group is accountable for. E.g. discipline of staff or sales of product.

• Duties – Work or job requirements arising from responsibilities. E.g. Writing a warning letter for late coming or to meet clients or customers to persuade then to buy products or services.

• Authority – the right to make decisions and take action. E.g. secretary is given the authority to sign orders up to RM500.– Failure to coordinate between departments result in duplication

of work, stress, communication breakdown and therefore frustrated staff

Definition of terms


• Responsibility is defined as “a particular burden of obligation upon a person who is responsible.” Responsible is defined as “answerable or accountable, as for something within one’s power or control.” Therefore, a leader is responsible and has responsibility for the operation for which she has been given authority.


• Authority is defined as “a power or right, delegated or given.” In this sense, the person or company that hires a leader vests him with the authority to manage or direct a particular operation. It is expected that this individual will exercise the full scope of his authority to properly, profitably, and professionally manage the operation.


Organisation Pyramid

BODCHIEF

EXECUTIVE

EXECUTIVEDIRECTORS

MANAGERS

EXECUTIVE

AUTHO

RITY

RESPONSIB

ILIT

Y

How are Organisations formed?


Organisation Chart (I)

CEO/PRESIDENT

Human Resource

Operations Security

Recruitment

FinanceResearch &

Development

Training

Sales &Marketing

Employee

Relations

Assistant


Organisation Chart (II)

• Shows;– The business divided into areas where employees

have responsibilities.– States relationships between staffs e.g. Supervisor,

subordinate, peer.– Shows the number of people working in the

organisation.– Historical record – organisation changes makes the

chart become out of date.– As information to new employees and special group.– Main lines of communication.


Span of Control (I)

• The number of subordinates a supervisor has reporting to him/her.

• It is recommended that a supervisor has about 5/6 subordinates for effective management.

• 2 types of span of Control; – Narrow– Wide

• Narrow– Closer and more contact with subordinate– Tight control and tight supervision– More time for other duties – planning, decision making– A lot of layers, more positions


Span of Control (II)

• Wide– Reduced operation and administrative costs– Easier communication– Coordination problems reduced– Quicker decision making– Can cultivate higher motivation level in

subordinates


• What is the Span of Control?– The number of people who report to one manager

in a hierarchy– The more people under the control of one manager

- the wider the span of control– Less means a narrower span of control

• Example below shows a span of control of 4 for the Marketing Manager

Marketing Manager

Marketing Assistant

Market Researcher

Telesales Supervisor

Customer Care

Assistant


Advantage of a Narrow Span of Control

• Allows a manager to:– Communicate quickly with employees under

them– Control employees more easily

• Feedback of ideas from workers more effective

• Requires a higher level of management skill


Advantage of a Wide Span of Control

• There are less layers of management to pass a message through

• So the message reaches more employees faster

• It costs less money to run a wider span of control because a business does not need to employ as many managers

Module Code and Module Title Title of Slides © 2007 Prentice Hall, Inc. All rights reserved.

Exhibit 10–3 Contrasting Spans of Control


Span of ControlNarrow Span of Control

Manager

Wide Span of Control

Manager


Factors influencing span of control

Narrow span Wider Span

Complex work Simple work

Uncertain environment Stable environment

Less able subordinates Able subordinates

More risk/danger Less risk/danger

Less able manager Able manager


Factors affecting Span Of Control

• Competence of a manager

• Complexity of functions

• Similarity of function

• Non supervisory duties of manager

• Direction and control needed by subordinates

• Physical proximity / Geographic location


Work Specialisation

• The degree to which the work necessary to achieve organisational goals is broken down into various jobs.

• Without some specialisation, it would be difficult for the organisation to function.

• People have different skills and abilities, they are usually able to carry out work effectively and efficiently if the job required a particular skill or ability they possess.


Departmentalisation

• The main department designs are by;– Function– Product– Geography– Matrix


Departmentalisation

• How jobs/ tasks are divided, grouped and coordinated.

• All departments must understand and ‘pull’ together toward achieving the organisational goals.

• Activities are grouped by functions e.g. Human Resources, Finance, Marketing.

• Names of the departments depend on the type of business the organisation is in.


ProductionProductionFinanceFinance R&DR&D AccountingAccounting Sales & Sales & MarketingMarketing

Human Human ResourceResource

Chief Executive OfficerChief Executive Officer

Functional StructureFunctional StructureFunctional StructureFunctional Structure


Functional Organization Structures


Product StructureProduct Structure

W ashing M achineDivision

LightingDivision

TelevisionDivision

CorporateM anagers

CEOCorporation


Geographic StructureGeographic Structure

NorthernRegion

W esternRegion

SouthernRegion

EasternRegion

CorporateM anagers

CEOCorporation


Matrix Organization


Matrix Organizational Structure


Matrix organizations provide clear accountability within a specific business function and allow more efficient allocation of specialized skills across the entire business. By taking advantage of the shared services and skills and not having to develop and manage those skills themselves, the divisional or product line organizations can better focus on their core business objectives


Matrix Structures

Advantages Speeds operational decision making

Project loyalty

Flexible use of human resources

Disadvantages Complex

Costly

Confusing

Time management


Chain of Command (COC)

• Unbroken line of authority form the top to the bottom of the organisation.

• Everyone is accountable to someone.• When the COC is too long;

– Complexity in communication– Message gets distorted– Depersonalised employee relations– Too much ‘red tape’

• Borderless organisation• Team work


Chain of Command• Line on which orders and decisions are

passed down

• From top of hierarchy to bottom

ExampleManagingDirector

ProductionDirector

ProductionManager

FactorySupervisor

MachineOperators


Centralisation

• Amount of authority delegated to different positions in the organisation structure.

• Decision making is focused at the top of the organisation hierarchy and lower level just carry out decisions made.

• Authority and work is not / little delegated.• Advantages

– Top management is aware of the happenings and overall needs, better control over activities

– Better standardised procedures and policy– Easier to maintain secrecy


Decentralisation

• Decision are made at all management levels.• Lower level management provide input in decision

making.• Authority and work is delegated• Advantages

– Reduces work load for Top management– Faster decisions– Better decisions– Employees learn to make decisions– Improves staff morale– Organisation becomes flexible


Centralised Organisations• What are they?

– Organisations where important decisions are taken at the centre and then passed out to the various departments / locations

• Advantages– Tight control of decisions– Decisions made by senior management– Helps decisions to be consistent across the business– Avoids repetition of functions (e.g. only one purchasing

department)• Disadvantages

– Lack of motivation for managers– Central management may be “out of touch”– May be slow to make decisions that need to taken quickly


De-Centralised Organisations• What are they?

– Organisations where important decisions are delegated to managers in other departments / locations

• Advantages– Increased motivation of managers– Encourages local initiatives– Decisions based on more up-to-date information– Decisions made quicker

• Disadvantages– Managers may lack experience– Local decisions may be inconsistent with the overall business aims and

objectives– Duplication of functions and costs


TALL & FLAT STRUCTURES (continued)

Flat Structure / Decentralised Wider span of control

Shorter linesOf authority

Tall Structure / Centralised

Narrower span of control

Taller Lines ofauthority


Formalisation

• Actions which are and not to be done, stated in written policies, rules, procedures

• Helps with vertical coordination


Quick Review Question

• Does authority come together with responsibilities?

• Which is better a centralised or decentralised organisation?

• Why is that a long chain of command not seen to be good for the organisation?


Key Design Questions and Answers for Designing the Proper Organization Structure


Follow Up Assignment

• Read Chapter 8 of Management by K.M. Bartol & D. C. Martin


Q & A

Question and Answer Session


Chapter 4 – Management Theories

Next Session

Chap3 Organisation Structure

Education

Transcript of Chap3 Organisation Structure