Organisational Structure RobbinsCh10

Robbins, Bergman, Stagg, Coulter: Management 4e © 2006 Pearson Education Australia

Chapter 10,15 / Topic 7 Organising

Organisational Structure and Design

Robbins, Bergman, Stagg, Coulter: Management 4e © 2006 Pearson Education Australia 2

L E A R N I N G O U T L I N E Follow this Learning Outline as you read and study this chapter.

l Defining organisational structure

• Explain why organising is important

• Identify the six key elements used in designing an organisation’s structure

• Discuss the traditional and contemporary view of work specialization.

• Describe each of the five forms of departmentalization.

• Explain cross-functional teams.

• Differentiate chain of command, authority, responsibility, and unity of command.

• Discuss the traditional and contemporary views of chain of command.

• Discuss the traditional and contemporary views of span of control.


L E A R N I N G O U T L I N E (cont’d) Follow this Learning Outline as you read and study this chapter.

l Defining organisational structure (cont’d)

• Describe the factors influence the amount of centralisation and decentralisation.

• Explain how formalisation is used in organisational design.

l Organisational design decisions

• Contrast mechanistic and organic organisations.

• Explain the relationship between strategy and structure.

• Tell how organisational size affects organisational design.

• Discuss Woodward’s findings on the relationship of technology and structure.

• Explain how environmental uncertainty affects organisational design.


L E A R N I N G O U T L I N E (cont’d) Follow this Learning Outline as you read and study this chapter.

l Common organisational designs

• Contrast the three traditional organisational designs.

• Explain team-based, matrix, and project structures.

• Discuss the design of virtual, network, and modular organisations.

• Describe the characteristics of a learning organisation.


Defining organisational structure and design

l Organisational structurem The formal arrangement of jobs within an organisation.

l Organisational designm A process involving decisions about six key elements:

n Work specialization

n Departmentalization

n Chain of command

n Span of control

n centralisation and decentralisation

n Formalization

n Next Week: Please ensure you have covered Reading 8.1

o “Right away and all at Once. How we saved Continental”


Plan your work and work your plan!

l Major part of implementing plans (doing) involves the arrangement and assignment (organising) of tasks, roles and responsibilities to achieve objectives

l S.M.A.R.T. Objectives

l Drives the course of action

l Coordinates multiple efforts

l What is the relationship between structure and design? Could a manager create an organisational structure without taking design into account, and the consequences?


Formal framework having 4 elements

l Assignment of tasks and responsibilities

l Clustering of individual positions and these into work units

l Mechanisms to ensure vertical

coordination (individuals reporting)

l Mechanisms fostering horizontal coordination such as task forces (e.g.

Corporate Social Responsibility)


Organisational structure/design

l Work specialisationm The degree to which tasks in the organisation are divided

into separate jobs with each step completed by a different person.

n Overspecialization can result in human diseconomies from

boredom, fatigue, stress, poor quality, increased absenteeism, and higher turnover.

Inherited from Scientific management!


Departmentalisation by type

l Functional m Grouping jobs by

functions performed

l Productm Grouping jobs by

product line

l Geographicm Grouping jobs on the

basis of territory or geography

l Process m Grouping jobs on the

basis of product or customer flow

l Customerm Grouping jobs by type

of customer and needs


Functional departmentalisation

• Advantages

• Efficiencies from putting together similar specialties and people with common skills, knowledge, and orientations

• Coordination within functional area

• In-depth specialization

• Disadvantages

• Poor communication across functional areas

• Limited view of organisational goals

Figure 10.2a


Geographical departmentalisation

• Advantages

• More effective and efficient handling of specific

regional issues that arise

• Serve needs of unique geographic markets better

• Disadvantages

• Duplication of functions

• Can feel isolated from other organisational areas

Figure 10.2b


Product departmentalisation

+ Allows specialisation in particular products and services

+ Managers can become experts in their industry

+ Closer to customers

– Duplication of functions

– Limited view of organisational goalsSource: Bombardier Annual Report.

Figure 10.2c


Process departmentalisation

+ More efficient flow of work activities

– Can only be used with certain types of products

Figure 10.2d


Customer departmentalisation

+ Customers’ needs and problems can be met by specialists

- Duplication of functions

- Limited view of organisational goals

Figure 10.2e


Organisation structure (cont’d)

l Chain of commandm The continuous line of authority that extends from upper

levels of an organisation to the lowest levels of the organisation and clarifies who reports to who.

m Classical writers arguing for subordinates to have one boss never envisaged the complexity of today.

m Contemporary writers recognise that more highly trained workers need more flexibility by being able to respond to multiple bosses



l Cannot discuss chain of command without discussing 3 analogous concepts

l Authoritym The rights inherent in a managerial position to tell people what

to do and to expect them to do it.

l Responsibilitym The obligation or expectation to perform.

l Unity of commandm The concept that a person should have one boss and should

report only to that person.

m How does the classical theorists argument for subordinates having only one boss fit with 21st Century organisationstructure?



l Span of controlm The number of employees who can be effectively and

efficiently supervised by a manager.

m Width of span is affected by:

n Skills and abilities of the manager

n Employee characteristics

n Characteristics of the work being done

n Similarity of tasks

n Complexity of tasks

n Physical proximity of subordinates

n Standardization of tasks

Classical versus contemporary theorists? Why are wider spansControl currently favoured? Could that situation change?


Contrasting spans of control

Figure 10.3

What do you see as the relationships between levels, spans and efficiency



l Centralisationm The degree to which decision-making is concentrated at

a single point in the organisations.

n organisations in which top managers make all the decisions and lower-level employees simply carry out those orders.

l Decentralisationm organisations in which decision-making is pushed down

to the managers who are closest to the action.

l Employee Empowermentm Increasing the decision-making discretion and power of

individuals.

What do you consider are the advantages and disadvantages for each in organisations today?


Factors that influence the amount of centralisation

l More Centralisationm Environment is stable.

m Lower-level managers are not as capable or experienced at making decisions as upper-level managers.

m Lower-level managers do not want to have a say in decisions.

m Decisions are significant.

m organisation is facing a crisis or the risk of company failure.

m Company is large.

m Effective implementation of company strategies depends on managers retaining say over what happens.

l Discuss the technological imperative for centralisation of information. For example efforts to track finances and employee communications are increasingly enabled by information technology. Could be the beginning of a real trend back to centralisation of all organisational activities?


Factors that influence the amount of decentralisation

l More decentralisation

m Environment is complex, uncertain.

m Lower-level managers are capable and experienced at making decisions.

m Lower-level managers want a voice in decisions.

m Decisions are relatively minor.

m Corporate culture is open to allowing managers to have a say in what happens.

m Company is geographically dispersed.

m Effective implementation of company strategies depends on managers having involvement and flexibility to make decisions.

l Discuss the idealistic aspects of decentralisation. For example with regard to decision makers, and corporate culture?



l Formalisationm The degree to which jobs within the organisation are

standardized and the extent to which employee behavior is guided by rules and procedures.

n Highly formalized jobs offer little discretion over what is to

be done.

n Low formalization means fewer constraints on how

employees do their work.

The more rules and procedures the more formalised the organisation


Mechanistic versus organic organisation

Table 10.2

Examples of each?


Structural contingency factors

l Structural decisions are influenced by:m Overall strategy of the organisation

n organisational structure follows strategy.

m Size of the organisation

n Firms change from organic to mechanistic organisations as they grow in size.

m Technology use by the organisation

n Firms adapt their structure to the technology they use.

m Degree of environmental uncertainty

n Dynamic environments require organic structures; mechanistic structures need stable environments.

n What works for one organisation does not necessarily work for another

n What that appropriate structure looks like depends on the 4 contingency variables


Structural contingency factors (cont’d)

l Strategy and structure

m Achievement of strategic goals is facilitated by changes in organisational structure that accommodate and support change.

l Strategy provides the reasoning behind structure.

m Strategy drives Structure (Alfred Chandler)

n “restructuring” is based upon a change of plans or strategies

l Size and structure

m As an organisation grows larger, its structure tends to change from organic to mechanistic with increased specialization, departmentalization, centralisation, and rules and regulations.

m Size affects structure at decreasing rate (not linear)

n >2000 employees has little effect – additional members have minimal impact



l Technology and structurem organisations adapt their structures to their technology.

m Woodward’s classification of firms based on the complexity of the technology employed:

n Unit production of single units or small batches

n Mass production of large batches of output

n Process production in continuous process of outputs

m Routine technology = mechanistic organisations

m Non-routine technology = organic organisations

Adapt to the best use of necessary industry technologies!


Woodward’s findings on technology, structure, and effectiveness

Table 10.3

What that appropriate structure looks like depends on 4 contingency variables

She

f

She found there was no one best way to organise a manufacturing firm



l Environmental uncertainty and structure

m Mechanistic organisational structures tend to be most effective in stable and simple environments.

m The flexibility of organic organisational structures is better suited for dynamic and complex environments.

n The scarcer the resources

m Cultural values of the country the organisation is based


Designing motivating jobs

l Job designm The way into which tasks can be combined to form

complete jobs.

m Factors influencing job design:

n Changing organisational environment/structure

n The organisation’s technology

n Employees’ skill, abilities, and preferences

m Job enlargement - Horizontal

n Increasing the scope (number of tasks) in a job.

m Job enrichment - Vertical

n Increasing responsibility and autonomy (depth) in a job.

Powerful Motivator/De-motivator: Carefully consider!


Goal-setting theory

Figure 15.7

•Cornerstone of MBO•Intention: Specific, Challenging•Participation: Accept/Assigned? Mixed•Feedback: Guides Behaviour


Designing motivating jobs (cont’d)

l Job characteristics model (JCM)m A conceptual framework for designing motivating jobs that

create meaningful work experiences that satisfy employees’growth needs.

m Five primary job characteristics:

n Skill variety: how many skills and talents are needed?

n Task identity: does the job produce a complete work?

n Task significance: how important is the job?

n Autonomy: how much independence does the jobholder have?

n Feedback: do workers know how well they are doing?

How does the JCM work to motivate e.g. early starters,Tireless, goal driven team leaders?


Job characteristics model

Source: J.R. Hackman and J.L. Suttle (eds.). Improving Life at Work

(Glenview, IL: Scott, Foresman, 1977). With permission of the authors.

Figure 15.8


Guidelines for job redesign

Source: J.R. Hackman and J.L. Suttle (eds.). Improving Life at Work

(Glenview, IL: Scott, Foresman, 1977). With permission of the authors.

Figure 15.9


Designing motivating jobs (cont’d)

l Suggestions for using the JCMm Combine tasks (job enlargement) to create more

meaningful work. (multi-tasking)

m Create natural work units to make employees’ work important and whole. (self-directed teams)

m Establish external and internal client relationships to provide feedback. (Stakeholders)

m Expand jobs vertically (job enrichment) by giving employees more autonomy.

m Open feedback channels to let employees know how well they are doing.


From theory to practice

Recognise

individual

differences

Ensure goals

are perceived as

attainable

Check the system

for equity

Individualise

rewards

Link rewards

to performance

Suggestions

for

Motivating

Employees

Use goalsDon’t ignore

money

Match people

to jobs


Current issues in motivation (cont’d)

l Flexible work/job schedulesm Compressed work week

n Longer daily hours, but fewer days

m Flexible work hours (flextime)

n Specific weekly hours with varying arrival, departure, lunch

and break times around certain core hours during which all employees must be present.

m Job Sharing

n Two or more people split a full-time job.

m Telecommuting

n Employees work from home using computer links.

What do you think might be the disadvantagesto such working arrangements?



l Motivating professionalsm Characteristics of professionals

n Strong and long-term commitment to their field of expertise.

n Loyalty is to their profession, not to the employer.

n Have the need to regularly update their knowledge.

n Don’t define their workweek as 8:00 am to 5:00 pm.

m Motivators for professionals

n Job challenge

n organisational support of their work



l Motivating contingent Workersm Opportunity to become a permanent employee

m Opportunity for training

m Equity in compensation and benefits

l Motivating low-skilled, minimum-wage

employeesm Employee recognition programs

m Provision of sincere praise

m Video: Radisson Kestrel Hotel: Organisational S.W.O.T.

m Fixing what is broken: H-P’s structural change p.368


Integrating contemporarytheories of motivation

Figure 15.11


Common organisational designs

l Traditional designsm Simple structure

n Low departmentalization, wide spans of control, centralised

authority, little formalization

m Functional structure

n Departmentalization by function

o Operations, finance, human resources, and product research

and development

m Divisional structure

n Composed of separate business units or divisions with

limited autonomy under the coordination and control the

parent corporation.


Strengths and weaknesses of common traditional organisational designs

Figure 10.4


Organisational designs (cont’d)

l Contemporary organisational designsm Team structures

n The entire organisation is made up of work groups or self-

managed teams of empowered employees.

m Matrix and project structures

n Specialists for different functional departments are assigned to work on projects led by project managers.

n Matrix participants have two managers.

m Project structures

n Employees work continuously on projects; moving on to

another project as each project is completed.


A Matrix organisation in an aerospace firm

Figure 10.6



l Contemporary organisational designs (cont’d)m Boundaryless organisation (not rigid and pre-defined)

n An flexible and unstructured organisational design that is

intended to break down external barriers between the

organisation and its customers and suppliers.

n Removes internal (horizontal) boundaries:

o Eliminates the chain of command

o Has limitless spans of control

o Uses empowered teams rather than departments

n Eliminates external boundaries:

o Uses virtual, network, and modular organisational structures

to get closer to stakeholders.


Removing boundaries

lVirtual organisation

m An organisation that consists of a small core of full-time employees and that temporarily hires specialists to work on opportunities that arise.

lNetwork organisation

m A small core organisation that outsources its major business functions (e.g., manufacturing) in order to concentrate on what it does best.

lModular organisation

m A manufacturing organisation that uses outside suppliers to provide product components for its final assembly operations.

Examples??



l The learning organisationm An organisation that has developed the capacity to

continuously learn, adapt, and change through the practice of knowledge management by employees.

m Characteristics of a learning organisation:

n An open team-based organisation design that empowers employees

n Extensive and open information sharing

n Leadership that provides a shared vision of the

organisation’s future, support and encouragement

n A strong culture of shared values, trust, openness, and a

sense of community.


Characteristics of a learning organisation

Figure 10.7


Knowledge Management & The Learning Organisation ( adapted from Young, G: 2008)

Knowledge Management & The Learning Organisation:

Traditional Organisat ions Learning Organisations

Attitude towards knowledge If it is working, don’t change it If you are not changing , it wont

be working for long

Attitude towards new ideas If not invented here, reject it If it was invented or reinvented

here, accept it

Who’s responsible for

innovation

Traditional areas such as R & D Everyone in the organisation

Main Fear Making mistakes Not learning, not adapting

Competitive Advantage Products and Service Ability to learn, knowledge and

expertise

Managers Job To control others To enable others


Things to think about in 21st CenturyOrganisational Design?

l 20th Century Legacy models obsolete

l Professional workers (knowledge workers) create value through brands and networks (Intangible assets)

l Productive professionals generate

competitive advantage

l What are organisations doing to improve this intangible productivity?


Things to think about in 21st CenturyOrganisational Design?

l Vertical design structures (Heirarchies) with matrix & ad hoc overlays increase

complexity and inefficiencies for professionals

l Opportunities in the 21st century economy unleashed through dramatic

transformation of organisational structures to unleash the power of professionals

Organisational Structure RobbinsCh10

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