3 Managing Organisational Structure

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OrganizationalStructureOrganizationalStructure

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Designing Organizational StructureDesigning Organizational Structure

Organizing: the process by which managersestablish working relationships amongemployees to achieve goals.

Organizational Structure : formal system of task &reporting relationships showing how workers useresources.Organizational design : managers make specific choicesresulting in a given organizational structure.

Successful organizational design depends onthe organization’s unique situation.



Factors Affecting Organizational DesignFactors Affecting Organizational Design

Environment

Strategy

HumanResources

TechnologyDetermine designor organizational

structure

Determine designor organizational

structure



Determinants of StructureDeterminants of Structures The environment : The quicker the environment

changes, the more problems face managers.Structure must be more flexible when environmental

change is rapid.Usually need to decentralize authority.

s Strategy : Different strategies require the use of different structures.

A differentiation strategy needs a flexible structure,low cost may need a more formal structure.Increased vertical integration or diversification alsorequires a more flexible structure.



Determinants of StructureDeterminants of StructureTechnology : The combination of skills, knowledge, tools,equipment, computers and machines used in the organization.

More complex technology makes it harder for managers toregulate the organization. Technology can be measured by:

Task Variety : new problems a manager encounters.Task Analyzability : programmed solutions available to amanager to solve problems.

High task variety and low analyzability present manyunique problems to managers.

Flexible structure works best in these conditions.Low task variety and high analyzability allow managersto rely on established procedures.



Determinants of StructureDeterminants of Structures Human Resources : the final factor affecting

organizational structure.Higher skilled workers who need to work in teamsusually need a more flexible structure.Higher skilled workers often have professional norms(CPA’s, physicians).

Managers must take into account all fourfactors (environment, strategy, technologyand human resources) when designing thestructure of the organization.



Job DesignJob Design Job Design: group tasks into specific jobs.

Results in a division of labor between workers that iseffective and efficient.

Job simplification: reduction of the tasks each worker performs.Too much and boredom results.

Job enlargement: increase tasks for a given job to

reduce boredom.Job enrichment: increases the degree of responsibilitya worker has over a job.

can lead to increased worker involvement.



Job Characteristics ModelJob Characteristics Model

Skill VarietyTask Identity

Task Significance

Skill VarietyTask Identity

Task Significance

AutonomyAutonomy

Feedback Feedback

Meaningfulnessof work

Meaningfulnessof work

ResponsibilityResponsibilityfor Work for Work OutcomesOutcomes

ResponsibilityResponsibilityfor Work for Work OutcomesOutcomes

Knowledge of Knowledge of results of results of

work work

Knowledge of Knowledge of results of results of

work work

High:High:MotivationMotivation

PerformancePerformanceSatisfactionSatisfaction

High:High:MotivationMotivation

PerformancePerformanceSatisfactionSatisfaction



Job Characteristics ModelJob Characteristics Models Jobs have five characteristics describing extent of:

– Skill variety: employee uses a wide range of skills – Task identity: worker involved in all tasks of job from beginning

to end of the production process – Task significance: worker feels the task is meaningful to

organization. – Autonomy: employee has freedom to schedule tasks and carry

them out.

– Feedback: worker gets direct information about how well the jobis done.

s These affect the motivation, satisfaction and performance of employees.



Grouping Jobs into FunctionsGrouping Jobs into FunctionsOnce tasks are grouped into jobs, managersmust decide how to group jobs together.

Function : people working together with similar skills, toolsor techniques to perform their jobs.

Functional structure consists of departments such asmarketing, production, and finance.

Workers can learn from others doing similar tasks.

Easy for managers to monitor and evaluate workers.

Hard for one department to communicate with others. Managers can become preoccupied with their department and forget the firm

ProsProsProsPros

ConsConsConsCons



A Sample of Pier 1’s Functional StructureA Sample of Pier 1’s Functional Structure

V . P . T V . P . C

V . P . M D i r e c tC o r p . P

E x e c . VF i n a n c e

S e n i o r S t o r e s

D i r e cT r a n s p

V . P .D i s t r i b

S e n i o r L o g i s t i

C l a r k J oC E O



Divisional StructuresDivisional StructuresA division is a collection of functions working together to produce aproduct.

Divisions create smaller, manageable parts of a firm.

Divisions develop a business-level strategy to compete.A division has marketing, finance, and other functions.

Functional managers report to divisional managers who thenreport to corporate management.

Product structure: divisions created according to the type of product or service.Geographic structure : divisions based on the area of a country or world served.

Market structure: divisions based on the types of customers served.



Product StructureProduct Structure

W a s h i n g

D i v i s i o

L i g h t i n

D i v i s i o

T e l e v i s

D i v i s i o

C o r p o r M a n a g

C E OC o r p o r



Geographic StructureGeographic Structure

N o r tR e g

W e sR e g

S o u tR e g

E a s tR e g

C o r pM a n a

C E OC o r p o



Market StructureMarket Structure

L a r g e BC u s t o m

S m a l l BC u s t o m

E d u c a tI n s t i t u

I n d i v i dC u s t o m

C o r p oM a n a g

C E OC o r p o r





Matrix & Product TeamsMatrix & Product Teams Matrix structure : managers group people by functionand product teams simultaneously.

Results in a complex network of reporting relationships.

Very flexible and can respond rapidly to change.Each employee has two bosses which can cause

problems.Functional manager gives different directions than

product manager and employee cannot satisfy both.



Matrix StructureMatrix StructureCEOCEO

Func.Func.ManagersManagers

SalesSales DesignDesign ProductionProduction

ProductProductteam Ateam A

ProductProductteam Bteam B

ProductProductteam Cteam C

Product Team

= two boss employee

TeamManagers

TeamManagers



Hybrid StructuresHybrid Structures

Many large organizations have divisional structures where each manager can select thebest structure for that particular division.

One division may use a functional structure, onegeographic, and so on.

This ability to break a large organization into

many smaller ones makes it much easier tomanage.



Coordinating FunctionsCoordinating FunctionsTo ensure sufficient coordination between

functions, managers delegate authority. Authority : the power vested in the manager to make

decisions and use resources.

Hierarchy of authority : describes the relative authorityeach manager has from top to bottom. Span of Control: refers to the number of workers a

manager manages. Line authority: managers in the direct chain of command

for production of goods or services. Example: Sales Staff authority: managers in positions that give advice to

line managers. Example: Legal



Tall & Flat OrganizationsTall & Flat OrganizationsTall structures have many levels of authority relative to theorganization’s size.

As levels in the hierarchy increase, communication getsdifficult.

The extra levels result in more time being taken toimplement decisions.Communications can also become garbled as it is repeatedthrough the firm.

Flat structures have few levels but wide spans of control.Results in quick communications but can lead tooverworked managers.



Minimum Chain of CommandMinimum Chain of Command

Managers should carefully evaluate:Do they have the right number of middle managers?Can the structure be altered to reduce levels?

Centralized v. DecentralizedDecentralized operations puts more authority at lower levels and leads to flat organizations.

Workers must be able to reach decisions.Divisions and functions can begin to lose sight of organizational goals and focus only on their small area.

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3 Managing Organisational Structure