The Dynamics of Alternative Organisational Forms

Chapter 4

Suzaan Hughes
 Learning Outcomes
1. Discuss the fundamental characteristics of organising, including concepts
such as work specialization, chain of command, span of management and
centralization versus decentralization.
2. Describe functional and divisional approaches to structure.
3. Explain the matrix approach to structure and its application to both
domestic and international organisations.
4. Describe the contemporary team and virtual network structures and why
they are being adopted by organisations.
5. Explain why organisations need coordination across departments and
hierarchical levels and describe mechanisms for achieving coordination.
6. Identify how structure can be used to achieve an organisation’s strategic
goals.
7. Define production technology and explain how it influences organisation
structure.

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Organising viewed in relationship with the
other management functions

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Organising as a Management Function
•An organisation chart is a diagram describing
reporting relationships and the formal
arrangement of work positions within an
organisation. It includes:

The division Supervisory Communica- Major Levels of

of work relationships tion channels subunits management

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Organising
All organisations wrestle with structural design and
reorganisation

The deployment of organisational resources to achieve

strategic goals
❖ Division of labour
❖ Lines of authority
❖ Coordination

Organising is important because it follows from strategy

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 Structure Follows Strategy

• Business performance is influenced by

structure

• Strategic goals should drive structure

• Structure should facilitate strategic goals

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 Organising the Vertical Structure

Organising structure defines:

1. The set of formal tasks assigned to individuals and departments

2. Formal reporting relationships

3. The design of the systems to ensure effective coordination

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4.1 - Sample Organisation Chart

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 Organising Concepts

Work Specialization is the degree to which

organisational tasks are subdivided into
individual jobs; also called division of labour

Chain of Command is an unbroken line of

authority that links all individuals in the
organisation and specifies who reports to whom

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 Authority, Responsibility
and Delegation

•Authority is vested in organisational positions, not people

•Authority flows down the vertical hierarchy
•Authority is accepted by subordinates
•Responsibility is the duty to perform the task or activity as
assigned
•Accountability is the mechanism through which authority and
responsibility are aligned
•Delegation is the process managers use to transfer authority
and responsibility down the chain

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 Line and Staff Authority
• Line authority means that people in management positions have formal
authority to direct and control immediate subordinates
• Staff authority is narrower and includes the right to advise, recommend,
counsel in the staff specialists’ area of expertise

Line departments perform primary business tasks

• Sales
• Production

Staff departments support line departments

• Marketing
• Labour relations
• Research
• Accounting
• Human Resources
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 Span of Management

•The number of employees reporting to a supervisor

•Less supervision/larger spans of control
✓Work is stable and routine
✓Subordinates perform similar work
✓Subordinates are in one location
✓Highly trained/require little direction
✓Rules and procedures are defined
✓Few planning or nonsupervisory activities
✓Manager’s preference

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 Span of Management
❖ Tall structure has more levels and a narrow span
❖ Flat structure has a wide span and fewer levels

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4.2 - Reorganisation and
Span of Management

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 Centralization and Decentralization
•Centralization – decision authority is located near the top of the
organisation
•Decentralization – decision authority is pushed downward to all
levels
•Factors that influence centralization versus decentralization:
• Change and uncertainty are usually associated with
decentralization
• Strategic fit
• Crisis requires centralization

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 Departmentalization:
Functional and Divisional

Basis for grouping positions into departments and

departments into the total organisation
•Vertical functional approach
✓Grouping of positions into departments based on skills,
expertise, work activities and resource use

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4.3 Organisational structures

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4.3 Organisational structures

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 Departmentalization:
Functional and Divisional
Divisional approach
• Grouping based on organisational output, product, program,
business
Geographic or Customer-based divisions group activities by
geography or customer

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4.4 - Functional versus
Divisional Structures

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4.5 - Geographic-Based Global Organisation
Structure

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 Departmentalization:
Matrix and Team Approach

•Matrix approach combines functional and divisional

approaches
• Improve coordination and information
• Dual lines of authority
•Team approach is a very widespread trend
• Allows managers to delegate authority
• Be more flexible and responsive

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4.6 - Dual-Authority Structure in a Matrix
Organisation

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4.7 - Global Matrix Structure

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 Virtual Network Approach
•Extends idea of horizontal coordination and collaboration
•Could be a loose interconnected group
• i.e., outsourcing

Virtual network structure means that the firm subcontracts most

of its major functions to separate companies

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4.8 - Network Approach to Departmentalization

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4.9 - Structural Advantages and Disadvantages

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 Organising for Horizontal Coordination
Companies need more flexibility than vertical structure can offer
• Meet fast-shifting environment
• Break down barriers between departments
• Need integration and coordination

Lack of coordination and cooperation can cause information

problems
• Growing global challenge

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4.10 - Evolution of Organisation Structures

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 Reengineering

Radical redesign of business processes to

achieve dramatic improvements in cost,
quality, service and speed

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 Task Forces, Teams and
Project Management

Task Force – a temporary

team or committee formed to • Project Manager –person
solve a specific short-term
responsible for
problem involving several
departments coordinating activities of
several departments for
Cross-functional Team – the completion of a
furthers horizontal coordination specific project
by including members across
the organisation

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 4.11 - Project Manager
Relationships to Departments

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 Relational Coordination
•Frequent, timely, problem-solving communication carried out
through [employee] relationships of shared goals, shared
knowledge and mutual respect.

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4.12 - Factors Affecting Organisation Structure

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 Organisational Designs

• A mechanistic design is centralized, with many rules and

procedures, a clear-cut division of labour, narrow spans of
control, and formal coordination.
• An organic design is decentralized, with fewer rules and
procedures, open divisions of labour, wide spans of control,
and more personal coordination.

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Copyright ©2020 John Wiley & Sons, Inc. 35
4.13 - Relationship of Structural Approach to
Strategy and the environment

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A continuum of organisational design alternatives:
from bureaucratic to adaptive organisations

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 Structure Fits the Technology

•Knowledge, tools, techniques and activities should match

production activities
•Manufacturing firms can be categorized according to:
✓Small-batch and unit production
✓Large-batch and mass production
✓Continuous process production
•The technical complexity of each type of firm differs

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4.14 Relationship between technology and
structure

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 Service Technology
Intangible output
• Output is intangible
• Services are perishable
• Cannot be stored in inventory

Direct contact with customers

• Employees and customers interact directly
• Production and consumption are simultaneous

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 Outsourcing of services

•Known also as ‘offshoring outsourcing’

•Organisations relocate of a business process to perform a
business function, e.g.
• Call centres
• Can lead to poor quality service to customers

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 Organisational Designs
• Contemporary organising trends include:
o Fewer levels of management
• Shorter chains of command
• Less unity of command
o Wider spans of control
o More delegation and empowerment
o Decentralization with centralization
o Reduced use of staff

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Copyright ©2020 John Wiley & Sons, Inc. 42