Organization

Structure
All organizations need
structure
A typical business structure is one that is based on departmental lines, and these departments
are divided according to function or the type of work carried out.
Purpose of Organization
Structure
•who has overall responsibility for decision-making
• the formal relationships between different people and departments – their immediate ‘line’
manager
• the chain of command –
• the the span of control –
• formal channels of communication both vertical and horizontal –
• the identity of the supervisor or manager to whom each worker should report to
Business objectives and organisational structure
An organization consists of any number of individuals. Each This is an example of Entrepreneurial structure suitable for
individual fills a certain role within the structure, small business ( sole trader)
performing tasks that help achieve the objectives set by
management. When the objectives change, as they often do
over time or in new circumstances, then the structure needs
to change.

New competitors enter the industry : A more competitive

market will demand a quicker-acting and more flexible
structure. An organizational structure is not fixed for all
time. It needs to adapt and be flexible enough to allow the
business to be responsive to meet changing conditions,
including different objectives.

The business grows and develops : As a business expands,

its internal structure must change.
 Business objectives and organisational structure
The business grows and develops: As a company expands,
its internal structure must change. Another manager or
supervisor might be required. It could become too time-
consuming for one person to control the work of all the
employees, even if delegation is used.
 Further Structural Changes
• If the business is very successful and further
expansion is achieved – possibly by producing in
other geographical areas – then further structural
changes will become necessary.
• The organizational structure will therefore change
with the size of the business and the range of
activities that it is involved in.
 Business objectives and organisational structure
Business objectives change :
• For example, if one of the long-term objectives of the business is to increase sales in other countries, then
the organizational structure must be adapted to create a regional marketing department.
• If the objective becomes one of making innovative products using the latest technology, then the business
structure must include a research and development department.
• The structure must reflect the objectives of the business.
Business objectives and organisational structure
Intrapreneurship is being encouraged :
Many businesses are now seeing intrapreneurship as a way of giving them a competitive advantage..
Structural changes are needed to encourage intrapreneurs:
• Intrapreneurial teams or task forces from different departments and divisions should be created. These
will help to stimulate new ideas that are not just focused on one department.
• High levels of delegation and trust must be shown, with only minimal direct management control on a
day-by-day basis.
• Flexibility of team members is important. A team should be able to call on a specialist for a short or a
long period to help with its project.
Other reasons for the change of
Organization Structure
1.The style of management, or the culture of the managers -
Theory X -
Theory Y -

2. Adopting new technologies – may lead to delayering.

 Types of organisational structure
A. The functional structure :
• A functional structure splits an organization into departments based on their major area of responsibility.
• The most common departments in a business are marketing, production (or operations), finance, and human
resources. Each of these departments is led by a functional manager.
• All authority rests with this departmental head.
• Other employees are grouped according to their role. For example, in the marketing department, there might
be sales managers, market researchers, and promotions managers.
• This type of structure is usually also organized hierarchically.
Types of organisational structure
Advantages of functional structure Disadvantages of functional structure
• Employees often display a high level of • The structure is a vertical one and this often does
departmental loyalty and pride in the work of not allow for good connections between
their department. departments.
• Coordination between departments is therefore
• It encourages employees to become
difficult, for example, when developing a new
specialists and this can increase efficiency and major project.
productivity.
• Communication flows through the department
• Departments are led by managers who are heads to the top management, so employees may
specialists in the functional area. feel remote from senior management.
• There might be competition between
departments, which may not benefit the whole
organization.
Types of organisational structure
2. The hierarchical (or bureaucratic) structure:
This is one where there are different layers of
the organization with fewer and fewer people
on each higher level.
 Types of organisational structure
Features of a hierarchical structure
1.Levels of hierarchy :
Each level in the hierarchy represents a grade or rank of staff. A narrow (or tall) organizational structure has
many levels of hierarchy and this creates three main problems:
 Communication through the organization can become slow, with messages becoming distorted or filtered
in some way.
 Spans of control - are likely to be narrow as there is a clear relationship between the number of levels in
a hierarchy and the average span of control.
 Those on lower levels can feel remote from the decision-making power at the top.
Features of a hierarchical structure

2. Chain of command is the route through 3.Span of control: the number of subordinates
which authority/information is passed down reporting directly to a manager.
an organization and information is sent
upwards(eg. Sales, change in trends) •can be either wide – with a manager directly
responsible for many subordinates, which
•The taller the organizational structure, the promotes delegation.
longer the chain of command will be – slowing
down communications. •or narrow – a manager has direct responsibility
for a few subordinates, leading to close control.
Types of organisational structure
WIDER SPAN OF CONTROL NARROW SPAN OF CONTROL
Types of organisational structure
Advantages of a hierarchical structure Disadvantages of a hierarchical structure
•The role of each individual will be clear and •Lack of coordination between departments
well-defined. due to few horizontal links between them.
• There is a clearly identifiable chain of • Managers have tunnel vision – don’t see
command. beyond their depts.
• The clearly laid out level of the hierarchy – • Inflexibility – resistance to change
helpful for career planning
• The role determines the hierarchy
Types of organisational structure
C. A flat organizational structure will have few
levels of hierarchy but will tend to have wider spans
of control.
Types of organisational structure
The benefits of a flat organizational structure with wide spans of control are that:
• Each worker is delegated more authority as there is less direct control from a manager who is responsible
for many other employees.
• Employee empowerment can be an important motivational force.
• A short chain of command results in better communications: there is a clear link between the number of
hierarchy levels and the spans of control.
• There are few levels of hierarchy so fewer middle managers are needed, reducing business costs. This
increases the average size of each span of control.
 Types of organisational structure
D. Structure by product or geographical area: When the structure of a business is based on the different
ranges of products that it makes or areas that it operates in, it can be referred to as a divisional
organizational structure. Divisions may follow vertical structure too.
• Each of these product divisions will be self-contained. They have their own marketing, production, and
research teams.
• Key functions such as strategic decision-making and finance are usually still centralized.
• Examples of the structure by product include an IT hardware manufacturer structured into divisions for
business computers, consumer electronics, laptops, and tablets.
Types of organisational structure
Advantages of Product/geographical structure Disadvantages of Product/geographical structure
• focus on specific market segments • duplication of roles, for example, each division has
its own sales team
• respond to consumer needs and market changes
more quickly • rivalries between divisions might develop as they
each focus on divisional objectives
• measure the performance and profitability of each
division separately. • loss of overall central control over each division.
 Types of organisational structure
Delayering: removal of one or more of the levels of hierarchy from an organizational structure. This creates
shorter structures.
It solves the problem of communication and employee motivation in narrow hierarchical structures.
• This development in organizational structures has been assisted by improvements in IT and communication
technology.
• These allow senior managers to communicate with and monitor the performance of junior employees and
widely dispersed departments much more effectively.
• This diminishes the importance of the role of middle managers .
Types of organisational structure
Advantages of Delayering Disadvantage of Delayering

• reduces business costs • there could be ‘one-off ’ costs of making

• shortens the chain of command – improves managers redundant, for example, redundancy
communication payments
• increases spans of control and opportunities for • increased workloads for managers who remain –
delegation • fear that redundancies might be used to cut costs
• may increase workforce motivation - less could reduce the sense of security of the whole
remoteness from top management workforce – one of Maslow’s needs
Types of organisational structure
•The matrix structure: An organizational structure that creates project teams by appointing
employees who are experts in their field from different departments.
• This method of organizing a business is task- or project-focused.
• The matrix structure cuts across the departmental lines of a hierarchical chart and creates
project teams made up of people from all departments or divisions.
• Emphasis is placed on an individual’s ability to contribute to the team rather than their position
in the hierarchy.
 Types of organisational structure
Main features :
• Organisations need flexible structures that remove
as much bureaucracy as possible by eliminating as
many rigid rules and regulations as possible.
• The use of project teams should lead to more
innovative and creative ideas, as employees will be
more motivated to contribute.
Types of organisational structure
Advantages of matrix structure Disadvantages of matrix structure
• Promotes coordination between different
departments leading to employees focusing on
what is good for the project and the whole •Resistance from senior mangers –
business. • Conflict of interest -
• Flexibility - a new team can be quickly
created to meet new market conditions
• Better solutions as experts are drawn from
across the departments.
 Delegation
Delegation: passing authority down the organizational hierarchy to perform tasks and take decisions.
• The wider the span of control, the greater the degree of the delegation that is undertaken
• Acc to Herzberg improves the motivation.
• Makes employees accountable, but managers retain ultimate responsibility.
• Subordinates then have accountability for the work they do.
• If a job is done poorly, then the worker is accountable to his or her immediate manager. They can be held
to account and disciplined for inadequate performance.
Processes of accountability

For effective accountability there needs to be a clear set of guidelines so that the worker knows what is
expected of them and how their work will be assessed.
• Give clear expectations before the employee starts the job.
• Make sure the employee has the appropriate skills, providing training if necessary.
• Establish two-way communication to provide feedback on how the employee is performing while doing
the job, not just at the end of the task.
• Agree on a clear measurement of performance so that the worker knows when they will be assessed as
having done a job well or poorly.
• The consequences of good or poor performance need to be made clear to the employee.
Delegation – Advantages and
disadvantages
Advantages Disadvantages
gives senior managers more time to focus on if the task is not well defined or if inadequate
important, strategic roles training is given, then delegation is unlikely to
succeed
shows trust in subordinates - delegation will be unsuccessful if insufficient
authority (power) is given to the subordinate
develops and trains staff for more senior positions managers may only delegate the boring jobs
that they do not want to do –
helps staff to achieve fulfilment through their
work
Control, authority and trust
Authority and responsibility
It is important to understand the relationship between authority and responsibility. Delegation gives
subordinates the authority to perform certain tasks. This means that they have the power to undertake jobs
and make decisions necessary for these jobs to be completed.
However, the overall responsibility for the work of each employee or department remains with the
manager. The manager delegates authority, but not responsibility. The manager must take the ultimate
blame for underperformance or mistakes within the department.
The reason behind this important principle is that it is the manager who:
• selects the employee (or delegatee) to undertake the task
• allocates resources
• arranges training.
Control, authority and trust
Control and trust
If any of these were the reasons for poor performance, then the manager should ultimately take
responsibility.
Accountability still exists with the employee, however. A worker cannot perform a delegated
task without believing that they will be held accountable for their actions. This ultimate control
over their work is achieved by:
• setting and agreeing targets
• regular appraisal
• monitoring of performance against targets.
Control, authority and trust
• Control and trust
• Delegation involves a manager showing trust in a subordinate because less control will be exercised over
the employee’s work.
• Many managers do not like giving up control.
• Some managers feel less important if they reduce control over workers. They may not want to take any risks
by giving up control. These managers do not make good delegators.
 Control and trust
• There is a conflict between showing trust in a worker and controlling the worker’s efforts.
• Effective delegation means slowly releasing management control in order to show more trust.
• This trust allows the worker to gain a greater sense of achievement when the work is done well.
• A modern development of delegation is called empowerment. This approach not only delegates tasks and
authority to individuals and groups but also allows them to decide on the best method to complete the job.
• This gives even more chance for employees to show initiative and creativity (Herzberg’s motivators).
• However, it requires an even greater level of trust from managers as there is even less direct control over
the work being carried out.
Centralization and
decentralization
CENTRALISATION DECENTRALISATION

These principles are closely linked to Decentralization: decision-making powers are

Delegation. passed down the organization to empower
subordinates and regional/product managers.
Centralization: keeping all of the important
decision-making powers within head office or
the center of the organization.
Centralization and
decentralization –
Advantages
Advantage – Centralization Advantages – Decentralization
A fixed set of rules and procedures in all areas of More local decisions can be made that reflect
the firm should lead to rapid decision-making different conditions –
Due to consistent policies ,conflicts are minimized More junior managers can develop and this
in the organization. prepares them for more challenging roles.
Senior managers take decisions in the interest of Delegation and empowerment are made easier
the whole business –
Central buying should allow for greater economies Quick and flexible decision making
of scale.
Senior managers at central office will be
experienced decision-makers.
Line and staff management functions
LINE MANAGERS STAFF MANAGERS

Line and staff relationships : Staff managers: managers who, as specialists,

provide support, information and assistance to
Line managers: managers who have direct line managers. Eg. Economists, market
authority over people, decisions and resources researchers, scientists.
within the hierarchy of an organization. For
example, the sales director will have line Staff managers do not have line authority over
authority over the sales managers for each of others and do not take decisions.
the different products the firm sells.
 Line and staff management functions
Conflict between Line and Staff :
• Due to their professional status and experience, staff managers can be very well paid.
• They are often accused of having less loyalty to the business as their services might be in great demand by
a wide range of firms. This could lead to them being attracted by better rewards in other organisations.
• The line managers might resent experts coming into the organisation and telling them how to do their
jobs.
• Some staff managers might have frequent access to, and communications with, the directors of the
business. This can cause jealousy from line managers who do not have the same easy access to directors.
Informal organizations
•Informal organization: the network of personal and social relations that develop between people
within an organization.
• Their members cross across departmental lines
• Individual’s effectiveness at work can be greatly affected by the employees around them.
• A clever manager will try to use informal groups to the benefit of the business – basing team-
working on informal groups
• The informal group leader has more power and influence over the team than the formal leader
– so the managers will have to choose supervisors carefully.