CH5- Structure in the entrpreneurial organisation

Question 1

Why do larger organizations struggle with entrepreneurship and innovation?

Answer 1

As organizations grow, they tend to become more structured, usually by introducing more levels of hierarchy. This hierarchy can slow down decision-making and innovation because it introduces bureaucracy and reduces the organization’s flexibility.

Question 2

What is ‘deconstructing’ in the context of large organizations?

Answer 2

Deconstructing means breaking a large organization into smaller, more manageable units. This allows the organization to behave more like a startup—faster, more responsive, and more entrepreneurial in identifying and capitalizing on new opportunities.

Question 3

Why is hierarchy a problem for large organizations?

Answer 3

Hierarchy, while necessary for organizing large groups of people, can become a barrier when it slows down communication and decision-making. With more layers of management, information takes longer to flow, which hinders the organization’s ability to quickly adapt to market changes.

Question 4

What are the benefits of hierarchy in an organization?

Answer 4

Hierarchy provides structure and order. It gives managers clear authority, simplifies communication, and allows for specialization and cooperation within the organization. It helps in managing complex tasks efficiently by reducing the number of communication channels.

Question 5

How does a simple hierarchy compare to a self-organizing team?

Answer 5

In a simple hierarchy, there are fewer interactions and relationships to manage, making communication more efficient. For example, in a team of five people, there are only 4 interactions needed in a hierarchical structure, whereas in a self-organizing team, the same group would need 10 interactions to communicate a single message.

Question 6

What is a self-organising team?

Answer 6

A self-organizing team is a group of individuals who manage their own tasks and make decisions collectively, without the need for a formal hierarchy or manager overseeing their work. These teams have the flexibility to distribute responsibilities and decide how best to achieve their goals.

Question 7

Why do interactions increase in a self-organizing team?

Answer 7

In a self-organizing team, everyone communicates directly with each other. As the number of team members increases, the number of interactions grows rapidly. This can create communication overload, leading to delays, confusion, and potential conflicts.

Question 8

What is Parkinson’s Coefficient of Inefficiency?

Answer 8

This principle, proposed by Northcote Parkinson, suggests that when a group exceeds 21 people, communication becomes inefficient. In a self-organizing team of 21 people, there would be 210 interactions needed to share a single message, which is impractical and leads to misunderstandings.

Question 9

What is the ideal group size for managing effectively?

Answer 9

Managers can typically manage about 15 to 20 people before communication and control become inefficient. Beyond this point, informal communication between staff increases, leading to potential delays and conflicts.

Question 10

Why is size an enemy of creativity?

Answer 10

As organizations grow larger, the need for structure (especially hierarchy) tends to stifle the creativity and freedom needed for innovation. Larger organizations often struggle to maintain the flexible, creative environment that smaller companies and startups excel in.

Question 11

How can larger organizations overcome these challenges?

Answer 11

By breaking themselves down into smaller units and encouraging more decentralized decision-making, larger organizations can create an entrepreneurial environment. This allows them to remain agile and responsive to changing markets.

Question 12

What is a formula to calculate the number of interactions in a self-organising team?

Answer 12

The formula n(n−1)/2 shows how communication complexity grows rapidly as team size increases in self-organizing teams. While small teams may benefit from flexibility, larger teams require hierarchy or structure to keep communication manageable.

Question 13

Why do organizations need structure as they grow?

Answer 13

As organizations grow, they need a structured hierarchy to avoid chaos and ensure operations are efficient, stable, and rule-driven. Without structure, coordination between different departments and employees becomes challenging.

Question 14

What is a classic hierarchy in organizations?

Answer 14

A classic hierarchy involves departments (e.g., marketing, production), functions within those departments (e.g., sales, advertising), and individuals. This structure is divided into clear levels, creating a stable environment and a defined career path for employees.

Question 15

What are the potential downsides of hierarchical structures?

Answer 15

While they create stability and efficiency, hierarchical structures can sometimes discourage collaboration and knowledge-sharing between departments. This can stifle innovation, as new ideas often emerge from cross-departmental interactions.

Question 16

What happens when an organization grows beyond a certain size?

Answer 16

Larger organizations often adopt a divisional structure to manage complexity. This can involve grouping divisions based on products, markets, or geographical regions. In some cases, divisions become subsidiaries with greater freedom.

Question 17

How are departments or divisions grouped in large organizations?

4 main ways to group employees:

Answer 17

• Common Tasks: Grouping people by similar tasks or functions.
• Common Products: Grouping by product lines.
• Geographic Proximity: Grouping based on location.
• Processes: Grouping based on the processes like sales, manufacturing, or R&D.

Question 18

What are tall and flat structures in an organization?

Answer 18

• Tall Structures: Many management layers with a narrow span of control (fewer people report to each manager).
• Flat Structures: Fewer management layers with a wider span of control (more people report to each manager). Flat structures are often more cost-effective and encourage faster decision-making.

Question 19

Why has there been a trend toward flattening structures?

Answer 19

The trend towards flattening, or delayering, started in the 1980s in the U.S. and spread to Europe. This was driven by the need to reduce managerial costs and improve responsiveness, facilitated by advances in information technology. Flat structures push decision-making to lower levels, encouraging autonomy and efficiency.

Question 20

What are the benefits of a flat organizational structure?

Answer 20

Flat structures encourage greater collaboration, empower employees, and reduce bureaucracy. They also facilitate open communication, allowing teams to make decisions faster and be more agile in responding to changes.

Question 21

What is a matrix structure?

Answer 21

A matrix structure overlays functional and product-based hierarchies. Employees report to two managers—one for their function (e.g., accounting, sales) and one for their product or geographical area. This structure is used in multinational companies to maintain consistency across different locations while encouraging informal coordination.

Question 22

What are the pros and cons of the matrix structure?

Answer 22

• Pros: Encourages communication and coordination across functions and geographies.
• Cons: It can become overly complex, leading to slower responsiveness and decision-making, especially in large organizations.

Question 23

How do project and venture teams operate within this structure?

Answer 23

Project teams are smaller, cross-functional groups that are more flexible than matrix structures. These teams often foster creativity and innovation by bringing together people with different skills to work on a specific project. For example, at Gore (makers of Gore-Tex), teams self-manage, set their own goals, and elect leaders, encouraging autonomy and innovation.

Question 24

What is a traditional hierarchical structure?

Answer 24

It’s a mechanistic, rigid, and bureaucratic form of organizational structure where power is centralized at the top, and employees are expected to follow set rules and procedures strictly.

Question 25

Traditional hierarchical structure

Why is it called a “machine bureaucracy”?

Answer 25

It’s called a machine bureaucracy because it operates much like a well-oiled machine—good at handling simple, repetitive tasks with extensive standardization. This setup works best in stable environments where routine is key and security is important.

Question 26

Where is a machine bureaucracy most appropriate?

Answer 26

• Stable environments: Little change over time.
• Simple tasks: Tasks that don’t need much flexibility or creativity.
• High volume production: It’s great at minimizing costs and focusing on efficiency, such as in highly automated or batch manufacturing processes.
• Mature product phases: When products are in their mature phase, machine bureaucracies can “milk” them for profit, treating them as cash cows.

Question 27

What did contingency theorists say about organizational structures?

Answer 27

Contingency theorists in the late 1950s and 1960s argued that there is no one best way to structure an organization. Instead, the best structure depends on:
* The organization’s scale of operation.
* The technology used.
* The environment it operates in.