Chapter 12 – Organisational structure and design

Question 1

What is an organisational structure?

Answer 1

Johnson et al: The organisational structure can be seen as the ‘skeleton’ of the organisation that ‘provides the basic framework on which everything else is built’.

Carter: organisational structure as a ‘framework of relationships’, recognising the dangers of complexity and ‘energy loss’ where the structure has too many links

Question 2

According to Robbins and Judge, what are the six key elements that ought to be considered when developing an organisational structure? SDCSLF

Answer 2

1. Specialisation: division of tasks into separate jobs to enable the use of expertise in a particular subject or skills
2. Departmentalisation: the grouping of related specialisations
3. Chain of command: the hierarchical line of authority from top to bottom
4. Span of control: the number of people who report to any one person
5. Level of centralisation: the degree to which authority is concentrated at a single point
6. Formalisation: the level of discretion given to people doing the work

Question 3

outline the different structural forms

Answer 3

• Simple
• Functional
• Divisional
• Matrix
• Multi-national
• Joint-venture
• Flexibility and innovation
• Modular and outsourcing
• virtual

Question 4

What is a functional structure?

Answer 4

recruit people with specialist skills to act as a function head – owner-manager unlikely to be skilled

Question 5

What is a divisional structure?

Answer 5

views the business as a series of products, services, geographical areas, etc – this structure is more likely to have a senior manager or director with significant control and oversight across the entire range of functions within a particular division

Question 6

What is a matrix structure?

Answer 6

combines the functional and divisional structures, often creating dual lines of accountability and a much greater communication cross-section (horizontal dimension) across the different hierarchies (vertical dimension). There is often a separate head-office type function which offers cross-functional services to the remainder of the business.

Question 7

What are the different types of multinational structures that can be considered? GILT

Answer 7

1. Global product divisions - optimal structure where there is a financial benefit for establishing a particular business function in one geographic territory but with worldwide coverage
2. International divisions - acting as stand-alone operations although run under the oversight and principles of the parent company
3. Local subsidiaries - degree of autonomy in overseas territory - allows the building of a local reputation
4. Transnational corporations - require a challenging mix of local responsiveness, global coordination and the ability to drive

Question 8

Johnson et al recognised three key challenges that 21st century organisations need to consider - what are they?

Answer 8

1. The speed of change and increasing levels of uncertainty
2. The importance of knowledge creation and sharing as a fundamental part of strategic success: transparency is seen as a core stakeholder requirement
3. An acceptance that markets recognise few geographic boundaries

Question 9

Atkinson: developed a model of the flexible firm, which requires three dimensions of flexibility driven by market stagnation, job losses, economic uncertainty, technological change, and a reduction in the expected basic working hours of employees:

Answer 9

• Functional flexibility: the ability to redeploy the employees quickly and smoothly between activities and tasks
• Numerical flexibility: the ability to change the numbers of people required in line with the tasks being completed
• Financial flexibility: the need for different methods of remunerating employees to enable functional and numeric flexibility

Question 10

What is Handy’s shamrock?

Answer 10

• The core workers are the full-time employees who provide essential and the necessary specialised, professional management requirements in organisations
• The peripheral workers are part-time casual and freelance workers who are only utilised when the work requires them.
• The contract workers are outsourced roles such as cleaning, or for the work of a particular project

Question 11

What are the advantages and disadvantages of a simple structure?

Answer 11

+ve’s
- clarity of accountability with decision maker in regular contact with all employees
- wide spans of control
- centralised authority

-ve’s
- the need for the manager to deal with every aspect of the business
- rigidity can prevent personal progression
- focus on day to day rather than strategy