Organisational Design

Question 1

Define ORGANISATIONAL STRUCTURE

Answer 1

Organisational structure defines how job tasks are formally divided, grouped and coordinated.

Question 2

What is the purpose of organisational structure?

Answer 2

• economic and efficient performance of the organisation and level of resource allocation/utilisation
• monitoring activities of the organisation
• accountability for areas of work undertaken by groups and individual team members of the organisation
• coordination of different parts of the organisation and different areas of work
• flexibility in order to respond to future demands and developments, and to adapt to changing environmental influences
• social satisfaction of members working in the organisation.

Question 3

What are the building blocks of organisational structure?

Answer 3

1. Specialisation
2. Departmentalisation
3. Chain of command
4. Span of control
5. Centralization
6. Formalization
7. Boundary spanning

Question 4

Define SPECIALISATION

Answer 4

Specialisation is the division of labour in separate activities.

• Large tasks are divided into smaller roles completed by individuals.
• it is related to Taylorism and the classical approach
• people complete one task that they are trained for
• this increases efficiency and productivity.

Question 5

Define DEPARTMENTALISATION

Answer 5

Departmentalisation is the basis by which jobs are grouped together so that common tasks can be coordinated. They can be separated by function, product/service, geography and customer type.

Question 6

Define a CHAIN OF COMMAND

Answer 6

A chain of command is the path of authority along which instructions are passed, from the CEO downwards.
In more modern businesses, it is less relevant because lower down employees are encouraged to contribute to decision making more and self managed and cross functional teams have increased in popularity.

Question 7

Define a SPAN OF CONTROL

Answer 7

A span of control is the number of employees a manager is expected to effectively and efficiently direct. It determines the number of managers an organisation has.
There is a trend towards wider spans of control rather than narrow ones, meaning each manager has more subordinates to control and therefore communication may not be as effective.

Question 8

Define a TALL ORGANISATIONAL STRUCTURE

Answer 8

A tall organisational structure is one that has many levels of hierarchy. Close supervision is possible as managers have fewer subordinates; horizontal communication is more efficient and there are more opportunities for promotion.

Question 9

Define a FLAT ORGANISATIONAL STRUCTURE

Answer 9

A flat organisational structure is one that has few levels of hierarchy. Supervision is less effective as managers have more subordinates to control; horizontal communication is more difficult and there are fewer opportunities to get promoted.

Question 10

Define CENTRALISATION

Answer 10

Centralisation refers to a degree to which decision making is concentrated at a single point in the organisation. Key decisions are often made by senior management and enforced upon subordinates.

Question 11

What are the advantages of centralisation?

Answer 11

• senior managers have control over decision making
• the marketing message, appearance, quality etc. is consistent throughout the organisation
• economies of scale keep costs low

Question 12

What are the disadvantages of centralisation?

Answer 12

• local conditions will be ignored
• local managers’ experience will not be utilised
• local staff may feel alienated or demotivated
• change will occur slowly

Question 13

What are the advantages of decentralisation?

Answer 13

• local managers/staff feel more empowered and may be more motivated
• local conditions and differences are taken into account
• the organisation can be more responsive to changes in the market, which could lead to a competitive advantage.

Question 14

What are the disadvantages of decentralisation?

Answer 14

• local managers may lack the skills and experience necessary to make good decisions
• the scope for economies of scale is limited as each store has a different approach
• corporate image may not be consistent

Question 15

Define FORMALISATION

Answer 15

Formalisation is the degree to which jobs within an organisation are standardised. A highly formalised job means a minimum amount of discretion; employees have little freedom. A lowly formalised job is the opposite, and employees have a great deal of freedom.

Question 16

Define BOUNDARY SPANNING

Answer 16

Boundary spanning occurs when individuals form relationships with people outside their formally assigned groups.

• positive results have come from organisations that have introduced internal boundary spanning
• external boundary spanning works best when it is backed up with internal boundary spanning.

Question 17

What are the main types of organisational structure?

Answer 17

Simple structure, functional structure, divisional structure, matrix structure, virtual organisations, team structure.

Question 18

Define a SIMPLE ORGANISATIONAL STRUCTURE

Answer 18

A simple structure is one where the manager and the owner and one and the same. They have a wide span o control as there are few levels of hierarchy and a centralised structure for decision making. Good for small organisations.

Question 19

What are the advantages of a simple organisational structure?

Answer 19

• simple, fast and flexible
• inexpensive to maintain
• the line of accountability is clear

Question 20

What are the disadvantages of a simple organisational structure?

Answer 20

• difficult to maintain in anything other than small organisations
• risky, as everything depends on one person; what if they are wrong, ill, or can’t work?

Question 21

Define a FUNCTIONAL ORGANISATIONAL STRUCTURE

Answer 21

A functional organisational structure is one where employees are grouped according to a specialised or similar set of roles or tasks. Workers have similar skills and experience if they are in the same functional group.

Question 22

What are the advantages of a functional organisational structure?

Answer 22

It allows specialists to become experts more easily than if they worked in diversified units.

Question 23

What are the disadvantages of a functional organisational structure?

Answer 23

• creates rigid, formal communications because the hierarchy dictates the communication protocol.
• coordination may become a problem
• infighting may lead to reduced motivation.

Question 24

Define a DIVISIONAL ORGANISATIONAL STRUCTURE

Answer 24

A divisional organisational structure is one where the organisation is divided into groups based on geographic location or product type. Often means that different roles are replicated in different departments or locations.

Question 25

What are the advantages of a divisional organisational structure?

Answer 25

• facilitates coordination in units to achieve on-time completion, budget targets and development, and introduction of new products to market, while addressing the specific concerns of each unit.
• provides clear responsibility for all activities related to a product

Question 26

What are the disadvantages of a divisional organisational structure?

Answer 26

The duplication of functions and costs - several people doing the same job leads to unnecessary costs, inconsistency and possible tensions.

Question 27

Define a MATRIX ORGANISATIONAL STRUCTURE

Answer 27

A matrix organisational structure is task orientated. People and resources are grouped by function and product. Workers complete tasks in functional teams as well as in their own department.

Question 28

What are the advantages of a matrix organisational structure?

Answer 28

• puts specialists together to enable the sharing of specialised resources and knowledge across products
• product departmentalisation facilitates coordination

Question 29

What are the disadvantages of a matrix organisational structure?

Answer 29

• workers may become confused, or overwhelmed with their workload
• tendency for people to foster power struggles
• high level of stress places on individuals

Question 30

Define a VIRTUAL ORGANISATION

Answer 30

A virtual organisation is typically a small, core organisation that outsources major business functions. It is highly centralisation, with little or no departmentalisation. Also called a modular or network organisation.

Question 31

Define a TEAM STRUCTURE

Answer 31

A team organisational structure is one in which employees work together regardless of department function or skills.

• eliminates the chain of command and replaces departments with empowered teams.
• removes vertical and horizontal boundaries
• breaks down external barriers
• when fully operational, the team structure may break down geographical barriers.

Question 32

What are the models of organisational design?

Answer 32

The mechanistic model and the organic model

Question 33

Describe the mechanistic model

Answer 33

There is high levels of specialisation and rigid departmentalisation. The chain of command is clear and the majority of decision making is centralised. Narrow spans of control exist as well as high levels of formalisation.

Question 34

Describe the organic model

Answer 34

There are both cross-functional and cross-hierarchical teams. There is a free flow of information as well as wide spans of control. Decision making is decentralised and there are low levels of formalisation.