Organisational structure and design Flashcards
At any point in time, the operation of an organisation can be frozen to examine its structure. How can this be examined?
Name an example of an organisation that operates a decentralised organisational structure.
step back and understand the operational structure = ask how are the people and their roles related to each other? How does the organisation work? How does it do whatever it is that it does?
Tata Group operates a decentralised organisational structure that deliberately places significant responsibility in different companies within its group
THE NATURE OF ORGANISATIONAL STRUCTURE
What are the consequences of not understanding the structure of an organisation? (6)
There is no one right or correct organisational structure. What is the role of the company secretary/governance professional?
= no clarity of (1) how the people within an organisation work, (2) their differing roles, (3) their lines of communication, (4) their reporting lines, (5) their areas of responsibility and accountability, and (6) the various systems that enable the business to operate on a day-to-day basis
= be able to understand, analyse and challenge the structure of the organisation
(nature of the role itself should enable a cross-functional view of the organisation = able to step back and think: How does/ Why does / Who makes this organisation work?
THE NATURE OF ORGANISATIONAL STRUCTURE
Johnson et al. (2017) suggest that the organisational structure can be seen as what?
Structure is the manner of defining what?
The systems are what?
seen as the ‘skeleton’ of the organisation that ‘provides the basic framework on which everything else is built’
how and why an organisation works
the systems are the mechanisms
THE NATURE OF ORGANISATIONAL STRUCTURE
What are the 6 aspects within the initial analysis of organisational structure that should be held in ones head?
(1) How do the relationships work; where is the authority?
(2) What are the channels and the patterns of communication that enable the linkage between the different parts of the structure?
(3) How do we ensure that the structure is designed to enable the realisation of the strategic goals?
(4) How do we enable system change?
(5) What are the strategic drivers?
(6) Where in the structure is there an opportunity for the players (the people) to stop and think – both about the organisation and about the maximising of individual potential?
THE NATURE OF ORGANISATIONAL STRUCTURE - STRTAEGY & STRUCTURE
If the structure is so fundamental to the success of an organisation, how does it relate to the strategy? (Is a strategy required before developing a structure? Is a structure required before developing a strategy?)
What is the traditional view and who was it developed by?
What is the newer view and who was it developed by?
both are true in different circumstances = The strategy needs to be designed to shape and deliver the vision as required by the stakeholders AND
The structure needs to enable the delivery within the constraints of short-term and long-term viability and sustainability
Traditional view = strategy before structure = Chandler (1962) = having devised a strategy, determine what is required to deliver the vision, which will lead to the required organisational structure
Quinn (1980) = argued ‘strategy then structure’ (traditional view) oversimplifies what is required and what actually happens within an organisation = suggested instead strategic change may need to happen incrementally (he called this logical incrementalism) and that the structure will be intertwined with the strategy through the life of an organisation, with both needing to lead and follow at different stages
THE NATURE OF ORGANISATIONAL STRUCTURE - STRTAEGY & STRUCTURE
Suggest how the concept of emergent strategy relates to the debate between whether structure should come before strategy or vice versa. (3)
The concept of emergent strategy suggests that an organisation will need to be prepared to ‘mould’ its predefined rational strategy as the organisation and its strategic plan are influenced by internal and external forces.
If a structure is used to define the strategic plan, then the emergence of structural change (people, environment, etc.) is likely to require change to the strategic plan.
If a strategic plan is used to define an organisational structure, then the emergence of challenge and force on the strategy (changing perspectives of the market or of stakeholders) is likely to require changes to the operational structure.
THE NATURE OF ORGANISATIONAL STRUCTURE - ELEMENTS OF ORGANISATIONAL STRUCTURE
Robbins and Judge (2016) describe organisational structure as being what?
They suggest that there are 6 key elements that ought to be considered. What are they?
Name an example for each.
the manner in which the required business functions are formally divided, grouped and co-ordinated
- Specialisation = the subdivision of tasks within the organisation into separate jobs to make the most effective use of the differing skills of employees
E.g., the development of employees with specific skills that maximise their personal abilities - Departmentalisation = the grouping together of jobs to improve the efficiency and effectiveness of an operation
E.g., alignment of function, product, geography, process or customer can allow greater focus for a range of related jobs within a production process, - Chain of command = the hierarchical line of authority that runs from the top to the bottom of an organisation
E.g., clarification of levels of accountability and authority - Span of control = the number of people that any one person has accountable to them
E.g., the optimising of how many subordinates a manager can effectively and efficiently control - Levels of centralisation = the degree to which decision-making is concentrated at a single point within an organisation
E.g., centralised structure will imply that senior management make all or most of the decisions (a decentralised structure will imply that decision-making is delegated down throughout the organisation) - Formalisation = how the different jobs within the organisation are structured and formalised
E.g., the levels of discretion that are or are not given to the people carrying out the jobs
THE NATURE OF ORGANISATIONAL STRUCTURE - ELEMENTS OF ORGANISATIONAL STRUCTURE
What are the 6 differing concepts of organisational efficiency?
- Managerial efficiency = the ability of an organisation to meet its strategic goals.
- Allocational efficiency = the deployment of resources to achieve goals and create value.
- Productive efficiency = the output achieved in a period of time by employees working under managerial oversight.
- Resource efficiency = the use of organisational resources to achieve objectives and minimise waste.
- Process efficiency = the consumption of time, labour and cost by a process, relative to the organisational outputs.
- Cost efficiency = the understanding and alignment of required costs with output.
TRADITIONAL STRUCTURAL FORMS
Transparency and clarity are required, for all to see within the organisation, and this is usually achieved by what?
Can this help employee motivation?
drawing an organisation chart, reflecting clearly the lines that exist between the different job functions and the levels of the hierarchy
An individual can feel motivated if they appear at the right level and with the anticipated lines of communication BUT there is a risk of demotivation if the chart reveals something unexpected
TRADITIONAL STRUCTURAL FORMS - SIMPLE STRUCTURE
What is meant by simple structure?
Which type of organisations typically use it?
What are the 3 advantages?
What are the 3 disadvantages?
This type of organisation structure is usually quite flat, with the business being run by a single owner-manager, and with limited lines of hierarchy (Even if a supervisor was introduced into this structure, it would only add one additional line between the manager and the employees)
small businesses and have a limited number of employees and a limited range of activities
Advantages = (1) clarity of accountability, with decision-maker in regular contact with all employees, (2)wide spans of control. (3) centralised authority
Disadvantages = (1) the need for the manager to deal with every aspect of the
business, (2) rigidity can prevent personal progression, (3) focus on day-to-day rather than strategy
TRADITIONAL STRUCTURAL FORMS - FUNCTIONAL STRUCTURE
What is meant by functional structure?
Why?
The concept and the requirement of a functional structure will be based upon what?
What are the 3 advantages?
What are the 3 disadvantages?
As an organisation expands and diversifies, it is usually necessary to expand the organisational structure and recruit people with specialist skills to act as a function head for different aspects of the organisation
The owner–manager is unlikely to be skilled, at an appropriate level, in all of the differing aspects of a growing business (finance, sales, production, engineering) = will often need to hire people with these skills to enable the business to continue on its growth curve
a particular business need, mode of operation, and the anticipated customer or other stakeholder requirements
Advantages = (1) flexibility and breadth of senior skills, (2) focused decision-making structure, (3) opportunities for people progression
Disadvantages = (1) duplication of tasks, lack of centralisation, (2) differing values between functions, (3) short-termism – what is best for my function?
TRADITIONAL STRUCTURAL FORMS - DIVISIONAL STRUCTURE
What is meant by divisional structure?
What is the difference between a functional structure and a divisional structure?
The concept and the requirement of a divisional structure will be based upon what?
What are the 3 advantages?
What are the 3 disadvantages?
Rather than using the business operational lines of the functional organisation structure, a divisional structure views the business as a series of products, services, geographical areas or something similar
Whereas the functional structure requires specialists to oversee and manage the different aspects of business, the divisional 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.
a particular business need, mode of operation, and the anticipated customer or other stakeholder requirements
Advantages = (1) separation of strategic from operational, (2) responsiveness to the external environment, (3) opportunities to ‘grow’ management skills and talent
Disadvantages = (1) loss of central control with short-term inter-division
competitiveness, (2) expensive solution with duplication of function across divisions, (3) image and quality differentiation
TRADITIONAL STRUCTURAL FORMS - DIVISIONAL STRUCTURE
What types of companies will in effect operate a divisional structure?
What are the 2 core types of such structure in operation, although obviously with many variants?
Must an organisation stick to 1?
many listed companies will in effect operate a divisional structure with a holding company sitting at the top of the structure owning, either in whole or in part, the subsidiary and associated companies.
(1) The holding company and head office run a central services operation for all subsidiaries, giving a centralisation of functions such as finance and human resources. (The cost of these functions is passed on as an overhead to each business based upon levels of requirement.)
(2) The holding company simply acts as a forum for strategic thinking, boardroom and governance related activities.
= Each individual subsidiary being accountable for the operation and cost of its own administrative type requirements such as finance and human resources.
No = many organisations will switch from one mode of operation to the other and back again in an effort to minimise cost and/or maximise efficiency.
TRADITIONAL STRUCTURAL FORMS - MATRIX STRUCTURE
Why do many organisations find that using a matrix structure overcomes many of the problems that arise from some of the other purely hierarchical structures?
In such structures there is often what? (Head office)
There is a recognition of the need for what?
There is usually what? (Communication)
What are the 3 advantages?
What are the 3 disadvantages?
= the matrix structure combines the functional and divisional structures, often creating dual lines of accountability and a much greater communication cross-section (the horizontal dimension) across the different hierarchies (the vertical dimension).
a separate head-office type function which offers cross-functional services to the remainder of the business.
need for hierarchical reporting for ultimate accountability and developmental and progression opportunities.
usually a more formalised communication structure operating across the different businesses, or different aspects of the same business
Advantages = (1) specialised skills can be used across divisions, (2) resources can be shared more easily, leading to greater efficiency, (3) flexibility can lead to removal of silo thinking and better personal opportunities
Disadvantages = (1) risk of power struggles across the senior team, (2) uncertainty about ultimate accountability – who do I really report to?, (3) hard-workers can become overburdened, and people can avoid accountability
TRADITIONAL STRUCTURAL FORMS - MULTINATIONAL AND TRANSNATIONAL STRUCTURE
A company operating within an international or multinational context will be required to consider a wider range of structural operating parameters.
What will determine how such a company should be structured?
Name an example of an organisation with this structure.
When an organisation is based in one country but buying from and/or selling to other countries, the structure can be largely based around what?
When an organisation is running operations in more than one country, what are the 4 multinational structures that can be considered? (Local independence and responsiveness and global co-ordination)
The differences between national cultures, and the inherent expectations of employees, together with acceptability or otherwise of working practices
Unilever uses its central functions to drive its wide range of products and diversity on international customers
what is acceptable within the ‘home’ country but making reputational allowances for the expectations of the international customers
(1) International divisions = low local independence and responsiveness, and low global co-ordination
(2) Local subsidiaries = high local independence and responsiveness, and low global co-ordination
(3) Global product divisions = low local independence and responsiveness, and high global co-ordination
(4) Transnational corporations = high local independence and responsiveness, and high global co-ordination
TRADITIONAL STRUCTURAL FORMS - MULTINATIONAL AND TRANSNATIONAL STRUCTURE
INTERNATIONAL DIVISIONS
What are international divisions?
When are they used?
Which types of organisations use them?
LOCAL SUBSIDIARIES
Local subsidiaries will have a degree of what?
When are these structure particularly useful?
What will often be established in this manner?
Why?
International divisions = stand-alone operations; although run under the oversight and principles of the parent company, they are not integrated into the core structure.
(Usually such structures will draw upon ‘head office’ for many administrative and oversight functions)
This is often the starting point for a business when it is establishing its initial overseas operation and allows it to test the local potential and requirements without having to change the core ‘home’ structure.
This is often used by organisations with large domestic markets, such as the US or China, when they establish smaller overseas operations.
Local subsidiaries will have a degree of autonomy in the overseas territory, particularly in customer-focused activities such as design, marketing and production.
particularly useful where there is a need to be responsive to local regulations and culture
Legal, accountancy and other consultancy practices will often be established
in this manner
allows the building of a local reputation with a degree of autonomy from the main organisational structure, which in turn will not need changing to enable an effective subsidiary operation
TRADITIONAL STRUCTURAL FORMS - MULTINATIONAL AND TRANSNATIONAL STRUCTURE
- GLOBAL PRODUCT DIVISIONS
Global product divisions are the optimal structure when what?
Why is the local responsiveness and independence low?
Why is global co-ordination high?
when there is a financial benefit in establishing a particular business function (e.g. production, finance, help-desks) in one geographic territory, but with worldwide coverage for the organisation
because the function is established in that territory for sound economic reasons
because the function will impact an entire organisation
TRADITIONAL STRUCTURAL FORMS - MULTINATIONAL AND TRANSNATIONAL STRUCTURE -
TRANSNATIONAL CORPORATIONS
Transnational corporations require what?
What is this similar to?
Bartlett and Ghoshal (1998) suggest that such structures have what 3 core characteristics?
Ultimate strategic success for the group will often depend on what?
require a challenging mix of local responsiveness, global co-ordination and the ability to drive strategic growth and innovation across a wide range of different geographic territories and cultures
similar to a matrix structure but spread across different countries.
(1) Each national unit will operate independently as a source of ideas and capabilities for the whole corporation.
(2) National units achieve greater efficiency and economies of scale by being able to act as specialists for the entire corporation.
(3) The ‘head office’ will deliver success by establishing the independent role requirement of each business unit, but then underpin this with effective systems, relationships and culture across the units to ensure a cohesive approach.
the ability of ‘head office’ to effectively monitor and influence the business metrics (KPIs, working capital, etc.) of all units while allowing for local culture requirements
TRADITIONAL STRUCTURAL FORMS - JOINT VENTURE STRUCTURE
What is a joint venture organisational structure?
What is the structure designed to enable?
What are the 4 advantages?
What are the 3 disadvantages?
= a form of strategic alliance = can take a range of different legal forms and can involve collaboration for a single particular purpose or for a wide range of business activities.
The use of the word ‘joint’ implies 2 or more parties, and the structure is designed to enable each party to retain their individual autonomy while working together in a formal legal structure designed to achieve specific strategic objectives to add value to each participant party in the ‘venture’
Advantages = (1) retention of individual autonomy and structure, (2) liability is limited to agreed contribution, (3) reduces reputational damage, (4) net accounting basis
Disadvantages = (1) reporting and compliance may add to the administrative burden, (2) guarantees may exceed limited liability and increase potential costs, (3) risk of double taxation
TRADITIONAL STRUCTURAL FORMS - FOCUSED PROJECT STRUCTURE
What is a focused project structure?
What form could it take?
Which organisations will commonly use this method?
The structure will be established to fulfil what?
when an organisation establishes a formal internal structure for one specific purpose.
The structure could take the form of any of the other suggested structures in the textbook, depending on the size of the project, but it will always be aligned to the core strategic drive and under the oversight of the ‘head office’ operation.
Organisations such as civil engineering companies or film companies
Fulfil a set of focused criteria and strategic objectives and will then usually be dissolved when the objectives have been met
EMERGING STRUCTURAL FORMS - GROWTH & CHANGE
In the same way that emergent strategy almost inevitably builds upon rational strategy, emerging structural forms build on and adapt the more traditional organisational structures.
The emerging structural forms are reactive to what?
What are some of the drivers?
Expand on this.
the changes in societal expectations, globalisation and the ever-changing capabilities of technology
Traditional = centralised, bureaucratic, structured
Empowered = developed, participative, fluid
In a traditional structure we would expect to find a dominance of centralised and often bureaucratic control with clear lines of demarcation within a hierarchical structure.
In an empowered structure we would expect to find devolved decision-making at many different organisation levels, much greater participation, and a far more fluid communication and accountability structure.
EMERGING STRUCTURAL FORMS - GROWTH & CHANGE
Lynch (2015) identifies a number of environmental changes that have taken place, which require this rethinking of organisational structure. Name 7 from the early 21st century.
- better education and at higher levels
- computer literacy and wider skills
- complex, computer driven projects
- sophisticated electronic engineering
- differing models of management and human behaviour
- radical growth in markets and market behaviour
- ability to deal in intangibles (futures, etc.)
EMERGING STRUCTURAL FORMS - FLEXIBILITY & INNOVATION
Johnson et al. (2017) recognised 3 key challenges that 21st-century organisations need to recognise and include within their business structures, business models and strategic thinking. What are they?
In more traditional structures, strategy and innovation were led from what?
Why have organisations had to learn to build flexible structures?
(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
(3) An acceptance that markets recognise few geographic boundaries
led from the top of the organisation, or through defined specialist functions.
To enable organisational flexibility and the ability to respond rapidly and appropriately to stakeholder expectations, and to the required rate of technological response
EMERGING STRUCTURAL FORMS - FLEXIBILITY & INNOVATION
Atkinson (1984) developed a model of the flexible firm, which required what?
What are the 3 dimensions?
3 dimensions of flexibility driven by market stagnation, job losses, economic uncertainty, technological change, and a reduction in the expected basic working hours of employees
(1) Functional flexibility = the ability to redeploy employees quickly and smoothly between activities and tasks
(2) Numerical flexibility = the ability to change the numbers of people required in line with the tasks being completed
(3) Financial flexibility = the need for different methods of remunerating employees to enable functional and numeric flexibility
(His model was an early recognition of the need for organisational structures to consider the tasks being undertaken by people other than the core group of employees)
