Organisational structure and design Flashcards
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
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
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
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?
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 (many listed companies use this with a holding company at the top)
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 - 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? (Reporting)
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
EMERGING STRUCTURAL FORMS - BOUNDARY-LESS ORGANISATIONS
What does the term ‘boundary-less’ suggest?
In The Boundaryless Organisation (1995) Askenas et al. discuss 4 different dynamics which need to be flexible, either individually or jointly, and the strategic impacts that such an approach can drive within an organisation. What are the 4?
What was a key conclusion?
while inevitable boundaries will have to exist, they can be significantly more flexible than in more traditional structures, with differing levels of people within the structure being given more autonomy to implement change and be accountable for such change
(1) Vertical = The hierarchical boundaries between people at different levels in the organisation
(2) Horizontal = The silo boundaries that exist between different functions and departments.
(3) External = The micro-level boundaries that are placed between the organisation and its customers, suppliers and regulators
(4) Geographic = The macro-level boundaries that exist between nations, cultures and markets
key conclusion = the evolution of the boundary-less organisation aligns with the view ascribed to Mintzberg that the development of strategy needs to be based around emergent ‘strategic thinking’ rather than the more rational ‘strategic planning’.
EMERGING STRUCTURAL FORMS - VIRTUAL STRUCTURES
The rapid growth of technology and the ability to immediately communicate across the world has led to the growth of a totally different type of organisation.
How is a virtual organisation structure held together?
Name 3 organisations that use a virtual structure.
Internet communications have allowed the development of what?
held together through partnership, collaboration, networking and maximisation of the use of technology
Dell Computers, Nike and Reebok operate successful businesses without directly owning any of their own manufacturing facilities
development of virtual organisations, where the leadership and administrative
centre sits ‘in the cloud’ and although the thrust of the business might outsource manufactured products from tangible businesses, the organisational structure has only a ‘net’ existence
EMERGING STRUCTURAL FORMS - VIRTUAL STRUCTURES - THE GIG ECONOMY
What is the human cloud?
Who often finds work on these sites?
What are the 2 benefits of the human cloud?
What are 4 dangers?
Human cloud = focuses on service sector work that is done remotely = Workers, who can be anywhere in the world, place “bids” to do the work on offer
Plenty of people in developed countries find work on these sites, but a sizeable chunk is going to the developing world where the cost of living is lower
Benefits:
(1) it gives talented people in developing countries the opportunity to access global demand for their skills, when local markets are limited =unlocks human potential that may otherwise be squandered
(2) allows people to work from home – so long as they have the internet – in countries where poor infrastructure can mean gruelling commutes
Dangers:
(1) workers in richer countries can find themselves undercut by competitors in poorer places
(2) Online gig workers may have long working hours, often overnight because of time zone differences
(3) As freelancers, they have no employment protections.
(4) Governments will struggle to gather tax revenue from all this economic activity happening in people’s bedrooms.
DETERMINING APPROPRIATE STRUCTURE
What 2 things are apparent from the exploration of different types of structure?
This is not to suggest that an organisation needs its structure to exist in a state of constantly changing fluidity, but that those leading the organisation must ensure what?
Handy (1993) argues that structural form results from the competing pressures of what? (2) (name 2 examples for each)
- There is no one ideal structure that will definitely enable all organisations to achieve their strategic objectives.
- It is important for every organisation to determine an optimal structure for its operations at any particular point in time, but to continually challenge and be aware of the need for flexibility and structural evolution when required.
ensure a process exists to keep relevant drivers of change on the radar, so that change can be proactive rather than reactive
uniformity and diversity:
Uniformity = (1) economies of scale, (2) control processes
Diversity = (1) differing stakeholder goals, (2) decentralised control
DETERMINING APPROPRIATE STRUCTURE
Goold and Campbell (2002) proposed that there are 9 different tests that we can apply to consider the question ‘how do we know whether we are operating the most appropriate organisational structure?’
What are the 9 tests?
- Market advantage = Does the structure enable strategic market focus?
- Parenting advantage = Is the corporate centre adding value?
- People = Is the potential of the employees maximised?
- Feasibility = Are all legal and regulatory expectations recognised?
- Specialised cultures = Is the input of specialists recognised and allowed for?
- Difficult links = How does the structure enable communication challenge?
- Redundant hierarchy = Are there too many layers of control?
- Accountability = Are the lines of accountability transparent and clear?
- Flexibility = How is a change in strategic drivers recognised and challenged?
DETERMINING APPROPRIATE STRUCTURE
The core questions for an organisation to ask are identified by Lynch (2015). What are they? (3)
- What kind of organisation are we, and do we want to be anything different? (commercial, profit-making, non-profit-making, charitable, co-operative, government, etc.)
- Who are the influential stakeholders? (owners, directors, managers, employees, customers, suppliers, banks, environment, etc.)
- What is our purpose? (vision, objectives, goals, success factors, etc.)
