INTERNAL ORGANISATION

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INTERNAL ORGANISATION

• How organisations sort themselves..and why.

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Options. Business can organise by-
Function
Structures
Place
Customer
Product/Service
Technology
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FUNCTIONAL GROUPING

• Very common in most organisations
• Where the business is sorted into departments
  based on skills-
• Marketing
• Finance
• Human Resources
• Operations
• Research and Development

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Details

• Usually a centralised decision-making structure
• Decisions made at the top
• Traditional

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PRODUCT OR SERVICE

• Organised into divisions
• Each division will have its own functions self
  contained
• Used by large organisations
• Many merged conglomerates use this structure
• Cadbury Schweppes 2 divisions

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CUSTOMER GROUPING

• Organisations that are structured around
  customers or groups of clients
• Usually found in the service sector
• Medical practice
• Solicitors
• Bank

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PLACE/TERRITORY

• Designed around geographical factors
• Used by companies selling over a large area
• Multinationals eg Shell
• Meet the needs of the customers in the different
  countries
• Locals can be employed

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TECHNOLOGY

• Used when production can be broken down into
  obvious stages
• Many manufacturing firms use this
• Cutting
• Assembly
• Packing
• Transportation

Allows specialisation
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But .

• Many firms may use a combination of these methods
• A business with a main functional structure may
  have a secondary technological structure in
  Operations and a customer grouping in marketing

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FORMS OF ORGANISATION STRUCTURE
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In brief

• Hierarchical
• Flat
• Matrix
• Entrepreneurial
• Centralised
• Decentralised

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Hierarchical Structure

• Traditional
• Organised in levels
• Called the pyramid structure
• Decisions made at the top and passed down
• Shown in the form of an organisation chart
• Clearly defined roles
• Usually organised in functions
• Criticised for lack of flexibility
• Going through major restructuring

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HIERARCHICAL STRUCTURE
Rector Depute Rector PTs Senior
Teachers Teachers
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Details

• Fayol said that an organisation with more than 5
  levels will suffer from communication problems
• Chinese Whispers Effect
• Them v- Us scenario
• Cannot react to changes in the business
  environment (market)
• Can be stagnant and overstaffed
• Is inefficient

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Features of a Hierarchical Structure

• A Hierarchical structure will be made up of
• A NARROW SPAN OF CONTROL
• A LONG CHAIN OF COMMAND

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Span of control

• If the organisation is to work effectively there
  must be a suitable span of control
• THE NUMBER OF PEOPLE IN THE BUSINESS THAT A
  MANAGER HAS DIRECT CONTROL OF

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SPAN OF CONTROL WILL DEPEND ON-

• How good the manager is at their job
• The type of work the business does
• The kinds of decisions that have to be made

manager
This manager has a span of control of 5
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CHAIN OF COMMAND

• The Chain of Command runs right the way down an
  organisation from the top the chairman through
  the managers to the workers at the bottom
• It is another way of describing the levels of an
  organisation

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This organisation chart has 8 levels
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CHAIN OF COMMAND

• An organisation should not have too many links in
  the Chain of Command as this leads to poor
  communications
• CHINESE WHISPERS EFFECT
• Short 3 to 4 Long 6 to 7

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Problems with Hierarchical structures

• Designed for close control no room for
  initiative
• Decision-making can take a long time
• Inability to change quickly

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What can be done?

• RESTRUCTURING/DELAYERING
• The removal of layers from the organisation can
  reduce these problems
• Middle management have often been found to be
  carriers of information
• Not effective in the running of the business

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Delayering
The length of the Chain of Command is 8. This
may be too long and the business could encounter
communication problems. Delayering could help.
Remove middle management
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EMPOWERMENT

• Delayering leads to-
• Workers being more responsible
• Workers being more productive
• Empowerment
• Motivation improves if staff are given more
  responsibility

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DOWNSIZING

• This is also a method of reducing the size of
  your business and cutting costs
• If a particular area of your business is not
  profit making or can be contracted out then it
  can be removed
• THIS IS KNOWN AS DOWNSIZING-

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DOWNSIZING
This example has 6 departments and could downsize
if it had to cut costs.
Remove department
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THE FLAT STRUCTURE
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A product of Delayering

• Caused by the need to respond to the market
• This structure has fewer levels of management
• Shown as a flat pyramid
• No problems with communication
• Decisions are made more quickly
• Many large organisations have gone through the
  delayering process

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The Matrix Structure

• Based around specialist skills and getting groups
  of people working together
• Individuals within a team have their own
  responsibility
• Gives scope for people lower down the
  organisation to use their skills
• Encourages initiative

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Matrix Structure
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The Entrepreneurial Structure
Decision- maker
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Features-

• All decisions are made centrally
• Few collective decisions and a great reliance on
  key workers
• Most small businesses have this type of structure
• Decisions can be made quickly
• Subordinates know who is in charge
• Little consultation required
• Not effective for large businesses

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Centralised Structure

• Where all decisions are made centrally (like
  entrepreneurial)
• Rely heavily on a number of key workers
• Advantages
• Senior management have full control
• Procedures can be standardised
• Senior managers have holistic view
• Senior managers are experienced

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Decentralised Structure

• Subordinates have authority to take some
  decisions
• Delegation is freely used
• Advantages
• Empowerment of workers
• Reduces stress on senior management
• Provides greater job satisfaction for
  subordinates
• Allows flexibility and quick response to change

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In practice.

• It is unlikely that any organisation will use one
  of these structures completely
• There is usually a mix of both
• Quality and staff selection could be
  decentralised
• Finance is centralised