HND Organisation Studies

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HND Organisation Studies

• Lecture 3
• Organisation Structure Bureaucracy, matrix,
  divisional and functional structure

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Learning outcomes

• To understand the classical and contingency
  approach to organisational design and structure
• To understand the role which environmental and
  technological factors play in organisational
  design and structure

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Dimensions of Organisational Structure

• Internal structures
• Vertical structure of authority relatively
  static framework of communication, leadership and
  decision-making
• Horizontal structure of groupings of activities
  relatively flexible
• Operating mechanisms rules, regulations, job
  descriptions, reward systems used to reinforce
  the basic structure

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Issues of Organisational Structure

• How to divide the work to be performed into a
  number of distinct tasks
• How to group the tasks together to achieve
  overall goals in an efficient manner

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Characteristics of Organisational Structure

• Specialisation reflects the extent of division
  of labour within the structure
• Standardisation extent to which specific
  procedures exist to deal with tasks to be carried
  out
• Formalisation the extent to which procedures
  and rules are written down
• Centralisation extent to which authority to
  make decisions is in the hands of a few senior
  managers
• Configuration the shape of the organisation as
  illustrated in an organisational chart

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Characteristics of Organisational Structure

• Chain of Command (Scalar Chain)
• the vertical arrangement of direct authority and
  responsibility relationships
• Constitutes the hierarchy of the organisation
• Unity of command principle, no subordinate should
  receive orders from more than one boss

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Characteristics of Organisational Structure

• Span of Control
• Horizontal axis
• The number of subordinates supervised by a
  manager/supervisor
• Tall organisation narrow span of control
• Flat organisation wide span of control

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The Classical Approach- Weber and Bureaucracy
(Weber 1948)

• Authority in organisations generally fell into
  one of three categories
• Traditional- based upon a line of succession
  linked to the person not their abilities
• Charismatic- Based upon the personal attributes
  of the position holder
• Rational-legal - based upon the formal position
  rather than the person
• Weber believed that rational-legal provided the
  most effective mechanism for organisations

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Why rational legal?

• Authority lies with the position- not the person-
  therefore person can be replaced
• It provided a clear line of accountability
• Clients would be treated on the basis of the
  merits of case not favouritism
• In order to achieve this Weber argued that the
  optimal organisational design was that of
  Bureaucracy.

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Characteristics of Bureaucracy

• Specialisation each office has specified tasks
  influence
• Hierarchy clear chain of command
• Rules ensuring uniformity, coordination,
  stability, continuity
• Impersonality cool professionalism
• Appointment on the basis of technical competence
• Progression offers a career for life
• Exclusivity the job is the individuals sole
  occupation
• Segregation of official activity from outside the
  organisation
• Accurate written records to guide and influence
  conduct

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CHARACTERISTICS OF BUREAUCRATIC STRUCTURES

• division of labour
• well defined hierarchies
• formalisation
• impersonality

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CHARACTERISTICS OF BUREAUCRATIC STRUCTURES

• well defined career paths
• employment based on merit
• development of rules, policies and procedures
  (recorded in writing) to cover all eventualities

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ADVANTAGES of BUREAUCRACY

• facilitates management control without day to day
  involvement
• removal of favouritism
• reduced ambiguity

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ADVANTAGES of BUREAUCRACY

• consistency
• clearly defined reporting mechanisms
• reduced employee stress

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DISADVANTAGES OF BUREAUCRACY

• procedures and policies become basic standards -
  employees do no more and no less
• employee alienation
• concentration of power at the top of the hierarchy

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DISADVANTAGES OF BUREAUCRACY

• impersonal to outsiders
• impossible to establish rules and procedures to
  cover all eventualities
• slow to establish new rules and procedures

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Dysfunctions of bureaucracy

• Goal displacement- following rules becomes a
  larger priority than fulfilling the end goal
• Dealing with position rather than person
• Duplication
• Lack of transferable skills
• Can cause people to under develop
• Overly rigid

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Summary of Bureaucracy

• Bureaucracy is a highly centralised, formalised,
  specialised organisational design
• It has advantages (ensures equality of treatment)
• It also has disadvantages (inflexible and top
  heavy)
• In reality most complex organisations need some
  degree of bureaucratic organisation

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Business environment and organisational structure

• In reflection- all organisations are open systems
  which must adapt to their environment
• There is no one best form of organisational
  design
• However, when dealing with different
  environments, the contingency approach best
  reflects the reality of organisational design

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The contingency approach (Late 1950s)

• Adopting a universal approach fails to look at
  the environmental factors
• Contingency theorists believe that the most
  appropriate structure is the one that matches the
  circumstances
• 3 variables in circumstances
• Environment
• Size
• Technology application of knowledge to perform
  work
• People
• Strategic choice
• Past experiences

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The environment and Organisational Structure

• When novelty and unfamiliarity in both market
  situation and technical information become the
  accepted order of things, a fundamentally
  different kind of management system becomes
  appropriate from that which applies to a
  relatively stable commercial and technical
  environment (BURNS AND STALKER 1961)

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Environmental stability (Burns and Stalker 1961)

• STABLE
• stable, predictable demand
• unchanging, well known set of competitors
• technological change evolutionary
• govt. policy stable and predictable

• UNSTABLE
• demand subject to rapid change as new products
  come on line
• competitors change rapidly
• technological change is revolutionary
• govt. policy is unpredictable and subject to
  rapid change

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Entrepreneurial Structure

• The entrepreneur is at the centre of the
  structure
• External technical advice is sought from
  manufacturers or consultants
• Few support staff
• Centralised decision-making
• Mixture of task and power culture

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Functional Structure

• Most common form when the organisation has
  outgrown the entrepreneurial structure
• Divides the organisation into its main functions
  (production, sales, accounting etc) similar
  specialists activities are grouped together into
  independent departments
• A manager is placed in charge of each function
  under the overall control of the owner or senior
  manager

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Advantages of Functional Structure

• Specialised resources are used efficiently
• Quality is enhanced by specialists from the same
  functional area
• Opportunities exist for extensive division of
  labour
• Creates a career structure which enables
  progression within the functional specialsm
• Efficient use of management talent, specialsms
  are easier to manage grouped together

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Advantages of Functional Structure

• Fosters communication between specialists and
  enhances the development of skills and knowledge
• Promotes economy of scale and avoids duplication
  of specialist resources
• Suitable where the market is stable and
  technology rountine requiring little
  interdependence between departments

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Disadvantages of Functional Structure

• Responsibility for overall outcomes is unclear
• Can lead to difficulties in efficient
  co-ordination of functional departments
• Can lead to interdepartmental conflict
• Can result in a lack of creativity and innovation

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Divisional Structure

• Activities are group around products or regions
  not possible with functional structure
• Ensures a closeness to the customer not possible
  with functional structure
• Emphasis on profit centres promotes
• Clear accountability
• Longer planning horizions
• Can facilitate the development of senior
  executives with general management experiences as
  divisional leaders

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Divisional Structure

• Shop floor divisional structure
• Employees work in cells in which a large number
  of functions or tasks are undertaken to complete
  a whole product
• Employees form teams which are cross functional
  and multi-skilled with a high degree of autonomy

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Divisional Structure by Product

• Board of Directors
• Head Office
• Divisional managers
• Product 1 Product 2 Product 3 Product 4
• Functions 1 Functions 2 Functions 3 Functions 4

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Divisional Structure by Region

• Where a company has few products activities are
  assigned to sales areas
• Board of Directors
• Head Office
• Divisional managers
• Northern Europe Eastern Europe Western
  Europe
• Functions Functions
  Functions

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Advantages of Divisional Structure

• Provides excellent co-ordination across
  functional departments
• Since departmental units are small and self
  contained, employees identify with the product or
  project rather that function
• Since divisions can react to customer
  requirements, divisional structure is well suited
  to changeable environments

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Disadvantages of Divisional Structure

• May be costly duplication of resources across
  departments
• Specialists my become isolated from their
  colleagues
• Competing demands on people may result in stress
• Co-ordination across divisions is difficult

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Matrix Structure

• Involves project teams made up of members from a
  variety of different functions and divisions
• Each individual has a dual role as s/he maintains
  functional/divisional relationships as well as
  membership of the project team
• Vertical and horizontal relationships are
  emphasised, project team members report to
  functional and product managers with equal
  authority

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Advantages of Matrix Structure

• Improves decision-making by bringing a wide range
  of expertise to problems
• Assists in the development of managers
• Improves lateral communication and cooperation
  between specialists

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Disadvantages of Matrix Structure

• Lack of clear responsibility
• Clashes of priority
• Employees may be confused by reporting to two
  bosses
• Complex structure makes it difficult to implement
  successfully

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Mechanistic Structure (stable environments)
(Burns and Stalker)

• well defined chains of command
• specialisation and division of labour
• detailed job descriptions, including precise
  definitions of rights, obligations and methods

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Mechanistic Structure (stable environments)
(Burns and Stalker)

• reliance on vertical communication
• reliance on rules and procedures to cover all
  eventualities (as far as possible)

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Characteristics of Organic Structures (unstable
environments) (Burns and Stalker)

• no preoccupation with adhering to chain of
  command
• less emphasis on division of labour
• divisional rather than functional structure

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Characteristics of Organic Structures (unstable
environments) (Burns and Stalker)

• jobs are not rigidly defined
• emphasis on lateral communication
• power and influence of junior and middle managers
  is relatively high

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Organisational size

• As organisations expand and become more elaborate
  the more of a tendency towards bureaucracy is
  exhibited
• This can lead to economic efficiency
• However also all the problems of bureaucracy

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Technology and Structure (JOAN WOODWARD 1965)

• Unit small batch production organisations
  which manufacture and assemble small orders or
  single units to direct customer specification
• Large batch mass production characterised by
  long production runs of a standardised product

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Technology and Structure (JOAN WOODWARD 1965)

• Process (continuous flow) production
  represents the highest level of
  technology occurs where the process involves the
  continual processing of the same raw material eg
  oil refining

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Technology and Structure (JOAN WOODWARD 1965)

• Unit successful organisations characterised by a
  loose formal structure and flat hierarchy of
  management explained by reliance on skilled
  labour and need for flexibility to be able to
  meet individual customer needs - craft technology
  predictable outcome
• Mass successful organisations characterised by
  wide spans of control (facilitated by large
  numbers of employees performing the same, simple,
  automated process) taller structures due to
  planning and control undertaken by specialists or
  managers more complex technology less
  predictable

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Technology and Structure (JOAN WOODWARD 1965)

• Process due to the high level of technological
  sophistication and the interdependence of the
  process, successful organisations relied on
  narrow spans of control, resulting in tall
  structures and well defined hierarchies of
  authority, high ratio of administration and
  management - highly complex technological
  processes unpredictable outcome

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Conclusions

• Bureaucracy does have advantages
• However this classical approach of one method
  fits all is problematic in modern rapidly
  changing sectors
• Organisations must taker into account their
  environment when their design is being decided.

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Tutorial Questions

• See assignments on module web page fir tutorial
  questions on organisational structure