ORGANISATION STRUCTURE
AND DESIGN
Organisation Structure and Design
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Organisation Structure - It is the formal
arrangement of jobs within an organisation.
Organisation Design - The process of
creating or changing structure, is called
organisational design and involves decisions
regarding
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Work specialisation
Departmentalisation
Chain of command
Span of control
Centralisation and decentralisation
Formalisation
PURPOSE OF ORGANISING
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Divides work to be done into specific jobs
and departments
Assigns tasks and responsibilities
associated with individual jobs
Coordinates diverse organizational tasks
Clusters jobs into units
Establishes relationships among
individuals, groups, and departments
Establishes formal lines of authority
Allocates and deploys organizational
resources
WORK SPECIALISATION
It is dividing work activities into separate job
tasks.
 Individual employees specialise in doing a part
of the activity rather that the entire activity in
order to increase work output. (Division of
labour concept)
 Thus work specialisation increases efficiency
however, if carried to extremes, it can lead to
reduced performance, boredom, fatigue, stress,
poor quality, increased absenteeism and
turnover.
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ECONOMIES AND DISECONOMIES
OF WORK SPECIALISATION
DEPARTMENTALISATION
It is the basis on which jobs are grouped
together.
 Functional departmentalisation
 Geographical departmentalisation
 Product departmentalisation
 Process departmentalisation
 Customer departmentalisation
 Cross functional teams – recent trends
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CHAIN OF COMMAND
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The line of authority extending from upper
organisation levels to the lowest levels, which
clarifies who reports to whom.
Authority – the rights inherent in a managerial
position to tell people what to do and expect
them to do it.
Responsibility – the obligation or expectation to
perform any assigned duties
Unity of command – the management principle
(by Fayol) that each person should report to
only one manager.
Delegation - The assignment of authority to
another person to carry out specific duties
CHAIN OF COMMAND
The concept of chain of command has
less relevance today because of
advancements in IT and trend towards
empowering employees.
 New structural designs such as self
managed and cross functional teams
make the concept of chain of command
less relevant
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SPAN OF CONTROL
It is the number of employees a manager can efficiently and
effectively manage.
 Span of control determines the number of levels and
managers in an organisation – hence the cost.
 Generally, the wider of larger the span of an organisation ,
the more efficient it is.
 Many factors influence the number of employees that a
manager can efficiently and effectively manage including
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skills and abilities of the manager and employees
characteristic of the work being done
similarity and complexity of employees tasks
physical proximity of subordinates
degree to which standardised procedures are in place
the sophistication of the organisation’s information system
strength of organisation culture
preferred style of management.
SPAN OF CONTROL
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Narrow span of controls are expensive and add
levels of management
Vertical communication is made difficult in
narrow spans of control
They slow decision making process and isolate
upper management
Narrow spans of control encourage overly tight
supervision and discourage employee autonomy.
Recent trends have been towards wider spans of
control
To ensure that performance doesn’t suffer in
wider spans, more investment is being made in
employee training
CENTRALISATION AND
DECENTRALISATION
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Centralisation is the degree to which decision making
takes place at the upper levels of the organisation.
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The degree to which lower-level employees provide
input or actually make decisions is decentralisation.
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Employee empowerment is the trend nowadays.
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Centralisation-decentralisation is relative not absolute no organisation is completely centralised or
decentralised
CENTRALISATION - ADVANTAGES
Facilitates coordination
 Helps ensure that decisions are
consistent with organisation’s objectives
 Avoids duplication of activities
 Useful in times of organisation change
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DECENTRALISATION - ADVANTAGES
Decreases burden on top management
 Increases motivation of employees
 More rapid response to environmental
change
 Results in better decisions
 Increases control
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FACTORS AFFECTING CHOICE BETWEEN
CENTRALISATION AND DECENTRALISATION
Nature of decision to be made
 Economies of scale
 Local adaptation
 Uncertain and dynamic environment
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FORMALISATION
How standardised an organisation’s jobs
are and the extent to which employee
behaviour is guided by rules and
procedures.
 In highly formalised organisations,
employees have little discretion over
what’s done, and how its done.
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Functional Structure
Multidivisional structure
Geographic Structure
Hybrid Structure
Unilever’s Structure
Matrix Structure
CONTEMPORARY ORGANISATION
DESIGNS
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Boundaryless structure
◦ Term coined by Jack Welsh, GE’s former chairman
◦ He seeked to eliminate the vertical and horizontal
boundaries with GE and the external barriers
between the company and it’s suppliers and custmers
◦ These organisations seek to eliminate the chain of
command, have limitless spans of control, and
replace the departments with emplowered teams
◦ It relies heavily on IT and is sometimes called T-form
(technology based) organisation
◦ Flattended hierarchy (status and ranks are minimised)
through cross hiearchial teams, participative decision
making, use of 360 degree performance appraisals
◦ Horizontal barriers are removed through cross
functional teams
CONTEMPORARY ORGANISATION
DESIGNS
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Team structure
◦ Breaks down departmental barriers and
decentralizes decision making to the level of
work teams
◦ In larger organisations team structure
(flexibility) complements the bureaucracy
structure (standardisation)
◦ Employees are more involved and empowered;
reduced barriers among functional areas
◦ no clear chain of command; pressure on
teams to perform
CONTEMPORARY ORGANISATION
DESIGNS
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The virtual organisation
◦ It is also called network or modular
organisation
◦ It is typically a small, core organisation that
outsources major business functions
◦ Highly centralised with little or no
departmentalisation
◦ Maximum flexibility – allows individuals with
innovative ideas and minimum money to
successfully compete against giants in the
industry
CONTEMPORARY ORGANISATION
DESIGNS
Network Organization - A small core
organization that outsources its major
business functions (e.g., manufacturing)
in order to concentrate on what it does
best
 Modular Organization - A manufacturing
organization that uses outside suppliers
to provide product components for its
final assembly operations
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Problems in Outsourcing
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Choosing the wrong activities to outsource
Choosing the wrong vendor
Writing a poor contract
Failing to consider personnel issues
Losing control over the activity
Ignoring the hidden costs
Failing to develop an exit strategy (for either
moving to another vendor, or deciding to
bring the activity back in-house)
LEARNING ORGANISATION
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An organization that has developed the capacity
to continuously learn, adapt, and change through
the practice of knowledge management by
employees
An open team-based organization design that
empowers employees
Extensive and open information sharing
Leadership that provides a shared vision of the
organization’s future; support; and
encouragement
A strong culture of shared values, trust, openness,
and a sense of community
LEARNING ORGANISATION
MECHANISTIC ORGANISATION
High specialisation
 Rigid departmentalisation
 Clear chain of command
 Narrow spans of control
 Centralisation
 High formalisation
 These organisations strive for efficiency
and rely heavily on rules, regulations,
standardised tasks and similar controls.
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ORGANIC ORGANISATION
Cross functional teams
 Cross hierarchical teams
 Free flow of information
 Wide spans of control
 Decentralisation
 Low formalisation
 This structure is highly flexible and
adaptive
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FACTORS INFLUENCING CHOICE OF
ORGANISATION STRUCTURE
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Strategy
◦ Differentiation (Innovation) – Organic structure
◦ Cost minimisation – Mechanistic
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Size
◦ Larger organisations are more Mechanistic
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Technology – degree of routiness
◦ Routine technologies – taller and more
departmentalised structures, high formalisation,
high centralisation (but high formalisation may
result in decentralisation)
FACTORS INFLUENCING CHOICE OF
ORGANISATION STRUCTURE
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Environment
◦ Assessed through capacity (abundant or
scarce), volatility (stable or volatile) and
complexity (simple or complex)
◦ Organizations operating in scarce, dynamic
and complex environments face the greatest
uncertainty because they have little room for
error, high unpredictability and diverse set of
elements in the environment to monitor and
usually have more organic structures
TODAY’S ORGANISATION DESIGN
CHALLENGES
Keeping employees connected
 Building a learning organisation
 Managing global structural issues
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