Learning for "What are organisational
structure?"
Some starting thoughts:
When two or more people come together; to work to achieve a common
purpose or to achieve objectives, we have the basis of an organization. Often, the next step is to establish what must
be done and by whom – such as functions to be performed, where these will take
place, people involved etc all of which leads to thinking about how the
organization will be structured and how it will operate.
A Definition
Organizational structure refers to the formal definition of tasks, jobs,
work units, people, and resources in a business/organization and the
relationships between these.
What is Organizational Structure? Why is it Important?
Departmentalization
Grouping related functions into manageable units to achieve the
objectives of the enterprise in the most efficient and effective manner is
traditionally referred to as departmentalization. The primary forms of departmentalization are
by function, process, product, market, customer, geographic area, and sometimes
matrix (also called project organization). In many organizations, a combination
of these forms is used.
Structure shapes the effectiveness of an organization in terms of
inter-departmental working relationships, product and service development lead
times, quality, efficiency, and responsiveness to customer demands. It also
influences individual employee and working team morale, motivation, commitment,
and satisfaction.
Different Types of Organizational Structures
By Function
Perhaps the oldest and most common method of grouping related functions
is by specialized function, such as marketing, finance, and production (or
operations). Sometimes this form of departmentalization may create problems if
individuals with specialized functions become more concerned with their own
specialized area than with the overall business.
By Process
Departmentalization can also take place by process. This type of
structure is often found in large process or manufacturing companies,
By Product
Whenever specialized
knowledge of certain products or services is needed, departmentalisation by
product may be observed. This usually occurs in large diversified companies.
By Market
When a need exists to
provide better service to different types of markets, departmentalisation by
market may be the appropriate form. Below is an example of a business serving
non-profit markets, which uses the market form of departmentalisation,
By Customer
Sometimes key or major
customers warrant departmentalisation by customers or groups of type of
customers. This is often the case in banks, financial institutions or service
industries such as marketing, advertising and insurance.
By Geographic location
When organizations are
spread throughout the world or have territories in many parts of a country,
departmentalisation by geographic area may provide better service to customers
and be more cost effective.
Combination of Organization Structures
Divisional
In reality, organizations of any size may employ multiple types of
structure using various combinations of the elements covered on the previous
slides.
Multiple
Many organizations, particularly large, physically dispersed and
diversified organizations, utilize several different forms of
departmentalization.
Matrix
Departmentalization by matrix, or project, has received considerable use
in recent years, particularly in such industries as aerospace (e.g., NASA).
Staff with different backgrounds and experiences appropriate to the project are
assembled and given the specific project to be accomplished within a certain
time period.
Other Aspects of Organizational Structure
A note on Centralization v decentralization
Centralization and decentralization involve the principle of delegation
of authority. When a limited amount of authority is delegated in an
organization, it is usually characterized as centralized. When a
significant amount of authority is delegated to lower levels in the
organization, the business is characterized as decentralized. Centralization
and decentralization are opposites, and there are different degrees of each. In
a highly centralized organization, employees at lower levels have a limited
range of decision-making authority. The scope of authority to make decisions in
decentralized organizations, by way of contrast, is very broad for lower level
employees.
Emerging
Organisational Structures
Each new generation of technology creates new opportunities to redesign or
rethink organizational structure. The acceleration of
change requires flexible structures that can rapidly incorporate and adapt to
technological and process changes.
Whilst backbone structures (such as the ones we have looked at in this
document) focused on strategic management as well as provision of administrative
and support functions will still exist; there will be a growing use of informal
structures (task oriented), to include project teams (actual and virtual),
matrix structures, collaboration networks, and others that work within and
across the organizational hierarchy.
Technology fulfills the communication and coordination functions that
once were accomplished through a formal chain of command. Organizations are no
longer limited to one design presumed to be right for all circumstances. They
can adopt whatever informal structures are needed to meet current operations
and dismantle them when the requirements change. This enables large
organizations to act like small ones in dealing with change. They do not have
to overhaul a large infrastructure. Using informal structures, they can
experiment and adapt on a small scale before making large resource commitments;
they can also redirect personnel quickly and avoid the cost of overall
restructuring.
Virtual Organization (Food for thought)
Organic or Open Organization
The usual goals for organizations are high productivity and
efficiency. Organizations are seen as
reliable machines and employees are considered to be sub-machines or
constituent parts of the machine. This
type of organization requires stable environment in which it operates and it is
not subjected to rapid change and development.
The emergence of globalization and the high connectivity through
telecommunication channels has on the one hand provided the firms with
opportunity in the shape of new markets.
On the other hand, this also has its adverse consequences in that it encourages
the threat of substitute products and services, usually from small and medium
sized firms, operating in manufacturing and service industries and communities at
much reduced costs. The environment
therefore becomes turbulent and subject to rapid change. Well documented and established rules,
stringent policies and procedures for business processes and manufacturing
regimes become hurdles that undermine the ability of organization to adapt to the
changes in the environment quickly and effectively.
Organic organization philosophy promotes the encouragement of creativity
of individuals. It is based on the
hypothesis that productivity and adaptability to rapid change is increased when
employees are placed at the centre of their environment and they are allowed to
manage themselves and their resources.
When their creativity is accounted for and rewarded. When their continuous
development is encouraged through provision of opportunities and resources.
This type of system or organization allows for the de-centralization of jobs. Formal procedures are de-emphasized.
Modular Organization
Modularity in organization changes the traditional hierarchical
structure to form loosely coupled networks of organizational actors. The
underlying idea is that these loosely coupled actors or objects would quite
easily form and reform organizational components that are loosely coupled.
The idea of modularity in organizational structure goes hand in hand
with idea of modularity in software development. One of the software engineering goals for
software design is that we should design software applications in a highly
modular fashion. Computing applications
should be made of components that are highly modular. That is each components should do one thing
and one thing only. For example in a
Human Resource Management application a component may be responsible for
creating Wage Slips. This is a tangible
and of value business process and outcome.
The same component should not also manage employee schedule. It should be modular. Furthermore, software components should be
loosely coupled. That is if we change the internal structure or implementation
of one of the components, this does not adversely affect the performance or
functionality of other components that it interacts with. In other words these components should be
loosely coupled. In building systems we
endeavor to build solutions made up of components that are highly modular and
loosely coupled.
These are organizations where non-core functions are likely to be sub-contracted
or outsourced. This is a direct effect
of the use of technology and telecommunication channels for doing
business. Using affordable technology
and connectivity, companies can maintain relationships with business partners
at lower costs than ever before. This
also has an impact on the product in that such organizations tend to build
products or services that are highly modular.
These organizations concentrate on their core capabilities and build
alliances and joint ventures.
In summary
Other Aspects of Organizational Structure - A note on centralization v
decentralization
Characteristics of Decentralized Structures
Some emerging trends are significant
·
Business areas/functions are increasingly
accountable for the value they create for the customer.
·
Business boundaries are blurring as electronic
networks tie business partners, suppliers and customers more closely together.
·
Activities are becoming more distributed, business
wide (and sometimes worldwide).
·
The size and importance of premises such as
centralized business headquarters is decreasing.
Acknowledgements
Classifications and some diagrams in this document are derived from:
Montana, P.
and Charnov, B. Management: A Streamlined Course
for Students and Business People. (Hauppauge, New York:
Barron’s Business Review Series, 1993), pp. 155-169.