Management
Organisations
Useful vocabulary
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organising
organisational structure
organisational chart
organisational design
work specialisation
departmentalisation
chain of command
authority
responsibility
unity of command
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span of control
centralisation
decentralisation
formalisation
mechanistic
organisation
organic organisation
simple structure
functional structure
divisional structure
Today’s lecture
We will:
• Describe six key elements in
organisational design
• Contrast mechanistic and organic
structures
• Discuss the contingency factors that favor
either the mechanistic model or the
organic model of organisational design
• Describe traditional organisational designs
What is an organisation?
• “A consciously coordinated social unit
composed of two or more people that
functions on a relatively continuous basis
to achieve a common goal or set of goals.”
• (Robbins, 2011)
Three elements to
understanding organisations
Individual
Group
Organisation
System
Why look at organisations?
• Understanding organisations helps
improve manager effectiveness
• A more effective manager =
– Lower turnover of quality employees
– Higher quality applications for recruitment
– Better financial performance
• = Business and people success!
Reasons for organising
Designing organisational
structure
• Organising - arranging and structuring work
to accomplish an organisation’s goals (one of
the 4 functions of a manager)
• Organisational Structure - the formal
arrangement of jobs within an organisation
(organogram/organisational chart)
• Organisational Design – elements which
affect the organisational structure
Organisational design
There are six key elements:
1. Work specialisation (sub-dividing jobs)
2. Departmentalisation (grouping jobs)
3. Chain of command (who reports to who)
4. Span of control (how many people you
manage)
5. Centralisation and decentralisation (where
does decision making power lie)
6. Formalisation (the level of rules and
regulations)
Organisational design - 1
1. Work specialisation
• The degree to which tasks in the
organisation are divided into separate jobs
with each step completed by a different
person (Taylor – pig in a cart)
• Over-specialisation can result in human
diseconomies such as boredom, fatigue,
stress, poor quality, increased
absenteeism, and higher turnover.
Organisational design – 2
Departmentalisation
Functional
• Grouping jobs by
functions performed
Product
• Grouping jobs by
product line
Geographical
• Grouping jobs on the
basis of territory or
geography
Process
• Grouping jobs on the
basis of product or
customer flow
Customer
• Grouping jobs by type
of customer and needs
2. Departmentalisation –
Function and Geography
2. Departmentalisation Product
2. Departmentalisation –
process and customer
Organisational design - 3
• Chain of Command is the continuous line
of authority that extends from upper levels
of an organisation to the lowest levels of
the organisation—clarifies who reports to
whom.
3. Chain of command –
authority, responsibility, unity
• Authority - the rights inherent in a
managerial position to tell people what to
do and to expect them to do it.
• Responsibility - the obligation or
expectation to perform.
• Unity of Command - the concept that a
person should have one boss and should
report only to that person.
3. Example of chain of
command and authority
3. Line and staff authority
Line = contributes directly to the
achievement of organisational goals.
Organisational design - 4
• Span of Control is the number of
employees who can be effectively and
efficiently supervised by a manager.
4. Span width is affected by…
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Skills and abilities of the manager
Employee characteristics
Characteristics of the work being done
Similarity of tasks
Complexity of tasks
Physical proximity of subordinates
Standardisation of tasks
Sophistication of the organisation’s information
system
• Strength of the organisation’s culture
• Preferred style of the manager
4. Span examples
Organisational design – 5
• Centralisation - the degree to which
decision making is concentrated at upper
levels in the organisation.
• This is common in organisations in which
top managers make all the decisions and
lower-level employees simply carry out
those orders.
Organisational design – 5
• Decentralisation - when an organisation
relegates decision making to managers
who are closest to the action.
• Employee Empowerment
• Increasing the decision-making authority
(power) of employees
5. Comparing centralisation and
decentralisation
Organisational design - 6
Formalisation - the degree to which jobs
within the organisation are standardised and
the extent to which employee behavior is
guided by rules and procedures.
• Highly formalised jobs offer little discretion
over what is to be done.
• Low formalisation means fewer constraints
on how employees do their work.
Organisational structures
Mechanistic or organic
structures?
Contingency factors
Structural decisions are influenced by:
• Strategy - overall strategy of the
organisation
• Size - size of the organisation
• Technology – technology and how it is
used in the organisation
• Environment Uncertainty - degree of
environmental uncertainty
Contingency factors (1)
Strategy Frameworks:
Innovation
• Pursuing competitive advantage through
meaningful and unique innovations favors an
organic structuring
Cost minimization
• Focusing on tightly controlling costs requires
a mechanistic structure for the organisation
Contingency factors
Strategy and Structure
• Achievement of strategic goals is facilitated
by changes in organisational structure that
accommodate and support change.
Size and Structure
• As an organisation grows larger, its structure
tends to change from organic to mechanistic
with increased specialisation,
departmentalisation, centralisation, and
rules/regulations.
Sizes of organisations
Contingency factors (2)
Technology and Structure
• organisations adapt their structures to their
technology.
• Woodward’s classification of firms based on the
complexity of the technology employed:
– Unit production of single units or small batches
– Mass production of large batches of output
– Process production in continuous process of outputs
• routine technology = mechanistic organisations
• non-routine technology = organic organisations
Contingency factors (3)
Environmental Uncertainty and Structure
• Mechanistic organisational structures tend
to be most effective in stable and simple
environments.
• The flexibility of organic organisational
structures is better suited for dynamic and
complex environments.
Woodward – technology and
structure
Traditional organisation designs
Simple structure
• low departmentalisation, wide spans of control,
centralised authority, little formalisation
Functional structure
• departmentalisation by function
• operations, finance, marketing, human resources, and
product research and development
Divisional structure
• composed of separate business units or divisions with
limited autonomy under the coordination and control of
the parent corporation
Traditional organisation designs
Summary diagram
Summary
Today:
• Design and structure of organisations
• Factors which affect the structure and
design
• Traditional designs
Tomorrow:
• Contemporary designs and structures
Reading
Please read Chapter 11 before tomorrow’s
lecture.
Activity
• Using the organogram,
describe this organisation in
terms of the 6 organisational
design key elements.
• Eg. This organisation has a
span of…
• Is it mechanistic or organic?
An organogram/organisational
chart