Slide 10.1
Part 4
ORGANISING
Chapter 10
ORGANISATION STRUCTURE
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Slide 10.2
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Strategy, organisation and performance
Designing a structure: the components
Dividing work internally and externally
Co-ordinating work
Mechanistic and organic forms
Learning organisations
Cases and examples
– GSK, Multi-show, BAE, Roche, Arm Holdings, Pixar
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Slide 10.3
Structure and performance
Figure 10.1
Alternative structures and performance
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Slide 10.4
Why does structure matter?
• Evidence that a company’s structure affects
whether it adds value to resources.
• Current structure reflects assumptions about
how to divide and co-ordinate tasks –
Table 10.1.
• Knowledge enables us to question:
– assumptions in a structure, and its context
– alternatives available
– limitations of any structure.
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Slide 10.5
Structure and performance
(Continued)
• As a business grows, those running it divide the
work and co-ordinate the parts – they create a
structure within which people work.
• When an organisation is not performing well,
managers often change the structure.
• Structure affects performance since:
– it clarifies expectations and enables monitoring
– avoids confusion and waste of poor design.
What kind of structure works best?
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Slide 10.6
Designing a structure
• Structure is how work is divided, supervised and
co-ordinated
• It defines the responsibilities of divisions,
departments and people
– What they are expected to do
• Summarised in an organisation chart: compare
Multi-show Events and BAE factory.
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Slide 10.7
Structure of a unit in a large business
Figure 10.2
The structure within a BAE aircraft factory (www.baesystems.com)
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Slide 10.8
Developing structure in
a small business
Figure 10.3
The organisation structure at Multi-show Events
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Slide 10.9
Vertical structure – how centralised?
What decisions can people at different levels in
the vertical hierarchy take?
• Centralisation (those at the centre make most
decisions) and its opposite, both have
advantages and disadvantages (Table 10.2).
• A shifting balance, reflecting
– Attempts at rational analysis
– Managers’ career interests
– External forces – regulators’ rules.
What degree of centralisation works best?
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Slide 10.10
Grouping work into functions and divisions
Figure 10.5
Four types of structure
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Slide 10.11
Horizontal structure – three ways
• Functional (see BAE Systems)
– Common professional or other expertise (Figure 10.2)
• Divisional
– Products, customers (Figure 10.7) or geography
• Matrix
– In functional groups, work on divisional tasks.
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Slide 10.12
Contrasting structures in nursing
Figure 10.7
Task and named-nurse structures
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Slide 10.13
Dividing work externally
• Outsourcing
– When managers delegate activities to external
providers – innocent drinks (Chapter 2 case)
outsourced all manufacturing to save investment and
to grow more quickly.
• Collaborative networks
– Independent organisations agree to work together on
some parts of a larger task – Arm Holdings is an
example from a high-tech sector; GSK will source
more drugs in this way.
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Slide 10.14
Co-ordinating work
If divide work, then need to co-ordinate it by:
• Direct supervision
• Hierarchy
• Standardising inputs and outputs
• Rules and procedures
• Information systems
• Direct personal contact.
What method of co-ordination works best?
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Slide 10.15
Mechanistic and organic structures
Table 10.4
Characteristics of mechanistic and organic systems
Source: Based on Burns and Stalker (1961).
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Slide 10.16
Contrasting forms
• Burns and Stalker identified alternative forms
• Each appropriate to certain conditions
– Mechanistic – stable
– Organic – unstable
• Fit with conditions led to high performance
• Later work (Lawrence and Lorsch, 1967) focused
on differences between units within the same
organisation
• Related differences to contingencies.
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Slide 10.17
Contingencies – strategy
– For example, cost leadership or differentiation – what
structure to encourage relevant behaviour?
• Cost leadership requires efficiency – a functional
structure?
• Differentiation needs innovation – matrix or teams?
– Pixar is an example of a company whose innovative
business is supported by a highly organic structure.
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Slide 10.18
Strategies and structures
Figure 10.8
Relationship between strategies and structural types
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Slide 10.19
Contingencies – technology
What structure best supports technologies used to
transform inputs, in manufacturing or services?
• For example, production line or custom-made?
• For example, information systems enable different
ways of delivering services, and prompt a search
for new structures to support relevant behaviour?
• Chapter 18 (Managing Operations and Quality)
shows other ways of designing transformation
processes using different technologies.
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Slide 10.20
Contingencies – business environment
What structure best supports people as they cope
with different environments?
• Burns and Stalker (1961) contrasted
– Rayon plant (stable market, few changes) with
– Small electronics companies (volatile, uncertain
market, many changes).
• Lawrence and Lorsch (1967) showed that firms
face many environments with different needs
– How to link differently structured departments?
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Slide 10.21
Environment and structure
Figure 10.9
Relationship between environment and structure
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Slide 10.22
Contingencies – size and life cycle
What structure best supports an organisation as it
grows (number of staff)?
• Birth – informal, little division of labour, organic
• Youth – decisions shared more widely,
specialists employed
• Mid-life – extensive division of responsibility, with
rules for co-ordination
• Maturity – mechanistic, perhaps divisions,
rules for co-ordination.
Problem of managing the transitions.
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Slide 10.23
Contingencies or management choice?
• Contingency
– Effective performance depends on managers adopting
a structure suited to the key contingencies of the
environment in which it is operating.
• Management choice
– Managers have greater degree of choice over the
structures they adopt
• Standards of performance not always rigorous
• Preferred choices may have limited effect on
performance
• Political interests and ambitions shape choice.
• Implications for role of managers?
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Slide 10.24
Integrating themes
Entrepreneurship
New venture evolution may be analysed by their
timely focus on aspiration, market and capability.
Sustainability
Structure can support this aim in a business if, (e.g.)
it exposes more people to external context.
Internationalisation
Bartlett and Ghoshal (2002) show the dilemmas
firms face in designing international structures.
Governance
Financial crisis routine lead to calls for tougher
controls – but most failing companies have them.
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Slide 10.25
Summary
• The chapter outlined the main components
which managers use to create an organisation.
• The way they design these elements combine to
create relatively mechanistic or organic forms,
which affect performance.
• There is strong evidence that a form which fits
the strategy will add more value than a misfit.
• Large organisations usually have both
mechanistic and organic units, and need to
ensure they work together.
Boddy, Management: An Introduction PowerPoints on the Web, 6th edition © Pearson Education Limited 2014