Organisational Structure, Design, and Change

Session 3,4

Structure and Design

Structure is the spatial distribution of roles and
responsibilities

Design is a plan of making a fit between the

structure and other components of an organisation
Inter-relatedness

When to think about a design change?

New company or division Planning to grow Starting up a new company or a new division Organisation size is going to increase

Customer base, volumes, sales etc. are going to increase

Assumed new/more senior position Recently taken a new job Assessed your organization in a new role and have identified gaps Business strategy has changed Organisation is considering new focus Organisation has changed product/market/customer Surrounding organization has changed External environment change Key internal customers, suppliers, or partners are changing their organization Recently merged/acquired Changes in industry, market, regulatory environment, or technology

Dimensions of organisational structure

The division of labour Coordinating mechanisms

Distribution of decision rights

Authority/Control Organisational boundaries

Informal organization
Political alignments

Principles of Bureaucracy
1: A bureaucracy is founded on the concept of rational 2: Organizational roles are determined by technical
legal authority, a persons authority is due to position in the organization. Power should be separate from personality. competence, not social status, kinship, or heredity. This principle requires managers to see all potential job candidates objectively. authority and its relationship to other roles in the organization should be clearly specified. A clear pattern of vertical and horizontal differentiation is necessary for effectiveness. Role conflict, conflicting demands on a subordinate, and role ambiguity (fear of responsibility because of unclear tasks) should be eliminated.

3: A roles task responsibility and decision-making

Principles of Bureaucracy
4: The organization of roles in a bureaucracy is such that
each lower office in the hierarchy is under the control and supervision of a higher office. People know the chain of command.

5: Rules, standard operating procedures, and norms should

be used to control the behavior and the relationship between roles in an organization. Rules are formal written standards of behavior, whereas norms are unwritten.

6: Administrative acts, decisions, and rules should be

formulated and put in writing. When written down, rules become official guidelines that can be used even when people leave. Written documents ensure that people can be held accountable.
Are the principles of bureaucracy still valid? In what way?

Types of organisational design

Functional Divisional
Product
Product division Multi-division Product team Geographic Market/Customer

Matrix Other forms

Functional structure For whom?

Single line of business Are small

Require common standards

Have a core capability that requires depth of
expertise in one or more functional areas

Dont have a diverse line of products Dont compete in the marketplace based on speed
of product development cycle times

Advantages
Knowledge sharing Specialization

Disadvantages
Ability to service the needs of its
growing product line is strained (Control)

Leverage with suppliers

Economies of scale Standardization

Subunit orientation (Communication) Cost of each functions contribution to

the development of each product is difficult to measure (Measurement) geographical markets (Location) needs may fall short and sales opportunities are lost (Customer)

Issues with servicing different

Ability to identify and satisfy customer Focus of the management is on

integration rather than long term strategy (Strategy)

Integration needs
Pooled interdependence Organisational units
have a common source of resources but not interrelationship with other units for performing a task. E.g. Banks

Sequential interdependence coordination is

sequential in nature e.g. assembly line

Reciprocal interdependence It is required to

continuously pass the work back and forth between different units

Product structures For whom?

Compete on the basis of product features or being
first in the market

Produce multiple products for separate market

segments

Produce products with short life cycles; speed in

product development. Time is an advantage.

Have a large enough organization to achieve the

minimum efficient scale required to duplicate functions across the organization

Advantages
Reduction in product
development cycle

Disadvantages
Divergence each division manager
may run the business in competition with other divisions

Product excellence Broad operating freedom

Duplication Functions are duplicated

Economies of scale is lost Multiple customer points of contact

Geographic structure: For whom?

Have a high cost of transport Deliver service on-site

Need to be physically close to customers for

delivery/support

Need to create a perception that the organisation

is local

Geographic structure: Advantages

Advantages Disadvantages

Local focus culture,

language, or political factors influence buying patterns and differ significantly by region

Duplication Functions are

duplicated

Economies of scale is lost

Mobilizing and sharing

resources

Customer structure
Compete in market segments where buyers have
strength and influence over the market

Can use customer knowledge to provide an

advantage

Compete based on rapid customer service and

product cycle times

Have a large enough organization to achieve the

minimum efficient scale required to duplicate functions

Advantages
Advantages Disadvantages

Customizations

Divergence

Relationships
Solutions

knowledge/standards not shared across customer segments development efforts leveraging scale are lost

Duplication of

Opportunities for

Matrix structure: for whom?

There is a need to combine capabilities for market
function or product and geography Both product expertise and product innovation are important for meeting organisation goals

advantage Organisations that are multi-focussed in both product and

Need to share resources: Pressure exists to share scarce

employee resources across product lines

Retaining flexibility to recombine resources in the face

of uncertainty - Environmental domain of the organisation is both complex and uncertain. Frequent external changes and high interdependence between departments require a large amount of coordination and information processing in both vertical and horizontal direction5

Strengths and Weaknesses of Matrix Organization Structure

Advantages
Achieves coordination

Disadvantages
Causes participants to experience dual
authority, which can be frustrating and confusing Means participants need good interpersonal skills and extensive training Is time consuming; involves frequent meetings and conflict resolution sessions Will not work unless participants understand it and adopt collegial rather than vertical-type relationships Requires great effort to maintain power balance

necessary to meet dual demands from customers Flexible sharing of human resources across products Suited to complex decisions and frequent changes in unstable environment Provides opportunity for both functional and product skill development Best in medium-sized organizations with multiple products

3-18

Horizontal structure
Reengineering along workflow processes that link
organizational capabilities to customers and suppliers Top
Management Team Process Owner
Market Analysis

Team 1
Research

Team 2
Product Planning

Team 3
Testing

Customer

New Product Development Process Process Owner Team 1

Analysis Purchasing

Team 2
Material Flow

Team 3
Distrib.

Customer

Procurement and Logistics Process

When?
When by making certain processes organised
horizontally it is possible to become more flexible and provide tailored responses to fit customer needs Manufacturing organisation - making customized products
only e.g. GE plant in Salisbury, manufactures lighting panel boards for industrial and commercial purposes Product development - Ford Escape Hybrid SUV (team comprised of research and engineering) Processing claims/orders: Barclays for its mortgage services

Order acquisition process, Order fulfilment process,

product development process, New business development process, Customer support process

Strengths and Weaknesses of Horizontal Structure

STRENGTHS:
Flexibility and rapid response to

WEAKNESSES:
Determining core processed to
organize around is difficult and timeconsuming Requires changes in culture, job design, management philosophy, and information and reward systems Traditional managers may balk when they have to give up power and authority Requires significant training of employees to work effectively in a horizontal team environment Can limit in-depth skill development

changes in customer needs Directs the attention of everyone toward the production and delivery of value to the customer Each employee has a broader view of organizational goals Promotes a focus on teamwork and collaborationcommon commitment to meeting objectives Improves quality of life for employees by offering them the opportunity to share responsibility, make decisions, and be accountable for outcomes