Lecture 6 - Organisation Structure

Organisation Structure Harry Kogetsidis School of Business  Lecture’s topics What is organisation structure? What are the basic elements of organisation structure? What are the basic types of organisation structure?  Organisation Structure Organisation...

Organisation Structure Harry Kogetsidis School of Business  Lecture’s topics What is organisation structure? What are the basic elements of organisation structure? What are the basic types of organisation structure?  Organisation Structure Organisation structure describes the way work is divided, supervised and coordinated.  Organisation Charts Organisation structure is often represented by an organisation chart – i.e. a chart showing the main departments and work positions in the organisation and the reporting relations between them. An Organisation Chart (example 1) An Organisation Chart (example 2)  Types of structure Formal structure: The official structure of the organisation. The official guidelines, documents or procedures setting out how the organisation’s activities are divided, supervised and coordinated.  Types of structure Informal structure: The unofficial, but often critical, working relationships between organisational members. If this could be drawn, it would show who talks to and interacts regularly with whom regardless of their formal titles and relationships.  The Basic Elements of Structure 1. Work specialisation 2. Chain of command 3. Span of control 4. Centralisation vs Decentralisation 5. Departmentalisation  Work Specialisation a job is broken down into a number of steps and each step is completed by a separate individual different employees have different skills need to make efficient use of the diversity of skills that employees have Negative results of work specialisation employees difficult to replace boredom – which can result in low productivity, poor quality and a high employee turnover lack of motivation, as employees rarely see a finished product and do not therefore have a sense of pride in their work  Chain of Command The continuous chain of authority that extends from the highest levels in an organisation to the lowest levels and clarifies who reports to whom.  Chain of Command Early management writers believed that each employee should report to only one manager – a term called unity of command.  Chain of Command Some concepts closely related to chain of command: Authority Responsibility Accountability Delegation  Authority The right that a person in a specified role has to make decisions, allocate resources or give instructions. If managers attempt to give instructions beyond their area of formal authority, they are likely to meet resistance.  Responsibility An employee’s duty to perform assigned activities and to meet the expectations associated with a task.  Accountability Employees with formal authority over an area are required to report on their work to those above them in the chain of command.  Delegation Managers giving people who are below them in the chain of command the authority to undertake specific activities or decisions. Responsibility/Accountability/Delegation Responsibility can be delegated but accountability cannot. A good manager will: credit others when delegated responsibilities succeed accept blame when delegated responsibilities fail  Authority vs Power Authority is based on the position – not the individual. Power an individual’s capacity to influence decisions.  Span of Control The number of persons (subordinates) directly reporting to a manager. The right number must be found in order for these people to be managed effectively and efficiently.  Span of Control The level of direct supervision an employee needs decreases with the level of experience they have and training they receive. Span of Control  Centralisation vs Decentralisation Centralised organisations: decisions are made by a few people at the centre of the organisation. Decentralised organisations: decisions are pushed down to the level closest to where the problem is.  Departmentalisation refers to how the various activities of the organisation are grouped together into units a manager is in charge of each unit e.g. Functional Departmentalisation  Types of Structure Mechanistic structure Organic structure (Burns & Stalker, 1961)  Mechanistic Structure High in specialisation. High in centralisation. High in formalisation (i.e. the practice of using written documents to direct and control employees). Communication is vertical.  Organic Structure Knowledge is widely spread. There are few prescriptive job descriptions and rules and regulations are kept to a minimum. Cross-functional team work is encouraged. Communication is horizontal.  Types of structure Mechanistic structure: Rigid and stable. Organic structure: Flexible and highly adaptive.  Types of structure Mechanistic structure: Best at simple and repetitive tasks. Organic structure: More effective at complex and unique tasks.  Types of structure Mechanistic structures are most effective in stable environments. Organic structures are most effective in dynamic and uncertain environments.  Types of structure Organisations could use a combination of the two types. e.g. finance department – mechanistic advertising department – organic