week 5 MAN 132 Organisational Structure (1).pdf

MAN 132 Week 5 Management and Organisational Structure Lecture 1: Fundamentals and Theoretical Foundations of Organisational Structure Lecture 2: Determinants and Dimensions of organizational structure...

MAN 132 Week 5 Management and Organisational Structure Lecture 1: Fundamentals and Theoretical Foundations of Organisational Structure Lecture 2: Determinants and Dimensions of organizational structure Lecture 3: Types of Organisational Structures  Introduction Organizational structure refers to the formal arrangement of roles, responsibilities, and relationships within an organization. It defines how tasks are divided, grouped, and coordinated among individuals and departments. The organizational structure provides a framework for understanding the hierarchy, communication channels, and authority within the organization.  Order of the Week Lecture 1: Fundamental and Theoretical Foundations of Organisational Structure Lecture 2: Determinants of Organisational Structure Lecture 3: Types of Organisational Structures/ Designs  Fundamentals of Organisational Structure The fundamentals of organizational structure encompass the basic principles and elements that define how an organization is designed and how its various components interact. Here are the key fundamentals:  Fundamentals of Organisational Structure Hierarchy: – Definition: The arrangement of levels of authority and responsibility within the organization. – Importance: Provides a clear line of authority and helps in understanding reporting relationships. Roles and Responsibilities: – Definition: The specific tasks, duties, and authorities assigned to individuals or positions within the organization. – Importance: Clarifies expectations, reduces ambiguity, and ensures that everyone understands their contributions.  Fundamentals of Organisational Structure Departmentalization: – Definition: The process of grouping individuals and tasks into functional areas or departments based on similarities in skills, functions, products, geography, or customers. – Importance: Facilitates specialization, coordination, and efficient use of resources. Span of Control: – Definition: The number of subordinates or employees that a manager or supervisor can directly manage. – Importance: Influences the level of control, communication effectiveness, and the efficiency of decision-making.  Fundamentals of Organisational Structure Chain of Command: – Definition: The formal line of authority and communication that extends from the top of the organization to the lowest level. – Importance: Establishes reporting relationships and ensures a clear flow of information. Centralization and Decentralization: – Definition: Centralization involves concentrating decision- making authority at the top levels, while decentralization disperses it to lower levels. – Importance: Affects the speed of decision-making, employee empowerment, and organizational flexibility.  Fundamentals of Organisational Structure Formalization: – Definition: The extent to which rules, procedures, and job descriptions are explicitly documented. – Importance: Impacts consistency, predictability, and control within the organization. Organizational Chart: – Definition: A visual representation of the organizational structure, depicting relationships, roles, and reporting lines. – Importance: Provides a quick overview of the organization's structure and hierarchy.  Fundamentals of Organisational Structure Unity of Command: – Definition: The principle that each employee should have one direct supervisor or reporting relationship. – Importance: Reduces confusion, prevents conflicting instructions, and ensures accountability. Adaptability and Flexibility: – Definition: The ability of the organization to respond to changes in the internal and external environment. – Importance: Ensures the organization can adjust its structure to meet evolving demands and challenges.  Fundamentals of Organisational Structure 1.Organizational Culture: 1. Definition: The shared values, beliefs, and norms that shape behavior and decision- making within the organization. 2. Importance: Influences how the structure is perceived and how individuals interact with one another. 2.Integration and Differentiation: 1. Definition: Balancing the need for coordination (integration) with the need for specialization (differentiation). 2. Importance: Ensures efficient operations while allowing for specialized functions within the organization.  Theoretical Foundations of Organisational Structure Theory Rudiments Scholar Classical Management Frederick Taylor Theories Emphasizes efficiency and Scientific Management productivity through systematic observation and analysis of work processes. Centralization of decision- making. Administrative Management Focuses on principles of management, including unity Henri Fayol of command, scalar chain, and division of labor. Emphasizes the importance of clear organizational structure.  Theoretical Foundations of Organisational Structure Theory Rudiments Scholar Behavioral Management Theories Examined the social and Hawthorne Studies psychological factors affecting Elton Mayo ( Team leader) productivity. Emphasizes the informal aspects of organizations and the importance of human relations. Maslow's Hierarchy of Needs: Proposes a hierarchy of human Maslow needs influencing motivation. Implications for designing organizational structures that support employee well-being.  Theoretical Foundations of Organisational Structure Theory Rudiments Scholar Contingency Theory Identifies the relationship between technology and Joan Woodward Joan Woodward's organizational structure. Contingency Model Contends that different technologies require different organizational structures Lawrence and Lorsch's Argues that organizations need Differentiation and to balance differentiation Lawrence and Lorsch Integration (specialization) and integration (coordination) based on environmental demands  Theoretical Foundations of Organisational Structure Theory Rudiments Scholar Views organizations as systems with interrelated parts working Talcott Parsons Structural-Functional together to achieve common Approach goals. Highlights the importance of differentiation and integration for organizational effectiveness.  Theoretical Foundations of Organisational Structure Theory Rudiments Scholar Focuses on the role of culture Edgar Schein Organizational Culture in shaping organizational Theory structures. Argues that shared values and beliefs influence how organizational structures are designed and maintained.  Theoretical Foundations of Organisational Structure Theory Rudiments Scholar Examines how transaction Oliver Williamson Transaction Cost costs influence the choice Economics between hierarchical and market-based governance structures. Emphasizes the importance of minimizing transaction costs for efficiency  Theoretical Foundations of Organisational Structure Theory Rudiments Scholar Explores how organizations DiMaggio and Powell Institutional Theory conform to institutional norms and values in their structures. Examines the impact of external influences on organizational design.  Theoretical Foundations of Organisational Structure Theory Rudiments Scholar Examines how organizations Pfeffer and Salancik Resource Dependency structure themselves to Theory manage external dependencies. Highlights the role of power and influence in shaping organizational structures.  Theoretical Foundations of Organisational Structure Theory Rudiments Scholar Views organizations as Network Theory networks of relationships. Emphasizes the importance of Social Network Analysis informal networks in influencing organizational structure and communication.  Theoretical Foundations of Organisational Structure Theory Rudiments Scholar Focuses on an organization's Dynamic Capabilities ability to adapt and change in Theory response to dynamic environments. Discusses how organizational structures should be flexible and responsive to change.  Conclusion Understanding and applying these fundamentals is essential for creating an effective organizational structure that aligns with the organization's goals, enhances efficiency, and supports a positive work environment. Organizational structure is not a one-size-fits-all concept, and organizations often tailor these fundamentals to meet their unique needs and circumstances.  Lecture 2:Determinants of Organisational Structure RECAP Definition of organizational structure. Importance of organizational structure in achieving organizational goals. Overview of the key determinants that influence the design of organizational structures.  Determinants Size Nature of the Industry  Size of the Organization 1. Organizational size refers to the scale or magnitude of an entity, indicating the number of individuals, resources, and activities within the organization. 2. It is typically measured by the total number of employees, the extent of physical facilities, annual revenue, or other relevant metrics, depending on the context.  Impact of Organisational Size on Structure Hierarchy and Span of Control: – Larger organizations tend to have more hierarchical levels. – Span of control, or the number of subordinates a manager oversees, increases with organizational size. Bureaucracy and Formalization: – Larger organizations often exhibit more bureaucratic features, relying on rules and formal procedures to manage complexity. Specialization and Departmentalization: – Larger organizations require more specialization to handle diverse tasks. – Departmentalization (functional or divisional) is influenced by the need to manage complexity efficiently. Communication Channels: – Larger organizations face challenges in communication due to increased complexity. – Formal and informal communication channels need to be carefully managed for effective information flow.  Impact of Organisational Size on Structure Centralization vs. Decentralization: – Decision-making processes may become more centralized in larger organizations. – Decentralization becomes challenging as size increases, impacting the speed and flexibility of decision- making. Flexibility and Adaptability: – Smaller organizations tend to be more flexible and adaptable. – Larger organizations may struggle with agility due to increased layers of hierarchy and formalization. Technology Integration: – Technology plays a crucial role in managing communication and coordination challenges in larger organizations. – Information technology becomes a vital tool for enhancing efficiency and connectivity. Challenges and Opportunities: – Larger organizations face challenges in maintaining communication, coordination, and flexibility. – Smaller organizations may encounter challenges in resource availability but often have greater adaptability.  Impact of Organisational Size on Structure Leadership and Management: – Leadership styles may vary based on organizational size. – Effective management in larger organizations requires strategies for handling increased complexity and ensuring alignment with organizational goals. Structural Adjustments: – Organizational size necessitates periodic reviews and adjustments to the structure. – A dynamic approach to organizational design is crucial to accommodate changes in size and complexity over time  Nature of the Industry The nature of the industry in which an organization operates plays a crucial role in determining its organizational structure. Different industries have unique characteristics, demands, and challenges, influencing how work is organized and how decisions are made. Here's a breakdown of how the nature of the industry impacts organizational structure:  Nature of Industry Technology Intensity: – High-Tech Industries: Organizations in high-tech industries, such as software development or biotechnology, often require flexible and dynamic structures. Matrix structures or project-based teams may be common to foster innovation. – Traditional Industries: In contrast, industries with more traditional technologies, like manufacturing, may have more hierarchical and mechanistic structures. Degree of Competition: – Highly Competitive Industries: Intense competition often drives the need for quick decision-making and adaptability. Flatter structures and decentralized decision-making may be prevalent. – Less Competitive Industries: In less competitive industries, where stability is more common, organizations might opt for more centralized and hierarchical structures. Regulatory Environment: – Heavily Regulated Industries: Organizations in industries with strict regulations, such as healthcare or finance, may have more formalized and bureaucratic structures to ensure compliance. – Less Regulated Industries: Industries with fewer regulations may have more flexibility in their structures, allowing for innovation and experimentation.  Nature of Industry Consumer Behavior and Expectations: – Consumer Goods Industries: Organizations focused on consumer goods may adopt structures that enable quick responses to changing consumer preferences. Decentralized structures and market-oriented approaches are common. – Industrial Goods Industries: Organizations in industrial goods may emphasize efficiency and cost control, leading to more centralized and mechanistic structures. Innovation Requirements: – Innovative Industries: Industries where innovation is crucial, such as technology or pharmaceuticals, may benefit from organic and flexible structures that encourage creativity and collaboration. – Stable Industries: In stable industries, where innovation is less critical, organizations may prefer more stable and hierarchical structures.  Nature of Industry Globalization: – Global Industries: Organizations operating globally often require structures that facilitate coordination across diverse locations. Matrix structures or network structures may be effective. – Local Industries: Organizations serving local markets may have simpler structures, focusing on the specific needs of the local customer base. Nature of Products or Services: – Complex Products/Services: Industries with complex products or services may adopt matrix structures to accommodate cross-functional collaboration. – Standardized Products/Services: Industries with standardized offerings might lean towards more mechanistic structures to achieve efficiency and cost-effectiveness. Supply Chain Dynamics: – Complex Supply Chains: Organizations with intricate supply chains may adopt structures that enhance coordination and communication across different stages of the supply chain. – Simple Supply Chains: In industries with straightforward supply chains, simpler structures may suffice.  Technology Technology is a significant determinant of organizational structure, shaping how work is organized, how information flows, and how decisions are made within an organization. The impact of technology on organizational structure can be profound, influencing various aspects of design and management  Strategy and Goals Examination of how organizational strategy shapes its structure. Relationship between business strategies (cost leadership, differentiation) and structural choices. Adapting structure to accommodate strategic goals Structure follows strategy or strategy follows structure? Alfred Chandler.  Environmental Uncertainty The contingency approach to organizational design in response to uncertainty. Strategies for managing uncertainty through structural adjustments.  Culture and Leadership Understanding how organizational culture influences structure. The role of leadership in shaping the structure. Case studies illustrating how companies align structure with cultural values.  Other Determinants Human Resources Discussion on how employee skills and competencies impact organizational design. The role of human resource policies and practices in shaping structure. Balancing employee empowerment with organizational control. Geographical Dispersion: Exploration of how organizational structure varies with geographical dispersion. Coordination mechanisms in global or multi-location structures. Challenges and opportunities associated with global organizational structures. Regulatory Environment: Overview of how legal and regulatory requirements influence structure. Compliance considerations and their impact on organizational design. Case studies highlighting organizations adapting to regulatory changes. History and Tradition: - Recognition of the influence of organizational history and tradition. - How past experiences and practices shape the current structure. - The challenge of organizational inertia and the need for periodic structural reviews  Conclusion The dynamic nature of organizational structure - the need for periodic reviews and adjustments. The role of flexibility and adaptability in ensuring an organization's structural effectiveness. Encouragement for students to explore further readings and real-world examples for a deeper understanding of organizational structure determinants.  Lecture 3: Types of Organisational Structures / Design Functional Matrix Divisional Network Team-Based Structure Flat Structure Hierarchical Structure Holacracy Virtual Organisations  Functional Structures Functional Structure: Description: Organizes employees based on their specialized functional areas, such as finance, marketing, and operations. Advantages: Specialization, efficiency, clear career paths. Disadvantages: Communication barriers between functions, slow response to external cha  Divisional Divisional Structure: Description: Divides the organization based on products, services, or geographical locations. Advantages: Flexibility, quick response to market changes, focus on specific markets. Disadvantages: Duplication of functions, potential for competition between divisions.  Matrix Structure Matrix Structure: Description: Combines elements of both functional and divisional structures, employees report to both functional managers and project managers. Advantages: Flexibility, enhanced communication, expertise utilization. Disadvantages: Role confusion, power struggles, complexity.  Network Structure: Description: Utilizes a network of independent organizations or individuals to achieve specific tasks or projects. Advantages: Flexibility, access to specialized skills, cost-effectiveness. Disadvantages: Lack of control, coordination challenges.  Team-Based Structure Description: Organizes employees into cross- functional teams that work on projects or tasks. Advantages: Collaboration, adaptability, employee empowerment. Disadvantages: Potential for conflicts, difficulty in managing larger teams  Flat Structure Description: Has few levels of hierarchy, often with a wide span of control. Advantages: Quick decision-making, open communication, reduced bureaucracy. Disadvantages: Limited career advancement, potential for overburdened managers.  Hierarchical Structure Description: Traditional pyramid-shaped structure with clear lines of authority and communication. Advantages: Clear chain of command, stability, well-defined roles. Disadvantages: Slow decision-making, limited flexibility, communication challenges.  Holacracy Description: Focuses on self-management and distributed decision-making, often eliminating traditional hierarchical roles. Advantages: Flexibility, adaptability, employee empowerment. Disadvantages: Requires a cultural shift, potential for confusion.  Virtual Organization Description: Relies on technology to connect a network of geographically dispersed individuals or teams. Advantages: Global talent access, cost savings, flexibility. Disadvantages: Communication challenges, potential for isolation.  Organic vs Mechanistic Structures Organic and mechanistic organizations are two contrasting types of organizational structures that reflect different approaches to management and decision-making. These terms were popularized by organizational theorist Tom Burns and G.M. Stalker in their work "The Management of Innovation" (1961). Here are the key characteristics of each type:  Organic vs Mechanistic Structures Characteristic Mechanistic Organization Organic Organization Encourages innovation and Innovation and Creativity Limited innovation and creativity creativity Limited employee involvement in Encourages employee Employee Involvement decision-making involvement and participation High level of bureaucracy and Low bureaucracy, emphasis on Bureaucracy formal rules individual autonomy Formalized coordination Flexible coordination, often Coordination mechanisms through informal networks Focus Stability and efficiency Adaptability and responsiveness Clearly defined job roles and Fluid job roles, employees taking Job Design responsibilities on multiple tasks  Organic vs Mechanistic Structures Characteristic Mechanistic Organization Organic Organization Hierarchical, rigid, and formalized Flexible and decentralized Structure structure structure Centralized decision-making by Decentralized decision-making, Decision-Making top management involving lower levels Centralized control with clear Decentralized control, shared Authority and Control lines of authority responsibilities High degree of specialization in Cross-functional roles, less Specialization tasks and roles specialization Formal communication channels, Informal communication, open Communication strict protocols channels High flexibility, adaptable to Flexibility and Adaptability Low flexibility, resistant to change change Slow response to environmental Quick response to environmental Response to Environment changes changes  Conclusion The choice of organizational structure depends on various factors, including the organization's size, industry, goals, and external environment. Many organizations may adopt a hybrid approach, combining elements from different structures to meet their specific needs. It is important to note that many organizations exhibit a mix of organic and mechanistic characteristics, creating a hybrid or contingency structure that adapts to the specific needs and challenges faced by the organization. The choice between organic and mechanistic structures often depends on the nature of the industry, the external environment, and the organization's strategic goals.