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Organisational structures includes creating the organisations structure, designing the best possible arrangement of tasks into jobs, and arranging the work processes. It is the organising function that provides an orderly framework for the tasks that need to be done, in a systematic and effective manner.
So, this topic covers organisational structure, the contingency factors that affect organisational design, and various structural configurations. It discusses the various options for how to structure the organization. It also considers how power, empowerment, delegation, and control are influenced or made possible by the Organising process.
The 'organising process' is how an organisation's structure is created. Organisational structure can play an important role in an organisation's success. Managers seek structures that will best support and allow employees to effectively and efficiently do their job. And today's changing, complex business environment means many organisations all over the world are experimenting with different approaches to organisational structure and design.
WHAT IS 'ORGANISING' & WHY IS IT IMPORTANT?
Put simply, Organising is the management function of choosing which tasks are to be done, who is to do them, who is to report to who and where decisions are to be made. Organising establishes relationships between activity and authority, and has four distinct areas:
It sets what work activities have to be done to accomplish organisational goals.
It classifies the type of work that needs to be done and groups the work into manageable work units.
It assigns the work to individuals and delegates the appropriate authority.
It defines the hierarchy of decision-making relationships (i.e., who is responsible to whom).
SOME BASICS: DEFINITIONS
Organising is the process of creating an organisation's structure. That process has several purposes.
An organisational structure means, the formal framework by which job tasks are divided, grouped, and coordinated.
Organisational design is the process of developing or changing an organisation's structure. It involves decisions about six key elements: work specialisation, departmentalisation, chain of command, span of control, centralisation/ decentralisation and formalisation.
Work specialisation - that is, the degree to which tasks in an organisation are divided into separate jobs. (Another term for this is division of labour).
Work specialisation can be traced back to the writings of Adam Smith. Work specialisation was seen as a way to make the most efficient use of workers' skills because workers would be placed in jobs according to their skills and paid accordingly. Other advantages of work specialisation included improvement in employees' skills at performing a task, more efficient employee training, and encouragement of special inventions and machinery to perform work tasks.
Work specialisation was viewed as a source of unending productivity improvements. And it was -up to a certain point. But, the human problems created by highly specialised jobs included boredom, fatigue, stress, lowered productivity, poor quality of work, increased absenteeism, and higher job turnover. So attention began to be paid to how to design jobs that were more satisfying and motivational for the job holder, and thus greater worker productivity.
THE ORGANISING PROCESS
The organising process starts with defining the work tasks. Once the work tasks have been defined, they must be grouped together in a logical way. Departmentalisation is the name given to this process. Departmentalisation groups the jobs in some orderly manner so as to accomplish organisational goals. There are five major ways to departmentalise:
1. Functional departmentalisation is grouping jobs by functions performed.
2. Product departmentalisation is grouping jobs by product line.
3. Geographical departmentalisation is grouping jobs on the basis of territory or geography.
4. Process departmentalisation is grouping jobs on the basis of product or customer flow.
5. Customer departmentalisation is grouping jobs on the basis of common customers.
All 5 methods are widely used.
BASICS OF ORGANISATIONAL STRUCTURE
The chain of command is the continuous line of authority that extends from the upper organisational levels to the lowest levels and clarifies who reports to whom. Three related aspects are authority, responsibility, and unity of command:
Authority is the right inherent as a manager to tell people what to do and to expect them to do it.
Responsibility is the obligation or expectation to perform.
Unity of command is the classical management principle that a subordinate should have one and only one superior to whom he or she is directly responsible; that is, a person should report to only one manager.
A simple structure is an organisational design with low departmentalisation, wide spans of control, authority centralised in a single person and little formalisation Its strengths are its flexibility, speed, clear accountability, and low cost to maintain. The major drawback is that the simple structure is most effective in small organisations. Simple structures become inadequate as organisation grows. A simple structure can overload the top; and managerial decision making slows as size increases. As an organisation grows, the structure tends to become more specialised and formalised.
THE "SPAN OF CONTROL" & ITS RELATIONSHIP TO COORDINATION AND MANAGERIAL EFFECTIVENESS.
The span of control is important because it determines how many levels and managers an organisation will have. "Span of control' is directly related to Controlling. If the span of control is too narrow, or, too wide, then either the manager will over-supervise their staff or, will have difficulty keeping track of all activities staff undertake. In either situation there are unnecessary potential costs and risks for the
What determines the 'ideal' span of control? Contingency factors, such as the skills and abilities of the manager and the employees; the characteristics of the work being done; similarity of employee tasks; the complexity of those tasks; the physical proximity of subordinates; the degree to which standardised procedures are in place; the sophistication of the organisation's information system; the strength of the organisation's culture, and the preferred style of the manager will influence the ideal number of subordinates.
The trend in recent years has been toward larger spans of control, primarily due to organisational de-layering - i.e. organisational restructuring that has removed hierarchical levels and created flatter organisational structures.
Centralisation and decentralisation are related to the span of control. These address who, where, and how decisions are made in organisations:-
Centralisation is the degree to which decision making is concentrated at a single point in the organisation, usually in the upper levels of the organisation.
Decentralisation occurs where decision-making authority is handed down to lower levels in an organisation. Today, the trend is toward decentralising decision making in order to make organisations more flexible and responsive.
Employee empowerment is another term for increased decentralisation and is the increasing of the decision-making discretion of employees.
These factors - the span of control, they way that centralisation or decentralisation operate, the degree of employee empowerment - all directly influence managerial coordination and effectiveness.
Other related factors include formalisation - the degree to which jobs within an organisation are standardised and the extent to which employee behaviour is guided by rules and procedures.
In a highly formalised organisation, employees have little discretion, and there is a high level of consistent and uniform output. Formalised organisations have explicit job descriptions, lots of organisational rules and clearly defined procedures.
Standardisation not only eliminates the possibility that employees will engage in alternative behaviours, it even removes the need for employees to consider alternatives.
In a less-formalised organisation, employees have a lot of freedom and can exercise discretion in the way they do their work.
The degree of formalisation can vary widely between organisations and even within organisations.
DIFFERENT ORGANISATIONAL STRUCTURES - ADVANTAGES & DISADVANTAGES
You have already learned about functional, divisional and matrix structures using different forms of departmentalisation. But these are not the only options. Organisations are not structured the same way- even companies of similar size do not necessarily have similar structures.
Organisations face dilemmas as to the best form of organisation structure. They have to balance the advantages of characteristics such as formal procedures, delegated authority, and specialised roles against their disadvantages. Although there are a number of typical organisation structures, such as functional, divisional, and matrix, there is no one best type of organisation structure. Most organisations have mixed structures, and structural design must closely match situation characteristics. Top managers put a lot of thought into how best to design the organisation's structure!
DECIDING THE ORGANISATIONAL DESIGN
There are two generic models for organisational design: mechanistic and organic.
A mechanistic organisational structure is characterised by high specialisation, rigid departmentalisation, narrow spans of control, high formalisation, a limited information network and little participation in decision making by low-level employees.
An organic organisational structure is highly adaptive and flexible with little work specialisation, minimal formalisation and little direct supervision of employees.
HOW STRATEGY, SIZE, TECHNOLOGY & ENVIRONMENTAL UNCERTAINTY MAY INFLUENCE STRUCTURE
The 'best' design - mechanistic or organic - is influenced by four variables: the organisation's strategy, size, technology and degree of environmental uncertainty.
The organisation's strategy influences organisational design. Alfred Chandler did the original work on the strategy-structure relationship, finding that structure followed strategy. This highlighted that as organisations changed their strategies, they had to change their structure to support that strategy. Organisational strategy is usually based on one or more of the following:
Innovation, which needs the flexibility and free flow of information of the organic organisation.
Cost minimisation, which needs the efficiency, stability and tight controls of the mechanistic organisation.
Imitation, which uses characteristics of both mechanistic and organic organisations.
There is considerable historical evidence that an organisation's size significantly affects its structure. Larger organisations tend to have more specialisation, departmentalisation, centralisation and formalisation, although the size-structure relationship is not linear.
Every organisation uses some form of technology to transform inputs into outputs. Technology also has been shown to affect an organisation's choice of structure. Back in the 1950's a British researcher Joan Woodward, found that organisations adapted to their technology. She showed that distinct relationships existed between the organisation's technologies, their subsequent structure and their effectiveness
d) Environmental uncertainty
The final factor that has been shown to affect organisational structure is environmental uncertainty. The more uncertain the environment, the more flexible and responsive the organisation may need to be.