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Structure relates to a skeletal framework of activities and processes in an organisation and specifies the roles of these in achieving goals and objectives of the organisation. According to (Mullins, 2009), a good structure is highly important due to the fact that decisions on structure are primary strategic decisions which can make or break an organisation. One important aspect of a good structure is the human element. Organisation structure should be designed so as to encourage employees and increase the morale and job satisfaction of organisation members which will result to overall organisation efficiency.
(Mullins, 2006) describes nine basic considerations in the design of organisation structure. The fundamental step is to define organisational objectives to enable further analysis and comparisons of other forms of structure.
Clarification of objectives
A clear definition of objectives is vital to provide a framework for the design of structure of an organisation. Organisation objectives provide fundamental schemes for division of labour and creation of group units and sub units. Clearly stated aims and objectives will assist in decisions on the strategy and structural dimension to employ to achieve organisational objectives.
Task and element functions
Certain functions must be performed in order to produce a good or service, from the development of the good or service to finance of resources used in the complete processing. These functions are referred to as the task functions. The results of the task functions must be coordinated to ensure the efficient achievement of total objectives of the organisation. Element functions refer to vital parts of the management process and are supportive of the task functions such as human resources and public relations.
Division of work
An organisation needs to accomplish an overall task of allocating many different activities to groups of people or individuals to achieve its objectives. The division of work and grouping together of individuals should be organised according to a basic criterion to establish a coherent link between the activities involved. The division of work and linkage of activities occur in various ways such as specialisation, use of similar resources or common expertise of organisation members as the most commonly used basis for grouping activities. Others include division by product or service, division by location, division by nature of the work performed, division according to common time scales such as shift working, division according to staff employed such as allocation of work based on experience and so on.
Centralisation and decentralisation
The extent of centralisation or decentralisation refers to the point of critical decision making in an organisation which reflects patterns of authority in a structure. In centralised structures decision making authority is within the power of top management while decentralised structures, decision making authority is delegated (Rollinson, 2005). The arguments in favour of centralisation in an organisation entail the easier implementation of a common policy, easier coordination and management control, preventing sub-units from becoming too independent, over-head cost reduction and faster decision making because of the smaller number of people involved. In contrary, arguments for decentralisation include decisions being made at a point closer to operational levels, increased responsiveness to local circumstances, improved level of personal customer service, more flexible structure, control is distributed more evenly which provides opportunity for development for those lower down, and encouraging effect on motivation and morale of staff. Basically, decentralisation tends to be easier to implement in the private sector organisations than public sector ones where procedures and protocols are the order of the day. Decentralisation being a more flexible approach provides support for employee participation and empowerment at all levels which increases innovation and improves technology while centralisation ensures professionalism in all activities by maintaining effective coordination and overall control of the organisations activities as a whole. A mix of both such as being global and local, practically being decentralised with a central control and authority should produce an organisational advantage.
A vivid illustration of decentralisation is the Zara fashion enterprise (cited in Mullins, 2009, p.596), where the company derived its success from integration of design, production, logistics and sales within companies globally rather than separating and outsourcing this different business elements unlike its contemporaries in the fashion industry, while still keeping control of all major operations in Spain. The company rejected rigid organisational structures in favour of a more flexible approach which comes from a highly integrated, fast and efficient form of communication between its global network of outlets and central hub of operations in Spain. The industry average time for introducing a design into the shops is six to nine months; Zara achieves this task in three to four weeks. What is peculiar here is that Zara only makes what is selling at the moment, store assistants and managers constantly get information about what is selling and how quickly it leaves the racks implying that local managers have a strong influence on their store's success and thus the company overall.
On the other hand, an illustration of centralisation is that of Nissan Motor Company (cited in Certo and Certo, 2006, p.123), a successful global automobile manufacturing company where the new CEO ordered calls for the elimination of 30 per cent of production capacity in Japan due to recent financial difficulties. The CEO's plan is to help reduce expenses as well as close offices in New York and Washington with a view to centralise company operations in Japan to enhance success.
Principles of organisation
The ten principles of organisation include principles of the objective, specialisation, co-ordination, authority, responsibility, definition, correspondence, span of control, balance and principle of continuity.
Span of control
This refers to number of subordinates who report directly to a particular manager or supervisor. Span of control is larger at lower levels of the organisation where responsibility is concerned more with the performance of specific tasks. If span of control is too wide, supervising too many subordinates effectively becomes difficult and stressful for managers as well as planning and development, training and control. Narrow span of control may lead to low morale and initiative of subordinates due to close supervision level, and also increase administrative costs.
Chain of command
This refers to the number of different levels in the structure of the organisation, the chain of hierarchical command. Every employee must know there position within the organisation structure. The combination of chain of command and span of control determines the overall pyramid shape of the organisation and whether the hierarchical structure is flat or tall. Flat hierarchical structure depict a broader span of control and few levels of authority while tall structure depicts narrower spans of control and more levels of authority. There is no ideal hierarchical structure but it is best to have a balance of both.
An illustration is Mc Donald's fast-food restaurants (cited in Certo and Certo, 2006, p.236). Mc Donald's decided to reorganise its global senior management team as a reaction to its recent poor financial performance. This involved creating two geographic areas of responsibility. The new positions focuses on managing operations in the America's while the other in Europe, Asia and the Pacific. The new structure evolved with a view to create clearer lines of responsibility and more focus on the company's financial performance within the territories. The new organisation hierarchy was also aimed at helping the company make business decisions more quickly.
Formal organisational relationships
This refers to individual authority relationships arising from defined patterns of responsibility in an organisation. This are identified as; line relationships where there is a direct relationship between subordinate and supervisor; functional relationships between people in advisory positions, and line managers and their supervisors; staff relationships are usually personal assistants who exercise only representative authority.
Line and staff organisation
This provides a means of making full use of specialists while maintaining the concept of line authority.
Project team and matrix organisation
A project team refers to a separate unit set up temporarily for a particular project which is disbanded when the duration elapses while matrix organisation involves functional departments specialising in numerous activities.
In conclusion, the overall effectiveness of the organisation will be influenced both by a healthy structural design, and by the behaviour of people who work within the structure. There are numerous variables and factors which influence the soundest structure. Nothing like a perfect organisation exists but it is crucial to establish a framework of order and system through which organisation activities can be planned, organised, directed and controlled. Since structure divides up the organisation into different parts and specifies what roles these will play in achieving specific aims and objectives, it also provides for control and coordination of the parts to achieve this goals. Basically, the essence of structure is the division of work among organisation members, the coordination of activities and various jobs which are inter-related.