Introduction to Organisation Structure and Design

• Introduction to Organisation, Theory and Structure

 Definition of Organisation Structure
 The System Perspective
 The Life-Cycle Perspective

• Organisational Effectiveness
 Goal Attainment Approach
 The System Approach
 The Strategic-Constituencies Approach
 The Competing-Values Approach

• Dimensions of Organisation Structure

 Complexity
 Formalization
 Centralization

• Determinants - Strategy
 Meaning
 Types of Stratégies
 Classification Strategic Dimensions
 Chandler’s Strategy-Structure Thesis
 Miles and Snow’s Four Strategic Types
 Porter’s Competitive Strategies

• Determinants – Technology
 Woodward’s Research
 Knowledge based technology – Perrow’s Contribution
 Technological Uncertainty – Thompson’s Contribution
 Relationship between technology and complexity/Formalisation/Centralisation

• Organisational Design Options

 Common Elements in Organisations
 The Simple Structure
 The Bureaucracy
 The Divisional Structure
 The Adhocracy

• Bureaucracy: A Closer Look

 Features of Bureaucracy
 Criticism of Bureaucracy
 Is Bureaucracy a structural dinosaur?
 You can’t ignore the obvious: Bureaucracies are everywhere

• Adhocracy: A Closer Look

 Matrix
 Theory A, J, Z
 The Collateral Form
 The Network Structure
 Other Examples of Adhocracy
Introduction to Organisation, Theory and Structure

Definition of Organisation Structure:

• It defines

- how task are to be allocated

- who reports to whom
- formal coordinating mechanisms and interaction patterns that will be followed.

• Three components of Organisation Structure

- Complexity: it is extent of differentiation within the organisation. It includes the

degree of specialisation or division of labour, the number of levels in org.‘s
hierarchy, and extent to which the org.’s units are dispersed geographically.

- Formalisation: It is degree to which an organisation relies on rules and

procedures to direct the behaviour of employees.

- Centralisation: It considers where the locus of decision making authority lies.

The Systems Perspective

• System
- A set of interrelated and interdependent parts arranged in a manner that
produces a unified whole.
- They take inputs, transform them and produce some output

• Differentiation and integration

- Specialised functions are differentiated.
- In order to maintain unity among the differentiated parts and form a complete
whole, every system has a reciprocal process of integration.
- This integration is typically achieved through devices such as coordinated
levels of hierarchy, direct supervision, rules, procedures and policies.
- Every system requires differentiation to identify its subparts and integration to
ensure that the system doesn’t break down into separate elements.

• Types of Systems
- Closed system: System that receives no energy from an outside source and
from which no energy is released to its surrounding. Self contained system.
Very less relevance to the study of organisations.
- Open system: It recognizes the dynamics interaction of the system with its
environment.

• Features of Open System

- Environment awareness
- Feedback
- Cyclical character
- Negative entropy
- Steady state
- Movement towards growth and expansion
- Balance of maintenance and adaptive activities
- Equifinality

• Importance of the System Perspective

- It permits seeing the organisation as a whole with interdependent parts.
- It prevents lower level managers to identify and understand the environment
in which their system operation.
- It helps managers to see organisation as stable patterns and actions within
boundaries and to gain insights into why organisations are resistant to
change.
The Life-Cycle Perspective

• A life cycle:
- It refers to a pattern of predictable change.
- There are distinct stages through which organisations proceed, that the
stages follow a consistent pattern, and that the transitions from one stage to
another are predictable rather than random occurrences.

• Life Cycle stages

- Entrepreneurial stage
- Collectivity stage
- Formalisation and control stage
- Elaboration of structure stage
- Decline stage

• Importance of Life Cycle perspective

- It makes us aware that an organisation hasn’t always been the way it is or will
it always be the same in the future.
- It helps to decide appropriate action to solve any given problems depending
on stages.
Organisational Effectiveness

Goal attainment approach

• It states that an org’s effectiveness must be appraised in terms of

accomplishment of ends rather than means.

• Assumptions
- Org. are deliberate, rational, goal-seeking entities.
- Org. must have ultimate goads.
- These goals must be identified and defined well enough to be
understood.
- These goals must be few enough to be manageable.
- There must be general consensus or agreement on these goads.
- Progress towards these goals must be measurable.

• Problems
- Whose goals – it is possible that some of decision makers with real
power and influence are not the member of senior management
- What an org. states officially as its goals does not always reflect the
org.’s actual goals – official and actual goals may be different.
- Org. short-term goals are frequently different from its long term goals.
- Org. have multiple goals also creates difficulties such as they can
compete with each other and sometimes are even incompatible.
- There are multiple goals and diverse interests within the org.,
consensus may not be possible unless goals are stated in such
ambiguous and vague terms as to allow the varying interest groups to
interpret them in a way favourable to their self interests.
- Multiple goals must be ordered according to importance. How to
allocate relative importance to goals that may be imcompatible.

• Value to managers: The validity of those goals identified can probably be

increased significantly by
- Ensuring that input is received from all those having a major influence
on formulating the official goals, even if they are not part of senior
management.
- Including actual goals obtaining by observing the behaviour of org.
member.
- Recognising that org. pursue both short and long term goals.
- Insisting on tangible, verifiable and measurable goals than vague
statement.
- Viewing goals as dynamic entities that change over time.
The system approach

• System models emphasize criteria that will increase the long-term survival of
the org. such as the org’s ability to acquire resources, maintain itself internally
as a social organism, and interact successfully with it external environment. It
focuses more on means needed for the achievement of those ends.

• Assumptions
- Org. are made up of interrelated subparts.
- Effectiveness requires awareness and successful interaction with
environmental constituencies.
- Survival requires a steady replenishment of those resources
consumed.

• Making System Operative

The system view looks at factors such as relation with the environment to
assure continued receipt of inputs and favourable acceptance of outputs,
flexibility of response to environmental changes, the efficiency with which the
org. transforms inputs to outputs, the clarity of internal communications, the
level of conflict among groups and the degree of employees job satisfaction

• Problem
- Measuring specific end goals is difficult
- It focuses on the means necessary to achieve effectiveness rather
then on org. effectiveness itself.
- “It’s whether you win or lose that counts, not how you play the game!”

• Value to Manager
- Managers are less likely to make decisions that trade of the org’s
long-term health and survival for ones that will make them look good
in the near term.
- It increases awareness of interdependency of org. activities.
The Strategic-Constituencies Approach

• This approach seeks to appease only those in the environment who can
threaten the org’s survival.

• Assumptions
- Org. are assumed to be political arenas where vested interests
compete for control over resources.
- Managers pursue a number of goals and that the goals selected
represent a response to that interest group that controls the resources
necessary for the org to survive.

• Making Strategic Constituencies Operative

- Identify the constituencies to be critical to the org. survival.
- Evaluate to determine the relative power of each constituency.
- Identify the expectations that these constituencies hold in for the org.
- This approach will conclude by comparing the various expectations,
determining common expectations and those that are incompatible,
assigning relative weights to the various constituencies and
formulating a preference ordering of these various goals for the org as
a whole.

• Problem
- It is difficult to separate the strategic constituencies from each other.
- Environment changes rapidly.

• Value to Manager
- Managers understand on whom the survival of org. is dependent.
- It decreases a chance of ignoring or upsetting a group whose power
could significantly hinder the org operations.
- Manager can modify its preference ordering of goals as necessary to
reflect the changing power relationship with its strategic
constituencies.
The Competing-Values Approach

• The theme of this approach is that the criteria you value and use in assessing
an org. effectiveness – return on investment, market share, new product
innovation, job security – depend on who you are and the interest you
represent.

• Assumptions
- There is no best criterion for evaluating an org effectiveness.
- There is neither a single goal that everyone can agree upon nor a
consensus on which goals take precedence over other.
- An evaluator chooses goals based on his personal values,
preferences and interests.

• Making Competing Values Operative

- There are three basic sets of competing values.
- Flexibility versus control
Flexibility values innovation, adaptation and change.
Control favours stability, order and predictability.
- Wellbeing and development of people versus wellbeing and
development of organisation
The concern for the feelings and needs of people within org. versus
the concern for productivity and task accomplishment
- Org. means versus ends
The former stressing internal process and long term, latter
emphasizing final outcomes and short term

• Value to Manager
- It guides Managers in identifying the appropriateness of different
criteria to different constituencies and different life cycles.
 Comparing four Organisation Effectiveness Approaches

Approach Definition When useful

Goal Attainment An org is effective to the The approach is preferred

extent that it accomplishes when the goals are clear,
its stated goals. time bound and
measurable.

System An org is effective to the The approach is preferred

extent that it acquires when a clear connection
needed resources. exists between inputs and
outputs.

Strategic Constituencies An org is effective to the The approach is preferred

extent that all strategic when constituencies have
constituencies are at least powerful influence on the
minimally satisfied. org. and org. must
respond to demands.

Completing values An org is effective to the The approach is preferred

extent that the emphasis when unclear about its
of the org. in the four own emphases, or
major areas matches changes in criteria over
constituent preferences. time are of interest.
Dimensions of Organisation Structure

Complexity

• It refers to the degree of differentiation that exists within the org.

• There are three kinds of differentiation
- Horizontal
- Vertical
- Spatial

• Horizontal differentiation
- It refers to the degree of differentiation between units based on
 orientation of members,
 the nature of tasks they perform
 their education and training
- The most visible evidence of horizontal differentiation is specialisation and
departmentation.

• Specialisation refers to the particular grouping of activities performed by the

individual.
- Specialisation can be through functional specialisation or social
specialisation.
- In Functional specialisation, jobs are broken down into simple and repetitive
tasks. It is also known as division of labour. It creates high substitutability
among employees and facilitates their easy replacement by management.
- Social specialisation can be achieved by hiring professionals who hold skills
than cannot be readily routinised.

• Departmentation is the way in which org. typically coordinate activities that

have been horizontally differentiated. Department can be created on the basis
of simple numbers, function, product or service, client, geography or process.

• Vertical Differentiation
- It refers to the depth in structure.
- Differentiation increases, and hence complexity, as the number of
hierarchical levels in the org increases.

• Span of Control defines the number of subordinates that a manager can

direct effectively.
- Wide span – more number of subordinates and vice versa
- It creates tall or flat structure.
- Tall structures provide close supervision and boss oriented control and
coordination and communication become complicated.
- Flat structures have shorter and simpler communication chain, less
opportunity for supervision, but reduced promotion opportunities.

• Spatial Differentiation refers to the degree to which the location of an org’s

offices, plants and personnel are dispersed geographically.

• Why complexity is important

- The higher the complexity, the greater amount of attention they must pay to
dealing with problems of communication, coordination and control.
 - The higher complexity demands on management to ensure that
differentiated and dispersed activities are working smoothly and together
toward achieving the org’s goals.

Formalisation

• It refers to the degree to which jobs within the org are standardised.
• The formalisation is high, if there are explicit job descriptions, lots of org rules
and clearly defined procedures covering work processes in org.
• The formalisation is low, if employee’s behaviour is relatively non
programmed. Such job offer employee a great freedom to exercise discretion
in work.

• Range of formalisation
- High degree of formalisation: Unskilled jobs, repetitive jobs, production jobs
- The greater the degree of professionalisation, lesser formalisation
- The higher level in org, lesser formalisation

• Why is formalisation important

- Standardising behaviour reduces variability.
- It promotes coordination.
- Standardisation leads to less discretion. More discretion can cost money.
- Org with formalised jobs jet most effective performance from employees at
lower cost.

• Formalisation techniques
- Selection: An effective selection process will be designed to determine if
candidates is fit into the org. This technique control employee discretion. It
tries to prevent the employment of misfits.
- Roles requirements:
- Every job carries with its expectations on how the role incumbent is
supposed to behave.
- Job analysis defines the jobs that need to be done in the org and
outlines what employee behaviours are necessary to perform the jobs.
It results into Job Descriptions and Job specifications.
- Rules:
- Rules are explicit statements that tell an employee what he ought or
ought not to do.
- It tells employees what they can do, how they are to do it and when
they are to do it.
- Rules leave no room for employee judgement or discretion.
- Procedures:
- Policies are established to ensure standardisation of work
processes.
- The same input is processed in the same way and output is the
same each day.
- Policies:
- Rather than specifying a particular and specific behaviour, policies
allow employees to use discretion but within limited boundaries.
- The discretion is created by including judgemental terms (such as
best, satisfied, competitive) which the employee is left to interpret.
- Training:
 - This includes on the job variety where understudy assignments,
coaching and apprenticeship methods are used to teach employees
preferred job skills, knowledge and attitudes.
- New employees are required to undergo a brief orientation program
in which they are familiarised with org objectives, history, philosophy,
rules.
Centralisation

• It concerned with the dispersion of authority to make decisions within the org.
• A high concentration implies high centralisation, whereas a low centralisation
indicates decentralisation.
• Centralisation can be described as the degree to which the formal authority to
make discretionary choices is concentrated in an individual, unit or level
(usually high in the org) thus permitting employees (usually low in the org)
minimum input into their works.
• Why decentralisation is important
- Managers are limited in their ability to give attention to the date they receive.
- Org needs to respond rapidly to changing conditions at the point at which
the change is taking place.
- Decentralisation can provide more detailed input into the decision.
- It also provides motivation to employees by allowing them to participate in
decision making process.
- It is the training opportunity that it creates for low level managers.
• When centralisation is preferred
- A comprehensive perspective is needed in decision.
- A lot of economics involved.
Determinants - Strategy

Meaning

• It can be defined as the determination of the basic long-term goals and

objectives of an enterprise and the adoption of courses of action and the
allocation of resources necessary for carrying out these goals.

• Views on Strategy:
- Planning mode
- Evolutionary mode

• Planning mode
- Strategy is a plan or explicit set of guidelines developed in advance
- Managers identify where they want to go; then they develop systematic and
structured plan to get there.

• Evolutionary mode
- Strategy is not necessarily a well-though-out and systematic plan.
- It evolves over time as a pattern in a stream of significant decisions.

Types of Strategy

• Corporate-level strategy: It determines the roles that each business in the

organisation will play.

• Business-level strategy: For organisations in multiple businesses, each

division will have its own strategy that defines the products or services that it
will offer, the customer it wants to each.

Classifying strategic dimensions

• Innovation: It does not mean a strategy merely for simple or cosmetic

changes from previous offerings but rather one for meaningful and unique
innovations.

• Marketing Differentiation: It strives to create customer loyalty by uniquely

meeting a particular need. The org seeks to create a favourable image for its
product through advertising, market segmentation and prestige pricing.

• Breadth: It refers to the scope of the market to which the business caters; the
variety of customers, their geographic range and numbers of products.

• Cost Control: It considers the extent to which the org tightly controls costs,
refrain from incurring unnecessary innovation or marketing empences and
cuts prices in selling a basic product.
Chandler’s Strategy-Structure Thesis

• “A new strategy required a new or at least refashioned structure if the

enlarged enterprise was to be operated efficiently …. Unless structure
follows strategy, inefficiency results.”
• “Unless new structures are developed to meet new administrative needs
which result from an expansion of a firm’s activities into new areas,
functions, or product lines, the technological, financial and personnel
economies of growth and size cannot be realised.”

• Argument:
- The efficient structure for an org with a single product strategy is one
that is simple – high centralisation, low formalisation and low complexity
- From single-product line, companies typically expand activities within
same industry. This vertical integration strategy makes for increased
interdependence among org units and creates the need for a more
complex coordinative device. This desired complexity is achieved by
redesigning the structure to form specialised units based on functions
performed.
- If growth proceeds further into product diversification, again structure
must be adjusted if efficiency is to be achieved. This can best be achieved
through the creation of a multiple set of independent divisions, each
responsible for a specified product line.

• Research: The related and unrelated business strategies were associated

with multidivisional structures, while single-business strategies were
linked with functional structure.

• Conclusions
- He looked only at large, profit-making org.
- He focussed on growth as measure of effectiveness rather than
profitability.
- Definition of strategy is far from all-inclusive.
Miles and Snow’s four strategic types

• They have classified org based on the rate at which they change their
products or market into one of four strategic types: defenders,
prospectors, analyzers and reactors.
• Defenders
- They seek stability by producing only a limited set of products
directed at a narrow segment of the total potential market.
- Within this limited niche, defenders strive aggressively to prevent
competitors from entering their ‘turf’ through standard economic
actions such as competitive pricing or production of high-quality
products.
- They ignore development, environment to find out new areas of
opportunity but there is intensive planning oriented towards cost and
other efficiency issues.
- Their structure is made up of high horizontal differentiation,
centralised control and an elaborate formal hierarchy of
communication.

• Prospectors
- Their strength is finding and exploiting new product and market
opportunities.
- Innovations are more important than high profitability.
- They are built its reputation and long term profitability on developing
innovative products, getting quickly to the market with those products,
exploiting opportunities while they are still innovative and then getting
out.
- Their success depends on developing and maintaining the capacity
to survey a wide range of environmental conditions, trends and
events.
- So it has a low degree of routinisation, mechanisation, flexible
structure.

• Analysers
- They try to capitalise on the best of both the preceding types.
- Their strategy is to move into new products or new markets only after
viability has been proved by prospectors.
- They essentially follow their smaller and more innovative competitors
With superior products, but only after their competitors have
demonstrated that the market is there.
- They seek both flexibility and stability.
- They have a dual structure – part of these organisations have high
levels of standardisation, routinisation and mechanism for efficienty.
Other part are adaptive, to enhance flexibility.

• Reactors
- This label is meant to describe the inconsistent and unstable
patterns that arise when one of the other three strategies are pursued
improperly.
- In general, reactors respond inappropriately, perform poorly and as a
as a result are reluctant to commit themselves aggressively to a
specific strategy for the future.
Porter’s Competitive Strategies

• He proposes that management must select a strategy that will give its
org competitive advantage.
• It can choose from among three strategies – Cost leadership,
differentiation and focus. Which one management chooses depends
on the org’s strengths and competitor’s weaknesses.

• Cost-leadership strategy
- These org sets out to be the low-cost producer in the industry.
- Success requires that the org be the cost leader.
- Typical means to become cost leaders are efficiency of operations,
economy of scale, low-cost labour or preferential access to raw
material.
- Best structure is high in complexity, formalisation, centralised.

• Differential strategy
- These org seeks to be unique in its industry in ways that are widely
valued by buyer.
- It might emphasise high quality, extraordinary service, innovative
design, technological capability or an unusual, positive brand image.
- The key is that the attribute chosen must be different from those
offered by rivals and significant enough to justify a price premium that
exceeds the cost of differentiation.
- It demands a high degree of flexibility, low complexity, low
formalisation and decentralised decision making.

• Focus Strategy
- It aims at a cost advantage or differentiation advantage in a narrow
segment.
- Org will select a segment or group of segment in an industry (such
as product variety, type of end buyer, distribution channel, or
geographical location of buyer) and tailor the strategy to serve them to
the exclusion of other.

• Stuck in the middle

- It describes org that are unable to gain a competitive advantage by
on of the previous strategy.
Determinants – Technology

Woodward’s research
• Her research, which focused on production technology, was the first major
attempt to view org structure from a technological perspective.
• Background
- She chose approx one hundred manufacturing firm in the south of England.
- She categorised the firms into one of three types of technology – unit, mass
or process production.
- She treated these categories as a scale with increasing degrees of
technological complexity, with unit being the least complex and process the
most complex.
- Unit producers would manufacture custom-made products such as tailor
made suits, turbines. Mass producers would make large-batch or mass
produced products such as refrigerators or ford automobiles. Process
production included heavily automated continuous process such as oil and
chemical refiners.

• Conclusion
- There were distinct relationships between these technology classifications
and the subsequent structure of firm.
- The effectiveness of org were related to the fit between technology and
structure.

• Summary of Woodward’s finding on the relationship between technological

complexity and structure

Low -----------------------------------------------------------------------High

Structural Technology
Characteristic
Unit Production Mass Production Process Production

Number of vertical 3 4 6
levels
Supervisor’s span 24 48 14
of control
Manager/total 1:23 1:16 1:8
employee ratio
Proportion of High Low High
Skilled workers
Overall Complexity Low High Low

Formalisation Low High Low

Centralisation Low High Low

Knowledge based Technology – Perrow’s Contribution

• It considers only manufacturing base as it represents more than 50% of all

the org.
• Background
- It looked at knowledge technology rather than at production technology.
- According to Perrow, technology means ‘ the action that an individual
performs upon an object, with or without the aid of tools or mechanical
devices in order to make some change in that object.’
- There are two underlying dimension of knowledge technology – Task
variability and Problem analyzability.
- Task variability:
- It is the number of exceptions encountered in one’s work.
- These exceptions will be few in numbers if the job is high in routineness
and vice versa.
- Problem analyzability:
- It assesses the type of search procedures followed to find successful
methods for responding adequately to task exceptions.
- It can be well defined or ill defined.

• Using this two dimensions, he has constructed a two by two matrix

representing four cells – Routine technologies, Engineering technologies,
Craft technologies and Nonroutine technologies.
- Routine technologies:
- Few exceptions and easy to analyse problems.
- e.g. mass production processes such as steel, automobiles, bank teller
- Engineering technologies:
- A large number of exceptions but can be handled in a rational and
systematic manner.
- e.g. construction of office building, activities of tax consultants
- Craft technologies:
- Relatively difficult problems with a limited set of exceptions
- e.g. shoemaking, furniture restoring or performing artist.
- Nonroutine technologies:
- Many exceptions and difficult to analyse problems
- e.g. strategic planning, basic research activities

• Conclusion

Cell Technology Structural Characteristic

Formalisation Centralisation Span of Coordination
control and control
1 Routine High High Wide Planning
and rigid
rules
2 Engineering Low High Moderate Reports and
meetings
3 Craft Moderate Low Moderate- Training and
wide meetings
4 Nonroutine Low Low Moderate- Group
low norms and
group
meetings
Technological uncertainty: Thompson’s contribution
• Thomson’s contribution lies in demonstrating that technology determines the
selection of a strategy for reducing uncertainty and that specific structural
arrangement can facilitate uncertainty reduction.
• Background
- He proposed three types of technology that are differentiated by the tasks
that an organisational unit performs – Long-liked, Mediating, Intensive
technology
- Long-linked technology
- Tasks or operations are sequentially interdependent.
- Mass production assembly lines
- It requires efficiency and coordination among activities, owing to sequential
interdependencies, the major uncertainty facing management lies on the input
and output sides of management.
- Mediating technology
- It is one that links clients on both the input and output sides of the
organisation.
- e.g. Banks, telephone, retail stores, employment agencies, post offices
- Mediators perform an interchange function liking units that are otherwise
independent. The linking unit responds with standardising the org
transactions and establishing conformity in clients’ behaviour.
- Intensive technology
- It represents a customised response to a diverse set of contingencies.
- The exact response depends on the nature of problems and variety of
problems.
- Hospitals, research labs, management consulting firms, military combat
teams
- A number of multiple resources are available to the org, but only a limited
combination is used at a given time depending on the situation.
• Conclusion
- Long linked technology is accompanied by sequential interdependence – the
procedures are highly standardised and must be performed in a specified
serial order – low complexity and high formalisation
- Mediating technology has pooled interdependence – two or more units each
contribute separately to a larger unit – moderate complexity and formalisation
- Intensive technology creates reciprocal interdependence – the outputs of
units influence each other in a reciprocal fashion – high complexity and low
formalisation
Relationship between technology and Complexity/Formalisation/Centralisation
• Technology and Complexity
- Routine technology is positively associated with low complexity.
- The greater the routineness, the fewer the number of occupational groups
and the less training possessed by professional.
- The nonroutine technology is likely lead to high complexity.
- As the work becomes more sophisticated and customised, the span of
control narrows and vertical differentiation increases.

• Technology and Formalisation

- Routine technology is positively related with formalisation.

• Technology and Centralisation

- The routine technologies would be associated with a centralised structure
whereas the nonroutine technology, which would rely more heavily on the
knowledge of specialist, would be characterised by delegated decisions.
Organisational Design Options

Common elements in Organisations

• The operating core: Employees who perform the basis work related to the
production of products and services.
• The strategic apex: Top-level managers who are charged with the overall
responsibility for the org.
• The middle line: Manager, who connect the operating core to the strategic
apex.
• The technostructure: Analyst who have the responsibility for effecting certain
forms of standardisation in org.
• The support staff: People who fill the staff units, who provide indirect support
services for the org.

The Simple Structure

• The simple structure is depicted best as a flat organisation, with an organic
operating core and almost everyone reporting to one person where the
decision-making power is centralised.
• Strength
- Simplicity
- Fast and flexible
- Clear accountability, minimum amount of goal ambiguity
• Weakness
- Limited applicability
- With increased size, this structure proves inadequate.
- Concentrate power in one person
- Concentration of power can work against the org’s effectiveness and
survival.
• When should be used
- Small or in formative stage of development
- Environment is simple and dynamic
- Org faces high hostility or crisis or senior management is owner
- Number of employees are few

The Machine Bureaucracy

• Features
- Highly routine operating tasks
- Tasks are grouped into functional department
- Centralised authority
- Decision making that follows the chain of command
- An elaborate administrative structure with a sharp distinction between line
and staff activities
• Strength
- Ability to perform standardised activities in a highly efficient manager
- It requires less talented hence less costly middle and lower level managers
- The pervasiveness of rules and regulations substitute for managerial
discretion.
- Standardised operations coupled with high formalisation, allow decision
making to be centralised.
• Weakness
- Specialisation creates subunit conflicts.
- Functional unit goals can override the overall goals of org.
- Not effective for solving new problems
• When should be used
 - Large size, a simple and stable environment and technology that contains
routine work that can be standardised.
The Professional Bureaucracy
• It has been created to allow org to hire highly trained specialists for the
operating core, while still achieving the efficiencies from standardisation.
• Features
- Jobs require a high level of specialised expertise
- The power in this design rests with the operating core because they have
the critical skills that the org needs and they have the autonomy – provided
through decentralisation to apply their expertise.
- These professionals perform their activities relatively autonomously, but the
structure is high in complexity and there are lots of rules and regulations;
however, the formalisation is internalised rather than imposed by the org.
• Strengths
- It can perform specialised tasks that require the skills of highly trained
professional.
• Weaknesses
- Tendency for subunit conflicts to develop
- Compulsive in their determination to follow the rules.
• When should be used
- Large size, a complex and stable environment and a routine technology
internalised through professionalisation.
- The org’s operating core will be dominated by skilled professionals who
have internalised difficult-to-learn but nevertheless well defined procedures.

The Divisional Structure

• Feature
- The divisional structure is actually a set of autonomous units, each typically
a machine bureaucracy into itself, coordinated by a central HQ.
- Middle management gets a great deal of control
- Each division is generally autonomous with divisional managers responsible
for performance and holding complete strategic and operating decision
making authority.
- Central HQ provides support services to the divisions.
- The division tend to be organised into functional groups with high division of
labour, high formalisation and centralised authority in the division managers.
• Strengths
- It provides more accountability and focus on outcomes.
- HQ staff can concentrate on long term, strategic decisions instead on day to
day operating details.
- Excellent vehicle for training and developing general managers
- Ineffective performance in one division has little effect on the other divisions.
- Creation of self-contained business ‘within a business’.
• Weaknesses
- Duplication of activities and resources
- It stimulates conflicts.
- Autonomy is more in theory than in practice.
- It creates coordination problems
• When should be used
- Product and market diversity
- Org technical system can be efficiently separated into segments
- Environment is neither very complex nor dynamic
The adhocracy
• Features
- High horizontal differentiation, low vertical differentiation, low formalisation,
decentralisation and great flexibility and responsiveness
- Staff are professional with a high level of expertise
- Few rules and regulations
- Power flows to anyone with expertise regardless of his or her position
• Strength
- Ability to respond rapidly to change and innovation and to facilitate the
coordination of diverse specialists
- Adaptable and creative
• Weaknesses
- Conflict
- No clear boss-subordinate relationship
- Ambiguities over authorities and responsibilities
- lacks advantages of standardised work
- Employees undergo stress and tensions as it is not easy to set up and
dismantle work relationship on a continuing basis
• When should be used
- Strategies of diversity, change and high risk
- When requires flexibility
- Technology is non routine and complex
- Environment is dynamic and complex
- In the early years of org’s life cycle
Bureaucracy: A Closer Look

Features of Bureaucracy

• Division of labour
• Well-defined authority hierarchy
• High formalisation
• Impersonal nature
• Employment decisions based on merit
• Career track for employees
• Distinct separation of members’ organisational and personal lives

Criticism of Bureaucracy

• Goal Displacement
- It means displacement of org goals by subunit or personal goals
- Rules become more important than the ends that they were designed to
serve, the result being goal displacement and loss of org effectiveness.
- Specialisation and differentiation create subunits with different goals. The
goals of each separate subunit become primary to the subunit members.
- Rule and regulations not only define unacceptable behaviours but also
define minimum levels of acceptable performance.
- Decision makers use adherence to rules to protect themselves from making
errors.
• Inappropriate application of rules and regulations
- Bureaucracies breed such devotion to rules that members blindly repeat
decisions and actions that they have made a number of times before,
unaware that conditions are changed.
• Employee alienation
- Members perceive the impersonality of the org as creating distance between
them and their work.
- High formalisation further reinforces one’s feeling of being irrelevant –
routine activities can be easily learned by others, making employees feel
interchangeable and powerless.
• Concentration of power
- It generates an enormous degree of power in the hands of very few.
• Non member frustration

Is Bureaucracy a structural dinosaur?

• Rapid and unexpected change

• Growth in size
• Increased diversity
• Changes in managerial behaviour
- a new concept of human being
- a new concept of power
- a new concept of org values
You cannot ignore the obvious: Bureaucracies are everywhere

• It works
- Regardless of technology, environment and so on, it is effective in a wide
range of organised activities.
• Large size prevails
- It is efficient with large size.
• Societal values are unchanging
- Bureaucracy is consistent with the values of order and regimentation.
• Environmental turbulence is exaggerated
- Environment may not be as dynamic as assumed
- Changes are no more dynamic now
- Impact of uncertainties in the environment on the org are substantially
reduced as a result of managerial strategies.
• The professional bureaucracy has emerged
- The increased need for technical expertise in org and the rapid expansion of
knowledge based industries has been handled neatly by professional
bureaucracy.
• Bureaucracy maintained control
- High standardisation preferably with centralised power in the hands of the
dominant coalition, is desired by those in control.
Adhocracy: A Closer Look

Matrix

• It is a structural design that assigns specialists from specific functional

departments to work on one or more interdisciplinary teams, which are led by
project leaders.
• It breaks unity of command.
• Employees in the matrix have two bosses – their functional department
manager and their project manager.
• Authorities are shared between two managers
• Situation under which it should be used
- Environmental pressure from two or more critical sectors
- Interdependence between departments
- Economies of scale in the use of internal resources
• Types of Matrix Structures – Temporary, Permanent

Theory A, J, Z

Theory A Theory J Theory Z

Short-term employment
Specialised career path
Individual decision
making
Individual responsibility
Frequent appraisal
Explicit, formalised
appraisal
Rapid promotion
Segmented concern for
people
Life-time employment Long-term employment
Nonspecialised career path Moderately specialised
career paths
Consensual decision Consensual decision
making making
Collective responsibility Individual responsibility
Infrequent appraisal Infrequent appraisal
Implicit, informal Implicit, informal appraisal
appraisal with explicit, formalised
measures
Slow promotion Slow promotion
Comprehensive concern Comprehensive concern
for people for people

The Collateral Form

• It is a loosely structured organic appendage designed to coexist side by side

with a bureaucracy on a relatively permanent basis.
• They are typically small teams or separate business units that are given the
independence and resources to experiment.
• They can pursue their own ideas without rules, time consuming analysis and
approvals.
• By creating adhocracies within bureaucracies, a large corporation can
stimulate creativity and innovation, cut product-development time and hold on
to bright and achievement oriented employees.
The Network Structure

• It is a small central organisation that relies on other organisations to perform

manufacturing, distribution, marketing or other crucial business functions on a
contract basis.
• Management contracts out all the primary functions of the business. The core
of the network organisation is a small group of executives. Their job is to
oversee directly any activities that are done in-house and to coordinate
relationships with the other organisations that manufacture, distribute and
perform other crucial functions.

Other Examples of Adhocracy

• The Task Force

- It is a temporary structure formed to accomplish a specific, defined and
complex task that involves a number of organisation subunits.
- Members serve on the task force until its goal is achieved.
- It is desirable when org is confronted with a task whose success is critical to
org which has specific time and performance standards is unique and
unfamiliar and requires functions that are independent.

• The Committee Form

- It is desirable when
- A broad range of experience and backgrounds be brought to bear on
a decision
- When those who will be affected by a decision are allowed to be
represented
- When it is desirable to spread the work load

• The Collegial Form

- A structural form of adhocracy fashionable in universities, research labs and
other highly professional organisation.
- Full democracy in the making of all important decisions.
- All the key decisions are made by the department as a whole.
- It represents the utmost in decentralisation.