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Fundamentals of Organization Structure

Define Structure - The way in which people work together ? Define Culture - The way in which people work together ?
So what is the difference ?

Think of some words that might describe Structure and some words that might describe Culture

Structure Vs Culture
Structure
Firm Clear Distribution of Authority that helps define how people work together

Culture
Soft Intangible Norms and Values that help define how people work together

Organization Structure
 Three key components  Vertical aspect of organizing - Formal Reporting Relationships including the number of levels and the span of control. - Grouping of Individuals into departments and of departments into the total organization  Horizontal aspect of organizing - Design of Systems to ensure effective communication, coordination and integration of efforts

A Sample Organization Chart

Formal Organisational Structures


 Grouping of activities  Responsibilities of individuals  Reporting relationships  Levels of authority  Span of control - (Flatter Structures)  Systems of communication  Degree of delegation of authority But also Underlying activities and processes

Information-Processing Perspective on Structure


 Provide Vertical and horizontal information flow  Traditional organization vs. Learning organization - Traditional organization design emphasizes vertical communication and control. - Learning organization which emphasizes communication and collaboration  Centralized vs. Decentralized decision making - Centralized authority focused on top level decision-making - Decentralized authority focused on shared tasks and decisions

Efficiency versus Learning Outcomes

Effect of Structure on People - (R. Stewart - The reality of management )


People modify the working of the formal organisation, but their behaviour is also influenced by it. The method of work organisation can determine how people relate to one another, which may affect both their productivity and morale. Managers, therefore, need to be conscious of the ways in which methods of work organisation, may influence people s attitude and action.

Vertical Information Sharing


 Vertical linkages coordinate activities between the top and the bottom of the organization  Hierarchical referral are the vertical lines which identify the chain of command  Rules and Plans - Rules enabling employees to be coordinated - Plans provides standing information for employees.  Vertical information systems is a strategy for increasing vertical information capacity. It includes reports, computer-based communication and written information

Horizontal Information Linkages


 Horizontal linkage refers to the amount of communication and coordinate activities across organizational departments.  Information Systems enable information exchange throughout the organization  Direct Contact is a higher level of horizontal linkage (i.e. liaison role)  Task Forces is a temporary committee composed of representative from each department involved.  Full-Time Integrator responsible for coordination.  Teams is the strongest horizontal linkage.

Ladder of Mechanisms for Horizontal Linkages

Organization Design Alternatives


    Three keys indicators of organization design Required work activities Reporting relationships Departmental grouping options - Functional grouping - Divisional grouping - Multi-focused grouping - Horizontal grouping - Virtual network grouping

Departmental Grouping Options

Functional Grouping

Divisional Grouping

Multifocused Grouping

Horizontal Grouping

Virtual Network Grouping

Functional Structure
Strengths
 Allows economies of scales within functional departments  Enables in-depth knowledge and skill development  Enables organizations to accomplish functional goals  Is best with only one or a few products

Weaknesses
 Slow response time to environmental changes  May cause decisions to pile on top, hierarchy overload  Leads to poor horizontal coordination  Results in less innovation  Involves restricted view of goals

Divisional Structure
Strengths
 Suited to fast change in unstable environment  Leads to customer satisfaction  Involves high coordination  Allows units to adapt to differences  Best in large organizations with several products  Decentralizes decision making

Weaknesses
 Eliminates economies of scale in functional departments  Leads to poor coordination  Eliminates in-depth competence and technical specialization  Makes integration and standardization across product lines difficult

Functional vs. Divisional Structure -Example

Geographic Structure
 Organizing to meet needs of users/customers by geography  It is particular common in large nonprofit organizations  Many multinational corporations are organized by country  Focuses managers and employees on specific geographic regions  Strengths and weaknesses similar to divisional organization

Sample Geographic Structure

Matrix Structure
 Conditions for Matrix: - Condition 1: Share resources across the organization - Condition 2: Two or more critical outputs required: products and technical knowledge - Condition 3: Environment is complex and uncertain Two variations of matrix structure - functional matrix - product matrix A dual-authority structure can help to ensure a balance between vertical and horizontal aspects of organizations.

Matrix Structure
Strengths
 Achieves coordination to meet dual demands  Flexible sharing of human resources across products  Suited to complex decisions and unstable environment  Promote functional and product skill development  Best in medium-sized organizations with multiple products

Weaknesses
 Dual authority cause confusion  Need good interpersonal skills and extensive training  Time consuming  Need common understanding among participants  Requires great effort to maintain power balance

Sample Matrix Organization

Matrix structure of ULYSSES


To ensure the optimal use of the results beyond the participants, the partnership is an open structure allowing other partners to join the meetings/activities depending on the interests represented by new projects.

http://ec.europa.eu/research/transport/projects/items/ulysses_en.htm

Horizontal Structure
 Organization around core processes.  Key characteristics: - Structure is created around cross-functional processes - Self-directed teams are the basis of organization design and performance - Process owners are responsible for entire process - People on the team are given authority for decisions - Can increase organization s flexibility - Customers drive the horizontal corporation. - The culture promotes openness, trust and collaboration.

Horizontal Structure
Strengths
 Promote flexibility and rapid response to changes  Focus on the production and delivery of value  Each employee has a broader view of organization goals  Promotes a focus on teamwork and collaboration  Improves quality of life for employees

Weaknesses
 Determining core processes is difficult and time consuming  Requires many changes  Traditional managers may baulk when they have to give up power and authority  Requires significant training of employees  Can limit in-depth skill development

Sample Horizontal Structure

Virtual Networks and Outsourcing


 It extends the concept of horizontal coordination and collaboration beyond the boundaries of the organization  Most common strategy is outsourcing - Contract out certain tasks/functions  Virtual or modular structures subcontract most of its major functions to separate companies  The virtual network organization serves as a central hub with contracted experts

Virtual Network Structure


Strengths
 Enables organizations to obtain talent and resources worldwide  Gives a company immediate scale and reach without huge investments  Enables the organization to be highly flexible and responsive to changing needs  Reduces administrative cost

Weaknesses
 Managers do not have hands-on control over many activities and employees  Requires a great deal of time to manage relationships  Risk of organizational failure  Employee loyalty and corporate culture might be weak

Hybrid Structure
 Organizations often use a hybrid structure that combines characteristics of various structure approaches tailored to specific needs  One common type is the combination of the functional and divisional structures.  Often used in rapidly changing environments  Greater flexibility

Application of Structural Design


 Each type of structure is applied in different situations and is intended to meet different needs.  Structural alignment aligns structure with organizational goal  Symptoms of Structural Deficiency: Decision making is delayed or lacking quality Organization does not respond innovatively to a changing environment Employee performance declines, goals are not being meet Too much conflict

Application of Structural Design

Summary and Interpretation


 Structure must provide a framework, linking organization into whole  Provide vertical and horizontal linkages  Variety of alternatives for grouping  Virtual network extends horizontal coordination  Matrix structure attempts to achieve balance between the vertical and horizontal dimensions of structure.  Managers must find right balance  The purpose of the organization chart is to encourage and direct activities

AQUARIUS Advertising Agency


Analyze Aquarius with respect to the five contextual variables. How would you describe the environment, goals, culture, size, and technology for Aquarius? Design a new organization structure that takes into consideration the contextual variables in the case and the information flows. Would a matrix structure be feasible for Aquarius? Why or why not?

The Learning Organisation

Collective Policy Operations

Ideas Individual

Action

Ideas, thoughts, plans

Actions, doing, behaviour

Reproduced from J. Burgoynes article Feeding minds to grow the business People management 21 Sep. 1995

The Learning Organisation


Is it this way round ? Ideas produce action which eventually becomes operations which then becomes policy which generates ideas etc?

Collective Policy Operations

Ideas Individual

Action

Ideas, thoughts, plans

Actions, doing, behaviour

Reproduced from J. Burgoynes article Feeding minds to grow the business People management 21 Sep. 1995

The Learning Organisation


Or is it this way round ? Ideas produce policy which determines operations which drive actions which generate ideas etc.
Policy Operations

Collective

Ideas Individual

Action

Ideas, thoughts, plans

Actions, doing, behaviour

Reproduced from J. Burgoynes article Feeding minds to grow the business People management 21 Sep. 1995

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