Topic 6 Organisation Structure

1. Introduction to Management BM007-3-1-IMT (VD1)

Topic 6
Organisational Structure

2.

Learning Outcomes
At the end of this chapter, YOU should be able to know:
• Describe six key elements in organizational design.
• Contrast mechanistic and organic structures
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3.

Key Terms you must be able to
use
If you have mastered this topic, you should be able to use
the following terms correctly in your assignments and
exams:
•Authority
•Responsibility
•Span of Control
•Delegation
•Centralisation and decentralisation
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4. Definition

Organising
• Management function that involves arranging and
structuring work to accomplish the organization’s
goals
Organisational structure
• The formal arrangement of jobs within an
organization
Organisational chart
• The visual representation of an organization’s
structure
Organisational design
• Creating or changing an organization’s structure. A
process that involves decisions about six key
elements:
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5. Organisational Design – Key Elements

Work
Specialisation
Formalisation
Departmentalisation
Key element of
Organisational
Design
Chain of
Command
Centralisation &
Decentralisation
Span of Control
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6. Work Specialisation

• Dividing work activities into separate job tasks
• Individual employees “specialize” in doing part
of an activity rather than the entire activity in
order to increase work output.
• Also known as division of labor
• Work specialization makes efficient use of the
diversity of skills that workers have.
• At some point, the human diseconomies from
division of labor—boredom, fatigue, stress, low
productivity, poor quality, increased absenteeism,
and high turnover
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7. Departmentalisation

• The basis by which jobs are grouped together
• Five common forms of departmentalization are
used:– Functional
– Geographical
– Product
– Process
– Customer
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8. Functional Departmentalization

• Advantages
• Efficiencies from putting together similar specialties and
people with common skills, knowledge, and orientations
• Coordination within functional area
• In-depth specialization
• Disadvantages
• Poor communication across functional areas
• Limited view of organizational goals
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9. Geographical Departmentalization

• Advantages
• More effective and efficient handling of specific
regional issues that arise
• Serve needs of unique geographic markets better
• Disadvantages
• Duplication of functions
• Can feel isolated from other organizational areas
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10. Product Departmentalization

+ Allows specialization in particular products and services
+ Managers can become experts in their industry
+ Closer to customers
– Duplication of functions
– Limited view of organizational goals
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11. Process Departmentalization

+ More efficient flow of work activities
– Can only be used with certain types of products
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12. Customer Departmentalization

+ Customers’ needs and problems can be met by specialists
- Duplication of functions
- Limited view of organizational goals
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13. Chain of Command

• The line of authority extending from upper
organizational levels to the lowest levels, which
clarifies who reports to whom
• Managers need to consider it when organizing work
because it helps employees with questions such as:
– “Who do I report to?” or
– “Who do I go to if I have a problem?”
• When the COC is too long;
– Complexity in communication
– Message gets distorted
– Depersonalized employee relations
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14. Chain of Command: Three Important Concepts

1. Authority
• The rights inherent in a managerial position to tell people
what to do and to expect them to do it.
• Two forms of authority:
– Line authority: Authority that entitles a manager to direct the
work of an employee
– Staff authority: Positions with some authority that have been
created to support, assist, and advise those holding line authority
2.
3.
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Responsibility
The obligation or expectation to perform any assigned duties
Unity of command
The management principle that each person should report to
only one manager
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15. Line and Staff Authority

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16. Span of Control

• The number of employees a manager can
efficiently and effectively manage
• Determining the span of control is important
because to a large degree, it determines the
number of levels and managers in an
organization
– an important consideration in how efficient an organization will be
• Two types of span of Control
1. Narrow
2. Wide
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17. Contrasting Spans of Control

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18. Span of Control - Types

1. Narrow
– Closer and more contact with subordinate
– Tight control and tight supervision
– More time for other duties – planning, decision
making
– A lot of layers, more positions
2. Wide
– Reduced operation and administrative costs
– Easier communication
– Coordination problems reduced
– Quicker decision making
– Can cultivate higher motivation level in subordinates
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19. Centralization and Decentralization

• Centralization
– The degree to which decision making is concentrated
at upper levels of the organization
– Top managers make key decisions with little input from
lower level
• Decentralization
– The degree to which lower-level employees provide
input or actually make decisions
• Organization is never completely centralized or
decentralized.
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20. Centralization or Decentralization

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21. Formalisation

• How standardised an organization’s jobs are and
the extent to which employee behavior is guided
by rules and procedures
• In highly formalized organizations, there are
explicit job descriptions, numerous
organizational rules, and clearly defined
procedures
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22. Mechanistic and Organic Structures

Mechanistic organization
• An organizational design that’s rigid and tightly controlled
Organic organization
• An organizational design that’s highly adaptive and flexible
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23. Mechanistic Versus Organic Organizations

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24.

Quick Review Question
• Describe six key elements in organizational design.
• Contrast mechanistic and organic structures.
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25.

Question and Answer Session
Q&A
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