Intro
Organizational structure: the internal, formal framework of a business that shows the way in which management is organized, linked together and how authority is passed through the organization
Organizational structure chart displays:
- Chain of command; answerable? Report to?, authority, accountability
- Formal relationship between people
- Who has overall responsibility for decision making
- Formal channels of communication: vertical/horizontal
- Span of control
Level of hierarchy: a stage of the organisational structure at which the personnel on it have equal status and authority
Tall (vertical) organizational structure: one with many levels of hierarchy and, usually, narrow spans of control, long chain of command
Disadvantages:
- Communication issues
- Narrow span of control
- Sense of remoteness between higher and lower levels of the organization
Span of control: number of subordinates reporting directly to a manager
Chain of command: route through which authority is passed down an organisation – from the CEO and the board of directors
Flat (horizontal) structure: one with few levels of hierarchy and wide spans of control; encourages delegation since one cannot supervise large number of employees, short chain of command
Delegation: pass down authority in the organizational structure
Advantages | Disadvantages |
Gives managers more time to focus on other important issues | only boring tasks will be delegated which may not be motivating |
Showing trust in one’s subordinates may motivate them | Delegation is unsuccessful if sufficient authority isn’t given along with it /the person is inadequately trained to do the job |
Self-actualization: draw fulfillment through their work | |
Encourages staff to be accountable for their work based activities | |
May train them for senior posts | |
Accountability: obligation of one to account for their activities and to disclose results in a transparent way.
Delayering: removal of one/ more of the levels of hierarchy from an organisational structure
Advantages | Disadvantages |
Reduce business costs | One-off costs, eg: Redundancy payments for laid off managers |
Wider span of control; more delegation | Remaining managers may dwell in workload |
short chain of command; eases communication | Redundancy being used as a way of cutting costs may reduce workforce’s sense of security |
Less Sense of remoteness, helps motivation | |
Bureaucracy: organizational system with standardized procedures and rules.
Centralization: keeping all of the important decision making powers within the head office
Decentralization: decision-making powers are passed down the organization to empower
subordinates and regional/ product managers
Advantages: Centralization | Decentralization |
Rapid decision making since the whole organization follows the same rules | Quick decision making in response to changing business environment |
Experienced decision makers | Manager would knows the regional needs and make decisions based on that |
No conflict between divisions since only one body holds all decision making authority | More delegation opportunities; more motivation |
Decisions taken in the interest of the whole business not just one division | Prepares subordinates for senior, challenging posts |
Organizational Structures
Hierarchical structure: a structure in which power and responsibility are clearly specified and allocated to individuals according to their standing or position in the hierarchy
Hierarchical structure can be divided based on product, region or function
By product: Eg: Microsoft’s software, general motors’ car brands
Advantages | Disadvantages |
More autonomous than functional divisions in terms of recruitment, budgeting, advertising | Encourages rivalries between different product division competing for financial resources; lacks cooperation |
Allow a team to focus on only one single product | Duplication of developments, lacks coordination |
Better than multiple divisions managing the development of a product since one division means they could keep in track of development and build common culture/morale | |
By function:
Advantages | Disadvantages |
Grouping employees by their functional skills improves efficiency since people of common goals are clustered together promoting collaboration and professional expertise | Lacks horizontal links between departments; lacks coordination |
Employees can capitalize on their specialized skills as means of moving up the ladder in a given department. | Managers develop tunnel vision; more focus on departmental objects rather overall corporate aims |
| | Such structure is not immune to change since managers defend their position in the hierarchy and importance of their department |
By region:
Advantages | Disadvantages |
Recruitment of manager who are aware of the local business environment | Unhealthy competition between different regions |
Attracts local customers since the business tends to the needs of the particular regions | Difficult to keep up the core company belief eg.ethical code of practice in different regions |
Conversation tend to be more direct/personal in a geographical organizational structure | Poor coordination between different regions may lead to inconsistent strategies being adopted |
Tracking the performance of individual regional markets is simplified under this structure, as measures such as revenues, profit margins, costs and performance improvements can be tracked to specific regions. | Duplication of personnel between head and regional offices |
Factors influencing organizational structure:
- New technology IT may render jobs such as secretaries writing up letter useless, makes communication between head and regional offices easier resulting in middle management unnecessary.
- Business size, number of employees
- Leadership style, autocratic: narrow span of control, democratic: wide span of control, delegation etc.
- Corporate objectives such as expansion to other countries may require decentralization
- Retrenchment due to competition/economic recession causes delayering.
matrix structure: organizational structure that creates project teams that cut across all functional departments; horizontally linked structure, eg: IT businesses, not suitable for service/ business producing products with longer life span.
Advantages | Disadvantages |
Encourages communication between everyone in a team since the traditional link that exists only department heads is now demolished | Less authority over projects/bureaucratic control may not be taken well by senior managers |
Specialist knowledge from all departments can leads to new ideas and successful problem solving | If business allows cross-departmental groups to be created despite having leaders this might lead to a conflict of interest between the leaders |
Immune to dynamic business environment since teams are easy to create | |
Less chance of people focusing on departmental objectives rather than product/business aims | |
Handy’s Shamrock organization: a structure where workers are divided into core, outsourced and flexible workers.
- core workers: carry out the core processes and central to survival/growth of the business, given full-time permanent jobs, high salaries in return expected to be loyal, work long hours.
- outsourced: could be independent providers or "contractual fringe" eg.IT services, payroll, training etc. do not carry out jobs that are core to business processes
- flexible workers: temporary, part-time workers, called in whenever their labor is required, most likely to lose jobs during economic downturn
Business Communication
Effective communication: the exchange of information between people or groups, with feedback
Impacts:
- Aids in motivation if employees are asked to participate through group discussion
- New ideas and solution generated
- Coordination between departments
- Speed of decision making/response to market changes
- Reduces the risk of error eg. misinterpretation of poorly written mail, wrong product and pricing fixed etc.
Feedback: the response to a message by the receiver
Impact of Cultural differences on communication:
- High context Vs low Context culture
- sequential Vs synchronic culture
Impact of technology on communication:
- Employees need training
- Security issues, virus etc
- Initial costs
- Reduced social costs
- Information overload: so much information and so many messages are received that the most important ones cannot be easily identified and quickly acted on.
Intranet: internal computer networks built on internet technologies
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