Organisational Structure and Design

ORGANISATIONAL STRUCTURE AND DESIGN

Organizational structure- it us a framework/way in which parts of an organization are arranged. It is a skeleton. It lays the parameters of something.

Blunt defines an organizational structure as the way in which an organisation decides to divide its labour into different set groups and how it chooses to coordinate their activities. In general the structure of an organisation refers to the arrangement of roles, for example, who does what, and how these roles are co-ordinated. Salaman also defines an organisation as the regular patterned nature of organisational activities and processes. The term organisational structure does not refer to physical things but to social relationships among members of an organisation. A diagram showing an organisational structure is called the organogram. This represents the social relations or activities. Therefore organisational structure refers to recurring activities.

Organisational design= the process of finding the most suitable way of allocating roles in an organisation (creating an ideal structure for an organisation).

FUNCTIONS OF THE ORGANISATIONAL STRUCTURE

Ref; j. child (Organisations: a guide to problems and practice 1984)

1)Division of labour- allocation of tasks and responsibility among individuals.

2)Designation of formal reporting relationships- for example who is answerable to whom?

3)Grouping individuals together into sections or departments.

4)Provision of a framework for delegation of authority.

5)Provision of a framework for effective communication.

6)Provision of a system of performance appraisal and rewards.

TYPES OF ORGANISTIONAL STRUCTURE

Just like people, organisations can be described as tall or short. The height of the organisation is determined by the hierarchical levels in the organisation relative to the number of people involved. The more hierarchical, the taller the organisation.

Important here is the concept of span of control which is defined as the number of people whom a supervisor directly supervises. The narrower the span of control the taller the organisational structure. Drucker recommended 7 layers of administration as the maximum. Thomas Peters recommended 5 based on the reasoning that the Catholic Church has 5 layers to oversee over 9 million people.

Advantages of tall structures

1. They provide many steeps for career progression and these steps give a sense of achievement as members of the organisation climb the organisational ladder. This creates a sense of commitment and motivation. The more steps you create the more you ensure that people remain in the organisation and conform.
2. Tall structures enable a large number of people to be managed as a single unit. There is better co-ordination because the span of control is narrow.

Disadvantages of tall structures

1. Expensive –the many managerial levels increase the expense of the organisation. This means increased salaries, fringe benefits, tea boys; secretaries etc. managers are not productive in the real sense therefore only a few are necessary.
2. Communication problems- when information goes though a number of levels whether upward or downward, there is danger of distortion or information may be lost along the way. There is also a danger of delayed feedback that may lead to organisational conflict.
3. They sometimes create difficulties in distinguishing areas of responsibility for example too many managers are a problem (doing almost the same thing therefore overlap of areas of responsibility).
4. They lead to too much supervision because of the narrow spans of control. Too much supervision kills initiative and commitment.
5. Managerial conflict- from the tendency to by-pass some managers in either upward/downward communication (when people are impatient about a decision being made.
6. Delayed decision making- due to the problem of lack of clarity of areas of responsibility.

DIMENSIONS OF ORGANISATIONAL STRUCTURE

There are 3 dimensions (a) differentiation/ complexity (b) formalisation (c) centralisation

DIFFERENTIATION

It refers to how the organisation’s activities are grouped. It also refers to the number of different job titles and authority levels in the organisation. Differentiation has 3 elements (a) horizontal (b) vertical (c) spatial

Horizontal – the number of different units at the same level. It refers to the grouping of the organisation’s activities into departments or sections/units for example production, personnel, marketing etc.

Vertical/ hierarchical- the length of the organisation. It is the number of levels in an organisation.

Spatial/ geographical- the extent to which the organisation’s activities are located in different geographical areas.

FORMALISATION

This is the extent to which an organisation relies on written rules and procedures to determine the actions of employees. It is a control mechanism. E.g. bureaucracy is a highly formalised organisation.

CENTRALISATION

This refers to the location of decision-making authority in the hierarchy of the organisation. It refers to the degree to which top management delegates authority to make decisions. Decentralisation= the degree to which decision-making occurs lower down n organisation’s hierarchy. Decentralised organisations are characterised by les monitoring/ checking on decisions made by employees.

DIFFERENTIATION

Reasons for differentiation

1)It is inevitable for organisations to be differentiated since differentiation is a natural outcome of growth. Members of an organisation differ in terms of skills, experience etc. this leads to division of labour, which is the basis of differentiation.

2)It is necessary for those who design organisations to differentiate them in order to avoid confusion on roles.

3)Specialisation- increases individual dexterity.

4)Organisations have to be differentiated for practical purposes in order to make them more manageable.

TYPES OF DIFFERENTIATION

1. Differentiation by function (functional departmentalisation). This refers to the grouping of an organisation’s activities according to functions performed by people in that group, for example, accounting, marketing, personnel, production, etc. these functions are under specialist managers. Such an arrangement has the advantage of being efficient. The disadvantage is that it is costly since all technical and professional personnel are found throughout the organisation at divisional level.
2. Product differentiation (product departmentalisation)- here activities are grouped according to different products of the organisation. Groups of people responsible are usually under the authority of a specialist manager. Large diversified companies group their jobs on the basis of products. All jobs associated with producing and selling a product or product line will be placed under the direction of one manager.
3. Customer differentiation-this is a customer based structure. It is the basis of TQM, which is a customer oriented management style. It strives for customer satisfaction. Banks usually group their activities according to clients, (for example agro business, small business, individual accounts, and foreign currency. Universities also group their activities, as such. The advantage of this type of differentiation is that it is better able to satisfy customers. Some departmental stores are grouped to some degree on customer basis for example, women’s clothing, men’swear, children’s wear, etc. Meikles, Haddon and sly.
4. Geographical departmentalisation- it refers to the grouping of an organisation’s activities according top their geographical location, for example, eastern division, northern etc. it is usually associated with large corporations, for example O.K, ZESA etc.

*While differentiation is necessary, it presents problems of integration. Differentiation creates centrifugal forces (the tendency for different parts of the organisation to pull apart or pursue its own path). The more differentiated an organisation is the more problems it has in terms of integration.

REASONS FOR INTEGRATION

When you differentiate an organisation into departments (people with similar backgrounds), it creates a sense of them and us. This means that there is too much identification with one’s group at the expense of the whole organisation. This might lead to cases where the department pursues its own goals at the expense of the organisation. This may lead to a conflict between the goals of the department and those of the organisation.

The different parts of the organisation might have conflicting sub goals, for example, the production department may have the goal of producing as many units as possible while the personnel department may have the goal of ensuring the welfare of workers through the reduction of hours of work/ work loads.

The tendency towards disintegration and competition for resources. This happens where every department want to ensure that its sub goals are fulfilled. People tent to lose sight of the overall goals of the organisation when they pursue their departmental sub goals.

Conflict between specialists and line managers (those who are on the authority structure of organisations) conflict arises from specialist managers who want to do things according to their own expertise.

STRATEGIES FOR INTEGRATION

a)Mutual adjustment- mechanism of control that relies on workers coordination of themselves (self control) and adjusting their behaviours I relation to that of others, therefore there is no formal mechanism of control. This method assumes that people are rational. This solution is effective in small organisations where there is face-to-face interaction and where negotiations take place easily.

b)Direct supervision- where people cannot adjust their behaviour, they need someone to direct and correct them. This is the most common mechanism of integration found in all forms of organisations.

c)Standardisation of the work process- it is evident in assembly line type of production where the work is determined in advance as to how, where it should be done. This removes uncertainty therefore coordination is achieved at the design stage of the task

d)Standardisation of the product- this is where performance standards are laid down for the worker as to how much profits are aimed at, products produced by each worker etc. the worker is allowed some degree of freedom of how to meet the standards. Assuming the workers are rational, once they are given performance standards, they negotiate with others on how to meet these expectations.

e)Standardisation of skills- this is achieved at the entry stage through selection and training. The assumption is that if people with requisite skills are selected and trained properly, their behaviour can be predictable.

THE MATRIX ORGANISATION

Def: it is an organisational design that attempts to maximise the strengths and minimise the weaknesses of both the functional and product departmental bases. It is a balanced compromise between functional and product organisation. When continuous interchange between product and functions becomes necessary a matrix design is created in violation of the unity of command, the employee is involved in a 2 boss system.

In a matrix organisation personnel belong to 2 departments/ are answerable to 2 superiors. This places a high demand on the skills of their managers ( who have to deal with personnel from different departments). In matrix organisations communication is often face-to-face in groups and teams. Therefore a high level of interpersonal skills is needed in order to successfully function. Thus individuals who do not like high levels of human contact will be uncomfortable in matrix organisations.

WHY ORGANISATIONS ADOPT A MATRIX STRUCTURE

a)Eternal pressure- form the external environment that requires a dual focus, for example fast changes in technology and customer needs. Thus the organisations respond to two or more environments.

b)When facing high levels of uncertainty- high levels of uncertainty lead to the generation of information/ generates high information processing requirements.

c)When the organisation faces physical, human resource and financial constraints- this is especially true when the human resources are expensive or when there are costly technical equipment. The matrix organisation overcomes these constraints by encouraging the sharing of those existing resources and allows for flexibility in meeting competing requests.

1. Responsive and flexible in the face of changing demands
2. Pools expensive resources and uses them on several projects (offers utilisation of highly specialised staff and equipment)
3. The potentially high human involvement increases motivation
4. Workers have more information about the total project.

1. Dual authority relationships may contribute to ambiguity, confusion, power struggles and stress.
2. The lack of /absence of high interpersonal skills may lead to conflict.
3. The decision making process can be slow because of the need to consider total project goals and not only those of a functional speciality.
4. Lack of highly skilled management may increase all the above-mentioned weaknesses. Managers may compete rather than co-operate especially when one feels other managers are undermining his/her role.

HENRY MINTZBERG’S IDEAS ON ORGANISATIONAL STRUCTURE

He distinguished 5 parts of an organisation that worked differently in different organisation in his book entitled organisation structure and managerial roles. These 5 parts are:

• The strategic apex- individuals who direct the organisation- senior management, CEOs, Arch Bishops, etc.
• Middle line employees- located between the strategic Apex and operating core (at the bottom). These are the middle managers and supervisors responsible for carrying out orders and ensuring that policies are implemented.
• Operating core- the machine operators/ those who receive inputs and transform them to outputs, products, and services. The core may be blue collar or white-collar workers, e.g. nurses, teachers mineworkers.
• Techno-structure- technical support staff for example library services, designing systems, personnel training.
• Support staff- provides administrative and clerical support for the different levels, for example, reception, public relations, security, research and devt.

THE 5 TYPES OF ORGANISATION STRUTURE

1. Simple structure- this is characterised by low degrees of complexity. It is found in new organisations. The parts operating in this structure are the SA, and OC. The owner is the HR, MD etc.
2. Machine Bureaucracy- exemplified by large organisations. Standardised work and formal relationships. These exist within a stable. This structure provides customers with a guaranteed unvarying and predictable product, service. Most decisions are made at the SA. It is a tall structure. It contains the SA, ML, OC, and TSS.
3. Professional bureaucracy- members are professionals or highly skilled personnel. Operates within an autonomous / semi-autonomous environment. Contains specialists in their areas therefore very little supervision for example medical establishments, universities. Contains large OC and few levels between SA and professional employees. The structure is flat and decentralised. This structure has problems of adapting to change and maintaining quality since too much professional autonomy (caused by power of expertise) makes it difficult to implement changes.
4. Divisionalised form – refers to an organisation with various divisions with each division having its own structure. It consists of many semi-autonomous divisions where the ML and OC perform the bulk of the work. There is limited vertical decentralisation and the internal form of these divisions is usually in the form of a machine structure. There is standardisation of outputs that is meant to co-ordinate activities. For example MNC and universities.
5. Adhocracy- a highly organic and decentralised structure. This effectively is a structure-less organisation that is determined by the existing environment. It can change rapidly with the changing environment. The most important parts are the T, SS, OC. Co-ordination is achieved through mutual adjustment where there is lateral communication between members and members directly cooperate and mutually adjust to each other. The advantage of this structure is that quickly adapts to changes in the environment.

DETEMINANTS OF ORGANISATIONAL STRUCTURE

1. Strategy- this is management’s decision in selecting an appropriate structure of an organisation. There is an assumption that mangers are rationale people and they have the ability to select a structure that best fulfils the goals of an organisation. This means that they should be aware of the organisation goals. The organisation structure is designed as a means to arriving to an end, which is the goal. This is the view held by classical thinkers such as Taylor, Weber and Fayol. They placed a high emphasis on the choices made by managers towards the fulfilment of organisational goals.
2. Institutional isomorphism- Hawley (1968) defines it as a constraining process that forces one unit in a population to resemble other units that face the same set of environmental conditions. (See article by DiMaggio and Powell (1983) entitled the iron cage revisited: institutional isomorphism and collective rationality in organisational life in the Administrative Science Review Number 48 pp147-160). Organisations exist within organisational fields. An organisational field is made up of all organisations constituting an institutional life (e.g. Suppliers, customers, regulatory agencies and organisations that produce that same products/ services). Such organisations form a totality of actors. Organisations within the same field become more and more alike in teams of organisational arrangement. They adopt the same processes and structures, for example football teams, universities, supermarkets. After observing this DiMaggio and Powell came up with 3 reasons for isomorphism (a) the existence of coercive forces within the environment thus influencing organisations to adopt similar structures. For example governmental regulations. (b) Cultural expectations for example Japanese organisations have similar structures because of cultural influences. (c) Mimetic tendencies- this is the tendency for organisations to mimic/copy/ imitate each other. This is caused by uncertainty within the environment. Here organisations look up to each other for guidance, particularly the new comers.

1. The environment- the internal environment would mainly relate to the influence of size on the structure of the organisation. There is no consensus about the definition of size. Some use the number of people employed in an organisation, turnover, technology, profits, scale of operations etc. the most common definition of size uses the number of people employed as a defining characteristic. Blau et al 1963 used this definition of size. They were concerned with the effect of size on differentiation (differentiation being measured by the number of hierarchical levels within an organisation). They concluded that the larger the size of an organisation the more differentiated it becomes. There is also high standardisation and formalisation. Therefore as size increases so does complexity leading to the creation of tall structures that are meant to keep the span of control from getting too big. The Aston group from Aston University also discovered that there was a strong relationship between organisational size arguing than an increase in size led to an increase in formalisation, specialisation, centralisation and standardisation.

The external environment is defined as anything that exists outside the organisation but affects or has the potential to affect it in terms of its processes and structure. Organisational environments can be divided into specific and general. The general environment refers to those conditions that may have an impact on the organisation (the potential to affect but do not actually affect it at a given time). This could be international relations, world trade, and the political environment. The specific environment is the conditions affecting the organisation directly, for example conditions of the clients, suppliers, government, trade unions, etc. the specific environment is related to the domain of the organisation. This is the claim that the organisation has on the specific products and services offered and the market served. The environment of the organisation can be described as actual or perceived. The actual environment is what actually or objectively affects the organisation while the perceived environment is what members of the organisation perceive or imagine being the environment. The perceived environment is more important than the actual since it is perception that affects people’s behaviour more than reality. The organisational plans and policies are crafted in relation to the perceived environment. Emery and Trist in their article “the causal texture of organisational environments” in the journal Human relations 1965 proposed a model with 4 types of environments which organisations could be exposed to. These are placid randomised, placid clustered, disturbed reactive and turbulent.