Organizational Structure

Organizational Configuration

Structure Processes Relationships

An organization’s structure reveals: Who is responsible for what Who communicates with whom The levels of skills required at upper level

Types of structures: Functional: grouping done on the basis of functions,

for example, production, distribution, sales, marketing, finance

Advantages: Pooling of expertise No duplication of functions Suited to centralized organizations Disadvantages: Vertical barriers Focus on internal processes Struggle to cope with change

Divisional Structure

When functionally structured business grows by diversification, divisional structure is likely to be adopted

Advantages: Flexibility – in response to strategy Specialist expertise Manager’s interest in division’s strategy Enabling management by head office from

distance

Disadvantages: high central management costs Duplication of functions with all functions

represented in divisions Vertical barriers may prevent information sharing

between divisions Can be complex hierarchical process

Product Division – Geographic Division – Holding Company

Matrix Organization

Matrix structures attempt to ensure co-ordination across functional lines by the embodiment of dual authority in the organizational structure.

Advantages: Greater flexibility Should improve communication Dual authority – multiple orientation Responsibility to achieve end results Inter-disciplinary cooperation – mix of skills and

expertise

Disadvantages: Dual authority Role stress Costly – additional product managers One manager may feel threatened Requires consensus which may slow down

decision making

Centralization vs Decentralization

Flexibility of structure depends upon an organization’s approach to decision making

In centralization upper level hierarchy retains authority to make decisions

In decentralization authority is given to specific units or persons to make immediate decisions without referring them to the higher authorities

Centralization

Advantages: Better management control/co-ordinated decisions Goal congruence Standardization Balance between functional units and divisions Economies of scale Top managers make decisions (experience) Quick decisions in times of crises

Disadvantages: Reduced job satisfaction at lower level Senior management does not have

knowledge of all organizational activities Stress on senior managers Limited career opportunities and

development for subordinates Decisions take considerable time

Mintzberg Configuration

Six possible configurations: Simple structure – strategic apex – op core Machine bureaucracy – techno-structure Professional bureaucracy – dominance of op core Divisional form – strong middle line Adhocracy – complex & disorderly structure e.g.

project teams Missionary organizations – based on common set of

beliefs: unwilling to change or compromise

Planning and control processes

Formal or informal Focused on inputs or outputs Direct or indirect processes

Generic Control Processes

Direct supervision – hands on control Planning process – standardization Performance management – KPIs Internal market processes – transfer pricing

or service level agreements Culture Self-control by employees

External Relations

Outsourcing Strategic Alliances Networks Virtual organizations

Outsourcing

Advantages: Reduced cost Overcome skills shortage Flexibility Allows organization to focus on their core skills Disadvantages: Loss of control Dependency on suppliers Loss of confidentiality Loss of in-house skills

Strategic Alliances

Reasons: Cost sharing When take overs prohibited Complementary markets Learning Technology ( R & D ) Innovation Problems: core competencies/not new ones

Networks

Networks of experts come together for a particular project or purpose

Teleworking One contact point for customers Service networks

Virtual organization

The virtual organization is a temporary network of companies that come together quickly to exploit fast changing opportunities

Technology: informational networks will help companies to link up. Things done electronically

Opportunism: companies will band together to avail opportunities and evaporate

No borders: More cooperation among competitors, suppliers and customers

Trust: reliability, fate of one will depend on another

Excellence: partners will bring core competencies “best of everything”