Friday, April 18, 2008

MS01 Question 4

Explain characteristics of different types of organizational structures. Refer to your organization or any other organization you are familiar with and suggest the ways by which organizational structure can be improved for enhancing organizational effectiveness

Management Structure & OrganizationsOrganizational Structures
The aim of any business is to maximize profit. In order to do this there must bedivision and specialization of labour. This implies that different people come togetherin order to create a product that has value to consumers. Hence, the activities ofdifferent people involved in a business must be coordinated. So there is a need for anorganizational structure that brings this coordination about. People in an organizationmust know
(1) What their activity is and where it fits into the product as a whole;
(2) What their roles is, what responsibilities they have and to whom they areanswerable.The need to delegateAny organizational structure, which implies the combination of activities, isimpossible without delegation. It is especially necessary in a large organization todelegate decision-making. The obvious problem is that in opposition to thisimperative to delegate is the equally important need to coordinate all activities.Delegation does mean that the manager loses a measure of control. It is importantthat the overall shape of the organization is maintained. A great deal of managementtheory is focused on this issue – for example, the concept of a mission statement forthe company so that everyone knows where the company as a whole is heading andcan take responsible decisions accordingly.Delegation also means empowerment – it means that subordinates have a moreenriching work experience.
It is usual to distinguish between three types of role within an organization, and henceauthority.(1) LineThis is based on the analogy with an army. Each manager has authority overhis subordinates.
(2) StaffThis comprises a group of advisers who do not have authority to command thegeneral staff, but have the right and duty to advise managers.
(3) Functional authorityThis occurs when a manager or specialist is given authority to control theactivities of people in more than one department.
Companies have a choice between two types of organizational structure.
(1) lineonly, and (2) line and staff.
The line and staff organization obviously arises when companies recognize the needfor an advisory body. Clearly, since business is a dynamic process, there must bechanges and innovations. A company without staff may be uninventive. However,the obvious problem of the line and staff structure is that there can be clashes betweenline managers and staff advisors.Span of ControlSpan of control is the term for the number of subordinate employees directlyaccountable to a manager. The larger the number of employees a manager controlsthe wider is his span of control.Narrow spanThe manager controls six or fewer employees. There is close supervision of theemployees, tight control and fast communication. However, the supervision can betoo close, the narrow span means that there are many levels of management, resultingin a possibly excessive distance between the top and the bottom of an organisation.Wide spanThe manager controls more than six employees. Managers are forced to delegatework, and tasks may be less closely supervised. There are possible problems with theoverloading of work and with loss of control. However, there are fewer levels ofmanagement.The need for a line structureSpan of control means the number of people directly answerable to a manager. If amanager has to control too many subordinates then supervision becomes ineffective.Span of control should vary with level. Typically 4 to 8 for upper levels oforganization, and 8 to 15 for lower levels are recommended.Obviously, this depends on the nature of the task. Routine tasks require lessmanagement time to supervise. It is because of span of control that a line structurehas to develop. A company with 500 staff cannot have 1 manager and 500subordinates. There must be a line of authority.Flat or Tall?Hence, companies must have a line structure, but companies do have a choicebetween flat and tall organizational structures.
(1) In a tall structure each manager hasa small span of control and there are many ranks;
(2) in a flat structure, span-ofcontrolis greater and there are fewer levels of management.
Tall StructureFlat structure
There is a recent development in favour of flatter structures. It is argued that this kindof structure is leaner and fitter, more flexible and better able to cope with changes inthe external business environment.Tall structures are more “military” in style, and might have the advantages of a wellrunarmy. But being in a business is not quite like being in an army and people do notalways accept the same level of authority and coordination; they can resent themilitary style of administration. There has recently been a movement towards“flatter” organizations which can be more democratic and innovative.DepartmentalizationBusiness organisations are generally divided into specific departments – personnel,purchasing, production, sales, finance, distribution – are examples. None of thesedepartments can function properly without the other departments.In large companies there must be departmentalization. This means, activities must becoordinated by organizing them into departments. A company obviously faces theproblem of how best to organize its departments. The solution must depend on eachcompany, its market and also culture. Any departmental organization means thatthere can be conflict between departments and a loss of communication. It alsomeans that the company loses the benefit of organizing one way by organizing inanother.
Departments can be orgainised by
(1) function – for example, personnel, production, marketing;(2) product(3) territory (geographical region)(4) market segment or customer(5) time – for example, by shift(6) numbers – that is, to produce teams of a specific size(7) equipment
However, the usual choice facing a company is whether to organize by function, or byproduct.Organisation by function or product?When a business organisation is divided into specific departments each performing aspecific function – personnel, purchasing, production, sales, finance, distribution –this is known as a functional approach.
Managing Director*Purchasing *Sales *Production *Finance *Personnel *Distribution
The functional approach is used in large organisations.Another alternative is to organise the company according to products. That is, thecompany is divided into separate organisations, each of which is responsible for aseparate product. This is a product approach to organisation. In this case eachdivision within the company is a profit as well as a cost centre.
Managing Director**Purchasing *Sales *Production *Finance *Personnel *Distribution
Product A Product B Product C
Only large companies can effectively employ a product approach to organisation, andthe functions approach is suitable for small companies producing a limited range ofproducts in conditions of relative stability.Matrix structureDifferent structures can be combined together. When one has two parallelorganizational structures this is called a matrix structure. The idea is to combine theadvantages of two structures, but this has the obvious disadvantage of being harder tocoordinate and introducing more potential conflict.In the past most large companies were centralized – that is, involved structures inwhich decisions were taken at the centre or upper levels of organization. Just as therehas been a move to flatter organizations, so there has been a move to decentralizedones.Centralised/DecentralisedA centralised company is one where the decisions are taken at the centre of thecompany; a decentralised company is one where the decision-making is delegated tolower levels of management within the organisation.Modern theorists tend to argue in terms of adopting a contingency approach. Whatthis means is using the approach that is most appropriate in the circumstances, as wehave already seen that both a wide span and a narrow span have their attendantadvantages and disadvantages.Structures follows strategy in organizations. Strategy isthe determination of long-term goals and objectives, courses of action and allocationof resources, and structure is the way the organization is put together to administer thestrategy, with all the hierarchies and lines of authority that the strategy implies.Informal/formal organisationsWithin any company there are two types of organisation – the formal structure and theinformal structure. Both effect the organisation and relationships between staff.The formal organisation refers to the formal relationships of authority andsubordination within a company. The primary focus of the formal organisation is theposition the employee/manager holds. Power is delegated from the top levels of themanagement down the organisation. Each position has rules governing what can andcannot be done. There are rewards and penalties for complying with these rules andperforming duties well.The informal organisation refers to the network of personal and social relations thatdevelop spontaneously between people associated with each other. The primary focusof the informal organisation is the employee as an individual person. Power isderived from membership of informal groups within the organisation. The conduct ofindividuals within these groups is governed by norms – that is, social rules ofbehaviour. When individuals break these norms, other members of the group imposesanctions on them.Clearly, the informal structure can be either beneficial or detrimental to thefunctioning of the company or both.
**FUNCTIONAL STRUCTUREReduces duplication of activitiesEncourages technical expertiseSometime Creates narrow perspectivesSometime Difficult to coordinate
**DIVISIONAL STRUCTUREImproves decision makingFixes accountability for performanceIncreases coordination of functionsHard to allocate corporate staff support Loses some economies of scaleFosters rivalry among divisions
**MATRIX STRUCTUREReinforces & broadens technical excellenceFacilitates efficient use of resourcesBalances conflicting objectives of the organizationIncreases power conflictsIncreases confusion & stress for 2-boss employeesImpedes decision making
**LATERAL STRUCTUREDotted-line supervisionLiaison rolesTemporary task forcesPermanent teamsIntegrating managers
New Organizational Structures
Network Structure
This modern structure includes the linking of numerous, separate organizations to optimize their interaction in order to accomplish a common, overall goal. An example is a joint venture to build a complex, technical systems such as the space shuttle. Another example is a network of construction companies to build a large structure.
Virtual Organization
This emerging form is based on organization members interacting with each other completely, or almost completely, via telecommunications. Members may never actually meet each other. Self-Managed TeamsThese teams usually include from 5-15 people and are geared to produce a product or service. Members provide a range of the skills needed to produce the product. The team is granted sufficient authority and access to resources to produce their product in a timely fashion. The hallmark of a self-managed team is that members indeed manage their own group, i.e., they manage access to resources, scheduling, supervision, etc. Team members develop their own process for identifying and rotating members in managerial roles. Often, authority at any given time rests with whomever has the most expertise about the current activity or task in the overall project. Often members are trained in various problem-solving techniques and team-building techniques. These teams work best in environments where the technologies to deliver the product or service are highly complex and the marketplace and organization environments are continually changing. Self-managed teams pose a unique challenge for the traditional manager. It can be extremely difficult for him or her to support empowerment of the self-managed team, taking the risk of letting go of his or her own control.
Learning Organizations In an environment where environments are continually changing, it's critical that organizations detect and quickly correct its own errors. This requires continuous feedback to, and within, the organization. Continual feedback allows the organization to `unlearn' old beliefs and remain open to new feedback, uncolored by long-held beliefs. In a learning organization, managers don't direct as much as they facilitate the workers' applying new information and learning from that experience. Managers ensure time to exchange feedback, to inquire and reflect about the feedback, and then to gain consensus on direction. Peter Senge, noted systems theorist, points out in his book, The Fifth Discipline (Doubleday, 1990, p. 14), that the learning organization is "continually expanding its capacity to create its future ... for a learning organization, `adaptive learning' must be joined by `generative learning,' learning that enhances our capacity to create."Self-Organizing Systems Self-organizing systems have the ability to continually change their structure and internal processes to conform to feedback with the environment. Some writers use the analogy of biological systems as self-organizing systems. Their ultimate purpose is to stay alive and duplicate. They exist in increasing complexity and adapt their structures and forms to accommodate this complexity. Ultimately, they change structure dramatically to adjust to the outer environment. (Some assert that self-managed groups are self-organizing systems, although others assert that self-managed groups are not because an ultimate purpose is assigned to team members). A self-organizing system requires a strong current goal or purpose. It requires continual feedback with its surrounding environment. It requires continual reference to a common set of values and dialoguing around these values. It requires continued and shared reflection around the system's current processes. The manager of this type of organization requires high value on communication and a great deal of patience -- and the ability to focus on outcomes rather than outputs. Focus is more on learning than on method.
[ often testing its peculiarity]
-PRINCIPAL OF COORDINATION [keeping communication simple/short]
-PRINCIPAL OF KNOWLEDGE COMPETENCE [ removing unnecessary hierarchy]
-PRINCIPAL OF CONTROL/RESPONSIBLE [make accountability a key element]
-PRINCIPAL OF LIMITATIONS [ always test feasibility]
-PRINCIPAL OF EMPLOYEE [ people training/development ]
-PRINCIPAL OF ENTREPRENEUR STRATEGY [departmental obligations for results]
-PRINCIPAL OF PRODUCT MARKETING STRATEGY [ client obligations]=================================================================================================================

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