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Managing Organization ABE Graduate Diploma (QCF Level -6)

Prepared & Presented

By

Pyi Kyaw LynnB.A (English), Yangon University

M.B.A (Finance), Assumption University of Thailand

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CHAPTER [IV] : ORGANIZATIONAL STRUCTURE & DESIGN

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TODAY’S AGENDA

Infrastructure Superstructure Factors Influencing OD The Nature of

Bureaucracy Co-ordination In

Decentralized Structures Flexibility & Alternative

Forms of Organizational Design

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[A] INFRASTRUCTURE : The Distribution of Authority

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LINE Authority

STAFF Authority

To provide advice or exercise authority Outside the line structure Functional authority E.g., IT, Finance, HR,

Legal, PA, Market forecaster, economist. Don’t directly involve in firm’s objective &

just facilitate for others.

Take Hierarchical form

Authority of decision making for biz operations

Passed down directly from top to lower levels [successive levels of management ] who are responsible for the level below & accountable to the level above.

Chain of Command

Communication Channel

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Line & Staff Structure

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Line & Staff Structure

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Hierarchy of Authority

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Top management

Middle management

Supervisors

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Tall & Flat Structures

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Many levels & long chain of command Detailed breakdown of many responsibilities Large distance communication problems Chances of distortion & omission in defining objectives Inflexible to change

The flatter the firm, The broader the

responsibilities & authority at each level.

Greater management freedom the way in which the responsibilities are carried out & authority is exercised.

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Span of Control

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Limit a number of people report to manager More detailed supervision of subordinates e.g., new staff Complex work in nature Suitable for the need for consistency & precision

Less detailed supervision of subordinates. Greater freedom for subordinates Relatively simple & repeated tasks. Suitable for experienced staffs Suitable for the need for consistency & speed of operation

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Centralization & Centralized Authority

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Situation where authority & responsibility retained at a senior level.

Characterized by decision making by higher level & implementation at lower level.

E.g., one manager & subordinates

DEF

ADv

Create more mechanistic structure Lack of motivation & morale of staff With complete centralization, no one could make decision,

resulting the firm to be paralyzed & unable to function

DIS

BUREAUCR

ACY&

TALL

STRUCTURE

Quick decision making & common policy by senior management, creating unity of purpose/corporate policy. Standardized procedures E.g., equal opportunities Improved EOS by management control of activities and specialization. E.g., centralized buying Central authority act as referee to resolve conflicts. Fulfill crisis management by immediate action taken across the whole firm for sudden change.

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Decentralization & Decentralized Authority

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DEF

ADV

DIS

Systematic devolution/delegation/decentralization of authority & responsibility within the structure of a firm.

Authority delegation passed down from top level to the next. Departmentalization doesn’t mean decentralization as long as

authority of decision makings are not delegated.

Pressure on senior management reduced Decentralized decision making create closeness to the point of

activity, improving effectiveness. Managerial ability & morale develop at lower level. Encourages initiative & stimulates job satisfaction.

Autonomy of decentralized units create working against corporate policy.

Slow decision making to compromise because of the need for acceptance by all parties.

Decentralization need effective management skills, creating extensive training & resulting substantial costs.

Diminution of senior management authority through delegation.

FLAT

STRUCTUR

E

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[B] SUPERSTRUCTURE: The Organization of Responsibilities

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Multi-Disciplinary Projects : The Matrix Approach

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Matrix structure : operations focused on projects as well as staff divided into traditional functional teams or groupings.

Full responsibility & authority with regards to the project objectives is delegated to the project team as a whole.

DEF

ADv

Dual responsibilities [ belong to both functional group & project team ] of team member & may cause problems for both team members & functional departments.

A high degree of administrative effort to select & co-ordinate the team.

DIS

MATRIX

STRUCTURE

Flexible response to situations which put a sudden pressure on resources. E.g., allocation of HR. Staff’s specialist skills can be used to achieve project objective. Exchange of ideas create greater creativity & departmental barriers are broken down.

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[C] Factors Influencing Organizational Design

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ENVIRONMENT

STRETEGYCULTURE

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Structure & Environment

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Suitable for stable conditions with long-standing & slow changing market for a product

Based on long tradition ways with strict duties & new ideas are not encouraged.

A specialized functional tasks with precise obligations & technical methods for each functional role.

A hierarchical or vertical structure of control, authority, communication & interaction.

Encouraged loyalty & obedience to dominant superiors.

Knowledge located at the top &external exposure discouraged

Suitable for fluctuate market with constant modifying & redesigning products

Individual tasks are adjusted & redefined via interaction with others.

Network structure of control, authority & lateral communication with consultation rather than command.

Commitment to the task more important than obedience & loyalty.

Realistic & professional nature of individual tasks shape the organization.

Knowledge located anywhere in the network.

External affiliations & expertise form industrial, technical and commercial milieu out of the firm encouraged.

MECHANISTIC STRUCTURE ORGANIC STRUCTURE

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Structure & Strategy

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Strategic Planning

Role of Corporate centre >Act as Shareholder/Banker Aims to provide better investment performance.

Role of SBUs > Management strategy against tight financial targets set by centre. Autonomous

Financial Control

Role of Corporate centre > Act as Master planner & create strong linkages between SBUs.

Role of SBUs > Largely develop strategy but coordinated by centre.

Strategic Control

Role of Corporate centre > Co-ordinate & review strategy. Set fairly tight financial targets.

Role of SBUs > Concentrated on implementation. Assist in strategy.

Three Approaches to Strategic Management by Good & Campbell

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Charles Handy

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Structure & Culture : Charles Handy’s 4 Cultural Types

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Entrepreneurial Structure & Power Culture

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Structure : focuses on centralization like a web & central power which exudes form a central leader or influential figurehead. Authority : Centralized control, Interventionist behavior & Decisions making by central figure, Controlling & Allocation of resources. Communication to & from central. Focus : Development of functional Loyalty of key individuals & results oriented organization. Advantages : Strong, dynamic & responsive to external demands or change Disadvantages : Total dependency on central power & potential struggle if central figure is poor. The grower the firm, the higher the chance of break down of central power. E.g., Start-Ups, SME & Trading Companies, Small family businesses.

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Bureaucratic Structure & Role Culture

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Structure : focuses on functional specialism by Standards, Logic & Rationality, Rules & Systems, Job Descriptions & Procedures. Authority : Hierarchical , Prescription of Authority & Rules are major methods of influence. Decision making & conflict resolution by mechanisms & rules. Focus : Functional departments. Communication via well defined systems[ reports, procedures, manuals, memoranda, etc.,] Advantages : Suitable for stable environment & standardization & consistency. Effective where EOS , technical expertise are more important than flexibility and innovation, quality & profits. Disadvantages : Hard to adjust to change when rules & procedures are no longer fit the circumstances. Performance beyond role prescription is not encouraged. E.g., Manufacturing firms, Civil service, Public utilities & Gov departments.

Decision Making

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Matrix Structure & Task Culture

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Structure : focuses on completion of projects by means of project teams or groups. Emphasize on Expertise, Adaptability, Individual empowerment. Authority : Based on expert power & influence through the matrix or allocation of projects to get results. Decision making given in line with the project. Monitoring through progress reporting system. Focus : Up to date Information and Expertise via Network & teamwork. Liaison, Open communication & Integration & responsiveness to client needs. Advantages : Teamwork achieve synergy to harness creativity & problem solving, gaining efficiency. Disadvantages : When resources or budgets become scare, occurrence of competitions between project leaders and morality of team members suffer. High risks for job security. E.g., Merger & Acquisitions firms, Project or Contract based firms.

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Independence Structure & Person Culture

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Structure : focus on individual & each member within the structure determine the direction the firm move. Authority : Autonomous & Shared Authority based on need & expertise. Consensus model for decision making which affect them as a whole. Reject hierarchy of getting things done. Focus : Creativity, skills & talents. Individual interests linked to income generation and see organization as a base on which they can build their own interest. Advantages : Suitable culture for self-help group & effective for own members. Strong individual value & position respected by others. Disadvantages : Exists only to serve the members within it with no super ordinate objectives. Not suitable for business organizations. E.g., Law firms, Surgical teams, Consultant firms, Audit firms, Architects firms, Oversea sales person.

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Peters & Waterman’s Rational & Excellence Models

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THE EXCELLENCE MODEL [FELT]

Focus : Quality & Value rather than price. New products or services.

Flat : few levels of management Empowered : Staff have greater

control [autonomy] over decision, making the culture more democratic.

Lean: keeping stock –holding to a minimum by having JIT deliveries & outsourcing activities.

Teams : Replacement of traditional departments with multi-functional teams. Flexible work roles & staffs are encouraged to learn & deploy new skills.

THE RATIONAL MODEL [THROB]

Focus : EOS & low cost & cheapnessTall : many layers of management

with narrow span of control & long ladder for promotion.

Hierarchic : clear cut layers of power & authority. Instructions flow down from top to bottom, information & feedback reporting upward via layers.

Rigid : structure is based on a clear set of principles.

Organized : Strict division of labor with specialization into departments.

Bureaucratic : Firm is run by strict set of rules & roles are clearly defined. Formal & impersonal

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Max Weber & Bureaucracy

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[D] The Nature of Bureaucracy

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Based on personal quality or power of an individual. Inspire obedience by the strength of personality. Organization governed solely by the leader & leader’s decision. Potential “ succession crisis”.

Based on precedent & usage for the exercise of authority. The leader has the authority due to tradition attach to the post of the

leader. [what’s happened shall continue to happen] Distribution of power is at the disposal of the leader. Power delegation conditional upon continued support of the leader

Based on neither charismatic nor traditional. Authority based on reason or logic: the means are designed to serve

the ends [goals]. Like a well planned machines. Legal also applies because authority rests on the rules of the firm. Legitimate rules & regulations govern the function of the organization. Rational – legal authority > impersonal.

Charismatic Basis for

Authority

Traditional Basis for

Authority

Rational-Legal Basis

for Authority

TYPES OF AUTHORITY

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Cont’d

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–The Characteristics of Bureaucracy : Official duties tightly defined Division of labor & Specialization Employment : long time job security Hierarchy of authority [ rank & position ] Uniformity of decisions & actions Impersonal dealings with all parties /orientation.

[no account of human dimension] – The Criticisms of Bureaucracy : Over reliance on rules & lack of flexibility Dependence on status [status consciousness] Position can effect behavior Promotion based on seniority of role rather than ability. Reduce initiation & potential for new ideas Impersonal aspects [no passion & affection]

[going by the book] regarding problem solving. Co-ordination based on direction from center & centralized MIS

A form of structure used historically by large-scale organizations. The structure give power & control via hierarchy & roles , supported by rules, regulations & red tape.

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[E] Co-ordination In Decentralized Structures

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Need for Co-ordination

The Problem of Departmentalism : how authority are delegated & how operations are carried out ?? Allocation of resources between departments ??

Line & Staff Relationships : the roles of tensions of specialists & professionals !!

The Human Dimension : individuals & groups have own goals & motivations.

SECONDARY FUNCTION : To address Timing : various tasks to be in phase. Informing : all sections/ departments Balancing : suitable balance of

resources Resolving : Conflicts Integrating : various interests

Principles of Co-ordination

Co-ordination by Direct Contact : Vertical & Horizontal communication [Management by Walking Around]

Co-ordination via Early Consultation: Staff to be involved in the early staged of

decision-making process. Co-ordination as the Reciprocal

Relating All Factors in a Situation : Interacting each other to fit with the

firm. E.g., taking steps to overcome difficulties for new comers.

Co-ordination as a Continuing Process: never ending process

Co-ordination as a Democratic & Voluntary Process : to act fair & square rather than “carrot & stick”

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Cont’d

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The Role of Culture

Decentralized Culture by Davies Mutual Interest : to encourage a

culture a sense of common purpose at all levels.

Voluntarism : to choice for their own E.g., staffs are invited to volunteer for training. [optional to join or not]

Individual Differences : to accept each staff’s own personality & talents rather than force them into pre-set roles.

Motivation : positive encouragement on staffs rather than pressure & over-dependence on rules.

Human Dignity : to increase staff’s sense of own worth & dignity and staff at every level to be treated with respect.

Teamwork & Meetings

Teamwork : Psychological Issue by Argyris

Staffs develop psychological features: activity, independence, versatility, self-awareness.

Firms to be structured into projects & teams [ building blocks ] for effective performance.

Teamwork isn’t encouraged in rigid structures.

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[F] Flexibility & Alternative Forms of Organizational Design

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Mintzberg’s Model of Organizational Structure

CUSTOMERS/CLIENTS

Sales Marketing

SUPPORT STAFF Finance Functions Legal Functions Administration Press & Public Relations

STRATEGIC APEX[Senior Management]

OPERATING CORE

TECHO STRUCTURE Quality Control Maintenance Work Study Human Resource Management

MIDDLE LINE[Middle Managers]

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Mintzberg’s Model of Organizational Structure

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The Five Elements

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OPERATING CORE

STRATEGIC APEX

MIDDLE LINE

SUPPORT STAFF

TECHNOSTRUCTURE

People directly involved in the primary functions of a firm. E.g., productions workers in manufacturing firm. Shop floor workers at retail firm.

People concerned with supervision & control. E.g., BOD, Senior managers

Fill the gap between the strategic apex & the operating core by turning strategic decisions into operating plans. E.g., managers, supervisors.

Provide service such as public relations, pension management & staff welfare. Not involved in primary functions & work independently.

Concerned with technical, standardization, planning & control systems. A lot to do with monitoring & control of functions associated with operating core. E.g., Engineers, Accountants, QC staffs.

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The Shamrock Organization

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CORE WORKERS

People with permanent positions in the firm. It consists of professionals, technicians and managers whose skills

define the organization's core biz & competence. This core group defines what the company does and what

business it is in. They are essential to the continuity and growth of the organization.

CONTRACTURAL FRINGE

The leaf is made up of self-employed professionals or technicians or smaller specialized organizations who are hired or outsourced on contract for long term or short term.

E.g., cleaning service, catering service, IT service, hiring trainer. They are paid in fees for specialist services or peripheral activities

than in salary. No benefits are paid by the core organization, and the worker carries the risk of insecurity.

FLEXIBLE LABOR FORCE

The leaf comprises the contingent work force with unskilled or semi skilled nature at very low pay rates.

They are usually temporary and part-time workers & contracted for the particular project.

They are paid by the hour or day or week for the time they work , leave & re-employed when necessary. E.g., Freelance presenter at broadcasting industry.

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Outsourcing

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Outsourcing Contracting out internal services to external providers. Many companies made significant use of outsourcing for a range of services [1980s ~1990s] Outsourcing can be used for peripheral activities such as catering & IT services, transport, security, HR. Successful outsourcing depends on three things.(a) The ability to specify with precision

what is to be outsourced. (b) The ability to measure what is

actually supplied & establish the degree of conformance with specification

(c) The ability to make adjustments if specification is not achieved.

Franchising

The practice of using another firm's successful business model. Commercial contract between franchisor & franchisee. The franchisor's success depends on the success of the franchisees. The franchisee is said to have a greater incentive than a direct employee because he or she has a direct stake in the business. Essentially, and in terms of distribution, the franchisor is a supplier who allows an operator, or a franchisee, to use the supplier's brand name, standardized products, services& distribute the supplier's goods. In return, the operator pays the supplier a fee.

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International Franchising

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Thank You !!

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Q & A

1. In recent years, a noticeable trend has been a decrease in the number of management layers and a widening in span of control.With the aid of diagrams, explain how the span of control affects an organization’s structure. [10 marks]

2. Evaluate the benefits of widening the span of control within an organization. [15 marks]

3. “Any culture can be a good and effective culture, but people are often culturally blinkered/unaware of, thinking the ways that worked well in one place are bound to be successfully everywhere. This is not the case. (Handy)Discuss this statement. [25 marks]

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4. Culture is said to be both difficult to define and impossible to manage in a predictable way.Explain Handy’s model of organizational culture. [10 marks]Assess the extent to which an organization’s culture can be altered in a predictable way by managers. [15 marks]

5. (a) Using examples to support your answer, distinguish between centralized and decentralized authority. [10 marks](b) Analyze the importance of co-ordination as a key management function in a decentralized organizational structure. [15 marks]

6. (a) Culture is frequently defined as, “The ways we do things around here”.Discuss the key factors that influence the development of an organizations’ culture. [10 marks](b) Examine the impact that employee commitment has on the level of work performance. [15 marks]

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Q & A

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7. (a) Handy’s classification of four types of culture is based on organizational structure.Define the term “culture” and describe Handy’s four types of culture.

[10 marks](b) Evaluate Handy’s four types, explaining why they are relevant to organizations. Use examples to support your answer. [15 marks]

8. (a) Organizations sometimes change between operating a” Centralized” structure or a “Decentralized” structure. Explain and evaluate both types of structure. [9 marks](b) Suggest and justify two reasons why an international banking group would switch from a decentralized structure to a centralized structure.

[6 marks]

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Q & A