Organisation Structure

ORGANISATION DESIGN AND STRUCTURE Global Research on Organisational Structure Types, Benefits, and Design Principles

Factors Influencing Structural Design How should an organisation decide on the best design for itself? Structural Design Environment Worldwide Operations Organisation Size Organisation Strategy Technology How stable is the business environment? How easily available are raw materials? Does the organisation have global reach or branch offices worldwide? What are the organisation’s strategies to meet future goals and vision? What resources and technology are used throughout the organisation? How large is the organisation and what are aspects of its core business?

Structural Design Options What are common and emerging types of structures? Structure Type Description Functional Top-down, specialized departments reporting through separate chains of command, joined only at the top Divisional Each unit or division dedicated to one product, geographic area, common technology, or customer base Matrix Combination of functional and self-contained units, lateral teams imposed on functional departments Process-Based Process Owners drive team-based strategic execution with customer oriented goals in mission-based processes Network Separate units either internal or external to the company, each unit specializes in a business task or function held together by ad hoc arrangements

Each department is a function common to the entire organisation with its own chain of command. All join only at the top. The Functional Structure Advantages Disadvantages Works Best When..
Reinforces specialized skills and resources
Reduces duplication of scarce resources
Facilitates communication within department
Short-term focus on routine tasks
Business perspectives are narrow
Communication with other departments is reduced
Business environment is stable and predictable
Organisation is small to medium in size
Quality is maintained through routine tasks

Each divisional unit is responsible for either a product, geographical area, or customer base. Each division has its own functions such as Finance, Operations, etc. The Divisional Structure Advantages Disadvantages Works Best When..
Key interdependencies and resources within the division are coordinated toward an overall outcome
There is heavy duplication of resources, skills, and expertise as each division has its own functions
The organisation is very large in size
Business environment is dynamic and always in flux
Multiple products and customer types exist

The Matrix Structure Projects Functional departments focus on specialized resources while lateral project/product teams focus on outputs. Some employees will report to a functional manager and a product manager. Advantages Disadvantages Works Best When..
Interdependencies between functional departments are managed well
Skill diversification and training across functions is easier
Difficult to manage and control coordination
Employees may face unclear roles and inconsistent job demands
The organisation is very large
Business environment is uncertain and unpredictable
High level of technological interdependency across functions exists
The goal is product specialization and innovation

The Process-Based Structure Corporation is centered around key processes that define its work, driven by Process Owners. Teams manage everything from task execution to strategic planning with team-based rewards, customer-oriented goals. Advantages Disadvantages Works Best When..
Dramatic improvement of speed, efficiency
Adapts to environment changes rapidly
Reduces boundaries between departments
Lowers cost due to less overhead structure
Threatening to middle managers, specialists
Duplicates scarce resources
Command-control mindsets must change
Decision-making is longer in these teams
Business environment is uncertain and changing
Organisation is moderate to large in size
High customer-oriented goals
Non-routine and highly interdependent workflow and technologies required

The Network Structure An “Internal Market Network” structure exists when the organisation establishes each subunit as an independent profit center allowed to buy and sell services to each other and the external market. The “Externally Networked Organisation” develops temporary relationships with external corporations and institutions to meet goals. Advantages Disadvantages Works Best When..
Highly flexible without much managerial layers
High individual participation and distinction
Crosses departmental and geographical boundaries
Tough to manage numerous lateral relationships across many members
Hard to maintain commitment of members over time
Business environment is dynamic and always in flux
Consumers demand highly customized services / products that require complex technology

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Organisation Structure

by Home on Sep 13, 2009

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