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Organizational Structure


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Organizational Structure

  1. 1. Organizational Structure
  2. 2. Organizational Configuration <ul><li>Structure </li></ul><ul><li>Processes </li></ul><ul><li>Relationships </li></ul><ul><li>An organization’s structure reveals: </li></ul><ul><li>Who is responsible for what </li></ul><ul><li>Who communicates with whom </li></ul><ul><li>The levels of skills required at upper level </li></ul>
  3. 3. Types of structures: <ul><li>Functional: grouping done on the basis of functions, for example, production, distribution, sales, marketing, finance </li></ul><ul><li>Advantages: </li></ul><ul><li>Pooling of expertise </li></ul><ul><li>No duplication of functions </li></ul><ul><li>Suited to centralized organizations </li></ul><ul><li>Disadvantages: </li></ul><ul><li>Vertical barriers </li></ul><ul><li>Focus on internal processes </li></ul><ul><li>Struggle to cope with change </li></ul>
  4. 4. Divisional Structure <ul><li>When functionally structured business grows by diversification, divisional structure is likely to be adopted </li></ul><ul><li>Advantages: </li></ul><ul><li>Flexibility – in response to strategy </li></ul><ul><li>Specialist expertise </li></ul><ul><li>Manager’s interest in division’s strategy </li></ul><ul><li>Enabling management by head office from distance </li></ul>
  5. 5. <ul><li>Disadvantages: high central management costs </li></ul><ul><li>Duplication of functions with all functions represented in divisions </li></ul><ul><li>Vertical barriers may prevent information sharing between divisions </li></ul><ul><li>Can be complex hierarchical process </li></ul><ul><li>Product Division – Geographic Division – Holding Company </li></ul>
  6. 6. Matrix Organization <ul><li>Matrix structures attempt to ensure co-ordination across functional lines by the embodiment of dual authority in the organizational structure. </li></ul><ul><li>Advantages: </li></ul><ul><li>Greater flexibility </li></ul><ul><li>Should improve communication </li></ul><ul><li>Dual authority – multiple orientation </li></ul><ul><li>Responsibility to achieve end results </li></ul><ul><li>Inter-disciplinary cooperation – mix of skills and expertise </li></ul>
  7. 7. <ul><li>Disadvantages: </li></ul><ul><li>Dual authority </li></ul><ul><li>Role stress </li></ul><ul><li>Costly – additional product managers </li></ul><ul><li>One manager may feel threatened </li></ul><ul><li>Requires consensus which may slow down decision making </li></ul>
  8. 8. Centralization vs Decentralization <ul><li>Flexibility of structure depends upon an organization’s approach to decision making </li></ul><ul><li>In centralization upper level hierarchy retains authority to make decisions </li></ul><ul><li>In decentralization authority is given to specific units or persons to make immediate decisions without referring them to the higher authorities </li></ul>
  9. 9. Centralization <ul><li>Advantages: </li></ul><ul><li>Better management control/co-ordinated decisions </li></ul><ul><li>Goal congruence </li></ul><ul><li>Standardization </li></ul><ul><li>Balance between functional units and divisions </li></ul><ul><li>Economies of scale </li></ul><ul><li>Top managers make decisions (experience) </li></ul><ul><li>Quick decisions in times of crises </li></ul>
  10. 10. <ul><li>Disadvantages: </li></ul><ul><li>Reduced job satisfaction at lower level </li></ul><ul><li>Senior management does not have knowledge of all organizational activities </li></ul><ul><li>Stress on senior managers </li></ul><ul><li>Limited career opportunities and development for subordinates </li></ul><ul><li>Decisions take considerable time </li></ul>
  11. 11. Mintzberg Configuration <ul><li>Six possible configurations: </li></ul><ul><li>Simple structure – strategic apex – op core </li></ul><ul><li>Machine bureaucracy – techno-structure </li></ul><ul><li>Professional bureaucracy – dominance of op core </li></ul><ul><li>Divisional form – strong middle line </li></ul><ul><li>Adhocracy – complex & disorderly structure e.g. project teams </li></ul><ul><li>Missionary organizations – based on common set of beliefs: unwilling to change or compromise </li></ul>
  12. 12. Planning and control processes <ul><li>Formal or informal </li></ul><ul><li>Focused on inputs or outputs </li></ul><ul><li>Direct or indirect processes </li></ul>
  13. 13. Generic Control Processes <ul><li>Direct supervision – hands on control </li></ul><ul><li>Planning process – standardization </li></ul><ul><li>Performance management – KPIs </li></ul><ul><li>Internal market processes – transfer pricing or service level agreements </li></ul><ul><li>Culture </li></ul><ul><li>Self-control by employees </li></ul>
  14. 14. External Relations <ul><li>Outsourcing </li></ul><ul><li>Strategic Alliances </li></ul><ul><li>Networks </li></ul><ul><li>Virtual organizations </li></ul>
  15. 15. Outsourcing <ul><li>Advantages: </li></ul><ul><li>Reduced cost </li></ul><ul><li>Overcome skills shortage </li></ul><ul><li>Flexibility </li></ul><ul><li>Allows organization to focus on their core skills </li></ul><ul><li>Disadvantages: </li></ul><ul><li>Loss of control </li></ul><ul><li>Dependency on suppliers </li></ul><ul><li>Loss of confidentiality </li></ul><ul><li>Loss of in-house skills </li></ul>
  16. 16. Strategic Alliances <ul><li>Reasons: </li></ul><ul><li>Cost sharing </li></ul><ul><li>When take overs prohibited </li></ul><ul><li>Complementary markets </li></ul><ul><li>Learning </li></ul><ul><li>Technology ( R & D ) </li></ul><ul><li>Innovation </li></ul><ul><li>Problems: core competencies/not new ones </li></ul>
  17. 17. Networks <ul><li>Networks of experts come together for a particular project or purpose </li></ul><ul><li>Teleworking </li></ul><ul><li>One contact point for customers </li></ul><ul><li>Service networks </li></ul>
  18. 18. Virtual organization <ul><li>The virtual organization is a temporary network of companies that come together quickly to exploit fast changing opportunities </li></ul>
  19. 19. <ul><li>Technology: informational networks will help companies to link up. Things done electronically </li></ul><ul><li>Opportunism: companies will band together to avail opportunities and evaporate </li></ul><ul><li>No borders: More cooperation among competitors, suppliers and customers </li></ul><ul><li>Trust: reliability, fate of one will depend on another </li></ul><ul><li>Excellence: partners will bring core competencies “best of everything” </li></ul>