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Organisation Structure


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This was one of my client presentations on organisation structure options and benefits of the various designs.

Organisation Structure

  1. 1. ORGANISATION DESIGN AND STRUCTURE Global Research on Organisational Structure Types, Benefits, and Design Principles
  2. 2. 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?
  3. 3. 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
  4. 4. 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.. <ul><li>Reinforces specialized skills and resources </li></ul><ul><li>Reduces duplication of scarce resources </li></ul><ul><li>Facilitates communication within department </li></ul><ul><li>Short-term focus on routine tasks </li></ul><ul><li>Business perspectives are narrow </li></ul><ul><li>Communication with other departments is reduced </li></ul><ul><li>Business environment is stable and predictable </li></ul><ul><li>Organisation is small to medium in size </li></ul><ul><li>Quality is maintained through routine tasks </li></ul>
  5. 5. 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.. <ul><li>Key interdependencies and resources within the division are coordinated toward an overall outcome </li></ul><ul><li>There is heavy duplication of resources, skills, and expertise as each division has its own functions </li></ul><ul><li>The organisation is very large in size </li></ul><ul><li>Business environment is dynamic and always in flux </li></ul><ul><li>Multiple products and customer types exist </li></ul>
  6. 6. 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.. <ul><li>Interdependencies between functional departments are managed well </li></ul><ul><li>Skill diversification and training across functions is easier </li></ul><ul><li>Difficult to manage and control coordination </li></ul><ul><li>Employees may face unclear roles and inconsistent job demands </li></ul><ul><li>The organisation is very large </li></ul><ul><li>Business environment is uncertain and unpredictable </li></ul><ul><li>High level of technological interdependency across functions exists </li></ul><ul><li>The goal is product specialization and innovation </li></ul>
  7. 7. 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.. <ul><li>Dramatic improvement of speed, efficiency </li></ul><ul><li>Adapts to environment changes rapidly </li></ul><ul><li>Reduces boundaries between departments </li></ul><ul><li>Lowers cost due to less overhead structure </li></ul><ul><li>Threatening to middle managers, specialists </li></ul><ul><li>Duplicates scarce resources </li></ul><ul><li>Command-control mindsets must change </li></ul><ul><li>Decision-making is longer in these teams </li></ul><ul><li>Business environment is uncertain and changing </li></ul><ul><li>Organisation is moderate to large in size </li></ul><ul><li>High customer-oriented goals </li></ul><ul><li>Non-routine and highly interdependent workflow and technologies required </li></ul>
  8. 8. 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.. <ul><li>Highly flexible without much managerial layers </li></ul><ul><li>High individual participation and distinction </li></ul><ul><li>Crosses departmental and geographical boundaries </li></ul><ul><li>Tough to manage numerous lateral relationships across many members </li></ul><ul><li>Hard to maintain commitment of members over time </li></ul><ul><li>Business environment is dynamic and always in flux </li></ul><ul><li>Consumers demand highly customized services / products that require complex technology </li></ul>