This document discusses organizational structure and design. It begins by defining organizational structure as how job duties and communication channels are formally grouped and coordinated. Four main factors that influence structure are then examined: organizational strategy, size, technology, and environment. The document also identifies and compares different types of departmentalization including functional, product, customer, geographic, and matrix structures. Additional topics covered include authority, centralization vs decentralization, work design approaches, and emerging organizational designs like team and modular structures.

1. BBPP1103
Principles of Management

2. 4. Organisation Design
LO:
1. Explain the concept of organisational
structure
2. Identify the four factors that influence
organisational structure
3. Compare the different types of
organisational structure
4. Describe the concept of authority in
organisations
5. Differentiate between the concepts of
centralisation and decentralisation
6. Evaluate the different types of work design
7. Discuss the emerging organisational designs

3. 4.0 Introduction
OS refers to organisation’s functions that are
grouped and coordinated formally.
A system that connects the duties, workflow and
communication channels between individuals
and the various work groups
to simplify the use of each resource and
individual collectively as a management system
usually displayed in graphical form =
organisational chart
Typically in a pyramid chart

4. 4.1 Factors that influence OS
Organisational Strategy Size of Organisation
OS supports and facilitate the overall
organisational strategies to achieve the
objectives.
When strategies change, structure tend to
change too.
Small = lesser work specialisation, less
standardisation and more centralisation of
decision making.
Large = specialisation, standardisation and
decentralised decision making
Size measure = sales /manpower
Technology Environment
Technology is subject to routine and non-routine
activities.
Routine = departmentalisation structures
(centralised), work specialisation and
complying to rules
Non-routine = depends on expertise, thus
more decentralised, less specialisation and
don not need to comply to strict rules
external influences = environmental
influences
Some face static, some face dynamic
environment
Dynamic = more uncertainties, thus best to
reduce threats
Hence, OS may be altered according to the
uncertanties in its environment.

5. 4.2 Designing OS
Departmentalisation
based on the types of departmentalisation = division of work and employees to different
organisational units. Common types:

6. 4.2.1 Functional Departmentalisation
coordinates work and employees through different units and each unit is responsible for a
specific business function or expertise area.
Advantages : Allows work to be carried out by individuals who are qualified and skilled in
the areas concerned,
It reduces cost by reducing work duplication and use of resources
Each individual in the same department will acquire the same work
experiences or training, communication and coordination, thereby reducing
problems for management
Disadvantages: Difficulty in coordinating between departments
Can cause delays in decision making
Produce managers and employees who are restricted in experience and
expertise

7. 4.2.2 Product Departmentalisation
based on products and employees work in different units, each with the responsibility of
producing a product or service. For example,
Advantages : Allows managers and employees to expand their experience and expertise
that are related to the overall activity of the product or service produced.
Allows management to evaluate the work performance of each work unit
Disadvantages: Managers may focus on their product to the exclusion of the rest of the
organisation.
Administration costs may also increase due to each product having its own
functional-area experts

8. 4.2.3 Customer Departmentalisation
coordinates work and employees in different units that are responsible for specific types of
consumers only. For example,
Advantages : The organisation focuses all its efforts on fulfilling the needs of consumers.
Allows the organisation to specialise and adapt its products and services to
fulfil the requirements and resolve consumers’ problems.
Disadvantages: The existence of duplication of work and use of resources.
Difficulty to coordinate between departments that provide services to
different types of consumers.
Can cause employees to overemphasise effort to fulfil customer needs until
it affects the organisation’s business performance.

9. 4.2.4 Geographic Departmentalisation
coordinates the work and employees of different units that are responsible for conducting
business activities in certain geographical locations. For example,
Advantages : The abilities of the organisation to react with speed and efficiency to the
requirements of specific markets especially in different countries.
It helps to reduce costs by positioning the organisational resources nearer to
the targeted consumers.
Disadvantages: It creates duplication of work and the use of the organisation’s resources.
Difficulties will arise in coordinating between departments as the
departments are in geographical areas that are located far from each other.

10. 4.2.5 Matrix Departmentalisation
Combines two or more types of departmentalisation at the same
time. The employees report to two different supervisors or
managers. It leads to cross interactive functions that cannot be done
in the other types of departmentalisation.
Advantages : It allows the organisation to manage efficiently the
projects or activities that are large scale and complex.
Disadvantages: It requires a higher level of coordination to manage
the complexity involved.
Tend to focus on the conflict of authority.
Can cause confusion among employees who have to
report to more than one supervisor or manager.
Requires higher-level management skills

11. 4.3 Authority
The right to give directives, take actions and make decisions related to
activities to achieve the organisation’s objectives.
Normally channelled from top to bottom.
The right exists based on the formal position in an organisation
Chain of Command
Line & Staff Authority
Line & Staff Function
Span of Control

12. 4.3.1 Chain of Command
Explains who reports to whom. Individuals in the top rectangles have authority
over those in the lower rectangles, according to the lines that connect them.
Individuals at the lower levels must report all aspects of their work to the people
at the level above them.
To avoid confusion and conflict of authority, unity of command is needed in an
organisation, i.e. the management principle that states that employees only report
to one manager at a time

13. 4.3.2 Line & Staff Authority
The line authority and staff authority must work together to maintain
the efficiency and effectiveness

14. 4.3.3 Line & Staff Functions
Line Function = an activity that directly contributes
to the production and selling. E.g., the activities
that are conducted by the production and
marketing departments.
Staff Function = an activity that contributes
indirectly to the production and selling. E.g., The
activities that are conducted by the accounts,
human resources and legal departments

15. 4.3.4 Span of Control
Refers to the number of employees who report
directly to a manager or supervisor
Vertical = Restricted span of control. allows the organisation to
increase its efforts to monitor its employees. stringent
supervision. BUT, will incur higher costs especially employees’
salaries because it requires multiple levels of management. AND,
an cause delays in decision making and the staff/managers have
the tendency to refer their problems to upper management.
Creativity among employees will be limited.
Currently most organisations practise a broad span of control as it
reduces costs, expedites the decision-making process, increases
creativity and flexibility, narrows the gap towards consumers and
imparts power to employees

16. 4.4 Centralisation - Decentralisation
Centralisation is a situation where almost all control is
centralised, especially the control for decision making to one
party, which is the top level people in an organisation.
Give authority to the managers to make decisions even though it
is a trivial matter.
Decentralisation is a situation where a certain amount of
authority is handed down to subordinates or employees at the
lower levels of an organisation.
have more delegated authority at all levels.

17. 4.4 Centralisation - Decentralisation
Centralisation
Size – small organisation means top managers may not face many
difficulties in monitoring the whole organisation.
Standardised/work specialisation – does not require creativity.
Decentralisation
Size – large organisations will gain more advantages by practising
decentralisation. Large means increase in responsibilities, thus
managers at lower levels should be delegated with more authority
to deal with increased duties.
Place – when products/services are located at different places.
Creativity – when employees or managers of lower levels need to
be more creative in resolving particular issues.

18. 4.5 Work design
WD specifies the activities that are done by employees. It determines
how and where the work has to be done. It ensures a healthy and
safe working environment in achieving productivity and efficiency.
Work Specialisation.
The act of assigning the contents of smaller sections from the
overall work or process to individuals. It is economical, quicker,
cheaper wages, productivity problem minimal. BUT, employees
be easily bored, thus low job satisfaction and high absenteeism.
Job Rotation
Transferring employees from one type of specialisation to
another periodically. Hence, employees may have various skills. It
can reduce boredom in employees and give more job satisfaction

19. 4.5 Work design
Job Enlargement
It adds the number of tasks in an activity. It gives employees the
opportunities to develop other skills. BUT, it potentially causes
stress among them due to many tasks.
Job Enrichment
It results in an increase in the number of tasks in the activities and
gives the employees authority and control in making decisions
related to their work. Frederick Herzberg stated that as
employees only handle a few tasks, they are quickly bored. It
makes work activities more interesting and challenging and when
employee responsibilities increase, then the motivation and
interest will also increase.

20. 4.6 Organisation Process Design
Mechanistic Organisation
an organisation categorised by work specialisation and
responsibility, fixed roles and chain of command that are rigid
caused by centralised control and vertical communication.
It focuses on organisational structure.
Organic Organisation
an organisation categorised with a wide definition of work and
responsibilities, changing roles and decentralisation, and
horizontal communication.
It focuses more on the organisation processes.

21. 4.6.1 Emerging Design
Team Structure
Disintegration of departments and the decentralisation of
decision making to the level of work teams.
Allows the organisation to achieve efficient standardisation that
is practised by bureaucracy.
Encourage flexibility that comes with the team structure.
Modular Organisation
It outsources business activities to other organisations, suppliers,
experts or consultants. business activities can be bought from
other organisations for the purpose of adding activities and can be
dropped when they are no longer required.
Can be cheap and able to focus on its own tasks.

22. 4.6.1 Emerging Design
Virtual Organisation
An organisation that has become a part of the business network.
Virtual organisations exist is in a network that shares expertise,
costs, capabilities, markets and customers collectively to resolve
customers’ problems or producing certain products and services.
It allows organisations that are involved in the network to share
all costs involved
Borderless Organisation
An organisation that tries to eradicate the chain of command and
to replace departmentalisation with team authority. This means
the organisation is trying to eradicate borders whether vertically
or horizontally in an organisation.
Able to utilise its knowledge, expertise and capabilities of
employees in a better way.

23. 5. Human Resource
Management
LO:
1. Describe human resource management
2. Clarify the needs of human resources
3. Identify the methods for capturing the
interests of qualified candidates
4. Explain the methods for developing qualified
employees
5. Identify methods for maintaining qualified
employees in the organisation

24. 5.0 Introduction
HRM = a process of obtaining, developing
and maintaining a sufficient number of
qualified employees in order to achieve goals
that have been set

25. 5.1 Needs of Human Resources

26. 5.1 Needs of Human Resources
Planning:
• consider the mission, strategies and objectives
• human resource planning is interdependent
• Poor planning will result: Surplus in workforce
and/or shortage
Job Analysis Forecasting

27. 5.1.1 Job Analysis
A detailed process regarding the related tasks
of a particular job and the quality of human
resources needed to perform the job
Four types of Information:
1. Job activities
2. Tools and equipment used
3. The context of job (situation, workplace environment or
scheduling)
4. The needs of personnel in performing the job, meaning the
knowledge, skills and capabilities required for the
particular job

28. 5.1.1 Job Analysis
Job Description
a written statement that
clearly explains the job,
duties, responsibilities,
activities and performance
results required from the
job holder
Job specification
a written statement
stating the qualifications
required from the job
holder

29. 5.1.2 Forecasting
a process of predicting the total number and types of
employees with the knowledge, skills and abilities
needed by an organisation in the future
Internal Forecasting
Internal factors of the
organisation which influence
the level of demand and
supply of human resources
in the organisation.
e.g. financial performance,
productivity level, mission
and change in technology
External Forecasting
external factors of the
organisation that affect the
level of demand and supply of
its workforce in the future.
e.g. supply of labour,
unemployment rate, migration,
competition levels

30. 5.2 Recruitment/Hiring
The process of developing a group of
candidates who are interested and qualified for
a position offered by an organisation
Internal
External

31. 5.2.1 Internal Recruitment
promoting or moving existing employees into
a vacant position.
Advantages:
• able to boost the commitment, morale and motivation of the
employees
• reduce time and costs of employee development
• increase the probability of the employee performing
successfully
closed recruitment systems - made informally and in a subjective
condition.
open recruitment system - vacant position is announced to all the
employees.

32. 5.2.2 External Recruitment
a process of developing candidates from
outside the organisation.
Methods include job advertising, employee referral, walk-in,
government and private employment agencies, career seminars
and websites.
Choice of methods normally depends on types of vacant
positions and the urgency of getting new employees.

33. 5.3 Selection
The process of gathering information for
evaluation and then selecting the best
candidate for that particular position
Forms &
Resume
References &
background
Tests
Interviews

34. 5.3.1 Application forms & resume
Both contain the same information about the candidate such as
personal information, academic background, working experience
application forms prepared by the organisation itself
resume is prepared by the candidate

35. 5.3.2 References & Background
Checking
job references such as former employer or colleagues, teacher or
lecturers
to obtain validity and accuracy of the information provided
double check any particular information, negative matters or
job-related background
conducted with learning centres, former employers, court
records, police records and government agencies

36. 5.3.3 Selection Tests
measure either directly or indirectly whether a particular
candidate is able to perform the job well
Specific Ability
Test
= aptitude test
Measures ability
needed to do the
job
Cognitive Ability
measure perceptual
speed, verbal
comprehension,
numerical aptitude,
general reasoning
and spatial aptitude
Biographical Data
Or biodata is an
extensive study on
the personal
background and
experiences to
forecast future
behaviour
Personality Test:
measures the personality of the candidate towards the job. This test
shows the candidates personality dimensions
Methods used to test include in-basket training, role playing, small group
presentation and leaderless group discussion

37. 5.3.4 Interviews
a method where company representatives will ask the
candidate a series of questions related to the job
Unstructured
Interview
ask any questions
to the candidate
Structured Interview
ask a standard set of questions which had
been earlier prepared and drafted.
Include situation based, background-related,
behaviour-related, job-related
question

38. 5.4 Development of Qualified
Employees
Orientation
Training
Reward &
Promotion
Performance
Evaluation

39. 5.4.1 Orientation
the process of introducing new employees to the programmes,
policies and culture of the organisation
provide guidelines to succeed with the organisation
to ensure that new employees have the basic knowledge and
skills needed

40. 5.4.2 Training
provides opportunity for employees to develop working skills,
experience and knowledge they need in order to perform their
job or upgrading their job performance
Both new and existing employees
Not only lower-level employees but also by middle and higher
level management

41. 5.4.3 Determining needs for Training
Training can be costly, so conduct when really need it.
Determining the needs is a process of identifying and giving
priority to the learning needs of the employees.
Can be known via identifying performance ineffectiveness,
listening to complaints from customers, making observations on
employees and managers, or assessing the skills and knowledge
of employees.
The selection of candidates for training must be based on
information related to a particular job area

42. 5.4.3 Determining needs for Training

43. 5.4.4 Training Methods
On the Job
Trainees will be shown how to
perform a job.
An example is the job rotation.
Must be supervised.
Off the Job
done out of the location of the job
area.
Allows the demonstrator to focus
on a particular education subject
without any interference and in a
controlled environment.
Apprentice
requires an apprentice to work
for a certain period before he
is allowed to perform a job or
specialisation .
Normally supervised by
mentor
Vestibule
Trainees are taught how to perform
a job and use the relevant
equipment by an experienced
employee in a particular area.
trainers can emphasise on theories
and use the necessary techniques.

44. 5.5 Performance Evaluation
A process of evaluating job performance and preparing
feedback based on that evaluation
To inform the
employee about their
performance
help in personnel
development and
future training
Relevance
Measures the
performance related to
the assigned job.
Valid
method used must be consistent
regardless of time or who the
evaluator.

45. 5.5 Performance Evaluation
Individual Job
Output
quantity produced,
defaults made and
cost per unit
Behaviour
When it is difficult to
specifically identify the
output .
e.g. accuracy and
frequency of report
submission, or average
number of calls or
meetings with customers
Common Criteria used:
Attitude
a weak set of criteria.
e.g. having good manners,
exhibiting confidence, able to be
independent or cooperative, trying
to look busy or having a broad
experience.

46. 5.5.1 Who should Evaluate?
Supervisor
An employee is
evaluated by the
person who
supervises him
Colleagues
a reliable approach.
could augment the
effectiveness of
evaluation made by
supervisors.
May be biased.
Subordinates
can provide important
and detailed
information regarding
the behaviour of their
superiors.
BUT, may be afraid.
360 degrees
Provides feedback on
performance from all parties
related to the job of the
employee being evaluated
which covers general
workers, customers,
colleagues and managers

47. 5.5.1 Methods of Performance
Evaluation
Essay Writing
requires the employee being
evaluated to explain about the
strengths, weaknesses, earlier
performances, potential and
suggestions in increasing
performance
Critical Incident
observes the behaviour that
acts as the key in
differentiating between a
good or bad work
performance.
Measurement of Objective
Performance
Objective performances that
are frequently used are
outputs, scraps, wastes, sales,
customer complaints or level of
default
Employee Comparison
the evaluators rank employees
according to such factors as
performance and value to the
organisation

48. 5.6 Retaining Qualified Employees
A process of keeping talented employees for as long as
possible.
Payment Level
whether at a level below, above
or at the same rate with the
payment of salary in the labour
market
Payment Structure
It is the internal payment distribution.
Individuals at the top level will
receive a higher pay compared to
those at lower levels
Variable Payment
relating payment with organisation
performance to increase motivation,
effort and job performance.
e.g., iecework, sales commissions,
profit-sharing and employee share
ownership
Employment Benefits
These are non-monetary rewards.
e.g., retirement and pension plans,
paid leave, sick leave, health
insurance, life insurance, health
treatment, discounts on products.

49. 5.7 Employee Separation
This is the loss of an employee by an organisation either
voluntarily or involuntarily
Involuntary separation arises when
an organisation decides to
discontinue the service of an
employee or retrench an employee.
Voluntary separation means that the
employee decides to leave or retire

50. 5.7.1 Employee Termination
a simple act but may hurt the feelings of employees
Employees should be first given a chance to change.
a series of specific warnings, time to correct,
consultation, show-cause letter, warning letter,
suspension without payment.
Employees should be terminated based on sensible and rational
reasons.
To avoid court action, thus should be job-related reasons.
the reaction of other employees when one of them is terminated.
affect the performance and motivation of existing employees.

51. 5.7.2 Downsizing
the act of organised repealing of positions and jobs in the
organisation.
caused by the reduction of cost, decline in market shares or
being too aggressive in employing workers and growth
Theoretically, downsizing should bring an increase in
productivity and better performance profit and increase
organisational flexibility.
When the financial condition and strategies implemented are not
effective and downsizing is necessary.
Should also provide counselling to ease the feelings of the
downsized employees and lift their motivation.

52. 5.7.3 Retirement
Employees separate from organisation when their retirement
period arrives.
Can also be early retirement.
To reduce workforce, organisations offer financial
benefits for employees in order to encourage them to
retire early
The organisation may lose talented employees and face a large
number of employees who want to retire early

53. 5.7.4 Employee Turnover
An employee voluntarily ends his service with an
organisation. High level or turnover is not good.
Functional Turnover
an employee with a bad performance
level chooses to resign voluntarily.
Good as poor worker can be replaced
with a better one.
Dysfunctional Turnover
a high-performance employee
chooses to leave voluntarily.
Not good because when many high-performance
employees leave a
company, productivity is affected
and costly to hire new employees
plus the training cost.