The document discusses various topics related to organizational structure and strategy. It begins by explaining that structure must be developed to support strategy and considers organizational configuration, centralization of decisions, and management systems. It also notes that structure and strategy influence each other and describes Mintzberg's components of organizational forms. The document then examines types of structures like functional, divisional, and matrix structures as well as topics such as span of control, centralization vs decentralization, and governance.

1. Chapter-9
Strategy and Structure
1. Structure needed to implement strategy
Development of appropriate structure requires consideration of 03 areas:
 Organizational configuration (group of stuff, departments, division)
 Centralization or decentralization of decision
 Management system (way of monitoring the performance and control)
2. Impact of strategic choices on structure and vice versa
Structure follows strategy (top down approach)
 Geographical expansion
 Vertical integration
 Diversification
Strategy follows structure (bottom up approach)
 Choosing from the alternative
3. Contingency approach to organization structure
If then approach, where if certain situational factors are present, then certain aspect of
structure are most appropriate. This most appropriate and flexible approach of structure.
Typical situational factors are:
 Type and size of organization and purpose
 Culture
 Presence of top-level management/power/control
 History
 Abilities, skills, needs, motivations of employees
 Technology
 Environment
Burns and Stalker identified 02 types of structure:
 Mechanistic or rigid or static
 Organic or fluid or flexible structure
4. Mintzberg’s organizational forms
Components of organization: There are 05 distinct components of organization’s are:
i) Strategic apex
ii) Middle line
iii) Operating core
iv) Technostructure
v) Support staff
Configurations of organization:
 Strategic apex: Owner
 Middle line: Functional level staff with control and operating core

2.  Operating core: Work directly to the product and services with mutual adjustments
 Technostructure:Consistsof analyst whois expert in setting procedures, standards,
design and highly regulated
 Support staff: A team with some expertise and capacity
Structure and environment:
Configurations
Key building
block
Environment
Internal
factor
Key
coordinating
mechanism
Simple structure
(entrepreneurial)
Strategic apex Simple
dynamic
Small young
simple task
Direct
supervision
Machine bureaucracy
(functional)
Technostructure Simple Static Large old
regulated
Standardization
of work
Professional
bureaucracy
Operating core Complex
Static
Professional
simple
systems
Standardization
of skill
Divisionalised Middle line Simple static
diverse
Very large
old divisible
tasks
Standardization
of Output
Adhocracy/innovative/
Matrix
Operating core Complex
dynamic
Young
complex
tasks
Mutual
adjustments
5. Types of business structures
 Entrepreneurial structure (simple): Single owner-manager who has specialist
knowledge, more flexible and ability to cope up with diversification.
 Functional structure (bureaucracy): Rigid structure, more efficient and can be
benefited from economics of scale but unsuitable in changing structure.
 Divisional structure: Large diversified structure with adoptability of growth and
diversification and supported by geographical structure.
 Product/Brand:Intheproductstructure the elements of an organization are grouped by
products or product lines. Some functional divisionalised remains but a divisional
manager is given responsibility for the product or product line, with authority over
personnel of different functions.
Customer or market segment divisionalisation
Divisionalisation by customer is commonly associated with sales departments and selling
effort, but it might also be used by a jobbing or contracting firm where a team of managers
may be given the responsibility of liaising with major customers.
Another example is where firms distinguish between domestic consumers and business
customers, with different marketing and supply efforts for each.

3. Hybrid structures
In the example below, research and development is centrally organized, but the operating
activities of the firm are geographically arranged. This is an example of a hybrid structure.
Matrix organization
Matrix organization is a structure which provides for the formalization of management
control between different functions, whilst at the same time maintaining functional
divisionalisation. It can be a mixture of a functional,product and territorial organization. It is
highly important for the hi tech and complex industries.
6. Span of Control
The 'span of control' refers to the number of people reporting to one person.
Can be either:
Tall or flat is the use of delegation – 'the transfer of legitimate authority without passing
on ultimate responsibility'.
Factors influencing span of control
 Locationof subordinates:Themore widely spread, the fewer that can be managed
effectively.
 Complexity/natureofthe work: As complexity increases (and the need for greater
teamwork), so the span decreases.
 Managementpersonalityandability: Thebetterthey are, the more people they can
manage.
 Subordinate ability: The better they are, the more that can be delegated and
therefore managed by the manager.
 Level of organizational support: Personnel departments can remove the routine
personnel tasks from a manager, enabling him to manage more people.
 Level of 'danger'involvedifdelegation takes place: The more dangerous, the less
people that can be managed.
Effects of setting span of control incorrectly
 Too flat
 Too narrow
Span and IT
New technology (e.g. the Internet) has often resulted in flatter structures (i.e. wider spans)
with fewer levels of management. Office-based technology can facilitate a greater range of
functions and self-checking for staff.
7. Network organisations
A network structure is applied both within and between organisations. Within the
organization, the term is used to mean something that resembles both the organic
organization. The network approach is also visible in the growing field of outsourcing as
a strategic method. networks becoming the corporations of the future, replacing formal
organization structures with innovations such as virtual teams.

4. The most outcome of the network structure:
 Share information and tasks
 Make joint decisions
 Fulfil the collaborative function of a team
Organisations are now able to structure their activities very differently:
 Staffing
 Leasing of facilities
 Production
 Interdependence
Network structures are also discerned between competitors, where co-operation on non-core
competence matters can lead to several benefits:
 Cost reduction
 Increased market penetration
 Experience curve effects
8. The shamrock organization
Handy defines the shamrock organization as a 'core of essential executives and workers
supported by outside contractorsand part-time help'.This structure permits the buying-in of
services as needed, with consequent reductions in overhead costs. It is also known as the
flexible firm.
Features of shamrock organization
 Professional core
 Flexible labor force
 Contractual fringe
 Customers
9. Centralization vs decentralization
Centralized structures: Upper levels retain authority to make decisions.
Decentralized structures: Ability to make decisions (i.e. commit people, money and resources) is
passed down to lower levels of the hierarchy.
Factors affecting amount of decentralization:
 Management style
 Size of organization
 Extent of activity diversification
 Effectiveness of communication
 Ability of management
 Speed of technological advancement
 Geography of locations
 Extent of local knowledge needed

5. 10. Divisionalised organisations
A Divisionalised structures-
 Itfocuses the attention of subordinate management onbusiness performance and results.
 It enables greater flexibility in business units to enable them to respond to local
competitive challenges.
 It enables financial evaluation and comparison of performance of divisions, e.g. by
measures such as return on capital employed.
Three key considerations in successful divisionalisation:
 Autonomy
 Controllability
 Corporate optimality
11. Transfer pricing between divisions
Transfer prices have several implications
 They determine the profits of division
 They affect performance evaluation
 They determine the tax to be paid
 They determine the currency in which profits are made
 They may determine the price and final sales of the product
 They can lead to dysfunctional decisions
12. Organizational structures for international business
Barlett and Ghoshal identify four possible structures for a multi-national business:
Global
Co-
Ordination
High
Low
Global product division Transnational cooperation
International division Local subsidiaries
Low High
Local Independence/Responsiveness
13. Corporate governance:
The set of rules which governs the structure and determines objectives of a company and
regulates the relationship between thecompany'smanagement, its board of directors and
its shareholders.
Key principle in Corporate Governance:
 Leadership
 Effectiveness
 Accountabilities
 Remuneration
 Relations with shareholders

6. Reward structures:
 Remuneration levels for non-executives
 Length of service contracts for executive directors
 Performance related systems of reward
 Compensation for loss of office
 Share option schemes
14. Risk profiles
The risk management cycle is an interactive process of identifying risks, assessing their
impact, and prioritizing actions to control and reduce risks.
Strategiescouldinclude:
 Ignoring small risks (but ensuring that they remain under cyclicalreview)
 Contractual transfer of risk
 Risk avoidance
 Risk reduction viacontrols and procedures
 Transferring risks to insurers
15. Governance of government, public and non-profit
organizations
Many of the issues are the same but there are some that are of specific importance to the sectors
(Government, Public,Not for profit):
 Accountability
 Stakeholders
 Openness and transparency
 Governance/board structures
 Monitoring performance
Identify risk
Understand and assess
scale of risk
Develop risk management
strategy
Implement strategy and
allocate responsibility
Establish risk management
group and goals
Implement and monitor
implementation of controls

7. The board's role and activities can be examined in terms of fivedistinct areas:
1. Responsibilities and mandate
2. Structure and organization
3. Processes and information
4. Performanceassessment and accountability
5. Organizational culture: The Nolan Seven Principles of Public Life include-
 Selflessness
 Integrity
 Objectivity
 Accountability
 Openness
 Honesty
 Leadership
Case:1
ByronTuffinByronTuffinis the ownerof fourhotels. Threeof these havebeen recently acquired;
one is in Rajshahi, one close to Chittagong and the third in Pabna. The original hotel is the
Imperial, outside Cox’s Bazar. The Imperial has been in the Tuffin family for fifty years and was
bequeathed to Byron by his father.
The Imperial has forty rooms. Five of these are de-luxe suites with lounge/ante-room, bedroom
and bathroom. Twenty are double bedrooms and the remainder are single rooms. The hotel has
a beautiful location in ten acres of landscaped gardens and, being on a small hill, the rooms at the
top command impressive views over the shore. The hotel makes good returns and has good all-
year-round occupancy rates. Much more comes from special events like weddings and as a
stopover for honeymooning couples before departure elsewhere the next day.
The Regent in Rajshahi and The Orangery in Pabna are similar to The Imperial. The former has
30 rooms while the latter has only 20 double rooms. The Serpentine hotel near Chittagong has 55
rooms, i.e. 30 double, 5 de-luxe suites and 20 single rooms.
Byron bought the hotels from an old family friend. Eachof the hotels needs some refurbishment.
Byron has ten years' experience in managing The Imperial but realizes that a four-hotel group is
a different matter. As a consultant brought in by his bankers (whohelped in the acquisitions) you
have been called in to assist Byron in developing the company. During the course of your
investigations you conduct many interviews: details from some of these are given below.
Carolyn Reeder (Finance manager, The Imperial)
'I'm a bit overqualified for this job. I'm a CA with four years' post-qualification experience. I've
been here for two years and, although the job is fairly easy, the people here are great to work
with. Byron is absolutely superb with customers: he checks their file (if they have one) before
they arrive and he makes them feel really special. They love him. On the other hand he does not
want to be concerned withdetail. He forgets about decisions and he has trouble taking decisions
without consulting everyone else first. He thinks about 'direction of the hotel' etc, so I suppose
he's more strategic. He does interfere sometimes though, by ordering my staff about orbypassing
me to get information from them.

8. Rick Fowler (Facilities manager) '
There's a fair amount to do here with the hotel being a grade II listed building. This is a 'special'
occasion hotel and I love the 'pre-war' feel to it. I've an excellent team of tradesmen under me
who are all qualified. They take pride in their work but there isn't always enough to keep them
occupied. Byron is a good enough man but on occasion he's difficult to pin down. He does
occasionally annoy me. He gives his opinion on how one of my staff should carry out a repair. He
orders them about too, overriding my authority. One instance willsuffice. Last month he ordered
Angus (a joiner) to repair his office door when I'd told Angus to refit a bathroom door in Room
22. This door would not close. We had a particularly difficult customer who wanted a room
change. When I remonstrated with Byron his response was '...why didn't you tell me you'd
scheduled Angus for elsewhere ...'. That's not the principle. Byron should only take decisions like
that following consultation with me. I go to Peter (Unwaring) for decisions on most things.'
Peter Unwaring (Operations manager) '
I look after the day-to-day operations of the hotel – bookings, staffing, etc. I only involveByron if
there is a problem. Wehave our weekly manager meetings whichare fairly easy going. Byronis a
good man to workfor– he does think 'big' though. He's alwayscoming up withideas forthe hotel.
He's also astonishing to watch with our regular customers. They adore him.
Alexandra Thorpe-Watson (Manager, The Regent)
'The acquisition was good news for us. The hotel needs some refurbishment – at the moment it
has a little too much 'faded gentility'. Byron from The Imperial seems an enthusiastic person.
We'veagreed that this hotel needs to be re-positioned. I've been here a year, and before I joined
the hotel was losing its direction.
Niall Gallagher (Manager, The Serpentine)
'This is a good hotel with a good occupancy rate. Our clients are mostly business people in
Chittagong for a few days. We also get tourists, which we need to encourage as our weekend
occupancy needs improving. Byron seems to be fairly open-minded in terms of ideas for the
direction of the group. I'll be interested in what he comes up with.
Byron Tuffin (Group owner)
'I'm really excited about our future. The group now has different hotels. We now have different
coveragegeographically and in terms of markets. We'llneed to invest in refurbishment, though. I
haveno problem withthat. Ifully understand and believe in the importanceof the client.Youhave
to make each guest feel that he is the most important person in the hotel.'
Requirement:
Prepare a memorandum covering the following.
(a) An appropriate organisations structure for the group together with reasons for your
recommendation and the advantages your structure would bring.
(b) A review of Byron's management style and your reasoned suggestions for a new
management structure, indicating the advantages of the new structure.

9. Answer:
Byron Tuffin
Memorandum
To: The Imperial Hotel Group Ltd
Prepared by: ABC Consultants
Date: July 20X4
Subject: Management and organisations structure
1 Organization structure
Current structure
The current structure is functional. This can be shown as follows.
This structure is perfectly suitable for a single hotel. However, despite the acquisitions being in
the same area of business (hotels), this structure is no longer available for the followingreasons.
(a) Decision-making will take too long due to
– The sheer volume of information being made available
– Different geographical coverage
(b) Centralized decisions will not make individuals react quickly enough to changes in the
market
(c) It may stifle initiative and creativity of the individual hotel managers who may well have
very good marketing ideas.
Recommended structure
For the reasons outlined above and below we would recommend the adoption of a divisional
structure. This would be as follows.
Group Services
The following are the advantages of such a structure.
(a) It is now much easier to assess the performance of each hotel and its manager
Byron Tuffin
Managing Director
Finance Manager
Carolyne Reeder
Facilities Manager
Rick Fowler
Operation Manager
Peter Unwarning
Board B
Tuffin
The imperial to
be appointed
The serpentine
Niall Galagar
The Orangery
Jonathan Rigby
The Regent
A Thorphy Watson
-Finance Director-CReeder
-FacilitiesManagerOperationManager
-PeterUnwarning
Rick Fowler

10. (b) Group services can set standards for the whole group
– In maintenance
– In service
(c) The group may benefit from purchasing economies, e.g.
– In cleaning services
– Laundry arrangements
(d) Individual managers feel more motivated because they are directly responsible for the
performance of their hotel.
(e) They can adapt more quickly to any changes in their respective markets.
(f) Group services can usefully redirect and re-allocate funds to the hotel needing it most.
This structure willalsofacilitate any potential growth.Withgroup support services in place, extra
hotels could be added as new divisions.
2 Management style and structure
Current style of structure Byron Tiffin’s current management seems to vary between
authoritarian and decentralized.
At times he interferes with decisions taken by individual managers (see the comments of R
Fowler).
Conversely,he distances himself fromdetail and is only interested in top-levelconsiderations and
decisions.
This ambiguity leads to inconsistent attitudes. Staff need to know exactly to whom to report and
the precise extent of their own authority.
Recommended style and management structure:
We recommend that Byron introduce a management structure as outlined in the diagram above,
i.e.
 A board of directors comprising the group service directors and directors of the
other three hotels plus at least one non-executive director.
 The adoption of a decentralized management style.
The advantages of these two simple changes are numerous and include the following.
(a) Clear and unambiguous reporting line – it is very important that the exact extent of the
decentralization is established. The limits should be defined in terms of spending limits, hire/fire
of staff, etc.
(b) It allows individual hotel managers to exercise initiative in running the hotels.
(c) This delegation of authority will improve/maintain motivation of the hotel managers. They
are aware that their performance is to be assessed on the basis of the performance of the
individual hotel.
(d) It allows Byron to stay away from the 'detail' and thus to focus on group direction/strategy.

11. (e) The board is now responsible for group direction; this is preferable to having Byron dictate
the direction and actionof individual hotels. The Serpentine, forexample, taps a different market
from the other hotels in the group and so requires a knowledge of a different market. It is thus
important that the board take decisions at this level. The non-executive directors will provide a
check on the activities of the directors.
Case-2: Doddess Plc (Page-280-281)