Organizational structures

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Organizational structures

• Lecture 7

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Definitions of organizational structures

• They define the levels of management in
  organizations
• Org.structures define relationships between jobs
• They define the centers of decisions in any
  organization.
• They help to achieve organizational goals by
  grouping jobs, defining relationship between
  positions as well as who takes the responsibility
  in organnzation.

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Types of organizational structures

• Functional organizational structure. Employees
  are grouped together according to their similar
  tasks, skills or activities. Functional
  structures are suitable for SMEs with high level
  of specialization.
• The decision making is centralized at the top of
  the organization.

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Benefits of functional organizational structure

• Efficient use of resources
• In-depth skill development
• Clear career paths
• Strategic decisions are made on the top of the
  organization.

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Disadvantages od functional design

• Slow decision making
• Less innovative.
• Performance responsibility is unclear
• Limited management training.
• Poor coordination across functions.

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Divisional organizational structure

• It is suitable for medium sized to big companies,
  expanding geographically or on customer base.
• A Divisional design means that all activities
  needed to produce a good or service are grouped
  into an anonymous unit.

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Differences between functional and divisional
design

• Functional designs are based on groupings by
  input
• Each department is not an independent profit
  center

• Divisional design considers output such as
  product, customer or location.
• Each division is independent profit center

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Forms of divisional responsible design

• Product division. Each unit is for a single
  product or a group of related products. Division
  by products is created when there is specific in
  the production process
• Customer division. Organization sells products to
  diverse group of customers.
• Geographic division. It is advantageous when is
  necessary to locate facilities close to customers
  who have differences in regional tastes or needs.

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Strengths of divisional design

• Adaptation to unstable environment
• High customer satisfaction
• High task coordination
• Clear performance responsibility
• General management training.

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Weaknesses of divisional design

• Inefficient use of resources
• Low-in depth training. Decrease of the number of
  personnel reduces the specialization
• Focus on divisions objectives.
• Difficult coordination between headquarter and
  the division.
• Loss of control.

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Hybrid design

• Hybrid design is one that has divisional units
  but also have functional departments specialized
  and centralized in the headquarter.

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Group task

• Give example of organizations having functional,
  divisional design.
• For which industry is functional design more
  appropriate and when divisional is suitable?

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Strengths of hybrid design

• Simultaneous coordination
• Integration of goals with objectives it provides
  autonomy for the divisions to modify their
  objectives based on unique situations.
• Adaptability and efficiency. Adapt to the
  opportunities of the environment.

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Matrix design

• It implements functional and divisional
  structures simultaneously in each department.
• The worker in each department is being supervised
  by two bosses at the same time.
• It is suitable for the following situations
• Environmental pressure exists for a dual focus
• Large amount of information needs to be
  processed
• Innovations are performed
• Organization is working on several projects
  together.
• Efficiency is needed in the use of resources.

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Strengths of matrix design

• Provides flexibility
• Encourages resource efficiency
• Enhances skill development
• Increase motivation and commitment
• Helps top management in planning process.

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Weaknesses of matrix design

• Creates dual authority confusion
• Is time consuming
• Generates high implementation cost
• Requires interpersonal skill training
• Spawns power struggle.

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Organizational design and environment

• The link between design and environment is
  examined by Burns and Stalker.
• There are two types of structures, according to
  them
• Mechanistic
• Organic

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Differences between mechanistic and organic
designs

• In the mechanistic design, tasks are broken down
  into specialized, separate tasks.
• Tasks are rigidly defined.
• Strict hierarchy of authority and control is used
  as well as too many rules are applied.
• Knowledge and control of tasks are centralized at
  the top of organizations.
• Communication is vertical.

• In the organic design, employees contribute to
  the tasks of the department
• Tasks are defined and adjusted through the
  employee interactions
• Less hierarchy and control and few rules
• Knowledge and control are located anywhere in the
  organizations
• Communication is horizontal.

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Task

• Give example of the organizations with organic
  and mechanistic design.
• Which of the design forms is more appropriate in
  Internet economy?

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Relationship between strategy and environment

• Organizations vary according to the environment
• Differentiation. It is the extent to which the
  organization is broken down into departments
• Integration. It is the degree of collaboration
  between the departments

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Relationship strategy and structure

• Alfred Chandler gives the idea that Structure
  follows the strategy.
• There are 3 strategies possible according to
  Chandler
• Defender
• Prospector
• Analyzer.

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Strategies by Chandler

• Defender
• Strategy To protect the organizations market
• Problem how to maintain strict control of the
  organization
• Structure Divisional design, centralized control.

• Prospector
• Strategy Seek high growth of the organizations
  market
• Problem How to facilitate and coordinate
  numerous activities
• Structure Divisional design and decentralized
  control.

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Strategies by Chandler

• Analyzer
• Strategy protect some markets while seeking
  growth in other markets
• Problem How to differentiate the organizations
  structure and processes to accommodate both
  stable and dynamic areas of operation.
• Structure Matrix design, centralized control.

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Link between strategy and structure by Mintzberg

• Design consists of 5 elements
• Strategic apex top management and its staff
• Middle line Middle and first-line managers
• Operating core
• Technostructure engineers, researchers,
  technician
• Support staff.

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Structures by Mintzberg

• Simple structure. It is used by small and young
  organizations run by aggressive environment.
• Machine bureaucracy. The organization is large
  and old, there is standartization of work
  processes. It is suited to stable and simple
  environment.

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Types of structures

• Professional bureaucracy. Operating core is
  dominating, coordination is achieved through
  standardization of skills. Decentralized decision
  making.
• Divisionalised form. Standartization of output is
  performed. Decisions are made by middle managers.
  Suitable for steady environment.
• Adhocracy. Typical for dynamic and complex
  environment. Matrix design with focus on
  operating core and technostructure.

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Relationship between technology and
organizational design

• Technology is process that transforms input into
  output. It includes technology, knowledge, tools,
  techniques.
• Woodward identified three categories of
  technology
• Unit, small-batch technology
• Large batch, mass production technology
• Continuous process technology.