Organisational Structure

Organisational structure and design (In development)

Organisational structure

 The formal arrangement of jobs within an organisation.

Organisational design

 A process involving decisions about six key elements:

1.             „ Work specialization

2.             „ Departmentalization

3.             „ Chain of command

4.             „ Span of control

5.             „ Centralization and Decentralization

6.             „ Formalization

1. Work specialization

 The degree to which tasks in the organisation are divided into separate jobs with each step completed by a different person. However, Over specialization can result in human dis-economies from boredom, fatigue, stress, poor quality, increased absenteeism, and higher turnover.

2. Departmentalization by type

·                     Functional: Grouping jobs by functions performed

·                     Product: Grouping jobs by product line

·                     Geographic: Grouping jobs on the basis of territory or geography

·                     Process: Grouping jobs on the basis of product or customer flow

·                     Customer: Grouping jobs by type of customer and needs

3. Chain of Command

The continuous line of authority that extends from upper levels of an organisation to the lowest levels of the organisation and clarifies who reports to who.

·                     Authority

 The rights inherent in a managerial position to tell people what to do and to expect them to do it.

·                     Responsibility

 The obligation or expectation to perform.

·                     Unity of command

 The concept that a person should have one boss and should report only to that person.

4. Span of control


 The number of employees who can be effectively and efficiently supervised by a manager.

  Width of span is affected by:

1.               Skills and abilities of the manager

2.               Employee characteristics

3.               Characteristics of the work being done

4.               Similarity of tasks

5.               Complexity of tasks

6.               Physical proximity of subordinates

7.               Standardization of tasks

5. Centralization and Decentralization

Centralization

  The degree to which decision-making is concentrated at a single point in the organisations.

  Organisations in which top managers make all the decisions and lower-level employees simply carry out those orders.

·                     Environment is stable.

·                     Lower-level managers are not as capable or experienced at making decisions as upper-level managers.

·                     Lower-level managers do not want to have a say in decisions.

·                     Decisions are significant.

·                     Organisation is facing a crisis or the risk of company failure.

·                     Company is large.

·                     Effective implementation of company strategies depends on managers retaining say over what happens.

Decentralization

  Organisations in which decision-making is pushed down to the managers who are closest to the action.

·                     Environment is complex, uncertain.

·                     Lower-level managers are capable and experienced at making decisions.

·                     Lower-level managers want a voice in decisions.

·                     Decisions are relatively minor.

·                     Corporate culture is open to allowing managers to have a say in what happens.

·                     Company is geographically dispersed.

·                     Effective implementation of company strategies depends on managers having involvement and flexibility to make decisions.

6. Formalization

·                     The degree to which jobs within the organisation are standardized and the extent to which employee behavior is guided by rules and procedures.

·                     Highly formalized jobs offer little discretion over what is to be done.

·                     Low formalization means fewer constraints on how employees do their work.