Org Structure (IB Recap)

• Organizational structure is the internal, formal framework of a business that shows how management is organized, linked together, and how authority is passed through the organization
• Organizational structure chart displays:

  • Chain of command; who is answerable and who reports to whom
  • Authority and accountability
  • Formal relationship between people
  • Overall responsibility for decision making
  • Formal channels of communication: vertical/horizontal
  • Span of control
  • Level of hierarchy: a stage of the organizational structure where personnel have equal status and authority
• Tall (vertical) organizational structure has many levels of hierarchy and narrow spans of control, leading to communication issues and a sense of remoteness between higher and lower levels of the organization
• Flat (horizontal) structure has few levels of hierarchy and wide spans of control, encouraging delegation and quick decision-making, but may lead to redundancy and a short chain of command
• Delegation is passing down authority in the organizational structure, giving managers more time to focus on important issues, but can be unsuccessful if sufficient authority isn't given or if the person is inadequately trained
• Self-actualization is drawing fulfillment through work, encouraging staff accountability, and preparing them for senior posts
• Accountability is the obligation to account for activities and disclose results transparently
• De-layering is the action of removing a level in a business hierarchy in order to reduce the size of a business hierarchy, especially in terms of a reduction in management. This creates a flatter (less layered) organizational structure.
• Bureaucracy is an organizational system with standardized procedures and rules
• Centralization keeps important decision-making powers within the head office, while decentralization empowers subordinates and regional/product managers
• Hierarchical structure allocates power and responsibility based on standing or position in the hierarchy, which can be divided by product, region, or function
• Matrix structure creates project teams cutting across functional departments, encouraging communication and specialist knowledge, but may lead to conflicts of interest and less focus on business aims
• Handy's Shamrock organization divides workers into core, outsourced, and flexible workers, each with different roles and expectations
• Effective communication aids in motivation, generates new ideas, promotes coordination between departments, speeds up decision-making, reduces errors, and requires feedback
• Cultural differences impact communication, such as high context vs low context culture and sequential vs synchronic culture
• Technology impacts communication by requiring training, posing security issues, initial costs, reduced social costs, and information overload
• Level of hierarchy: a stage of the organisational structure at which the personnel on it have equal status and authority 
• Span of control: number of subordinates reporting directly to a manager
• Chain of command: route through which authority is passed down an organisation – from the CEO and the board of directors
• Delegation: pass down authority in the organizational structure
• Disadvantages of Tall org Structures:

  • Communication issues
  • Narrow span of control
  • Sense of remoteness between higher and lower levels of the organization
• Advantages to Delegation : Gives managers more time to focus on other important issues

  Showing trust in one’s subordinates may motivate them

  Self-actualization: draw fulfillment through their work

  Encourages staff to be accountable for their work based activities

  May train them for senior posts
• Disadvantages to Delegation: only boring tasks will be delegated which may not be motivating

  Delegation is unsuccessful if sufficient authority isn’t given along with it the person is inadequately trained to do the job 
• Accountability: obligation of one to account for their activities and to disclose results in a transparent way.
• Delayering: removal of one/ more of the levels of hierarchy from an organisational structure
• Advantages to Delayering: Reduce business costs

  Wider span of control; more delegation

  short chain of command; eases communication

  Less Sense of remoteness, helps motivation
• Disadvantages of Delayering: One-off costs, eg: Redundancy payments for laid off managers; Remaining managers may dwell in workload; Redundancy being used as a way of cutting costs may reduce workforce’s sense of security 
• Advantages to Centralisation: Rapid decision making since the whole organization follows the same rules; Experienced decision makers

  No conflict between divisions since only one body holds all decision making authority 

  Decisions taken in the interest of the whole business not just one division
• Advantages to Decentralisation: Quick decision making in response to changing business environment; Manager would knows the regional needs and make decisions based on that; More delegation opportunities; more motivation; Prepares subordinates for senior, challenging posts
• Advantages to Org Charts by Product:

  • More autonomous than functional divisions in terms of recruitment, budgeting, advertising
  • Allow a team to focus on only one single product
  • Better than multiple divisions managing the development of a product since one division means they could keep in track of development and build common culture/morale
• Disadvantages to Org Charts by Product:

  • Encourages rivalries between different product division competing for financial resources; lacks cooperation
  • Duplication of developments, lacks coordination
• Advantages to Org CHarts by Function:

  • Grouping employees by their functional skills improves efficiency since people of common goals are clustered together promoting collaboration and professional expertise
  • Employees can capitalize on their specialized skills as means of moving up the ladder in a given department.
  • Such structure is not immune to change since managers defend their position in the hierarchy and importance of their department
• Disadvantages of Charts by Function:

  • Lacks horizontal links between departments; lacks coordination
  • Managers develop tunnel vision; more focus on departmental objects rather overall corporate aims
• Advantages to Charts by REGION:

  • Recruitment of manager who are aware of the local business environment
  • Attracts local customers since the business tends to the needs of the particular regions
  • Conversation tend to be more direct/personal in a geographical organizational structure
  • Tracking the performance of individual regional markets is simplified under this structure, as measures such as revenues, profit margins, costs and performance improvements can be tracked to specific regions.
• Disadvantages to Charts by Region:

  • Unhealthy competition between different regions
  • Duplication of personnel between head and regional offices
  • Poor coordination between different regions may lead to inconsistent strategies being adopted
  • Difficult to keep up the core company belief eg.ethical code of practice in different regions
• Factors influencing organizational structure:

  • New technology IT may render jobs such as secretaries writing up letter useless, makes communication between head and regional offices easier resulting in middle management unnecessary.
  • Business size, number of employees
  • Leadership style, autocratic: narrow span of control, democratic: wide span of control, delegation etc.
  • Corporate objectives such as expansion to other countries may require decentralization
  • Retrenchment due to competition/economic recession causes delayering.
• Matrix structure: organizational structure that creates project teams that cut across all functional departments; horizontally linked structure, eg: IT businesses, not suitable for service/ business producing products with longer life span.
• Handy's Shamrock organization structure includes three types of workers: core, outsourced, and flexible workers
• Core workers:

  • Carry out core processes essential for the survival and growth of the business
  • Given full-time permanent jobs with high salaries
  • Expected to be loyal and work long hours
• Outsourced workers:

  • Could be independent providers or "contractual fringe" such as IT services, payroll, training, etc.
  • Do not carry out jobs that are core to business processes