ORGANIZATIONAL STRUCTURE

By Himashi De Mel BA (Hons) ; CIMA passed finalist

Introduction to organisational

structure

The set of formal tasks assigned to individuals and departments

Formal reporting relationships, including lines of authority, decision

responsibility, number of levels and span of control

The design of systems to ensure effective coordination of employees across

departments

Organisation chart

A firms organisational structure can be illustrated with an

organisation chart.

Organisation chart would indicate the interaction among job

positions.

This chart indicates the chain of command.

Example: Organisational chart for a

water bottling plant

Organising concepts

Work Specialization is the degree to which

organisational tasks are subdivided into individual

jobs; also called division of labor

Chain of Command is an unbroken line of authority

that links all individuals in the organisation and

specifies who reports to whom

Authority

Authority is the formal and legitimate right to make

decisions and issues orders

Power that has been legitimized by an organisation

Authority is vested in organisational positions, not in people

Authority is received from mainly legal sources but managers can

develop authority by acceptance as well.

Authority is accepted by subordinates

Authority flows down the vertical hierarchy

Authority can be transferred from one to another

Responsibility

Responsibility is the duty to perform the task or activity

assigned

Requirements of assigned task to be done

It should be match with the responsibility

Ultimate responsibility cannot be transferred

Responsibility is highly connected to accountability

Accountability

The obligation to demonstrate and take responsibility for

performance in light of agreed expectations.

There is a difference between responsibility and

accountability:

responsibility is the obligation to act

accountability is the obligation to answer for an action

Delegation of authority

The act of assigning formal authority and responsibility for

completion of specific activities to a subordinate

Also known as passing authority to a lower level

Benefits of delegation

More effective use of your time

Motivation of staff

Training

Self development

More effective working team

Barriers to delegation

Lack of abilities to carry out the delegated tasks

Fear of subordinates

Fear of losing control

Fear that subordinates might do a better job

Some employees do not accept the delegated tasks

Concern about what to do with extra time

Feeling of indispensability

Span of management

The number of employees reporting to a supervisor is

span of management

Factors associated with less supervisor involvement and

larger span of control

Work is stable and routine

Subordinates perform similar work

Subordinates in single location

Highly trained and need little direction

Rules and procedures are defined

Support systems and personnel are available to manager

Little supervision is required

Reorganisation and span of

management

Tall vs flat organisations

Many layers of management

between lowest and highest levels

Small span of control

Close supervision, better

communication and reduce

delegation.

E.g. banking organisation

Characteristics of flat structure

Characteristics of tall structure

Fewer levels in hierarchy

Wider span of control

Subordinates grater decision

making authority, few

management costs , grater

employee motivation but less

control

Centralisation and decentralisation

Change and uncertainty are usually associated with decentralization

The amount of centralization or decentralization should fit the firm’s

strategy

During crisis or risk of company failure, authority may be centralized

Centralization means that

decision authority

is located near the

top of the organisation

Decentralization means

decision authority is

pushed downward to lower

organisational levels

Departmentalisation

Basis for grouping positions into departments

Choices regarding chain of command

Traditional approaches:

Vertical Functional

Divisional

Matrix

Innovative approaches:

Teams

Virtual Networks

Functional and divisional

Vertical Functional Approach

Grouping of positions into departments based on skills, expertise,

work activities, and resource use

Divisional Approach

Grouping based on organisational output

Product, Program, Business (self-contained unit)

Geographic or Customer-Based Divisions

Functional versus divisional structures

Geographic-Based Global Organisation

Structure

Matrix and team approach

Matrix approach combines functional and

divisional approaches

Improve coordination and information

Dual lines of authority

Team approach is a very widespread trend

Allows managers to delegate authority

Flexible, responsive

Dual authority structure in Matrix

organisation

Evaluation of matrix organisational

structure

Advantages Disadvantages

Uses resources and expertise

effectively.

Improves communication,

flexibility, innovation.

Focuses specialists on clients

and products.

Supports knowledge sharing

within specialty across groups.

Two bosses dilutes

accountability.

More conflict, organizational

politics, and stress.

Leads to confusion for

employees, as they are reporting

for two bosses.

Thank You!