1. Organisational Structure
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2. SapientNitro’s Global Organisational Structure
SapientNitro, including its Australian business led by Sean Cummins (seated middle right with staff in this photo), has established a global organisational structure that retains the flexibility of a boutique creative agency.
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3. Organisational Structure Defined
Division of labour and patterns of coordination, communication, workflow, and formal power that direct organisational activities
Relates to many OB topics (eg. job design, teams, power, organisational culture, organisational change)
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Division of Labour
Subdividing work into separate jobs assigned to different people
Division of labour is limited by ability to coordinate work
Potentially increases work efficiency
Necessary as company grows and work becomes more complex
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5. Coordinating Work Activities
Informal communication
Sharing information, forming common mental models
Allows flexibility
Vital in nonroutine and ambiguous situations
Easiest in small firms
Applied in team-based structures
Includes integrator roles
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6. Coordinating Work Activities
Formal hierarchy
Direct supervision
Assigns formal (legitimate) power to manage others
Coordination strategy for departmentalisation
Standardisation
Standardised processes (eg. job descriptions)
Standardised outputs (eg. sales targets)
Standardised skills (eg. training)
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7. Elements of Organisational Structure
Department-alisation
Span of control
Elements of organisational
structure
Formalisation
Centralisation
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Span of Control
Number of people directly reporting to the next level
Assumes coordination through direct supervision
Wider span of control possible when:
Other coordinating mechanisms are present
Routine tasks
Low employee interdependence
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9. Tall vs. Flat Structures
As companies grow, they:
Build taller hierarchy
Widen span, or both
Problems with tall hierarchies
Overhead costs
Worse upward information
Focus power around managers, so staff less empowered
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10. Problems with Flatter Structures (Delayering) in Large Firms
Undermines management functions
Increases workload and stress
Restricts management career development
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11. Centralisation and Decentralisation
Formal decision making authority is held by a few people, usually at the top
Centralisation
Decision making authority is dispersed throughout the organisation
Decentralisation
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Formalisation
The degree to which organisations standardise behaviour through rules, procedures, formal training, and related mechanisms
Formalisation increases as firms get older, larger, and more regulated
Problems with formalisation
Reduces organisational flexibility
Discourages organisational learning/creativity
Reduces work efficiency
Increases job dissatisfaction and work stress
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13. Mechanistic vs. Organic Structures
Narrow span of control
High formalisation
High centralisation
Organic
Wide span of control
Little formalisation
Decentralised decisions
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14. Boost Juice’s Evolving Structure
Boost Juice had a classic simple organisational structure when Janine Allis opened the first store in Adelaide. Now with more than 200 stores employing 2000 people, the company has evolved into a functional structure with several departments. As it expands overseas, the structure will likely change again to meet company needs.
Courtesy of Boost Juice Pty Ltd
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15. Effects of Departmentalisation
Specifies how employees and their activities are grouped together.
Three functions:
Establishes chain of command (supervision structure)
Creates common mental models, measures of performance, etc.
Encourages staff to coordinate through informal communication
Courtesy of Boost Juice Pty Ltd
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16. Features of Simple Structures
Minimal hierarchy – staff reports directly to owner
Roles are fairly loosely defined for flexibility
Informal communication for coordination
Centralised structure – owner makes most decisions
Courtesy of Boost Juice Pty Ltd
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17. Functional Organisational Structure
Organises employees around specific knowledge or other resources (eg. marketing, production).
CEO
Finance
Production
Marketing
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18. Evaluating Functional Structures
Benefits
Economy of scale
Supports professional identity and career paths
Easier supervision
Limitations
More emphasis on subunit than organisational goals
Higher dysfunctional conflict
Poorer coordination – requires more controls
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Divisional Structure
Organises employees around outputs, clients, or geographic areas.
CEO
Healthcare
Lighting
products
Consumer lifestyle
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Divisional Structure
Different forms of divisional structure
Geographic structure
Product structure
Client structure
Best form depends on environmental diversity or uncertainty
Movement away from geographic form
Less need for local representation
Reduced geographic variation
More global clients
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21. Evaluating Divisional Structures
Benefits
Building block structure – accommodates growth
Focuses on markets/products/clients
Limitations
Duplication, inefficient use of resources
Specialisations are dispersed – silos of knowledge
Politics/conflict when two forms of equal value
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Team-Based Structure
Self-directed work teams
Teams organised around work processes
Typically organic structure
Wide span of control – many employees work without close supervision
Decentralised with moderate/little formalisation
Usually found within divisionalised structure
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23. Evaluating Team-Based Structures
Benefits
Responsive, flexible
Lower admin costs
Quicker, more informed decisions
Limitations
Interpersonal training costs
Slower during team development
Role ambiguity increases stress
Problems with supervisor role changes
Duplication of resources
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24. Matrix Structure (Project-based)
Employees ( ) are temporarily assigned to a specific project team and have a permanent functional unit.
CEO
Game1
project leader
Game2
project leader
Game3
project leader
Art department leader
Software dept leader
Audio dept
leader
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25. Evaluating Matrix Structures
Benefits
Uses resources and expertise effectively
Improves communication, flexibility, innovation
Focuses specialists on clients and products
Supports knowledge sharing within specialty
Solution when two divisions have equal importance
Limitations
Increases goal conflict and ambiguity
Two bosses – dilutes accountability
More conflict, organisational politics and stress
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26. Network Organisational Structure
Product development partner (U.K.)
Call centre partner (Philippines)
Alliance of firms creating a product or service
Supporting firms beehived around a “hub” or “core” firm
Core firm
Accounting partner
(NZ)
Package design partner (Australia)
Assembly partner (China)
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27. Evaluating Network Structures
Benefits
Highly flexible
Potentially better use of skills and technology
Not saddled with same resources for all products
Limitations
Exposed to market forces
Less control over subcontractors than in-house
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28. J&J’s Decentralised Structure
Johnson & Johnson (J&J) is a conglomerate of 250 businesses in 57 countries that manufacture and/or market a wide variety of health-related products. To operate in this complex and diverse environment, J&J has a decentralised divisional organisational structure.
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29. External Environment & Structure
Dynamic
• High rate of change
• Use team-based, network, or other organic structure
Stable
• Steady conditions, predictable change
• Use mechanistic structure
Complex
• Many elements (such as stakeholders)
• Decentralise
Simple
• Few environmental elements
• Less need to decentralise
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30. External Environment & Structure (cont.)
Diverse
• Several products, clients, regions
• Use divisional form aligned with the diversity
Integrated
• Single product, client, place
• Use functional structure, or geographic division if global
Hostile
• Competition and resource scarcity
• Use organic structure for responsiveness
Munificent
• Plenty of resources and product demand
• Less need for organic structure
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31. Effects of Organisational Size
As organisations grow, they have:
More division of labour (job specialisation)
Greater use of standardisation
More hierarchy and formalisation
More decentralisation
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32. Technology and Structure
Technology refers to mechanisms or processes by which an organisation turns out its product or service
Two contingencies:
Variability – the number of exceptions to standard procedure that tend to occur
Analysability – the predictability or difficulty of the required work
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33. Organisational Strategy
Structure follows strategy
Strategy points to the environments in which the organisation will operate
Leaders decide which structure to apply
Differentiation strategy
Providing unique products or attracting clients who want customisation
Cost leadership strategy
Maximise productivity in order to offer competitive pricing
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34. Organisational Structure
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