Topic 5

Basic Organisational
Design
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 LEARNING OUTCOMES
By end of this topic, you should be able to:
• describe the six structural elements of organisational design;
• describe the five departmentalisation methods;
• explain the differences between mechanistic and organic
organisations;
• explain the contingency factors that influence organisational
structure;
• elaborate the six organisational 1-21
design structures. 2
6 STRUCTURAL ELEMENTS
Specialisation

Chain of Command

Span of Control

Authority & Responsibility

Centralisation & Decentralisation

Departmentalisation
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Specialisation

• workers are assigned

specific tasks.
• Work specialization is the
focus of the productive
effects of an individual
• division of labour breaks
down a production
process into a number of
separate operations

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Chain of Command

• hierarchy of reporting
relationships, accountability
• lines of authority and
decision-making power
within ranks of organisation.

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 Span of Control Few subordinates
under supervision
in next level: 3

• number of subordinates
under direct control

Many subordinates
in next level: 9

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Centralisation &
Decentralisation
• authority of
decision-making
kept at the top
level, is known
as centralised;
• when authority
delegated to
lower
organisational
levels, is known
as decentralised. 1-21 7
Source: slideshare.net/biswajit_86/bureaucracy-centralization-decentralization 1-21 8
 5 Departmentalisation Methods

Functional Product Customer Geographical Process

By product
By specific By location
By line, all By special
customers / (state,
performing related skills in a
groups' region,
a particular activities production
needs and country or
function under one process
specifications continent)
department

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MECHANISTIC &
ORGANIC
ORGANISATIONS
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 Mechanistic Organisation Organic Organisation
Emphasizes high level of productivity Emphasizes high level of productivity
and efficiency through: and efficiency through:
- high specialisation of labour - low degree of specialisation

- specialised job specification, - broad/loose defined job

responsibilities / roles responsibilities / roles

- best in stable environment - adaptive to dynamic environment

- extensive use of rules & procedures - limited use of rules and procedures

- centralised authority - decentralised authority

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 Contingency Factors influencing Organisational Structures

STRATEGY SIZE TECHNOLOGY ENVIRONMENT

• Structure follow • has impact on • complements • organisations

Strategy structure organisation re-structure to
• refashioned creation structure ensure
structure for • less important • to achieve high responsiveness
successful if organisation level of and flexibility to
implementation keeps effectiveness environmental
of new strategy expanding changes

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 Organisational Design Structures & Its Application

Simple Functional Divisional Matrix Team Boundaryless

Projects no vertical,
Faster Big
When need corporation, need horizontal
decisions
fast response mix work barriers
for small & Use work
to functional + groups
sole-owner specialization
geographical divisional / teams
firms. for economic
/market employees
of scale
/products managers
Change when
needs
growth >1 manager customers
horizontal
suppliers

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 Support, Collaboration, Coordination

Direct
reporting

Team
Structure
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 SUMMARY

• A well designed organisational structure can support an

organisation in its market competition, productivity, efficiency
and survival.

• An organisation needs to define well in its structure elements

when design its organisation structure.

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• Departmentalization is a method of dividing an organization into
different departments, which performs certain tasks in accordance
with the department's functions, products, geographic, customers,
and process.

• Some organisations may elect to redesign their structures for

successful implementation of new strategy.

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