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Organizational - Structure 2.2
Organizational - Structure 2.2
Organizational - Structure 2.2
IB Business Management
By the end of this topic, you should be able to:
• Contrast formal organization and informal organization.
• Define the terms organizational structure and organizational chart.
• Define the terminology in relation to different types of
organizational structures.
• Draw and describe different types of organizational charts.
• Outline the project-based organization and the Shamrock
organization.
• Explain the appropriateness of different organizational structures
given a change in external factors.
Formal organization
• Refers to the unofficial network of personal and social
relations that exist within an organization.
• Group of interactions among relatives, friends and companions
within an organization. These interactions are present during
work, meetings, trips, lunch time, etc.
• Exists in every organization and it is not stable.
• Does not officially exist as it does not have its own rules and
regulations.
• Escapes from the limits of the formal organization such as work
schedules, physical area, etc.
• Individuals get a certain social position or status based on their
role in each group.
Informal organization
• Communication is informal – it is done through rumours and
non-official channels.
• The main objectives are friendship, security, common
interest, individual and group satisfaction, etc.
• Members get social and personal benefits such as the
development of friend circles, communities, groups, etc.
Informal organization
• Define the term organizational structure.
• Formal system that orders and directs the different elements of
an organization in order to achieve its aims. These elements
include rules, procedures, roles, functions, and responsibilities.
• Define the term organizational chart.
• Graphical representation of an organizational structure. It shows
the levels of hierarchy within an organization as well as the lines
of authority, control, accountability, and communication.
Knowledge check
• Define the term delegation.
• Decision of a superior to pass down the responsibility of a
function or task. The superior remains accountable for the
outcome of that decision.
• Define the term bureaucracy.
• Managing system that has rules and procedures to make
decisions.
• Organizations are usually bureaucratic.
• A highly bureaucratic organization or an organization with “red
tape” is an organization with many rules and procedures that
makes the decision-making process complex.
Knowledge check
• Distinguish between a line manager and a staff manager.
• A line manager is an individual with the authority to make
decisions and who bears responsibility for the outcomes of those
decisions. A staff manager is an individual with the authority to
communicate the decisions made by a line manager without the
responsibility for those decisions.
• Distinguish between centralization and decentralization.
• Centralization is the concentration of the decision-making in a
single authority, usually the senior management. Decentralization
is when the decision-making is distributed among the different
levels of an organization. Senior management maintains the core
decisions.
Knowledge check
• Define the term de-layering and state the main purposes of its
application.
• Removal of levels of hierarchy from the structure of an
organization.
• The main purposes are: to reorganize the organizational
structure, to downsize the organization, to reduce bureaucracy, to
reduce costs, to improve communication, to improve efficiency.
• State one possible disadvantage of de-layering.
• It can lead to problems associated with wide spans of control.
Knowledge check
• State the different types of organizational structures.
• By hierarchy
• By function
• By product
• By region
• Matrix
Knowledge check
• Outline the main features of a matrix structure.
• It combines two different types of organizational structures,
generally by product and by function.
• Each product has a team of employees.
• The product manager gets input (and often approval) from the
functional managers.
• The employees have multiple superiors as they report to both the
product manager and a functional manager.
Knowledge check
By hierarchy
By function
By product
By region
Matrix
Draw an organizational chart to represent the following
business.
• The business has four levels of hierarchy. The managing
director has a span of control of four. Each of the four
functional directors controls a supervisory team and has a
span of control of two functional supervisors. Functional
supervisors are responsible for each function and have a span
of control of five members in their staff.
Workpoint
Managing
Director
Knowledge check
‘The most appropriate structure for a
business will be that which best helps it
to achieve its objectives.’
Dearden and Foster (1994)
• State the factors that influence the decision about the
structure of an organization.
• Type of organization
• Business objectives
• Potential growth
• Nature of the market
• External factors
Knowledge check
IB learner profile - Thinkers
Apply the Shamrock organization to your school. Identify:
• The functions that must be considered as core.
• The functions that could be contracted out.
• The functions that are peripheral.
Justify your answers.
Workpoint
• Lominé, L., Muchena, M., and Pierce, R. (2014). Business
Management. Oxford, United Kingdom: Oxford University Press
• Clark, P. and Golden, P. (2009). Business and management Course
Companion. Oxford, United Kingdom: Oxford University Press
• Gutteridge, L. (2009). Business and Management for the IB
Diploma. Oxford, United Kingdom: Oxford University Press
• Thompson, R. and Machin, D. (2003). AS Business Studies. London,
United Kingdom: Harper Collins Publishers
Sources