Organisational Design

and Structure
Engr. Dr Aede Hatib Bin Musta’amal
Organizational Structure
• Organizing
– The process by which managers establish
working relationships among employees to
achieve goals.
• Organizational Structure
– Formal system of task and reporting
relationships showing how workers use
resources.
• Organizational design
– The process by which managers make specific
choices that result in a particular kind of
organizational structure --- usually presented in
form of an organisation chart
 Organization Chart
• A chart that shows the structure of the
organization including the title of each
manager’s position and, by means of
connecting lines, who is accountable to
whom and who has authority for each
area.
• Indicating work specialisation:
• A component of organization structure
that involves having each discrete step
of a job done by a different individual
rather than having one individual do the
whole job
 Organization Chart

Information Services Group

Knowledge Architecture Manager

Knowledge Architecture Lead Search/Systems Lead Design Lead

Customer Liaison Developer Assistant Designer

Developer
Cataloger
Systems Admin
Cataloger

Taxonomy Designer
Economies of Specialisation
Why Have a Structure?
• to organise what they do

• A clear structure makes it easier to see

which part of the organisation does
what

• There are many ways to structure an

organisation
Organisational Structure Principles
• Chain of command
– The management principle that no person should
report to more than one boss
• Span of control
– The number of subordinates a manager can
direct
efficiently and effectively
• Authority
– The rights inherent in a managerial position to
give orders and expect them to be obeyed
• Responsibility
– An obligation to perform assigned activities
• Power
– An individual’s capacity to influence decisions
 Chain of Command
• Managers should carefully evaluate:
– Do the organization have the right number of
middle managers?
– Can the structure be altered to reduce levels?
• Centralized and Decentralized of Authority
– Decentralization puts more authority at lower
levels and leads to flatter organizations.
• Works best in dynamic, highly competitive
environments.
– Stable environments favor centralization
of
authority.
Chain of Command
The Span Of Control
• The number of subordinates reporting
directly to a supervisor (the number
of workers a manager manages).
• Wide spans: larger number of direct
reports.
• Narrow spans: fewer number of direct
reports.
• Tall Organisations:
• Have many levels of authority (more
management
layers) and narrow spans of control
• Flat Organisations:
– fewer management layer, decision making closer to
the customer, and wide spans of control
– Structure results in quick communications but can
Tall Organisation Structure
Flat Organisation Structure
Authority
• Authority
– The power to hold people
accountable for their actions and to
make decisions concerning the use of
organizational resources.
• Hierarchy of Authority
– An organization’s chain of command,
specifying the relative authority of
each manager
Authority
Types of Organisational Authority
• Line authority
– The position authority (given and defined by
the organization) that entitles a manager to
direct the work of operative employees
• Staff authority
– Positions that have some authority (e.g.,
organization policy enforcement) but that are
created to support, assist, and advise the
holders of line authority
 Power
• Types of power

Power based on one’s

Legitimate position in the formal
hierarchy

Coercive Power based on fear

Power based on the ability

Reward to distribute something that
others value
Power based on one’s
Expert expertise, special skill, or
knowledge
Power based on
Referent identification with a person
who has resources or
traits
Ways to Structure an organisation
• By simple structure
• An organizational form in which the
owner-manager makes most of the
decisions and controls activities, and
the staff serve as an extension of the
top executive.
• By function
– arranging the business according to
what each section or department
does
Ways to Structure an organisation
• By product or activity
– organising according to the different
products made
• By area
– geographical or regional structure
• By customer
– where different customer groups have
different needs
• Other structure:
– Matrix structure
Functional Structure
• Functional organizational structures are the
most common.
• A structure of this type groups individuals by
specific functions performed. Common
departments such as human resources,
accounting and purchasing are organized by
separating each of these areas and managing
them independently of the others.
• For example, managers of different functional
areas all report up to one director or vice
president who has responsibility for all of the
operational areas.
 Functional Structure

Advantages Disadvantages
• Specialisation – each • Closed communication
department focuses on could lead to lack
its own work of focus
• Departments can
• Accountability –
become
someone is responsible resistant to
for the section change
• Clarity – know your and • Coordination
others’ roles may take too
long
• Gap between top and
bottom
Product Structure
• Customers are served by self-contained
divisions that handle a specific type of product
or service.
• Allows functional managers to specialize in one
product area.
• Division managers become experts in their
area.
• Removes need for direct supervision of division
by corporate managers.
• Divisional management improves the use of
resources.
Product Structure
Product Structure
Advantages Disadvantages
• Clear focus on market • Duplication of
segment helps meet functions (e.g.
customers’ needs different sales force
• Positive competition
for each division)
between divisions
• Negative effects of
• Better control as each
division can act as competition
separate profit centre • Lack of central control
over each separate
division
Structure by Area
• Each regional or a country or area with
customers with differing needs is served
by a local self-contained division
producing products that best meet
those needs.
Structure by Area
Structure by Area
Advantages Disadvantages

• Serve local needs • Conflict between

better local and
• Positive central
competition management
• More effective • Duplication of
communication resources
between firm and and
local customers functions
Structure by Customer
• Certain industries will organize by customer
type.
• This is done in an effort to ensure specific
customer expectations are met by a
customized service approach.
• An example of this would be in healthcare. A
patient seen as an outpatient has very
different needs than those of patients who
spend time in the hospital as inpatients.
A customer centered structure creates
customized care for those patients.
Matrix Structure
• An organization structure in which employees are
permanently attached to one department but also
simultaneously have ongoing assignments in which
they report to project, customer, or product,
• An organizational structure that simultaneously
groups people and resources by function and
product.
• Results in a complex network of superior-
subordinate reporting relationships.
• The structure is very flexible and can respond
rapidly to the need for change.
• Each employee has two bosses (functional
manager and product manager) and possibly
cannot satisfy both.
Matrix Structure
• Advantages • Disadvantages
– Facilitates the – Can cause
use of uncertainty and
specialized lead to intense
personnel, power struggles
equipment and – Working
facilities relationships
– Provides become more
professionals complicated
with a broader – Decisions may
range of take longer
responsibility
and experience 10-31
 Challenges in Organization
• Merging separate organizations with
different structures
• Changing an existing organization to
meet external or internal changes
in conditions
• Conflicts between departments or
groups
• Interdependence between
organizational units
• Centralization vs.
April 18, 2006
decentralization
 Centralization and
Decentralization
• Centralization
– A function of how much decision-making
authority is pushed down to lower levels in an
organization; the more centralized an
organization, the higher the level at which
decisions are made
• Decentralization
– The pushing down of decision-making authority
to the lowest levels of an organization

Prentice Hall, 2002

April 18, 2006 LIS580- Spring 2006 33
 Decentralize?
• Decentralized Organization
– Organizational authority for most departmental
decisions is delegated to the department heads.
– Control for major companywide decisions is
maintained at the headquarters office.
• Decentralization Rules:
– Decentralize decisions that affect only one division
or area and that would take a long time for
upper management to make.
– Centralize decisions that could adversely affect the
entire firm and that upper management can fairly
quickly and easily.
G.Dessler, 2003
April 18, 2006 LIS580- Spring 2006 34
Thank you for your attention

See all of you again after the

mid-break