Lesson 1.1-Bussiness Management_JM

8/12/2019 Lesson 1.1-Bussiness Management_JM

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Lesson 1.1

Organisational Structures andManagement Theories


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Agenda

Organisational Structure

Functional structure

Divisional structure

Matrix structure

Network structure

Virtual organisation

Theories of Management

Classical School

Human relations school

Systems theory

Contingency theory


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Organisational structure refers to the pattern of relationships among positions in theorganisation and members of the organisation(1).Structure determines the way

information flows between levels in the organisation and degree to which

responsibilities are delegated, controlled, and coordinated.

Types of organisational structures:

Functional

Divisional

Product/brand

Geographical

Matrix


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OrganisationalStructure

Vertical structure Horizontal structure

Organisational structure can be further divided in to two types:

Vertical /hierarchical organisation-The authority and responsibility is depicted with

clear limits. e.g. Divisional

Horizontal /Flat structureWhere activities are grouped in order to use theresources toward goal achievement. e.g. Network


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Dimensions of Organisational Structure

Formalisation

Centralisation

Specialisation

Standardisation

Configuration


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Challenges in shaping structure Organisational structure and strategy are very closely related. Whenever there is a

change in the strategy it should be accompanied by a change in structure. If not there

can be business failures.

Size of the organisation

Level of diversification

Type of technology

Control

Change

Knowledge

Globalisation


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Choosing Structures

1.Market advantage test:

According to Alfred Chandler structure follows strategy :Does the structurefacilitate the strategy?

2.Parenting advantage test:

Does the structure match the parenting role of the business unit?

3.People test:

Are necessary people and expertise and skills available?

4.Feasibility study:

Technical, financial, social/ecological, commercial


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Functional Structure

Chief ExecutiveOfficer

Production Marketing Finance HR

The organisation is divided main activities (production, marketing etc) where

similar activities are grouped under independent departments. This structure is

suitable for stable environments with routine technology where interdependence

between departments is less and functional specialisation is emphasised.


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Divisional Structure

Product/ Brand Organisational Structure

Head Office

Pharmecutical Divisional Manager

Production

Marketing

HR

Finance

Cosmetics Divisional Manager

Production

Marketing

HR

Finance

Healthcare Divisional Manager

Production

Marketing

HR

Finance


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Divisional Structure

Geographical StructureHead Office

Divisional Manager-North

Production

Marketing

HR

Finance

Divisional Manager-South

Production

Marketing

HR

Finance

Divisional Manager-Central

Production

Marketing

HR

Finance


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Matrix Structure


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Project-based Structure

A project can be defined as a unique undertaking to achieve a specific objective that

requires resources and activity. It has a definitive beginning and an end. Teams are

formed, undertake project activities, then dissolved.

This type of structure is used for events with a limited time duration, e.g.

Construction. Project life cycle may vary in terms of time frame from a couple of weeks

to several years, dependent on the complexity, size and content of the project.

This is suitable where organisational structure has to constantly change. A small

corporate group will steer the project teams.


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Virtual Structure

A virtual organisation exists within a network of alliances, using the Internet and

other technological innovations such as e-mail and VoIP. It does not actually need to

exist in a physical form in one location.

The unique aspects of virtual organisations is that the company can operate globally

while the core of the organisation can be small amazon.com is a an example of a

successful virtual organisation.

It helps to overcome certain disadvantages of traditional structures due to its

flexibility and adaptability to change.


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Network Structure

This structure is more complicated than other structures. This consists of multiple

organisations that work together for one purpose.

Corecompany

Purchasingagencies

Manufacturingcompany HR Agency

Distributioncompanies


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There are four main schools of management thinking

Classical School

Scientific Management

Functions of Management

Bureaucracy

Human relations school

Systems theory

Contingency theory


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Contemporary perspective on organisations

Unlike the early days, the recent literature on management is immense and it is

difficult to categorise all these theories.

According to Gareth Morgan (author of management theory), we use different

perspectives as we try to understand organisations. e.g. the photographs of the

Parthenon from different angles can give different perspectives.

Likewise, the way we look at an organisation influences our understanding.

One such perspective is thinking organisation as a machine,where jobs, activities

and departments are organised to perform certain functions effectives and

smoothly.

This idea is implicit in early theories such as scientific and classical management.


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Managers or leaders

Generally the definitions for managers and leaders tend to overlap, however there

is a distinct difference. Managers require leadership skills but not all leaders are

managers.

Leaders providing direction, developing a vision and then influencing others, work

towards attaining organisational objectives.

We can observe natural leaders emerging in groups. But managers are usually

appointed or nominated as leaders and sometimes lack qualities displayed by a

strong leader. In spite of the fact that leadership is one of the most researchedareas in organisations and management,defining leadership qualities is complex.

However the importance of leadership to an organisation and its link with power,

authority and influence is widely accepted.


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Organisational Structure and Classical Management Theory

This theory tries to find the best form of organisational structure. It aims at

presenting general principles of management to guide the design of appropriate

organisational structure.

The followers of the classical management theory believe there is one best way

to perform and manage tasks.

Therefore principles of classical management theory emphasise tightly organised

bureaucratic structures where there is clear division of authority.


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Organisational Structure and Contingency Theory

Contingency theory is focused on finding optimum structure for particular

circumstances. In this regard, the following factors are taken into consideration.

Sizeorganisationssize

Technologytechniques, equipment, special knowledge

Peopletype of people, their skills, competencies and level of motivation

Past experiencegained from facing similar circumstances

Pattern of ownershipwhether owner is directly involved in management


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Classical School

Under this approach, the emphasis of the management is on the technical and

economic aspects of the organisation. Organisational behaviour is assumed to be

rational and logical. Three approaches can be identified under classical school (1).

Scientific Management

Functions of Management

Bureaucracy

The foundation of these theories is based on the belief that management can be

learnt and codified.


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Classical School

Scientific management

Fredrick W. Taylor developed the scientific management approach. His

experience in the steel and paper making industry helped him to introduce the

following four principles.

1. the development of a true science of work. This was the assessment of what constituted a

fair days work, as well as a fair days pay.

2. The scientific selection and progressive development of workers, involving careful

recruitment and training to ensure that the worker was capable of achieving output and

quality targets.

3. The bringing together of science of work and the scientifically selected and trained men.

This was referred to as mental revolution, as the workforce is encouraged to develop to their

full potential.

4.The constant and intimate cooperation between management and workers. Work was

allocated by consultation and cooperation between management and workers.


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Classical School

The Administrative School

This was introduced by Henri Fayol, who was a manager of a group of mining

and engineering companies in France. He defined the following operations as

ones, that give business control.

Technical: production, maintenance ,design

Commercial: sales, purchasing , marketing

Financial: capital investment

Security: protection of goods and people

Accounting: accounts, balance sheets, stock taking

Managerial: various functions


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Classical School

The Administrative School contd...

From the study of managerial aspect of organisations and role of managers Fayol

identified the following common features:

Forecasting and planning

Organising: allocation of resources, duties and authority

Coordinating: giving orders and instructions

Controlling: comparing actual performance with expected or budgeted

A managers effectiveness is judged by the efficiency in applying these elements.

Fayol also identified the need for managers to be trained for their new roles before

promotion.


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Classical School

Bureaucracy

This word does not have positive image. However Max Weber developed bureaucracy

as a the ideal type model. He identified eight characteristics of ideal type bureaucracy.

1.Specialisation

2.Heirachy

3.Rules

4.Impersonality

5.Appointes officials

6.Career officials

7.Full-time officials

8.Public /private division


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The Human Relations School

Elton Mayo developed this theory from the famous Hawthorne studies (1) on fatigue andproductivity. Mayos team discovered the experimenter effect'. i.e. workers efficiency

improved because of the scientists interest in them.

Fredrick Herzberg carried forward Mayo's identification of the motivational needs of

individuals. Herzberg introduced the two factor theory on motivation

According to Herzberg, hygiene factors prevent dissatisfaction and motivational factors move

employees towards action.

Motivational factors Hygiene factors

Challenging tasks Rules

A feeling of achievement Environment

Responsibility work breaks

Personal growth Supervision

Advancement Wages and fringe benefits

Recognition of ability


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Systems Theory

This was developed by Trist and Bamforth. They identified the link between social

needs and technological needs,through observing the long wall method of

mining.


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Contingency Theory

The classical management schools have not always been successful as per the

experience of consultants, researchers and managers. Therefore concept that one

method is correct is abandoned in favour of contingency.

Contingency suggests that the circumstances of the situation have a direct impact

on the effectiveness of the management practice that is used. However issues

arise when two such contingencies are in conflict and the contingency theory does

not state how such conflicts can be resolved. Popular advocates of contingency

theory are:

Burns and Stalker

Joan Woodward


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Contingency Theory

Joan Woodward focused mainly on the following factors in through the EssexStudies:

Number of levels of authority

The spans of control at different levels

Communication processes

Use of specialists

Use of management committees

Recruitment of graduates

These studies contributed to the debate as to whether technology forced

organisations to change their structure and culture.


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Management by Objectives (MBO)

Peter Drucker : Management by Objectives (MBO) (1)

Drucker proposed the concept of linking objectives to a timescale. According to

him objectives should be agreed for areas where performance and results have a

direct influence on the attainment of the basic company aims.

Profitability

Managerial performance

Worker performance

Public responsibility

In order for objectives to be effective, they must be stated in measurable and

behavioural terms. Then any deviation can be identified and corrective action

taken.


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References

1. Mullins Laurie J, Management and Organisational

Behaviour: Pearson Education LTD; 2007.

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Lesson 1.1-Bussiness Management_JM