ORGANIZATIONAL ASPECT. STRUCTURING AN EFFECTIVE ORGANIZATION An organization structure is the way in which the tasks and subtasks required to implement

ORGANIZATIONAL ORGANIZATIONAL ASPECTASPECT

STRUCTURING AN EFFECTIVE STRUCTURING AN EFFECTIVE ORGANIZATIONORGANIZATION

An organization structure is the way in which the tasks and subtasks required to implement a strategy are arranged.

An organization chart is a diagrammatical representation of structure.

STRUCTURE STABILITYSTRUCTURE STABILITY

Provides the capacity the firm requires to consistently and predictably manage its daily work routines.

STRUCTURE FLEXIBILITYSTRUCTURE FLEXIBILITY

Provides the opportunity to explore competitive possibilities and allocate resources to activities that will shape the competitive advantages of the firm that it will need to be successful in the future.

STRUCTURESTRUCTURE

Structure dictates how objectives and policies will be established.

Structure dictates how resources will be allocated.

Categorized in five types:◦Entrepreneurial Structure◦Functional Structure◦Divisional Structure◦Strategic Business Unit Services (SBU)◦Matrix Structure

ENTREPRENEURIAL ENTREPRENEURIAL STRUCTURE/FLAT STRUCTURESTRUCTURE/FLAT STRUCTURE

The most elementary form of structure and is appropriate for an organization that is owned and managed by one person.

A small-scale industrial unit, a small proprietary concern, or a mini-service outlet may exhibit the characteristics of organizations.


Advantages of Entrepreneurial Structure◦Quick decision-making, as power is centralized.◦Timely response to environmental changes.

Disadvantages of Entrepreneurial Structure◦Excessive reliance on the owner-manager and

so proves to be demanding for the owner-manager


Disadvantages of Entrepreneurial Structure◦May divert the attention of owner-manager to

day-to-day operational matters and ignore strategic decision

◦Increasingly inadequate for future requirements if volume of business expands

FUNCTIONAL STRUCTUREFUNCTIONAL STRUCTURE

As the volume of business expands, the entrepreneurial structure outlives its usefulness. The need arises for specialized skills and delegation of authority to managers who can look after different functional areas. The functional structure seeks to distribute decision-making and operational authority along functional lines. Most widely used as simple and least expensive.


Advantages of functional structure◦Efficient distribution of work through

specialization.

◦Delegation of day-to-day operational functions.

◦Providing time for the top management to focus on strategic decisions.


Disadvantages of functional structure◦Creates difficulty in coordination among

different functional areas.◦Creates specialists, which results in narrow

specialization, often at the cost of the overall benefit of the organization.

◦Leads to functional, and line and staff conflicts.◦Minimizes career development opportunities.◦Poor delegation of authority, inadequate

planning for products and markets.

DIVISIONAL STRUCTUREDIVISIONAL STRUCTURE

The structural needs of expansion and growth are satisfied by the functional structure but only up to a limit.

There comes a time in life of organizations when growth and increasing complexity in term of geographic expansion, market segmentation and diversification make the functional structure adequate.


It can be organized by:◦Geographic area

◦Product or service

◦Customer

◦Process


Advantages ◦Clear accountability.◦Higher employee morale.◦Creates career development opportunities for

managers.◦Allow s local control of situations.◦Leads to a competitive climate within an

organization.◦Allows new businesses and products to be

added easily.


Disadvantages◦Can be easily to set up◦Each division requires functional specialists◦Duplication of staff services, facilities, and

personnel ◦Managers must be well qualified◦Requires an elaborate, headquarters-driven

control system◦Competition between divisions may become so

intense that it is dysfunctional

THE STRATEGIC BUSINESS UNIT THE STRATEGIC BUSINESS UNIT (SBU)(SBU)

Any part of a business organization, which is treated separately for strategic management purposes. When organizations face difficulty in managing divisional operations due to an increasing diversity, size, and number of divisions, it becomes difficult for the top management to exercise strategic control.


Advantages of Strategic Business Unit (SBU)◦Establishes coordination between divisions

having common strategic interests.

◦Facilitates strategic management and control of large, diverse organizations.

◦Fixes accountability at the level of distinct business units.


Disadvantages of Strategic Business Unit (SBU)◦There are too many different SBUs to handle

effectively in a large, diverse organization.

◦Difficulty in assigning responsibility and defining autonomy for SBU heads.

◦Addition of another layer of management between cooperate and divisional management.

THE MATRIX STRUCTURETHE MATRIX STRUCTURE

Most complex of all designs – requires both vertical and horizontal flows of authority and communication. In large organizations, there is often a need to work on major products or project each of which is strategically significant.


Most complex of all designs – requires both vertical and horizontal flows of authority and communication. In large organizations, there is often a need to work on major products or project each of which is strategically significant.


Advantages of The Matrix Structure◦Project objectives are clear◦Many channels of communication◦Workers can see visible results of their work◦Shutting down a project can be accomplished

relatively easily◦Facilitates the use of specialized personnel,

equipment, and facilitates.


Disadvantages of The Matrix Structure◦Can result in higher overhead◦Dual lines of budget authority◦Dual resources of reward and punishment◦Shared authority◦Dual reporting channels◦Need for an extensive and effective

communication system

Documents

ORGANIZATIONAL ASPECT. STRUCTURING AN EFFECTIVE ORGANIZATION An organization structure is the way in which the tasks and subtasks required to implement