2: Organizational structure (Part 1)

1.1 Different types of structure

Entrepreneurial - Owner of small companies, usually is built around the boss and his/her employees.

Advantages - One person taking decision lead to decisions is being made quickly so the entrepreneur should recognize the market alters fast act quickly. Also the owner can control over the work force easily.

Disadvantages - The structure is suited to small companies so there is no career path for the employees, when organization growth is hard to cope with the increase volume of decisions.



Functional structure - Organization that have outgrown the entrepreneurial structure and it is on a functional basis, usually exist in a relatively stable environment.

Advantages - Not much of duplicating so similar activities are grouped together. Hence, there are lower costs, standardization of output, specialization and there is a career path for the employees.

Disadvantages - Empire building (Manager will try to gain control over the key project and maximize their job security. As a result some other part of the project may not be achievable and ruin the ultimate goal of the entire project). Decision making in company will be slower due to longer chain of command and the structure is not suited for rapidly growing and diversifying organization too.



Product/Division/Department - Organization structured in accordance with product lines, usually general managers who enjoy responsibility for their own resources.

Advantages - It is easier to grow and diversify, also division managers can clearly see their area so top management can concentrate on strategic matters. As a result general managers are able to train up.

Disadvantages - There will be lack of control and duplication in companies. Also specialists may feel isolated and allocation of central costs problem may occurred.



Geographically structured - Grouping activities on the basis of location, commonly operate over a wide geographic area.

Advantages - It’s enable geographic growth. Also, clear responsibility for areas and top management free to concentrate on strategic matters. General managers are able to train up.

Disadvantages - It’s almost same as divisional structure.



Matrix structure - It aims to combine the benefits of decentralization.

Advantages - It got the advantages of both functional and divisional structures. It is flexible, customer orientation and able to encourage teamwork and the exchange of opinions and expertise.

Disadvantages - It may cause difficulty is in the lines of control and dilution of functional authority, meetings are quite time consuming, also the admin cost is higher.

1.2 Further aspects of organisational structure

Ownership and managers are normally seperated in large companies. This is because managers does not have enough money and they need to rely on bankers or the market ( the owners ).
In order the managers to manage the company in the best interest of the owners and this causes many safeguard/ controls are put in the place such as the formal organisation structures.

Scalar chain
the line of authority that can be traced up or down. This relates the nember of management levels within the organisation.

Span of control
The number of people that she or he is directly responsible.

There are 2 types of span of control:
Tall- narrow span of control
Flat- wide span of control

There are many factors that will influence the span of control:
Nature of work - more repetitive of work wider is the span of control
Type of personnel - better managers have wider span of control
Location of personnel - widely spread personnel have narrower span of control

1.3 Centralisation and decentralisation

analysing structures by refrence of the level which decisions are made

Centralisation
upper levels retain the authority to make decision

Decentralisation
lower levels people are able to take decisions

Factors that will affect the amount of decentralisation:
- management style
- ability of management/employees
- location spread
- size of organisation
- scale of activities

advantages of decentralisation
- senior management can concentrate on strategy
- better decision due to local expertise
- better motivation due to increased training and career path
- quicker responses due to smaller cain of command

disadvantages of decentralisation
- loss of control
- dysfunctional decisions
- lack of goal congruence
- poor decision from inexperience managers
- training cost
- duplication of cost
- extra cost in obtaining information