Lecture 2 Organisational Structures Understanding Business Organisations
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UnderstandingBusiness NCC Education Limited V1.0 Understanding Business Organisations Lecture 2: Organisational Structures Organisational Structures Lecture 2 - 2.2 This topic will cover: The role of the organisation chart in illustrating the organisation structure The purpose of lines of authority and delegation Scope and Coverage NCC Education Limited V1.0 The purpose of lines of authority and delegation The benefits and drawbacks of a centralised hierarchy The five alternative forms of organisation structure The importance of co-ordinating work activities Organisational Structures Lecture 2 - 2.3 By the end of this topic, students will be able to: Describe the main purposes of an organisation chart Understandthe five alternative forms of Learning Outcomes NCC Education Limited V1.0 Understand the five alternative forms of organisation structure Understand the advantages and disadvantages of functional, divisional and matrix forms Explain the division of tasks from a vertical and horizontal perspective Lecture 2 Organisational Structures Understanding Business Organisations V1.0 Visuals Handout Page 2 Organisational Structures Lecture 2 - 2.4 Describes the way tasks are divided, supervised and co- ordinated within an organisation Organisation Structure NCC Education Limited V1.0 This is shown in picture form by an organisation chart Organisational Structures Lecture 2 - 2.5 Diagram that shows the main departments and positions within an organisation Shows who each department or division reports to Clarifies four features of the formal structure: Organisation Chart NCC Education Limited V1.0 Tasks Sub-divisions Levels Lines of authority Organisational Structures Lecture 2 - 2.6 Managing Director Operations Department Sales and Marketing Operations Manager Marketing Manager Lines of Authority NCC Education Limited V1.0 Event Assistant Operations Account Account Account Manager Manager Manager Manager Manager Manager Admin Storeman Admin Assistant Assistant Lecture 2 Organisational Structures Understanding Business Organisations V1.0 Visuals Handout Page 3 Organisational Structures Lecture 2 - 2.7 Responsibility a persons duty to perform a task assigned to them Delegation process by Responsibility and Delegation NCC Education Limited V1.0 which people transfer responsibility and authority for work to staff below them in chain of command Organisational Structures Lecture 2 - 2.8 The number of subordinates reporting to a supervisor Narrow span of control staff are closely supervised Span of Control NCC Education Limited V1.0 Wider span of control more autonomy and team work resulting in a flatter organisation structure Organisational Structures Lecture 2 - 2.9 Example of Wide Span of Control NCC Education Limited V1.0 Lecture 2 Organisational Structures Understanding Business Organisations V1.0 Visuals Handout Page 4 Organisational Structures Lecture 2 - 2.10 As a business grows the hierarchy becomes more complex Results in three different levels: Corporate Designing the Vertical Hierarchy NCC Education Limited V1.0 Divisional Operating Agreement is needed on where decisions are taken centralised versus decentralised Organisational Structures Lecture 2 - 2.11 Factor Advantages Disadvantages Response to change Can ensure thorough debate Slower response to local variations Use of expertise Concentration of expertise makes it easier to develop new services Less likely to take account of local knowledge Cost Economies of scale in purchasing, Centralised systems may be wasteful Advantages and Disadvantages of Centralisation NCC Education Limited V1.0 less admin cost if using common systems when applied locally local suppliers may offer better value Policy implications Local managers less likely to breach legal requirements Local managers more likely to breach legal requirements Consistency Provides consistent image to public less variation in service standards Common measures may not be appropriate locally Organisational Structures Lecture 2 - 2.12 An organisations work can be divided into smaller units or departments Five commonly used approaches to creating a horizontal structure: Creating a Horizontal Structure NCC Education Limited V1.0 Functional Divisional Matrix Teams Networks Lecture 2 Organisational Structures Understanding Business Organisations V1.0 Visuals Handout Page 5 Organisational Structures Lecture 2 - 2.13 Functional Structure Board NCC Education Limited V1.0 Production Purchasing Human Resources Organisational Structures Lecture 2 - 2.14 Factor Advantages Disadvantages Staff careers Clear career paths and professional development Isolation from wider issues damages promotion prospects Advantages and Disadvantages of Functional Structure NCC Education Limited V1.0 Resources Specialisation leads to high standards and efficiency Conflict over priorities Working relations Common professional interests support good internal relations Lack of wider awareness damages external relations Organisational Structures Lecture 2 - 2.15 Product Division A Product Division B Divisional Approach Board NCC Education Limited V1.0 Purchasing Purchasing Production Human resources Production Human resources Lecture 2 Organisational Structures Understanding Business Organisations V1.0 Visuals Handout Page 6 Organisational Structures Lecture 2 - 2.16 Factor Advantages Disadvantages Staff focus Functional staff focus on product and customer needs Isolation from wider professional and technical developments Resources Dedicated facilities meet Cost of duplication across the Advantages and Disadvantages of Divisional Structure NCC Education Limited V1.0 Resources Dedicated facilities meet customer needs quickly Cost of duplication across the organisation Working relations Common customer focus supports good internal relations Potential conflicts with other divisions over priorities Control Regional divisions use autonomy to meet local needs Develop policies independently of wider organisational interests Organisational Structures Lecture 2 - 2.17 Matrix Structure Board Production Purchasing Human NCC Education Limited V1.0 Product Division A Product Division B Production Purchasing Human resources Organisational Structures Lecture 2 - 2.18 Factor Advantages Disadvantages Staff focus Staff gain a variety of work experience and understanding of customer needs Functions develop professional ti Isolation from wider professional developments Conflicting demands of project and functional boss Advantages and Disadvantages of Matrix Structure NCC Education Limited V1.0 expertise Resources Dedicated facilities can be arranged to meet customer needs as required Costs of duplication across the organisation as demands vary Working relations Project focus supports good internal relations Potential conflict with functional divisions over priorities Lecture 2 Organisational Structures Understanding Business Organisations V1.0 Visuals Handout Page 7 Organisational Structures Lecture 2 - 2.19 Team Structure Board NCC Education Limited V1.0 Team A Team B Team C Organisational Structures Lecture 2 - 2.20 Management delegates significant responsibility and authority to an identifiable team The team is then mutually accountable for the results Working With Teams NCC Education Limited V1.0 Members of a team can come from across functions, or from a single business area Less hierarchical than a department One possible drawback is spending time in debate rather than action Organisational Structures Lecture 2 - 2.21 Purchasing Manufacturing agencies companies Network Approach E t NCC Education Limited V1.0 Human resources Distribution agency companies Entrepreneur Lecture 2 Organisational Structures Understanding Business Organisations V1.0 Visuals Handout Page 8 Organisational Structures Lecture 2 - 2.22 Management breaks non-core functions into separate companies Remaining organisation focuses upon the strategic direction of the business Network Structures NCC Education Limited V1.0 All other services are contracted in on an as required basis Network approach enables small firms to grow rapidly with limited capital expenditure Organisational Structures Lecture 2 - 2.23 Division of work must be co-ordinated to achieve intended results Considerations for organisations of all sizes include: Direct supervision by management Co-ordinating Work NCC Education Limited V1.0 Direct supervision by management Standardising inputs and outputs Developing rules and procedures to act as guidelines Using information systems to ensure information and knowledge is shared Encouraging direct personal contact Organisational Structures Lecture 2 - 2.24 A structure describes the way tasks are divided, supervised and co-ordinated within an organisation A span of control shows the number of subordinates reporting to a supervisor Structure can be vertical or horizontal both have advantages and disadvantages Summary NCC Education Limited V1.0 advantages and disadvantages Key factor in a vertical structure is whether to opt for centralised or decentralised control Five common approaches to creating a horizontal structure functional, divisional, matrix, teams and networks Lecture 2 Organisational Structures Understanding Business Organisations V1.0 Visuals Handout Page 9 Organisational Structures Lecture 2 - 2.25 References Boddy, D. (2005), Management: An Introduction, 3rd edition, Prentice Hall, Chapter 10 Boddy, D. (2007), Management: An Introduction, 4th edition, Prentice Hall, Chapter 10 NCC Education Limited V1.0 Campbell and Craig (2005), Organisations and the Business Environment, 2nd edition. Butterworth- Heinemann, Chapter 21 Organisational Structures Lecture 2 - 2.26 Lecture 2 Organisational Structures NCC Education Limited V1.0 Any Questions?