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ORGANISATIONAL STRUCTURES 1

Porter's Value Chain

Rather than looking at departments or accounting cost types, Porter's Value Chain focuses on
systems, and how inputs are changed into the outputs purchased by consumers. Using this
viewpoint, Porter described a chain of activities common to all businesses, and he divided them
into primary and support activities, as shown below.

Primary Activities
Primary activities relate directly to the physical creation, sale, maintenance and support of a
product or service. They consist of the following:
Inbound logistics These are all the processes related to receiving, storing, and distributing
inputs internally. Your supplier relationships are a key factor in creating value here.
Operations These are the transformation activities that change inputs into outputs that are
sold to customers. Here, your operational systems create value.
Outbound logistics These activities deliver your product or service to your customer. These
are things like collection, storage, and distribution systems, and they may be internal or external
to your organization.
Marketing and sales These are the processes you use to persuade clients to purchase from
you instead of your competitors. The benefits you offer, and how well you communicate them, are
sources of value here.
Service These are the activities related to maintaining the value of your product or service to
your customers, once it's been purchased.

Support Activities
These activities support the primary functions above. In our diagram, the dotted lines show that
each support, or secondary, activity can play a role in each primary activity. For example,
procurement supports operations with certain activities, but it also supports marketing and sales
with other activities.
Procurement (purchasing) This is what the organization does to get the resources it needs to
operate. This includes finding vendors and negotiating best prices.
Human resource management This is how well a company recruits, hires, trains, motivates,
rewards, and retains its workers. People are a significant source of value, so businesses can
create a clear advantage with good HR practices.

 Technological development These activities relate to managing and processing information,

as well as protecting a company's knowledge base. Minimizing information technology costs,
staying current with technological advances, and maintaining technical excellence are sources of
value creation.
Infrastructure These are a company's support systems, and the functions that allow it to
maintain daily operations. Accounting, legal, administrative, and general management are
examples of necessary infrastructure that businesses can use to their advantage.
Companies use these primary and support activities as "building blocks" to create a valuable
product or service.

Using Porter's Value Chain

To identify and understand your company's value chain, follow these steps.

Step 1 Identify subactivities for each primary activity

For each primary activity, determine which specific subactivities create value. There are three
different types of subactivities:
Direct activities create value by themselves. For example, in a book publisher's marketing and
sales activity, direct subactivities include making sales calls to bookstores, advertising, and
selling online.
Indirect activities allow direct activities to run smoothly. For the book publisher's sales and
marketing activity, indirect subactivities include managing the sales force and keeping customer
records.
Quality assurance activities ensure that direct and indirect activities meet the necessary
standards. For the book publisher's sales and marketing activity, this might include proofreading
and editing advertisements.

Step 2 Identify subactivities for each support activity.

For each of the Human Resource Management, Technology Development and Procurement
support activities, determine the subactivities that create value within each primary activity. For
example, consider how human resource management adds value to inbound logistics, operations,
outbound logistics, and so on. As in Step 1, look for direct, indirect, and quality assurance
subactivities. Then identify the various value-creating subactivities in your company's
infrastructure. These will generally be cross-functional in nature, rather than specific to each
primary activity. Again, look for direct, indirect, and quality assurance activities.

Step 3 Identify links

Find the connections between all of the value activities you've identified. This will take time, but the
links are key to increasing competitive advantage from the value chain framework. For example,
there's a link between developing the sales force (an HR investment) and sales volumes. There's
another link between order turnaround times, and service phone calls from frustrated customers
waiting for deliveries.

Step 4 Look for opportunities to increase value

Review each of the subactivities and links that you've identified, and think about how you can
change or enhance it to maximize the value you offer to customers (customers of support activities
can internal as well as external).

McKinsey 7s model
McKinsey 7s model is a tool that analyzes firms organizational design by looking at 7 key internal
elements: strategy, structure, systems, shared values, style, staff and skills, in order to identify if
they are effectively aligned and allow organization to achieve its objectives.

Understanding the tool

McKinsey 7s model was developed in 1980s by McKinsey consultants Tom Peters, Robert
Waterman and Julien Philips with a help from Richard Pascale and Anthony G. Athos. Since the
introduction, the model has been widely used by academics and practitioners and remains one of
the most popular strategic planning tools. It sought to present an emphasis on human resources
(Soft S), rather than the traditional mass production tangibles of capital, infrastructure and
equipment, as a key to higher organizational performance. The goal of the model was to show how
7 elements of the company: Structure, Strategy, Skills, Staff, Style, Systems, and Shared values,
can be aligned together to achieve effectiveness in a company. The key point of the model is that
all the seven areas are interconnected and a change in one area requires change in the rest of a
firm for it to function effectively.
Below you can find the McKinsey model, which represents the connections between seven areas
and divides them into Soft Ss and Hard Ss. The shape
of the model emphasizes interconnectedness of the
elements.
The model can be applied to many situations and is a
valuable tool when organizational design is at question.
The most common uses of the framework are:
To facilitate organizational change.
To help implement new strategy.
To identify how each area may change in a future.
To facilitate the merger of organizations.

7s factors
In McKinsey model, the seven areas of organization are
divided into the soft and hard areas. Strategy, structure
and systems are hard elements that are much easier to
identify and manage when compared to soft elements.
On the other hand, soft areas, although harder to manage, are the foundation of the organization
and are more likely to create the sustained competitive advantage.
Hard S

Strategy

Structure

Systems

Soft S

Skills

Style

Staff

Shared Values

 Strategy is a plan developed by a firm to achieve sustained competitive advantage and

successfully compete in the market. What does a well-aligned strategy mean in 7s McKinsey
model? In general, a sound strategy is the one thats clearly articulated, is long-term, helps to
achieve competitive advantage and is reinforced by strong vision, mission and values. But its
hard to tell if such strategy is well-aligned with other elements when analyzed alone. So the key
in 7s model is not to look at your company to find the great strategy, structure, systems and etc.
but to look if its aligned with other elements. For example, short-term strategy is usually a poor
choice for a company but if its aligned with other 6 elements, then it may provide strong results.
Structure represents the way business divisions and units are organized and includes the
information of who is accountable to whom. In other words, structure is the organizational chart
of the firm. It is also one of the most visible and easy to change elements of the framework.
Systems are the processes and procedures of the company, which reveal business daily
activities and how decisions are made. Systems are the area of the firm that determines how
business is done and it should be the main focus for managers during organizational change.
Skills are the abilities that firms employees perform very well. They also include capabilities and
competences. During organizational change, the question often arises of what skills the company
will really need to reinforce its new strategy or new structure.
Staff element is concerned with what type and how many employees an organization will need
and how they will be recruited, trained, motivated and rewarded.
Style represents the way the company is managed by top-level managers, how they interact,
what actions do they take and their symbolic value. In other words, it is the management style of
companys leaders.
Shared Values are at the core of McKinsey 7s model. They are the norms and standards that
guide employee behavior and company actions and thus, are the foundation of every
organization.

Using the tool

As we pointed out earlier, the McKinsey 7s framework is often used when organizational design
and effectiveness are at question. It is easy to understand the model but much harder to apply it for
your organization due to a common misunderstanding of what should a well-aligned elements be
like. There is a useful paper from excellencegateway.org.uk, which provides examples showing
how effective and ineffective elements look like. Yet, separate elements that are effective on their
own do not necessarily lead to optimal organizational alignment.
We provide the following steps that should help you to apply this tool:
Step 1. Identify the areas that are not effectively aligned
During the first step, your aim is to look at the 7S elements and identify if they are effectively
aligned with each other. Normally, you should already be aware of how 7 elements are aligned in
your company, but if you dont you can use the checklist from WhittBlog to do that. After youve

answered the questions outlined there you should look for the gaps, inconsistencies and
weaknesses between the relationships of the elements. For example, you designed the strategy
that relies on quick product introduction but the matrix structure with conflicting relationships
hinders that so theres a conflict that requires the change in strategy or structure.
Step 2. Determine the optimal organization design
With the help from top management, your second step is to find out what effective organizational
design you want to achieve. By knowing the desired alignment you can set your goals and make
the action plans much easier. This step is not as straightforward as identifying how seven areas
are currently aligned in your organization for a few reasons. First, you need to find the best optimal
alignment, which is not known to you at the moment, so it requires more than answering the
questions or collecting data. Second, there are no templates or predetermined organizational
designs that you could use and youll have to do a lot of research or benchmarking to find out how
other similar organizations coped with organizational change or what organizational designs they
are using.
Step 3. Decide where and what changes should be made
This is basically your action plan, which will detail the areas you want to realign and how would you
like to do that. If you find that your firms structure and management style are not aligned with
companys values, you should decide how to reorganize the reporting relationships and which top
managers should the company let go or how to influence them to change their management style
so the company could work more effectively.
Step 4. Make the necessary changes
The implementation is the most important stage in any process, change or analysis and only the
well-implemented changes have positive effects. Therefore, you should find the people in your
company or hire consultants that are the best suited to implement the changes.
Step 5. Continuously review the 7s
The seven elements: strategy, structure, systems, skills, staff, style and values are dynamic and
change constantly. A change in one element always has effects on the other elements and requires
implementing new organizational design. Thus, continuous review of each area is very important.

Beers Viable System Model

The Viable System Model identifies five management functions within an adaptive system.
System one consists of the units that do the basic work of the organization, for example
manufacturing products or delivering services.
System two consists of units that handle coordination and scheduling among the system ones.
System two activities include allocating space and equipment and enforcing rules and
procedures.
System three is the middle management function, except that its primary activity is to make a
resource bargain with the system ones. That is, system three makes resources available in
exchange for a commitment by the system ones to meet certain objectives that are agreed upon.

 System four is responsible for long-range planning and the design of new products and
services. Whereas system three is responsible for activities inside and now, system four is
responsible for activities outside and then.
System five manages the interaction between systems three and four and embodies the
corporate ethos. Hence, system five decides the identity of the firm and its governing principles
and norms. This includes decisions about the kinds of businesses to be developed by system
four and to be put into operation by systems three, two and one.
A key feature of the VSM is the management of variety. The people in an organization need
information to perform their jobs effectively, but too much information can be a distraction. What is
needed is both variety attenuation and variety amplification. An example of variety attenuation is
the environmental scanning activity. Some people in an organization must keep up with new
technology, new government regulations, and what competitors are doing. From a great variety of
sources of information, they select the information that is most important for the decisions the firm
must make. Variety amplification, on the other hand, refers, for example, to the distribution of the
organizations messages. Advertising messages go outside the firm. Plans, policies and
procedures need to be distributed within the firm. The VSM is very useful as a guide to studying
where variety is attenuated, where it is amplified, and if there is a balance in the varieties of
interacting sub-systems.
The VSM is recursive, meaning that it applies to all levels of an organization. For example,
consider General Motors. Within this large corporation the primary divisions or product lines are
Chevrolet, Pontiac, Buick, Oldsmobile and Cadillac. At the corporate level each division would be
considered a system one. System two would coordinate activities and policies among the divisions.
System three would allocate resources among the divisions. System four would consider starting
or stopping various product lines, such as sport cars, sport utility vehicles, or hybrid vehicles.
System five would make the final decision, and hence regulate the rate of innovation, and the kind
of businesses to engage in.
Within the Chevrolet division, the system ones might be different manufacturing plants. System two
would coordinate interaction among the manufacturing plants. System three would allocate funds
for the operation of the different plants. System four would consider whether new car models or
new manufacturing facilities are needed. System five would decide when to phase in new models
or manufacturing methods. The task of system five is to insure that the organization is adaptive.
A lower level of recursion would be different production lines within a manufacturing plant. The
levels of recursion go down as far as the individual who must both carry out assigned tasks
(systems one, two, and three) and consider whether he or she wants to change jobs or obtain
more schooling (system four). Finally, he or she has to ponder these considerations in the light of
basic personal values.
The fact that system three (middle management) does not supervise the system ones (the
producing units) in detail but only makes a resource bargain with them provides the system ones
with high levels of autonomy. This approach to management is quite compatible with todays highly
educated workers and large spans of control.

The VSM is a useful guide for knowledge management. The model explains what structures and
procedures are needed at each level of an organization and hence what information and what
decisions are needed in each part of the organization. By providing a single model of activities at
all levels of the organization, the VSM increases awareness, and knowledge, among employees of
how the organization functions.

Galbraiths Star Model

The organization design framework portrayed is called the Star ModelTM. In the Star ModelTM,
design policies fall into five categories. The first is strategy, which determines direction. The second
is structure, which determines the location of decision-making power. The third is processes, which
have to do with the flow of information; they are the means of responding to information
technologies. The fourth is rewards and reward systems, which influence the motivation of people
to perform and address organizational goals. The fifth category of the model is made up of policies
relating to people (human resource policies), which influence and frequently define the employees
mind-sets and skills.

Strategy is the companys formula for winning. The companys strategy specifies the goals and
objectives to be achieved as well as the values and missions to be pursued; it sets out the basic
direction of the company. The strategy specifically delineates the products or services to be
provided, the markets to be served, and the value to be offered to the customer. It also specifies
sources of competitive advantage.
Traditionally, strategy is the first component of the Star ModelTM to be addressed. It is important in
the organization design process because it establishes the criteria for choosing among alternative
organizational forms. (See the book, Designing Dynamic Organizations by Galbraith, Downey and
Kates, published by Jossey-Bass in 2002, for tools to help translate strategy into criteria.) Each
organizational form enables some activities to be performed well, often at the expense of other
activities. Choosing organizational alternatives inevitably involves making trade-offs. Strategy
dictates which activities are most necessary, thereby providing the basis for making the best tradeoffs in the organization design. Matrix organizations result when two or more activities must be
accomplished without hindering the other. Rather than choosing the or, matrix requires an
embracing of the and. Companies want to be global and local.

The structure of the organization determines the placement of power and authority in the
organization. Structure policies fall into four areas:
Specialization
Shape
Distribution of power
Departmentalization
Specialization refers to the type and numbers of job specialties used in performing the work. Shape
refers to the number of people constituting the departments (that is, the span of control) at each
level of the structure. Large numbers of people in each department create flat organization
structures with few levels. Distribution of power, in its vertical dimension, refers to the classic
issues of centralization or decentralization. In its lateral dimension, it refers to the movement of
power to the department dealing directly with the issues critical to its mission. Departmentalization
is the basis for forming departments at each level of the structure. The standard dimensions on
which departments are formed are functions, products, workflow processes, markets, customers
and geography. Matrix structures are ones where two or more dimensions report to the same
leader at the same level.
Processes: Information and decision processes cut across the organizations structure; if structure
is thought of as the anatomy of the organization, processes are its physiology or functioning.
Management processes are both vertical and horizontal.
Vertical processes allocate the scarce resources of funds and talent. Vertical processes are usually
business planning and budgeting processes. The needs of different departments are centrally
collected, and priorities are decided for the budgeting and allocation of the resources to capital,
research and development, training, and so on. These management processes are central to the
effective functioning of matrix organizations. They need to be supported by dual or
multidimensional information systems.
Horizontalalso known as lateralprocesses, are designed around the workflow, such as new
product development or the entry and fulfillment of a customer order. These management
processes are becoming the primary vehicle for managing in todays organizations. Lateral
processes can be carried out in a range of ways, from voluntary contacts between members to
complex and formally supervised teams.
Rewards: The purpose of the reward system is to align the goals of the employee with the goals of
the organization. It provides motivation and incentive for the completion of the strategic direction.
The organizations reward system defines policies regulating salaries, promotions, bonuses, profit
sharing, stock options, and so forth. A great deal of change is taking place in this area, particularly
as it supports the lateral processes. Companies are now implementing pay-for-skill salary
practices, along with team bonuses or gain- sharing systems. There is also the burgeoning practice
of offering non- monetary rewards such as recognition or challenging assignments.
The Star ModelTM suggests that the reward system must be congruent with the structure and
processes to influence the strategic direction. Reward systems are effective only when they form a
consistent package in combination with the other design choices.

People: This area governs the human resource policies of recruiting, selection, rotation, training,
and development. Human resource policies in the appropriate combinations produce the talent
required by the strategy and structure of the organization, generating the skills and mind-sets
necessary to implement the chosen direction. Like the policy choices in the other areas, these
policies work best when they are consistent with the other connecting design areas.
Human resource policies also build the organizational capabilities to execute the strategic
directions. Flexible organizations require flexible people. Cross-functional teams require people
who are generalists and who can cooperate with each other. Matrix organizations need people who
can manage conflict and influence without authority. Human resource policies simultaneously
develop people and organizational capabilities.

Implications of the Star ModelTM

As the layout of the Star ModelTM illustrates, structure is only one facet of an organizations
design. This is important. Most design efforts invest far too much time drawing the organization
chart and far too little on processes and rewards. Structure is usually overemphasized because it
affects status and power, and a change to it is most likely to be reported in the business press and
announced throughout the company. However, in a fast-changing business environment, and in
matrix organizations, structure is becoming less important, while processes, rewards, and people
are becoming more important.
Another insight to be gained from the Star ModelTM is that different strategies lead to different
organizations. Although this seems obvious, it has ramifications that are often overlooked. There is
no one-size-fits-all organization design that all companiesregardless of their particular strategy
needsshould subscribe to. There will always be a current design that has become all the rage.
But no matter what the fashionable design iswhether it is the matrix design or the virtual
corporationtrendiness is not sufficient reason to adopt an organization design. All designs have
merit but not for all companies in all circumstances. The design, or combination of designs, that
should be chosen is the one that best meets the criteria derived from the strategy.
A third implication of the Star ModelTM is in the interweaving nature of the lines that form the star
shape. For an organization to be effective, all the policies must be aligned and interacting
harmoniously with one another. An alignment of all the policies will communicate a clear, consistent
message to the companys employees.
The Star ModelTM consists of policies that leaders can control and that can affect employee
behavior, as suggested in Figure 4. It shows that managers can influence performance and culture,
but only by acting through the design policies that affect behavior.

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Mintzbergs Model on Organisational Structures

Ideology

According to Mintzberg organisations are formed of six main parts:

Operating core: Those who perform the basic work related directly to the production of products
and services
Strategic apex: Charged with ensuring that the organisation serve its mission in an effective
way, and also that it serve the needs of those people who control or otherwise have power over
the organisation
Middle-line managers: Form a chain joining the strategic apex to the operating core by the use
of delegated formal authority
Technostructure: The analysts who serve the organisation by affecting the work of others. They
may design it, plan it, change it, or train the people who do it, but they do not do it themselves
Support staff: Composed of specialised units that exist to provide support to the organisation
outside the operating work flow
Ideology: Traditions, beliefs, norms, culture. (Diapositivas de Ran tiene esta tambin)

Pressures
Each of these five parts has a tendency to pull the organisation in a particular direction favourable
to them:

Strategic Apexes centralisation

Support Staff - collaboration
Technostructures - standardisation
Operating Core professionalisation
Middle Line - balkanisation

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Five Generic Structures

There are five generic organisation structures which can be described in terms of the five-part
theory:
Simple structure
Machine bureaucracy
Professional bureaucracy
Divisionalised form
Adhocracy

Simple Structure

The simple structure, typically, has:

Little or no technostructure, few staffers
A loose division of labour, minimal differentiation among its units, and a small managerial
hierarchy.
The behaviour of simple structure is not formalised and planning, training, and liaison devices are
minimally used in such structures.
Coordination in the simple structure is controlled largely by direct supervision. Especially, power
over all important decisions tends to be centralized in the hands of the chief executive officer.
Thus, the strategic apex emerges as the key part of the structure. Indeed, the structure often
consists of little more than a one-person strategic apex and an organic operating core
Most organizations pass through the simple structure in their formative years. The environments of
the simple structures are usually simple and dynamic. A simple environment can be comprehended
by a single individual, and so enables decision making to be controlled by that individual. A
dynamic environment means organic structure: Because its future state cannot be predicted, the
organization cannot effect coordination by standardization

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Machine Bureaucracy

The design of a machine bureaucracy tends to be as follows:

Highly specialised, routine operating tasks
Very formalised procedures in the operating core
A proliferation of rules, regulations, & formalised communication
Large-sized units at the operating level
Reliance on the functional basis for grouping tasks
Relatively centralised power for decision making
An elaborate administrative structure with sharp distinctions between line and staff

Because the machine bureaucracy depends primarily on the standardization of its operating work
processes for coordination, the technostructure emerges as the key part of the structure
Machine bureaucratic work is found, in environments that are simple and stable. Machine
bureaucracy is not common in complex and dynamic environments because the work of complex
environments can not be rationalized into simple tasks and the processes of dynamic
environments can not be predicted, made repetitive, and standardized
The machine bureaucracies are typically found in the mature organizations, large enough to have
the volume of operating work needed for repetition and standardization, and old enough to have
been able to settle on the standards they wish to use
The managers at the strategic apex of these organizations are mainly concerned with the finetuning of their bureaucratic machines. Machine bureaucracy type structures are "performance
organizations" not "problem solving" ones.

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Professional Bureaucracy

The professional bureaucracy relies for coordination on:

The standardization of skills and its associated parameters such as design, training and
indoctrination.
In professional bureaucracy type structures duly trained and indoctrinated specialists professionals- are hired for the operating core, and then considerable control over their work is
given to them.
Most of the necessary coordination between the operating professionals is handled by the
standardization of skills and knowledge especially by what they have learned to expect from
their colleagues.

Whereas the machine bureaucracy generates its own standards the standards of the professional
bureaucracy originate largely outside its own structure (especially in the self-governing association
its operators join with their colleagues from other professional bureaucracies). The professional
bureaucracy emphasizes authority of a professional nature or in other words "the power of
expertise".
The strategies of the professional bureaucracy are mainly developed by the individual
professionals within the organization as well as of the professional associations on the outside.

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Divisionalised Form

Divisionalised form type organizations are composed of semi-autonomous units - the divisions. The
divisionalised form is probably a structural derivative of a Machine Bureaucracy - an operational
solution to co-ordinate and controls a large conglomerate delivering:
Horizontally diversified products or services
In a straight-forward, stable environment
Where large economies of scale need not apply
If large economies of scale were possible the costs and benefits of divisionalisation would need
careful examination. The modern, large holding company or conglomerate typically has this form
Like the Professional Bureaucracy, the Divisional Form is not so much an integrated organization
as a set of quasi-autonomous entities coupled together by a central administrative structure. But
whereas those "loosely coupled" entities in the Professional Bureaucracy are individuals
professionals in the operating corein the Divisionalised Form they are units in the middle line.
These units are generally called divisions, and the central administration, the headquarters
The Divisionalised Form differs from the other four structural configurations in one important
respect. It is not a complete structure from the strategic apex to the operating core, but rather a
structure superimposed on others. That is, each division has its own structure.
Most important, the Divisionalised Form relies on the market basis for grouping units at the top of
the middle line. Divisions are created according to markets served and they are then given control
over the operating functions required to serve these markets.

Adhocracy

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Adhocracy includes a highly organic structure, with:

little formalization of behaviour
job specialization based on formal training
a tendency to group the specialists in functional units for housekeeping purposes but to deploy
them in small, market-based project teams to do their work
a reliance on liaison devices to encourage mutual adjustment, the key coordinating mechanism,
within and between these teams
The innovative organization cannot rely on any form of standardization for coordination.
Consequently, the adhocracy might be considered as the most suitable structure for innovative
organizations which hire and give power to experts - professionals whose knowledge and skills
have been highly developed in training programs.
Managers (such as functional managers, integrating managers, project managers etc.) abound in
the adhocracy type structures. Project managers are particularly numerous, since the project
teams must be small to encourage mutual adjustment among their members, and each team
needs a designated leader, a "manager." Managers are also functioning members of project teams,
with special responsibility to effect coordination between them. To the extent that direct supervision
and formal authority diminish in importance, the distinction between line and staff disappears.

The Contingency Approach

The contingency approach to organisation structure is based on the idea that there is no one best
way to manage a company and that the way of solving situations that take place in an organisation
should be variable. In other words, the way you manage should change depending on the
circumstances.
This theory offers the management to view situations from diverse angles so that the problems that
should arise, could be solved before hand. Take, for example, any organisation that is having
problems with the results of a particular product. The product could be failing for any number of
reasons. It could be either external dissatisfaction (customer) or internal dissatisfaction (employee),
which could create a negative impact due to the bad publicity the company would be having. The
contingency approach would allow the management to think about the possible options and learn
more about the product or even employees. However, in situations where a quick decision is
necessary, this approach may be a bad option, as it takes time to evaluate all the possible reasons
that could lead to just a single situation.
The major variables in the contingency approach are the following three:
1) Size

2) Technology

3) Environment

1. Size implications
The owner of a small organisation can control most things directly, whereas large organisations
require a more complex structure with leaders in each department as they have more specialized
staff. We could say that small organisations are more informal than larger ones, which tend to be
more formalized. Therefore, we can infer that a divisional structure would not be as appropriate for
a small organisation as it could be for a larger one.

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2. Technology implications
There are different types of working technologies (small batch, large batch, continuous). Joan
Woodward found out that depending on the manufacturing techniques that the
organisation uses, there are variations in the organisation structure. She suggested that certain
organisational forms were appropriate for certain types of working technologies.
3. Environmental implications
The environmental factors that the management need to be aware of are the changes that are
happening at the present or in a possible future, and how those changes would affect the
organisations ability to function effectively. Competition against other industries is requiring leaders
to adopt new ways of thinking about managing their environments. As markets become global and
competition increases, the search for the best organisational structure has created a lot of new
organisational designs.
To deal with these variations in the external environment, an organisation should become
segmented into different units. Each unit should be concerned about a specific problem to deal
with. All units should be linked together for the successful achievement of the organisation's goals.
This need for a division of workload and the need to also be unified have led to: Differentiation and
Integration:
Differentiation: The organisation is composed of units that work on specialized tasks using
different work methods
Integration: The various units coordinate their work to achieve common goals
As organisations specialize in order to cope more effectively with their environment, they become
more differentiated. Due to this, the organisation ends up divided in different units and some
coordination is needed among them in order to be effective. P. Lawrence and J. Lorsch suggested
that the greater the internal differences, the greater the need for coordination between units.
There are two management systems that leaders use: Organic and Mechanistic
Organic: It encourages leaders and subordinates to work together in teams and to communicate
openly with each other
Mechanistic: It breaks down activities into separate, highly specialized tasks, relying extensively
on standardized rules
An organic management system is appropriate for firms that operate in changing market
environments, while mechanistic systems are more appropriate for firms operating in a relatively
stable environment.

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