CIMA E1 Syllabus D. Shape And Structure Of The Finance Function - Mintzbergs 5 building Blocks - Notes 1 / 9
Henry Minztberg
Henry Minztberg produced an organisational ideology divided into 5 organisational configurations
that help in understanding better how an organisation should be structured.
It is important to add that these configurations may not exist in real world but can be very helpful for someone who would like to understand the realities of an organisational structure.
The groups are...
Strategic Apex = Top Management
Strategic Apex has to do with the top management and those who make the rules (decision makers)
It drives the direction of the business through control over decision-making.
Middle Line = Management
– performs the managerial functions of control over resources, processes and business areas.
Operating Core = Normal employees of the firm
– performs the routine activities of the organisation, also known as the “do-er's”.
Technostructure = No line management responsibilities. Produce systems manuals etc
These are the people who guide the operating core in being efficient in their jobs.
They drive efficiency through rules and procedures.
Support Staff = Secretarial, cleaning, repairs, IT etc
– support all the companies' activities and provides expertise and service to the organisation.
Whichever group is most powerful dominates the organisation structure
Most powerful group | Structure |
---|---|
Strategic Apex | Entrepreneurial. Leaders give sense of direction |
Operating Core | Highly skilled workers with lots of influence e.g. Schools, hospitals |
Middle Line | Localised and divisionalised company |
Remember that poor performance in a company may simply be due to having an inappropriate structure for the environment and the strategies it follows
Mintzberg's Configurations
Simple Structure
Entrepreneurial. Strategic apex gives direct control, little middle line, support staff or technostructure. Owner are often managers. Flexible, quick to react. Minimal formal procedures and rules.
Machine / Functional Bureaucracy
Technostructure dominant. Controls through regulations. Slow to react to change
Needs standardisation in simple, repetitive and stable environments. Typically found in large, mature organisations.
Economies of scale can be achieved.
Professional Bureaucracy
Operating Core dominant. Highly skilled professionals abound
Machine bureaucracy generates its own standards BUT professional bureaucracy standards come from the outside
It's "the power of expertise"
Divisionalised
Middle line dominant. Division leaders are powerful and often able to restrict strategic apex influence
The autonomy in the Professional Bureaucracy are individuals—BUT—in the Divisionalised Form they are units in the middle line
Each division has its own structure.
Divisions are created according to markets served
Adhocracy
Complex and disordered. Extensive teamwork/project type work. Support staff very important as close relationship to external suppliers can be vital. Innovation is a strength hereNo standardisation
Most suitable structure for innovative organisations which hire and give power to experts
Project managers are particularly numerous
Missionary organisations
They have little structure or formal control but are held together by a shared set of values, reinforced by a strong culture.
It is more appropriate for start-ups in their early stages, or for campaigning organisations (especially smaller NGOs)
Basic / Traditional Organisation Structures
The basic organisation structures are the entrepreneurial, functional and divisional.
Each of these three basic structures is better than the other in the following aspects:
Controllability
Functional is the best and divisional is the worst.
Flexibility
Entrepreneurial is the best and functional is the worst.
Knowledge sharing
Functional is the best and divisional is the worst.
Efficiency
Entrepreneurial is the best and divisional is the worst.
Manager motivation
Divisional is the best and entrepreneurial is the worst.
Level of service
Divisional is the best and entrepreneurial is the worst.
Innovation and accommodating to market demands
Entrepreneurial is the best
An entrepreneurial structure organisation is responsive to the market, makes decisions and acts on them very quickly and has good control of it's resources.
Complex Structures / Matrix Structure
While many organisations choose one or the other of the simpler organisation structures, larger organisations often need to adopt a more complex form in order to fit the nature of their business.
In large organisations, it is common to see mixed structures with some parts being organised functionally, others divisionally, and maybe even the occasional matrix.
The matrix attempt to combine the strengths of two or more of the basic structures.
It attempts to combine the controllability and knowledge sharing of the functional structure with the flexibility and the service levels of the divisional structure.
In a matrix structure an employee may report to a line manager as well as a product or project manager.
This encourages employee flexibility and multiple reporting.
A matrix structure aims to combine the benefits of decentralisation (for example, speedy decision making) with those of co-ordination.