ACCA BT Syllabus B. Organisational Structure, Culture, Governance and Sustainability - Structural Organisation - Notes 1 / 7
Different Structures
Every organisation exists for the purpose of carrying out certain predetermined objectives and its structure must be necessarily to promote these objectives.
Thus an organisational structure is not fixed, it can change as the need requires.
It is also important to note that in different organisations one might find different organisational structures whilst one may also find different structures in the same organisation.
In any given case the organisation structure owns much to the historical background of the firm and to the personalities of those who managed it in its formative years.
Other influences which are equally relevant and possibly more persistent in determining organisation structure are the type of markets and customers to which the business sells, the type of product sold and the system of technology in used to produce the product.
Methods of Grouping Activities
The process of dividing and grouping the tasks which have to be performed into convenient units of management may be termed departmentalisation.
The board of directors and the chief executive must decide on the major divisions of activity.
The heads of each division will then have their own units, sections, branches or departments.
By Product/Division/Department
This method is used when a firm decides to group according to the product in question.
This method is mainly used by, for example a department store which sells soaps, hair products, feet products, makeup and fragrances.
When a variety of products of different types are being manufactured or sold there is always a danger that some products or lines will receive too little attention in selling and general promotional activities.
This danger can be met by forming an organisational structure on the basis of product groupings.
advantages | disadvantages |
accountability | increases the overhead costs |
specialisation | fail to share resources |
co-ordination |
.
Geographical or by Territory
This method has a great deal in its favour where the organisation is based on geographically scattered units.
For example, the branches of a bank may be grouped in this way under regional offices.
Of great importance is the need for securing due attention to local factors because a full appreciation is not always possible at a distance.
Functional
Departmentalisation may take place on the basis of function.
Some functions may include Sales, Marketing, Purchasing and Research & Development.
advantages | disadvantages |
pools expertise | focus on processes & inputs not customers and outputs |
avoids duplication | communication problems |
helps recruitment, development etc | poor co-ordination |
works well with centralised businesses | creates vertical barriers |
Economies of scale may be achieved | |
Control is very high |
Economies of scale - arise when unit costs fall as output rises.
.
Matrix
Is designed to encourage employee flexibility and multiple reporting.
A matrix structure organisation is formed by a team of people coming from different sections of the organisation.
This team is formed for a period of time to work on an assigned project.
The main advantage with a matrix structure is that the best people are chosen for a specific project thus expecting better results.
A matrix structure is led by a project manager and all team members have to report to him whilst working on this project.
On the other hand, the same members of this project have to report to their line manager when they are doing their normal job (they report only issues that has to do with their normal job).
This situation may lead to a conflicting loyalty towards who is really managing!
Entrepreneurial
This type of structure is built around the owner manager and is typical with small companies in the early stages of their development.
The entrepreneur often has specialist knowledge of the product or service.
Customer departmentation
An organisation may organize its activities on the basis of types of customer or market segment.
Hybrid structures
Organisation structures are rarely composed of only one type of organisation. Hybrid structures involve a mix of structures.
The Shamrock Approach
Core Workers – receive good promotion, security and status prospects relative to others and are often managers, team leaders and professional staff.
Interface Workers – low skilled labour that are generally called when needed for example part-time, seasonal staff – these type of workers are becoming more dominant and more demanded.
Suppliers – temporary and self-employed with general skills as needed, for example, consultants.