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The Organization and its Structure -MOBU1M2 Cheat Sheet by

CAPE Management of Business Unit 1, Module 2, Chapter 6
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INTROD­UCTION

An organi­zation is a well-c­oor­dinated social unit of two or more people with a desire to achieve a common goal or collective goals
An organi­zat­ional structure is a framework that outlines the lines of authority and commun­ication in the organi­zation
Importance of organi­zat­ional structures:
Facilitates coordi­nation of the activities conducted by the firm
A formal outline of a company's structure makes it easier to add new positions in the company
Improves operat­ional efficiency by providing clarity and guidance to employees as it relates to their actions and lines of commun­ication

CLASSI­FIC­ATION OF ORGANI­ZATIONS

Func­tional Organi­zat­ional Struct­ure
Defin­ition: a common type of organi­zat­ional structure in which the organi­zation is divided into smaller groups based on specia­lized functional areas, such as accoun­ting, purchasing or marketing.
Features:
i. Well-d­efined commun­ication channels which are usually downward.
ii. Clearly outlined chain of command and superv­isory roles
iii. Utilises job specia­liz­ation and depart­ments have well-d­efined roles
iv. Structure is less flexible and so it relies heavily on formal procedures
Who is Fredrick W. Taylor?
He is the father of the Scientific Management Approach, which resulted in the functional organi­zation structure
Advantages: i. Slow decisi­on-­making process ensures that all of the variables are carefully considered before they are acted upon, thus saving the organi­zation money, time and effort which could be invested elsewhere
ii. Segreg­ating the workforce according to function clarifies organi­zat­ional respon­sib­ility and allocation of tasks. This tends to eliminate duplic­ation of assign­ments that waste time and effort.
iii. Easier for upper-­level management to delegate operat­ional functions to lower-­level management
iv. Increase in accoun­tab­ility as there are clear lines of manage­ment.
v. Grouping employees by specia­liz­ation ensures a dependable level of depart­mental compet­ence, thus improving the efficiency of the department and the quality of work produced by the department
Disadvantages: i. Specia­liz­ation can result in the individual or group becoming complacent and losing interest due to the work becoming monoto­nous, thus, it will be harder to motivate them.
ii. Co-ord­ination and control may become too stringent and lead to low morale. Having a common organi­zat­ional purpose improves employee morale and perfor­mance and is an important predictor of organi­zat­ional success. When each group of specia­lists in a functional organi­zation is relatively isolated, the common bond that emphasizes a single overar­ching organi­zat­ional purpose is almost inevitably weaker than in an organi­zation where different kinds of employees regularly interact.
iii. The structure may become too rigid, hence, it may be unable to adapt to the constantly changing enviro­nment.
iv. The decision making process may be very slow, especially for very centra­lized struct­ures.
v. The different functional groups may not commun­icate with each other which could potent­ially result in decreased flexib­ility and innovation
 
 
Matrix Organi­zat­ional Struct­ure
Defin­ition: they are unambi­guous and relatively permanent (or stable) organi­zat­ional models, in which each element in the organi­zation reports to a higher element and concludes with the CEO or Board of Directors at the top.
Features:
i. Combines elements of the functi­onal, product and possibly geogra­phical organi­zat­ional struct­ures.
ii. It is usually used where the enviro­nment is rapidly changing and there is a need for effective coordi­nation to combat the situation.
iii. This structure depicts two lines of authority:
vertical authority which concen­trates on the major functional areas of the firm
horizontal lines which show the lines of authority across the different divisions, regions or depart­ments
iv. Employees are generally accoun­table to more than one boss
v. There are usually two separate chains of command
vi. there are two kinds of managers: functional managers and project managers
vii. the balance of power between functional and project managers isn't organi­zat­ionally defined
Pros:
Flexible and adaptable to the changing environment
Employees are more involved in the operation of the firm
Project management trains managers to become leaders in the functional organization
Facilitates efficient use of limited human resources
Cons:
Teams may substitute the firm's objectives for theirs as decent­ral­ization occurs
Requirement for high degree of cooper­ation between functional and project management
This structure may lead to conflicts among depart­ments as they compete for scarce resources
There is always a possib­ility of the problem of dual loyalties
 
Network Organi­zat­ional Struct­ure
Defin­ition: a decent­ralized organi­zat­ional structure in which managers coordinate and control relations that are both internal and external to the firm
Pros:
Minimizes admini­str­ative costs
Faster decisi­on-­making process since there is a reduction in hierar­chical structure
This network structure is more agile than other struct­ures. Because it is decent­ral­ized, a network organi­zation has fewer tiers, a wider span of control, and a bottom-up flow of decision making and ideas.
Communication is less siloed and flows freely, possibly opening up more opport­unities for innova­tion.
Cons:
This more fluid structure can lead to a more complex set of relati­onships in the organi­zation. For example, lines of accoun­tab­ility may be less clear, and reliance on external vendors can be quite high. These potent­ially unpred­ictable variables essent­ially reduce the core company’s control over its operat­ional success
Can be time-c­ons­uming especially when there are regular meetings
Features
i. This organi­zat­ional structure links a number of separated organi­zations with a desire to achieve a common goal through their interactions
ii.The network can be in the form of a joint venture agreement or where some of the major functions of the firm are subcon­tracted to other firms. These firms are linked by and to a compay which serves as the headqu­arters or hub
 
 
 
Team Organi­zat­ional Struct­ure
Defin­ition: an organi­zat­ional chart that groups employees on the same employment level into teams that perform specific job functions.
Features:
i.These teams are usually cross-­fun­ctional and are composed of employees from different functional departments.
ii.Team members are answerable to both their functional managers and the team leader
Pros
With no need to climb a lengthy chain of command to receive approval for ideas or changes to the business model, a team-based structure can make the necessary changes to quickly react to consumers' ever-c­hanging tastes and prefer­ences, as well as, allow for a more rapid response to different market condit­ions.
A team-based lateral organi­zat­ional structure can eliminate tradit­ional scalar chains of command, which can cause delays and worker frustr­ation with cumbersome commun­ication lines. A team can more effect­ively raise concerns to management without appearing to be disgru­ntled or unnece­ssarily upset, and without opening themselves as indivi­duals to reperc­ussions by management for the issues raised by their team. This can make indivi­duals more willing to speak out about problems or ineffi­ciency in the workplace.
Removes depart­mental barrier while facili­tating intrad­epa­rtm­ental relationship
By spreading the respon­sib­ility among team members rather than having a single individual in charge of decisi­on-­making or management of a business area, decisions can be reached by a quorum and can take place rapidly as team members can be assigned to research areas of need, implement changes, or work on other problems while other team members continue to focus on the current situation or business practice. Decisions made by a team are sometimes better thought out and more effect­ively implem­ented than decisions made by a single indivi­dual.
Cons:
This structure may lead to conflicts among depart­ments as they compete for scarce resources.
There is always a possib­ility of the problem of dual loyalties
Teams may substitute the firm's general object­ive(s) fr theirs as decent­ral­ization occurs
A lot of time is spent in meetings
 

CLASSI­FIC­ATION OF ORGANI­ZATIONS (cont'd)

Product Organi­zat­ional Struct­ure
Defin­ition: a framework in which a business is organised into separate divisions, each focusing on a different product or service and functi­oning as an individual unit within the company
Features:
i. Each product is assigned the main functional depart­ments of the organi­zation
ii. Each product unit is accoun­table for profit in that division
iii. Allows for delegation of respon­sib­ility by top management
Pros:
Can respond to market changes more flexibly and quickly
Focus is placed on the product's perfor­mance and level of profit­ability
Divers­ifi­cation in the product offerings of the firm is encouraged
Each product division is given more autonomy to achieve divisional and organi­zat­ional objectives
Cons:
Can nurture negative rivalries among divisions
Risk of over-e­mph­asizing divisi­onal, rather than organi­sat­ional goals
Duplic­ation of functional areas and resources, example a different sales team for each division
The success of the product is highly dependent on the people with direct contact with the product
 
Geog­rap­hical Organi­zat­ional Struct­ure
Defin­ition: this framework which is typically used by multin­ational corpor­ations, is an organi­sation structure where company hierarchy is divided on the basis of geographic location in which company operates which is headed by a centra­lized head office.
Features:
i. Each region is a profit centre
ii. The different regions are arranged on a functional or product basis.
iii. Regions are allowed some amount of autonomy in the management of their operat­ions.
Pros:
It will be easier for organi­sations to track profits within regions and can focus on them as each region has different profit margins, revenues and sales practices.
Each region has respon­sib­ility for profit generation
The organi­zation is presented with local opport­unities which may not otherwise be available
The firm can respond quickly to local enviro­nmental change
Cons:
There is duplic­ation of functional groups and resources across regions
Poor co-ord­ination across regions can hurt the entire organi­zation
Competition for corporate resources may lead to conflict
 
 
 
Virtual Organi­zat­ional Struct­ure
Defin­ition: An organi­zation consisting of networks of geogra­phi­cally dispersed employers and employees that combine their human resources, assets and ideas to produce a service or product.
Features: i. Heavy reliance on a centra­lized database that uses commun­ication techno­logies.
ii.­Mi­nimal physical structure
iii. The stakeh­olders within a virtual organi­zation may not meet face to face for a while, if ever at all. Instead they commun­icate via the Internet to receive their assigned tasks and send their reports once their tasks are completed.
iv. Very few physical assets
v.Heavy reliance on a network of part-time self-e­mployed workers who are connected electr­oni­cally
vi. require firms to be much more dependent on one another than they have been in the past, demanding unprec­edented levels of trust.
Pros:
Minimal overhead costs, as products are often outsourced
Access to worldwide expertise in order to produce high-q­uality goods and services, without having to meet physically.
Enables a company to manufa­cture and distribute products without the hindrances of organi­zat­ional boundaries or location.
Cons:
Virtual organi­zations can be very complex and problematic.
Commun­ication in the virtual office may be difficult as people are working within different time zones.
It can be difficult to build a corporate culture, as employees and employers may be from different cultures across the world.
Close monitoring of external suppliers is required.
Heavy reliance on external organi­zations to provide high-q­uality goods in large quantities
Lack of job security as the services of the employees might be sub-co­ntr­acted

CENTRA­LIZ­ATION AND DECENT­RAL­IZATION

Cent­ral­iza­tion: A process where the concen­tration of decision making is lies in the senior manage­ment's hands. All subjects and actions at the lower level are subject to the approval of top manage­ment. There is minimal delegation of respon­sib­ility
Adva­ntages of centra­liz­ati­on: In a centra­lized organi­zation, decisions are made by a small group of people and then commun­icated to the lower-­level managers. The involv­ement of only a few people makes the decisi­on-­making process more efficient since they can discuss the details of each decision in one meeting.
The standa­rdized procedures and better superv­ision in a centra­lized organi­zation result in improved quality of work. There are superv­isors in each department who ensure that the outputs are uniform and of high quality.
There are less extensive planning and reporting procedures
Facilitates easy control and coordi­nation of policies
Disa­dva­ntages of centralization:
The senior management may become over-b­urdened with their workload and may have to work long hours
Employees become loyal to an organi­zation when they are allowed personal initia­tives in the work they do. They can introduce their creativity and suggest ways of performing certain tasks. However, in centra­liz­ation, there is no initiative in work because employees perform tasks concep­tua­lized by top execut­ives. It limits their creativity and loyalty to the organi­zation due to the rigidity of the work.

Dictat­orship: An employee is always expected to work according to what has been dictated to him. No employee at the subord­inate level is given the authority to take a decision on a particular issue, in the absence of the lead. This causes psycho­logical reluctance and the employee sees no growth or motivation within the corpor­ation and hence results in him being disloyal towards the Company.
 
Decentralization:
Decentralisation refers to tire systematic effort to delegate to the lowest levels all authority except those which can only be exercised at central points.
Features of a decent­ralized organi­zat­ion: A decent­ralized organi­zation is often separated into divisions, with some amount of autono­my,­how­ever, working towards the fulfil­lment of the organi­zat­ion's goals
Adva­ntages of a decent­ralized organization:
Workload of senior management is decreased as the workload of the firm is dispersed among depart­ments and to different individuals
May improve the level of motivation among employees
Firms can respond to changes quicker
Disa­dva­ntages of decent­ral­iza­tion
Decentralisation becomes useless when there are no qualified and competent personnel.
Under decent­ral­iza­tion, it is not possible* to follow uniform policies and standa­rdized proced­ures. Each manager will work and frame policies according to his talent.
Decentralization of authority creates problems of co-ord­ination as authority lies dispersed widely throughout the organi­zation.
 

FACTORS AFFECTING THE CLASSI­FIC­ATION

Size of the firm: As firms increase in size it may be necessary to upgrade or downgrade their organi­zat­ional structure
The business cycle: Organi­zat­ional structural choices are also dictated by the life-cycle stage of your business. In many instances, companies that are in the beginning stage of their develo­pment tend to concen­trate power and authority in the hands of the founder, and on a small group of trusted advisors. Many companies at this stage don’t have a formal design, because business owners haven’t mastered which factors influence organi­zat­ional structure. However, as companies move into a growth phase, control often shifts from the upper tier of management to a more pyrami­d-like structure, in which authority is granted throughout the various levels.
Business strategy and object­ives: By aligning your strategy with the organi­zat­ion's most important object­ive(s), they will maximize their chances for sustained success.
The business enviro­nme­nt: The enviro­nment is the world in which the organi­zation operates, and includes conditions that influence the organi­zation such as economic, social­‐cu­ltural, legal‐­pol­itical, techno­log­ical, and natural enviro­nment condit­ions.

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