MGMT10002 Lecture Notes - Lecture 4: Centralisation, Knowledge Economy, Crisis Management
19 Jun 2018
School
Department
Course
Professor
PRINCIPLES OF MANAGEMENT WEEK 4
Organisational structures and Organisational cultures
Formal Organisational Structure: The framework by which the organisation defines how the tasks are divided, how
the work of employees and departments are coordinated and how the authority is distributed. In order to change the
results a company is getting, it is necessary to change their organisational structure as the organisational structure the
way it is currently designed is designed perfectly for the results the firm is currently getting.
The Key Steps for a formal organisation design include the:
Division of labour (differentiation): The division of labour leads to specialisation in certain tasks which can
increase the speed and effectiveness of production lines, however too much specialisation can reduce motivation. It
can alienate people from the process of production, ownership, meaning and pride in work are critical aspects of
today’s knowledge economy. It can also create a tunnel vision, being overly focused on your individual work and
losing sight of the overall organisation’s goals. And also create competition between departments. There may also be
misaligned efforts and missed cross-fertilisation opportunities.
Coordination of mechanisms (integration): seeks to address interdependences.
Form of
Interdependence
Demands on
communication, Decision-
making across units
Type of coordination
required
Priority for
locating units
close together
Type of
technology
Pooled Low Communication Standardisation, Rules,
Procedures
Low Mediating
Sequential Medium Communication Plans, Schedules, Feedback Medium Long-Linked
Reciprocal High Communication Mutual Adjustment,
Unscheduled Meetings
High Intensive
Pooled e.g. retail stores, Sequential e.g. car assembly line, Reciprocal e.g. hospital emergency room.
Distribution of decision rights (decentralisation).
The degree to which decision-making authority is concentrated at higher levels of the organisation. Centralisation-
organisational crisis management desire for control, Increase consistency. Decentralisation- complexity- size,
diversity, Desire for empowerment, increase flexibility.
Formalisation gives a standardisation of work flows (standard operating procedures), specification of decision criteria
and written documentation of decisions and activities etc. Today this is embedded in IT systems.
Basic (Traditional) Organisational Structures
Structure Type Advantages Disadvantages
Flat/Undifferent
iated
Clear view of org. goals; wide spans of
control and centralised authority allow quick
decision-making; few org. barriers little
formalisation ensure flexibility; inexpensive
Often unfeasible for larger organisations with
high variety/complexity of tasks; depends
critically on top management team
Functional Efficiencies from putting together similar
specialties with people with common skills,
knowledge and orientations; coordination
within function; in-depth specialisation
Poor communication across functional areas;
limited view of organisational goals.
Multi-divisional Allows specialisation in particular products,
services, geographies; closer to customers;
facilitates cross-functional collaboration.
Duplication of functions; limits
learning/knowledge sharing in functional areas;
can create unwanted rivalries/competition
between divisions
Matrix Fluid design that can respond to
environmental changes; high information
carrying capacity; high degree of
coordination/integration; potentially faster
decision making.
Expensive and complex; dual authority can lead
to task and personality conflicts which slow
down decision-making.
Contingency Factors:
Strategy: organisational structure follows strategy
Size: Firms change from organic to mechanistic organisations as they grow in size
Technology: Firms adapt their structure to the technology they use
Environmental Uncertainty: Dynamic environments require organic structures(highly flexible and adaptive); for low
environmental uncertainty need mechanistic structures need stable environments(rigid and tightly controlled).
find more resources at oneclass.com
find more resources at oneclass.com
Document Summary
Formal organisational structure: the framework by which the organisation defines how the tasks are divided, how the work of employees and departments are coordinated and how the authority is distributed. In order to change the results a company is getting, it is necessary to change their organisational structure as the organisational structure the way it is currently designed is designed perfectly for the results the firm is currently getting. The key steps for a formal organisation design include the: Division of labour (differentiation): the division of labour leads to specialisation in certain tasks which can increase the speed and effectiveness of production lines, however too much specialisation can reduce motivation. It can alienate people from the process of production, ownership, meaning and pride in work are critical aspects of today"s knowledge economy. It can also create a tunnel vision, being overly focused on your individual work and losing sight of the overall organisation"s goals.
