ASSIGNMENT

Unit 7: : Strategic Organisation Structure

1. Write short note on “Organisation is strategy or structure’.

Strategy is the actionable aspect of running a business. It includes pricing models, marketing
and branding tactics and competitor assessment. Formulating a strategy is done to determine
how the business will fit within the market – and more importantly – how the business will
compete.

Designing a strategy requires specific goal setting and a big picture vision for the
business. You can form the strategy first and mold the structure later to work with
the strategy. In an established business that has firm structural elements, you can
also form a strategy based on the existing structure and processes.

The structural elements determine how day-to-day operations are managed and run.
The structure works with the strategy to reach end goals that are set by the business.
In a creative environment, structure is often more loosely defined, with overlapping
job roles and less oversight. This environment is based on the goal to create and
innovate.

In a strict production-style business, the structural elements are far stricter. Without
strict structural processes, which built on a data driven approach, these businesses
would struggle to meet production goals.

2. Which factors influence the organisational design?

Strategy determines a course of action to direct various organizational activities.

It makes plans to co-ordinate human and physical resources to work towards a
common objective. Strategy is pre-requisite to organization structure and also
follows it. The relationship between strategy and organization structure is
depicted as follows:
Strategies to diversify product lines or markets require decentralized transition
as decision-making is done at wider level and strategies for organizations working
in stable environment. Where managers do not diversify their operations, require
a centralized organization.

The technology for manufacturing goods and services also affects the
organization structure. In case of mass production technology, mechanistic
organization structure is more appropriate, while in case of continuous
production or small scale production technology, the appropriate from is organic
structure. This is because mass production technologies involve standardization
and specialization of work activities and continuous or unit production
technologies require low levels of standardization and specialization.

People: Organization structure defines work, groups it into departments and

appoints people to run those departments. People at different jobs must possess
the skill, knowledge and efficiency to accomplish the related tasks.

Tasks: Activities performed by people who transform organizational plans into

reality are known as tasks. Various task characteristics are:

(a) Skill variety: It is the extent to which creativity and variety of skills
and talents are required to do a task. People with high degree of task varieties (for
example, a dress designer ) perform tasks that increase their intellectual ability
and give them high job satisfaction.

(b) Task identity: Whether to produce a product in whole or in parts

determines its task identity. When a product is produced as a whole, it has greater
task identity. People performing tasks with high task identity y (for example, a
computer programmer) perform various job functions related to that task from
beginning to the end, derive job satisfaction out of their work and feel motivated
to repeat those tasks.

(c) Task significance: The importance of task affecting the well-being or

lives of people working inside and outside the organization determines
significance of the task. People performing tasks with high task significance, i.e.,
tasks which positively affect the well-being and safety of others (for example, a
traffic police inspector), feel satisfied with their job performance and perform
work of high quality and esteem.

(d) Autonomy: It determines the extent to which a person enjoys t

freedom of performing various Job activities and determines the steps or
 procedures to carry them out. People who are responsible for all the functions
and schedules related to a job hold accountability for that job and enjoy greater
autonomy with respect to that task and derive greater job satisfaction.

(e) Feedback: It is the information that people receive about successful

completion of their task.

5. Decisions: Questions like who makes decisions-top managers or lower level

managers, how information flows in the organization so that decision-making is
facilitated, affect the organization structure. Centralized decision-making powers
give rise to mechanistic structures and decentralized decision-making processed
give rise to organic or behavioral structures.

6. Informal organization: Informal organizations are and outgrowth of formal

organizations. Social and cultural values, religious beliefs and personal likes and
dislikes of members which form informal groups cannot be overlooked by
management.

7. Size: A group known as Aston Group conducted research on firms of different

sizes and concluded that as firms increase in size, the need for job specialization,
standardization and decentralization also increases and organizations are
structured accordingly.

8. Environment: Organization structure cannot ignore the effects of

environment. Organizations must adapt to the environment, respond to
incremental opportunities and satisfy various external parties such as customers,
suppliers, layout unions etc. In case of stable environment where people perform
routine and specialized jobs, which do not change frequently, a closed or
mechanistic organization structure is appropriate.

9. Managerial perceptions: Organizations where top managers perceive their

subordinated as active, dynamic and talented entrepreneurs, prefer organic form
of structure, If they hold negative opinion about their subordinates, they prefer
mechanistic organization structure.

3. What are the major structural alternatives?

Departmentation is the foundation of organisation structure, that is, organisation

structure depends upon departmentation.

Departmentation means division of work into smaller units and their re-grouping
into bigger units (departments) on the basis of similarity of features. As the
organisation grows in size, the work is divided into units and sub-units.
Departments are created and activities of similar nature are grouped in one unit.
Each department is headed by a person known as departmental manager.

Departmentation, thus, helps in expanding an organisation and also promotes

efficiency by dividing the work on the basis of specialisation of activities and
appointing people in various departments on the basis of their specialised
knowledge.

There are four major structural alternatives:

• Functional Structure

• Divisional Structure

• Hybrid Structure

• Matrix Structure

• Functional Structure

• A functional organization structure is a hierarchical organization structure

wherein people are grouped based on their area of specialization. These
people are supervised by a functional manager with expertise in the same
field. This expertise helps him to effectively utilize the skills of employees,
which ultimately helps organizations in achieving its business objectives.

• People are classified according to the function they perform within the
organization in this kind of organization structure. The organizational
chart for a functional organization structure shows the president, vice
president, finance department, sales department, customer service,
administration, etc.

• Each department will have a department head who will be responsible for
the performance of his section. This helps the organization control the
quality and uniformity of performance.

Divisional Structure

• The divisional organizational structure organizes the activities of a

business around geographical, market, or product and service groups.
Thus, a company organized on divisional lines could have operating groups
 for the United States or Europe, or for commercial customers, or for the
green widget product line. Each such division contains a complete set of
functions. Thus, the green widget division would handle its own
accounting activities, sales and marketing, engineering, production, and so
forth.

• This approach is useful when decision-making should be clustered at the

division level to react more quickly to local conditions. The divisional
structure is especially useful when a company has many regions, markets,
and/or products. However, it can cause higher total costs, and can result in
a number of small, quarreling fiefdoms within a company that do not
necessarily work together for the good of the entire entity.

Hybrid Structure

• Hybrid structure is a form of departmentalization that adopts parts of both

functional and divisional structures at the same level of management.

• Many large organizations adopt this structure so as to incorporate the

advantages of both functional and divisional structures. The functional
structure is adopted to derive the benefits of economies of scale, greater
competence of managers and efficiency, in resources utilization while the
divisional structures is created to focus on products, services or markets

Matrix Structure

• A matrix structure is a type of departmentalization that superimposes a

horizontal setoff divisional reporting relationship onto a hierarchical
functional structure.

• It is also referred to as a grid organization or project or product

management organization.

• The main feature of a matrix organization is that functional and project or

product patterns of departmentation are combined in the same
organization structure.

• Thus, a matrix structure can be termed to both functional and divisional at

the same time

• It has two chains of command – vertical and horizontal

 • The heads of both divisional and functional departments that comprise the
matrix structure are at times referred to as ‘matrix bosses’

4. What is hybrid structure?

• Hybrid structure is a form of departmentalization that adopts parts of both

functional and divisional structures at the same level of management.

• Many large organizations adopt this structure so as to incorporate the

advantages of both functional and divisional structures. The functional
structure is adopted to derive the benefits of economies of scale, greater
competence of managers and efficiency, in resources utilization while the
divisional structures is created to focus on products, services or markets