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Organisation configurations and designs - Coggle Diagram
Organisation configurations and designs
In their start up phase, organisations will often be small in size, with few employees and there is less of a need for structure
The 'simple structure' is the simplest of all organisational structure forms, it is a centralised organisations with decisions typically taken by the managing director or owner
Businesses in the start up phase need strong leadership and one person can generally manage the more important decision making
The vision of the leader during the start up phase is paramount and they are likely to have a financial stake in the business and either a technical or managerial skill set to bring to the organisation
As the start up business grows, the simple structure comes under strain as the single owner becomes overwhelmed with the complexity of the organisation
Organisations vary according to their number of employees, span of control and management levels, degrees of specialisation, method of departmentalisation and degrees of centralisation
The arrangement may be referred to as the organisations structure, configuration (
the shape of the organisations role structure, the structures, processes and relationships through which the organisation operates
) or design
The most common forms of design include the functional, product or area based or some hybrid of the three
The primary purpose of design is to divide and allocate work then co-ordinate and control that work so goals are met
The design adopted by the organisation can impact performance and the accomplishment of goals
The design affects employee engagement, creativity, loyalty and commitment alongside utilisation of resources and presenting challenges for co-ordination and control
Functional structure
The organisation is structured according to functional areas such as finance, marketing and HR
Divided into relatively simple parts based on the primary and secondary activities which have to be undertaken such as production, finance and accounting, marketing, HR and R&D
In this structure all of the work activities related to a single function are grouped
Ultimately there is one senior manager responsible for all marketing activites just as there will be one different senior manager responsible for all finance and accounting activities
People are grouped according to their specialist expertise, their profession
This has the advantage of efficiency as managers of the same profession are better placed to oversee and guide their direct reports
It also reduces duplication of effort and provides some flexibility for managers to allocate similar work across their teams
Grouping people in this way helps to develop their specialisms and create a professional subculture, providing opportunities for creativity and promotion
It can enhance parochialism and intergroup conflict
Whilst arguably the most common organisational design, some may consider it to be a legacy of the classical management era and better suited for relatively stable and predictable environments
The product structure
The organisation is structured according to related products or services
This divisional structure has managers reporting to the head of the company by product types
Structuring by product involves organising the business into departments, each of which focuses on a different product or product set
This organisation design is popular in diversified organisations with a range of products or services
People are grouped according to their expertise in developing a particular product or product range to market
Whereas the primary rationale for grouping people together is based on the products or service with which they are involved it is often found that the departments below this either organic along functional or area lines, this depends upon the size and complexity of the organisation
In many ways the product structure operates as a collection of subsidiaries, providing focus and encouraging positive competition between parts of the business
This structure can enable the creation of completely separate processes form other product lines within the organisation, although this can also be a disadvantage as the senior manager for any product area may promote their part of the company to the detriment of others - this is often an issue of a lack of central control or co-ordination
An organisation may be divided by the type of customer each part of the company targets eg public sector or private sector
A clear focus on market segments help meet customer needs more effectively
Disadvantages stem from duplication of functions eg different sales force or HR team for each product group which results in higher overall costs
Area or geoprhapic structure
For organisations that cover a span of geographic regions it occasionally makes sense to organise by country or region
Each geographic location is overseen and directed by one or more exectuives, these executives oversee and direct the functions of the location and have responsibility for the entire operation in that area
This is done to better support logistical demands and differences in geographic customer needs which can be met in a localised fashion such as pricing, marketing of products and employment practices
Also allows the managers and staff to be more familiar with the local business environment, culture and legal climate enhancing decision making effectivness
Communication between employees of the different business functions can be much more personal in a geographical organisational structure
Rather than having to establish working relationships with people of different cultures and using different languages, possibly on the other side of the world, employees in a geographical structure often work in closer proximity to each other
Grouping employees this way an encourage the formation of strong, collaborative teams that can quickly adapt to local conditions
Deals effectively with complexity by breaking down like parts of the business into divisions
Co-oridnation between the divisions is lacking, if there is no need for divisions to co-ordinate, then the divisional structure is adequate
Matrix and Hybrid Structures
Where there is both complexity and the need for co-ordination between divisions a matrix structure may help
A matrix structure is an organisational design in which the line of command is shared by two or more decision makers
In the global firm, the typical matrix is either function and geography or business and geography
Matrix management is a system of management operating in a horizontal as well as vertical organisation structure where typically a manager reports to two superiors one a departmental line manager and the other a functional or project manager however many organisations have found this design difficult to implement and it is often criticised for the problems a worker has with having more than one manager
It is possible for organisations to mix and match their approach to configuration and structural design. A hybrid organisational structure is one in which more than one organisational design is used
A hybrid structure allows a company more flexibility in distributing work and assigning job roles, some departments may be functional such as finance or HR while others may be product or area based
A hybrid structure resolves the concerns around duplicated support functions but still enables the organisation to benefit from a product or area focus