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Traditional structural forms - Coggle Diagram
Traditional structural forms
A clear and transparent organisational structure is important within any business and a clarity of the lines of the communication and accountability
HR research into delegation of tasks and the motivation of individual shows clearly that for a human being it is important to know our position within any particular structure and our relationship with the other aspects of the structure
Transparency and clarity are required for all to see within the organisation and this is usually achieved by the drawing of an organisation chart reflecting clearly the lines that exist between the different job functions and the levels of the hierarchy
Often the individual can feel motivated if they appear at the right level and with the anticipated lines of communication - there is a risk of demotivation if the chart reveals something unexpected
Simple structure
The majority of organisations across the world are small businesses and have a limited number of employees and a limited range of activities
Even in such an organisation, it is important for people to know who is in charge
This type of organisation structure is usually quite flat with the business being run by a single owner-manager and with limited lines of hieraarchy
Advantages
Clarity of accountability with decision maker in regular contact with all employees
Wide spans of control
Centralised authority
Disadvantages
The need for the manager to deal with every aspect of the business
Rigidity can prevent personal progress
Focus on day to day rather than strategy
Functional structure
As an organisation expands and diversifies, it is usually necessary to expand the organisational structure and recruit people with specialised skills to act as a function head for different aspects of the organisation
The owner-manager is unlikely to be skilled at an appropriate level in all of the differing aspects of a growing business and will often need to hire people with these skills to enable the business to continue its growth curve
Advantages
Flexibility and breadth of senior skills
Focused decision-making structure
Opportunities for people progression
Disadvantages
Duplication of tasks, lack of centralisation
Differing values between functions
Short-termism - what is best for my function?
Divisional structure
Rather than using the business operational lines of the functional organisation structure, a divisional structure views the businss as a series of products, services, gegrapical areas or something similar
Whereas the functional require specialists to oversee and manage the different aspects of the business, the divisional structure is more likely to have a senior manager or director with significant control and oversight across the entire range of functions within a particular division
Advantages
Separation of strategic from operational
Responsiveness to the external environment
Opportunities to 'grow' management skills and talent
Disadvantages
Loss of central control with short-term inter-division competitiveness
Expensive solution with duplication of function across divisions
Image and quality differentiation
Many listed companies will in effect operate a divisional structure with a holding company sitting at the top of the structure owning, either in whole or in part the subsidiary and associated companies
There are two core types of such structure in operation
The holding company and head office run a central services operation for all subsidiaries, giving a centralisation of functions such as finance and HR. The cost of these functions is passed on as an overhead to each business based upon levels of requirement
The holding company simply acts as a forum for strategic thinking, boarding and governance related activities. Each individual subsidiary being accountable for the operation and cost of its own administrative type requirements such as finance and HR
Matrix structure
Many organisations find that using a matrix structure overcomes many of the problems that arise form some of the purely hierarchical structures
The matrix structure combines the functional and divisional structures, often creating lines of accountability and a much greater communication cross-section across the different hierarchies
Advantages
Specialised skills can be used across divisions
Resources can be shared more easily leading to greater efficiency
Flexibility can lead to removal of silo thinking and better personal opportunitites
Disadvantages
Risk of power struggles across the senior team
Uncertainty about ultimate accountability - who do I really report to?
Hard workers can become over-burdened and people can avoid accountability
Multinational and transnational structures
A company operating within an international or multinational context will be required to consider a wider range of structural operating parameters
The differences between national culture and the inherent expectations fo employees, together with acceptability or otherwise of working practices, will determine how a company needs to be structured
When an organisaton is based in one country but buying from and/or selling to other countries, the structure can be largely based around what is acceptable within the 'home' country but making reputational allowances for the expecrations of international customers
International divisions
are stand-alone operations although run under the oversight and principles of the parent company, they are not integrated into the core structure. This is often the starting point for a business when it is establishing its intitial overseas operation and allows it to test the local potential and requirements without having to change the core 'home' structure. Usually such structures will draw upon 'head office' for many administrative and oversight functions
Local subsidiaries
will have a degree of autonomy in the overseas territory, particuarly in customer-focused activities such as design, marketing and production. These structures are particuarly useful when there is a need to be responsive to local regulations and culture. Legal, accountancy and other consultancy practices will often be established in this manner. This allows the building of a local reputation with a degree of autonomy from the main organiational structure which in turn will not need changing to enable an effective subsidiary operation
Global product divisions
are the optimal structure when there is a financial benefit in establishing a particular business function (eg production, finance, help-desks) in one geographic territory but with worldwide coverage for the organisation. The local responsiveness independence are low because the function is established in that territory for sound ecocnomic reasons. The global co-ordination is high because the function will impact an entire organisation
Transnational corporations
require a challenging mix of local responsiveness, global co-ordination and the ability to drive strategic grwoth and innovation across a wide range of different geographic territories and cultures. In many ways this is similar to a matrix structure but spread across different countries.
Bartlett and Ghoshal (1998)
suggest that such structures have a number of core characteristics
Each national unit will operate independently as a source of ideas and capablilities for the whole corporation
National units achieve greater efficiency and economies of scale by being able to act as specialists for the entire coporation
The head office will deliver success by establishing the indepdendent role requirement of each business unit, but then underpin this with effective systems, relationships and culture across the units to ensure a cohesive approach. Ultimate strategic success for the group will often depend on the ability of the head office to effectively monitor and influence the business metrics, of all units while allowig for local culture requirements
Joint venture structure
A joint venture structure can tale a range of different legal forms and can involve collaboration for a single particular purpose or for a wide range of business activities. The use of the word 'joint' implies two or more parties and the structure is designed to enable each party to retain their individual autonomy while working together in a formal legal structure designed to achieve specific strategy objectives to add value to each participant party in the venture
Advantages
Retention of individual autonomy and structure
Liability is limited to agreed contribution
Reduces reputation damage
Net accounting basis
Disadvantages
Reporting and compliance may add to the administrative burden
Guarantees may exceed limited liability and increase potential costs
Risks of double taxation
Focused project structure
When an organisation establishes an internal structure for one specific purpose.
The strucure could take the form of any structure depending on the size of the project but it will always be aligned to the core strategic drive and under the oversight of the head office operation