Organisational Structure & Organisational Change

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Organisations are structured based on their purpose, size, location and span amongst many other considerations. This article looks at the different organisational structures and designs and then looks at how change is managed within them.

This article is a topic within the subject Managing Organisations and People.

Contents

Required Reading

Robbins et all, Managing Organisations and People MGMT1001, compiled from Management (6th ed) and Organisational Behaviour (6th ed), (3rd ed, Sydney, Pearson Australia, 2012), pp. 153-180 (chapter 5) and 270 - 302 (chapter 8).

Organisational Structure

[1]Organisations can be classified, in very broad terms, as mechanistic or organic in nature. A mechanistic organisation is one that is structured very rigidly, following very discrete tasks and usually promotes little independence to its employees. In contrast, and organic organisation is very flexible and informal, allowing a strong level of independence to its employees.

Classifying organisations as mechanistic or organic depends on what degree or importance they put on the following elements:

  1. Work Specialisation
  2. Departmentalisation
  3. Chain of Command
  4. Span of Control
  5. Centralisation
  6. Formalisation

These elements are briefly explained below.

Work Specialisation

[2]Work specialisation refers to the degree to which tasks are separated into individual jobs. A whole product assembly is separated into discrete tasks and individual employees are trained to complete individual tasks. The result is a highly efficient use of the diversity of skill in an organisation and generally higher outputs per unit of time. The downside is that employees often get bored of the monotonous tasks which in the long run can reduce productivity.

Departmentalisation

[3]Departmentalisation refers to the way different tasks are grouped together in an organisation. The purpose of departmentalisation is to allow interrelated jobs to be carried out quickly and efficiently, with effective communication and with reduced time and location gaps.

There are many different way organisations group tasks together. Some of these are:

  1. Functional Departmentalisation- Grouping by function (such as accounting, HR, sales)
  2. Product/Services Departmentalisation- Grouping according to products used or provided (such as car companies splitting work by company, family or heavy vehicle production)
  3. Geographic Departmentalisation- Grouping according to physical area (such as by state or region)
  4. Process Departmentalisation- Grouping based on product or customer flow (manufacturing companies use this structure from mining to processing to manufacturing of products)
  5. Customer Departmentalisation- Grouping according to specific customer groups (a company may split operations based on retail customers, wholesale customers, or government accounts)

Chain of Command

[4]Chain of command refers to an organisation's structural policy on how orders are made, by whom, and how the orders are passed to the employees. This structure outlines the line of authority from top to bottom management. It is usually dependent on three variables:

  • What kind of authority does the structure permit each manager or employee?
  • If there is authority then what is the responsibility that is attached to it?
  • Does the structure offer unity of command, that is a continuous line of communication and authority from top to bottom? Organisations will most likely want strong unit of command as otherwise authority and decisions can become confusing when orders come from two or three directions.

Span of Control

[5]Span of control refers to an organisation's structure of management. It looks at how many employees does a single manager oversee and how many levels of management there are. Typically, organisations follow two span of control structures: tall and flat.

While tall structures mean more managers and more levels of command (and hence paying more to employees), this structure usually means decisions take longer to get approved but that they also get done more efficiently and systematically. In contrast, flat structures tend to have less managers (and hence pay less to employees) but involve quick organisational changes and typically orders are not carried out as effectively.

Centralisation

[6]Centralisation referes to the degree to which decision making is concentrated to few individuals. High centralisation typically exists in tall structures while low centralisation (or decentralisation) exists in flatter structures.

Formalisation

[7]Formalisation refers to how standardised an organisation's jobs communication and employee behaviour are. This consideration spans all levels of an organisation from job descriptions to communication standards to employee dress to other clearly defined rules and procedures.

Choosing a Structure

[8]The choice of an organisation's structure depends on many factors but the most important ones are:

  • The strategy: in general, structure should follow startegy. For example, manufacturers would usually choose a highly mechanistic structure, with high levels of departmentalisation and specialisation and a strong chain of command.
  • The size: the more employees an organisation has, the more taller its structure will generally be. More employees usually requires more management which can severely affect and organisations choice of structure.
  • The technology used: often organisations can flatten out their structure if they have the right technology such as a strong communications software while efficient and reliable machinery will generally mean a small amount of required maintenance.
  • The environment: this refers to both the global environment and the financial environment. Organisations typically choose a structure based on how quickly things are moving in the outside world so that they can match output and other needs.

Managing Change

[9]Change is an inevitable part of every business, whether it be changes in employees, management, structure or even products and services. This also makes change management an essential part of every manager's job.

[10]The person responsible for implementing change is known as the change agent and this person does not necessarily have to be from within the department or organisation at all. The change agent will typically change at least one of the following:

  1. Structure- a change agent can alter the overall structure of the organisation choosing to move from organic to mechanistic, from flat to tall etc. Similarly, departments can be split or combined, levels eliminated or even responsibilities changed. Typically this type of change occurs due to external factors.
  2. Technology- a change agent may want to change the technology available in the organisation. This involved acquiring new machinery and software, tools and supplies. Sometimes this may include automation, which may involve redundancies.
  3. People- a change agent will often have to make decisions about the employees and managers in an organisation. Sometimes this includes firing while other times it means hiring, but very often the biggest change is in the relationships between people. Often change agents will implement education programs to keep employees relevant and updated, or other times they will implement team building exercises to increase unity. Sensitivity training may also be used as a means of changing behaviour through unstructured group interaction.

Sources of Change

[11]In general, change comes from two sources: external and internal. External sources of change are those that the organisation cannot control, such as market demand, financial stability, natural disasters as well as competition, suppliers and government laws. Internal sources are those that are introduced from the employees themselves. Such change can be a change of strategy, change of people (such as when employees move or new employees are introduced) or new equipment.

Change Processes

[12]There are two models (or theories) of how change should be introduced to an organisation. These are:

  1. The Calm Waters Metaphor which says that organisations must "unfreeze", or encourage movement away from the status quo, introduce changes and then "refreeze" to set the change into the organisation.
  2. The White-Water Rapids Metaphor which maintains that organisations must constantly introduce change.

In reality, the calm waters metaphor was true in the past when industries were manufacturing based and quite stable. Today however, nothing is stagnant and the white-water rapids metaphor is more relevant.

Sources of Resistance

[13]In every attempt to introduce change, there is always resistance. The reasons people resist change are usually:

  • Uncertainty about the new tasks and change
  • Habits are ingrained in employees who are reluctant to form new ones
  • Concern over personal losses
  • Belief that the change is not in the organisation's best interest.

Techniques for Reducing Resistance

[14]There are six available techniques that are used to reduce the amount of resistance to change in an organisation. These are:

  1. Education and Communication
  2. Participation (as in the managers actively participating with the employees in the change)
  3. Facilitation and Support (such as counseling)
  4. Negotiation
  5. Manipulation
  6. Coercion

Even though the last two techniques (manipulation and coercion) are not necessarily ethical or legal, they are used very often in organisations.

End

This is the end of this topic. Click here to go back to the main subject page for Managing Organisations and People.

References

"Textbook" refers to Robbins et all, Managing Organisations and People MGMT1001, compiled from Management (6th ed) and Organisational Behaviour (6th ed), (3rd ed, Sydney, Pearson Australia, 2012).

  1. Textbook p. 158
  2. Textbook p.159
  3. Textbook p.159
  4. Textbook p.161
  5. Textbook p.162
  6. Textbook p.164
  7. Textbook p.165
  8. Textbook p. 168
  9. Textbook p.270
  10. Textbook p.275
  11. Textbook p.270
  12. Textbook p. 272
  13. Textbook p.279
  14. Textbook p.282
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