Here we are concerned with the evaluation of each an organisation's strengths, weaknesses, opportunities and threats. 
 

Preparation

Consider your organisation's Strengths, Weaknesses, Opportunities and Threats (SWOT analysis). 

What do we Mean by Organisation Structure and Systems?
 

Introduction

We have to deal first with an ambiguity about the word organisation. It is used in the general heading for this program as a description of a complete working unit - a company in business, a department in the Civil Service. In this section, however, we are using the word in the more specific sense involving the arrangement of structure and systems through which people are managed. 

We deal with the three major factors of the organisational context - environment, resources and strategy. Then we introduce the four elements of the internal organisation - key tasks, structure, people and systems. Finally, we show how these factors and elements are related. 

While reading the note, you should think about your organisation of which you are in charge - department, section, group or whatever. 
 

Core text

This part of the course centres primarily on Charles Handy's book about Understanding Organizations: 

Charles Handy, Understanding Organizations, 1993, Oxford University Press. 

 

Recommended texts

Kay, J.A, Foundations of Corporate Success : How Business Strategies Add Value, 1995, Oxford University Press. 

Bain, Neville, Successful Management, 1995, Macmillan Press 

 

Session Outline

Read the following pages, making notes of issues on which you agree. 

Do the additional reading outlined below. 

Consider the following questions and prepare for discussion on them: 

1. Using the main headings in this Reading, define the main features of your parent organisation, and of the unit in which you work.

2. How well does your organisation meet the statements set out in "How successful organisations are structured". Consider data collected during your assignment on inter-functional relationships.

3. How far do the characteristics set out in the section "People in successful organisations" apply in your unit?

4. Which of the features of "How effective organisations co-ordinate" apply in your unit?

5. Can you identify additional criteria for defining the characteristics of an effective organisational structure? 

Summary of organisation issues

It is a basic job of the manager to design his internal organisation so that it fits the context within which it must operate. 

The three major factors in the organisational context are: 

• The environment 
• The resources available 
• The organisation's strategy

 

In designing his internal organisation, the manager must consider its four elements: 

• The key tasks. 
• The organisational structure 
• The organisational systems. 
• The people

 

Each of these elements interacts with each of the others. The manager must find a dynamic blend that fits the context within which the organisation operates. 
 

 

Designing

Task specialisation

The specialisation of work has brought one other major advantage. It has allowed a standardised quality of output. Until the tolerance level of components could be guaranteed, mass-production methods could not be employed. 

Dividing up work has some inevitable consequences. Usually it results in a smaller number of operations per person - the restaurant waiter does not have to worry about buying and cooking food, for instance. 

In line with the greater variety of jobs, each individual job calls for greater specialisation. Even within quite small departments, the job of one person can be totally different from that of all of his or her colleagues. 

When carried to extremes, the division of work can lead to the unfortunate consequences portrayed in Charlie Chaplin's film Modern Times. The manager's job in designing his organisation is to get the balance right. 
 

How should work be divided?

There are two basic sets of criteria. One is related to the output of the operation. The other set is related to the functions that must be performed in the operation. The set of output criteria includes product, market and region. The set of functional criteria includes business, managerial and technical functions. 

In practice most large organisations are divided according to different criteria at different levels. The approach that is adopted is designed to deal with the diversity faced by the organisation. So if an organisation is attacking very different markets, it may decide to differentiate its internal structure to meet that diversity. But if its market is very coherent, the organisation may be structured around the very diverse functions that must be carried on internally. 

The goal of the manager, in establishing the structure, is to establish a good fit between his internal organisation and the context within which it must operate. 
 

 

Alternative organisation structures

Structures vary according to need, which may differ over time; they also vary according to the competence (and prejudices) of those involved in the decisions about structure. Thus, organisations or parts of organisations may be structured: 

• By product 
• By region. 
• By market. 
• By function. 
• By technical expertise.

 

Frequently, a number of these structures will exist within one main organisation. The relatively familiar line and functional organisation has been supplemented more recently by "matrix" organisation. 

Lawrence and Lorsch, two American organisational researchers, have been comparing the different organisations of successful and unsuccessful companies that are otherwise similar. Successful organisations are structured in four significantly different

See Minzberg's Classification of Organisational Types

 

How successful organizations are structured

Successful organisations very clearly define the key tasks and allocate responsibility for achieving them. They establish a structure dedicated to the achievement of those key tasks. In that structure, there is a very clear and close match between the jobs and the key tasks. 

Successful organisations divide work according to the certainty of information that is available in the environment. So, they might separate the marketing role, which is operating in a very uncertain environment with low quality information, from the sales role, which operates in a more defined environment with harder information. 

Successful organisations separate tasks according to the time that elapses before feedback is received. So, in a marketing organisation they would separate the new product planning section, where feedback may not come from mouths, from the sales section, where feedback may be received the same day or the same week. 

Successful organisations concentrate their planning and control on the important aspects of the key tasks. Having clearly differentiated the key tasks, and set up a structure to achieve them, they concentrate on the really important aspects. If the key task is to achieve production schedules, then they concentrate on volume, time and quality slippage against the schedule. If the key task is market growth, they concentrate on high volume market segments so as to achieve that growth. 

 

Designing a structure for the key tasks

An organisation's structure shows the way that responsibility for its work is divided. Dividing work amongst people is so common that we often take it for granted. It is the fundamental step for any manager. He does not start managing until he divides up his work and makes others responsible for doing it. 

There are three common output criteria. Products are often diverse, or they fall into different groups. It may be sensible to match this diversity with product divisionalisation. This would be one way of managing the different products. But there will be organisational problems associated with what the products have in common. 

Even if there is only one product, there may be great diversity amongst the markets where it is offered. Market divisionalisation will provide a means of managing the product in its different markets. But in dealing with market diversity, other problems will remain; yet others may be caused. 

The third type of output divisionalisation is very common in large organizations. Regional divisionalisation may be called for because of basic differences between the regions - whether of culture, climate, economics or whatever. But regional divisionalisation may be managerially sensible simply because of geographical separation. In either case, organising on a regional basis may solve many problems. 

These three - product, market and region - are output criteria. They would not be very relevant however to a company making a single product, and selling it to a single customer in a single location. Faced with this lack of diversity, such a company would probably organise itself according to some functional criterion - whether business, managerial or technical function. It would decide in which aspect it faced the greatest diversity and use that as the basis for dividing the work. But, even in this simplest case, such a company will face organizational problems. Emphasis on the difference between basic and applied technical research may lead, as in the case of Rolls Royce, to business and managerial functions being overlooked. 

Some organisations, faced with diversity in all directions at once, divide up the work using all the criteria at once. This leads to matrix organisation. But, for matrix organisations to be practical, heavy demands are put on the definition of key tasks, on the people who work in them and on the systems to co-ordinate their work. 

The manager of an organisation deciding on this structure tries to deal with diversity in output and function. In doing so he inevitably causes problems for himself that will require co-ordination systems to solve. Frequently there is no single answer to the question "What is the best structure for us?" 

 

Systems for co-ordination

The more work is divided between jobs, departments and other organizational units, the greater the need to co-ordinate in order to define and meet organisational objectives. In the more predictable environments, managers can co-ordinate in advance through plans, policies, rules and systems. The more unpredictable the environment, the greater the likelihood that co-ordination will be secured through the communication of information between the operating units. Communication may be secured through a co-ordinator or by formal and informal processes (meetings) or by setting up special task groups or project teams. 

 

People in successful organisations

Successful organisations ensure that people possess the skills and knowledge necessary to carry out their key task. It sometimes happens that a person is promoted on the basis of his successful task performance. But little thought is given to the skills and knowledge he will require to cope with his new tasks. Sales ability has little to do with sales management competence; a very good production planner may make a very bad production manager. Where skill is lacking, training is provided. 

Successful organisations select people prepared to accept the constraints of highly structured jobs and independent people for less well-defined tasks and environments. Some jobs are highly structured and systematised, and require formal routines to be followed. In successful organisations they are filled by people who readily accept these constraints. Airline pilots, for instance, must follow exactly the procedures laid down, and must do what other people tell them. Many jobs in production departments apply similar constraints. Other jobs are unstructured, with no formal systems or routine. The job is what the person makes of it. In successful organisations such jobs are filled by independent people prepared to challenge orthodoxy. Some jobs in marketing are typically like this, as is some of the basic research. 

Successful organisations select people with sufficient self-confidence to deal with uncertainty. Some people are not happy working in an environment where the questions are not clear, let alone the answers. They find it difficult to cope with the uncertainty and ambiguity. People who like to know where they stand should be given more routine, predictable, well-defined jobs. These last two points go a long way to explaining the very common view that people who succeed in marketing are very different from people who get on in production. 

In successful companies, people concentrate on the really important aspects of their key tasks. This final important point arises from recent research and is very obvious after a little thought. But again, unsuccessful organisations ignore it. A successful sales department is focused on achieving profitable sales, not on the other interesting but peripheral activities of a sales department. Successful research departments concentrate on achieving technical goals, not on marketing or design or scientific side-issues. And if schedule performance is the key task for a production department, then that is what the people concentrate their attention on; they do not get side-tracked onto other more interesting but less relevant matters. 
 

 

How effective organisations co-ordinate 

Effective organisations in a stable context co-ordinate by plan. They have rigorous planning systems. They do not waste time or resources in operating unnecessary systems to co-ordinate by feedback. People who have to spend time in pointless meetings  

If they are in an uncertain environment, effective organisations also set up ways to co-ordinate by feedback. They supplement their co-ordination by plan with other appropriate methods to deal with uncertainty and change. The successful organisation also uses different approaches to co-ordination in different  

The more diverse the activities to be co-ordinated, the more managerial time is devoted. Supervising the work of 20 clerks all doing the same sort of work may take a relatively small proportion of a manager's day. But it may be impossible for one man to co-ordinate the work of 20 senior executives all doing very  

Managers in an effective organisation devote more time and effort to co-ordinating where the work of their subordinates is interdependent. If each of the 20 clerks depends on the output of all of the others, then one manager can probably not perform the co-ordination function effectively. 

Effective organisations recognise which relations are vital to their success. They achieve particularly strong co-ordination in these relationships. In every organisation, because of the context in which it operates, some relationships are especially important. It may be between production, or market research and advertising. 

Effective organisations resolve conflicts in favour of the key tasks. One inevitable consequence of dividing up work is conflict between units in the organisations. The way in which these conflicts are resolved clearly differentiates effective and ineffective organisations. If maintaining product quality is of supreme importance, then quality control wins its arguments with production and with sales. 

Effective organisations confront conflict head-on. Conflict is not avoided, nor is it smoothed over to keep everyone happy. The basis of the conflict is openly analysed, the issues are confronted by those concerned and the best solution for the organisation is implemented. 

Business strategy

This can be defined as: the major policies and plans for achieving goals and objectives which define what business the organisation should be in and the kind of organisation it should be. 

Goals:

Broad aims of the organisation, e.g.: 

• Become market leader 
• Grow by acquisition 
• Increase ROI

 

Objectives:

Specific aims of the organisation, e.g.: 

• To increase market share to 30 per cent 
• To acquire Company X 
• To achieve an ROI of 15 per cent

 

Planning horizons depends on nature of business, in particular its ability to change, e.g.: 

• Strategy + one year 
• Operations < one year

 

"Tactics" is sometimes used to describe business activity which involves adapting to major and unexpected change. 
 

 

Statement

• Defines products and services in functional terms, i.e. what they do rather than what they comprise. 
• Designates markets and market segments. 
• Identifies channels through which markets will be reached. 
• Defines means by which the operation will be financed. 
• Indicates size and kind of organisation needed. 

 

Strategy formulation

• Should ideally be undertaken rationally: 
• Opportunities, threats and associated risks. 
• Strengths and weaknesses. 
• Central is the capacity to take advantage of opportunities and the ability to cope with risks. 
 

The latter brings into question utility attitudes of the decision takers; personal values, aspirations; ideals.

 

Four components of strategy:

• What an organisation might do (market opportunities). 
• What an organisation can do (corporate competence and resources). 
• What the executives want to do (personal values, etc.). 
• What an organisation should do (in the interests of society). 
• Is strategy necessary? 

 

Four justifications:

• Inadequacy of broad goals. 
• The need to plan well ahead in organisations which can change only slowly. 
• Environmental proactivity rather than reactivity.
• The motivational value of objectives. 
   

 

Evaluation strategy 

• Is the strategy clearly defined? 
• Does the strategy fully exploit market opportunities? 
• Is the strategy consistent with current and projected corporate competence and resources? 
• Are the major policies and plans consistent with strategy? 
• Is risk uneconomic and are personal terms feasible? 
• Is the strategy consistent with personal values and aspirations of key managers? 
• Does the strategy satisfy ethical requirements? 
• Is the strategy sufficiently stimulating for persons working at all levels in the organisation? 
• Does the strategy seem to be working?

Resources