Organisational flows between the different levels of management.

Organisational
structure is the pattern of relationships among positions in the organisation.
It is a system used to define a hierarchy within an organization. It identifies
each job, its function and where it reports to within the organization. This
structure is developed to establish how an organization operates and assists an
organization in obtaining its goals to allow for future growth. Organizational
structure determines how the roles, power and responsibilities are assigned,
controlled, and coordinated, and how information flows between the different
levels of management.

A structure depends
on the organization’s objectives and strategy. In a centralized structure, the
top layer of management has most of the decision-making power and has tight
control over departments and divisions. In a decentralized structure, the
decision-making power is distributed and the departments and divisions may have
different degrees of independence.

A company such as
Proctor & Gamble that sells multiple products may organize their structure
so that groups are divided according to each product and depending on
geographical area as well. An organizational chart illustrates the
organizational structure.

 

PURPOSE

Organizational
structures help everyone know who does what. To have an efficient and properly
functioning business, you need to know that there are people to handle each
kind of task. At the same time, you want to make sure that people aren’t
running up against each other. Creating a structure with clearly defined roles,
functions, scopes of authority and systems help make sure your people are
working together to accomplish everything the business must do.

FUNCTION

To create a good
structure, your business has to take inventory of its functions. You have to
identify the tasks to be accomplished. From these, you can map out functions.
Usually, you translate these functions into departments. For example, you have
to receive and collect money from clients, pay bills and vendors, and account
for your revenues and expenditures. These tasks are all financial and are
usually organized into a finance or accounting department. Selling your
products, advertising, and participating in industry trade shows are tasks that
you can group under the umbrella of a marketing department. With differing ways
to organize the tasks, you can always choose something less traditional. But in
all cases, organizational structure brings order to the list of tasks.

 

CONSIDERATIONS

Employees do best
when they know who to report to and who is responsible. Organizational
structure creates and makes known hierarchies. This can include the chain of
command within an organization. A good organizational chart will illustrate how
many vice presidents report to a president or CEO and in turn, how many
directors report to a vice president and how many employees report to a
director. In this way, everyone knows who has say over what and where they are
in the scope of decision-making and responsibility. Hierarchy can also include
macro-level management. For example, one department may comprise several teams.
Perhaps several departments form one division of a company, and that division
has a vice president who oversees all the departments and teams within it.

 

FEATURES

Organizational
structure encompasses all the roles and types of jobs within an organization. A
complete organizational chart will show each type of position and how many of
these there are at present. When smaller organizations look at their
organizational structures, they usually focus more on job roles than hierarchy.
Small businesses, particularly growing ones, often change quickly — adding
positions and shifting people’s responsibilities as they remain flexible enough
to adapt as to go along. For these businesses, having known definitions of
people’s roles can be useful, especially as things change.

CONCEPTS OF ORGANISATIONAL STRUCTURE

The fundamental concepts
of organisational structure according to Snell (2002) are structural differentiation
and structural integration.

1.     Structural Differentiation

Structural
differentiation connotes that the organization is an amalgamation of different
units that work on many different kinds of jobs, using different skills and
techniques. Structural differentiation may be created by division of labour and
job specialization. Division of labour implies that the job of the organization
is sub – divided into tasks, and many people and units perform different jobs.

2.     Structural Integration

Structural
integration signifies the degree to which these differentiated units work
together and coordinate their activities. Integration is achieved through
collaboration and coordination in an organization. Therefore, some degree of
cooperation and communication must subsist among the different units of the
organisation.  

 

TYPES OF ORGANIZATIONAL STRUCTURE

Organizations are set
up in specific ways to accomplish different goals, and the structure of an
organization can help or hinder its progress toward accomplishing these goals.
Organizations large and small can achieve higher sales and other profit by
properly matching their needs with the structure they use to operate. There are
three main types of organizational structure: functional, divisional and matrix
structure.

1.     Functional Structure

Functional structure
is set up so that each portion of the organization is grouped according to its
purpose. In this type of organization, for example, there may be a marketing
department, a sales department and a production department. The functional
structure works very well for small businesses in which each department can
rely on the talent and knowledge of its workers and support itself. However,
one of the drawbacks to a functional structure is that the coordination and
communication between departments can be restricted by the organizational
boundaries of having the various departments working separately.

2.     Divisional Structure

Divisional structure
typically is used in larger companies that operate in a wide geographic area or
that have separate smaller organizations within the umbrella group to cover
different types of products or market areas. For example, the now-defunct
Tecumseh Products Company was organized divisionally–with a small engine
division, a compressor division, a parts division and divisions for each
geographic area to handle specific needs. The benefit of this structure is that
needs can be met more rapidly and more specifically; however, communication is
inhibited because employees in different divisions are not working together.
Divisional structure is costly because of its size and scope. Small businesses
can use a divisional structure on a smaller scale, having different offices in
different parts of the city, for example, or assigning different sales teams to
handle different geographic areas.

3.    
Matrix

The third main type
of organizational structure, called the matrix structure, is a hybrid of
divisional and functional structure. Typically used in large multinational
companies, the matrix structure allows for the benefits of functional and
divisional structures to exist in one organization. This can create power
struggles because most areas of the company will have a dual management–a
functional manager and a product or divisional manager working at the same
level and covering some of the same managerial territory.

 

The concepts of
organizational structure and performance include departmentalization,
delegation, the scalar principle or chain-of-command (authority is defined in
the organization), centralization, decentralization, and the contingency
approach.

Departmentalization
is the grouping of related functions into a departmental unit to achieve
efficiency of operations. Departmentalization can include line structure, line
and staff structure, and a matrix structure. The matrix structure can include
an employee working on projects managed by people not from his or her own
department.

Departmentalization
as part of organizational structure and performance can be according to product
or service category. Therefore, all employees who work on a particular product,
for example, leather coats for a clothing manufacturer would be grouped under
this department. All employees who are part of taking care of the needs of
customers who’ve purchased products would be in the Customer Service
department.

Performance, in fact
enhanced performance, in a company is achieved when those best suited to a job
are slotted into the appropriate department that can take advantage of the
employee’s skills and talents. Therefore, company management must analyze their
organizational structure and make decisions on who best fits within the
departments they’ve put in place. The end result is properly organized,
efficient, productive departments, with employees in each department achieving
their career goals, while helping the business enterprise achieve their goals.

Decentralization is
something that can promote creativity and new ways of doing things in a
business organization. Within a decentralized organization authority and
responsibilities are assigned to lower levels of the organization, who are
overseen by senior management. Those in these lower levels have more
decision-making capabilities than those in lower levels in a centralized
organization.

4.     Hierarchical Structure:

Different individuals
at different levels make decisions and execute them throughout the
organization. Under this structure, organization can be divided into three
interrelated levels:

i.                
Technical Level: This is the level that does the actual job
of he organization, such as physical production of goods in a manufacturing
company, giving direct service in banks and the process of delivering lecture
in a secondary school.

ii.              
Middle Management Level: This is the level is concerned with
coordination, integration and control of operations at the technical level. It
is also concerned with the administration of the internal affairs of the
organization, the resources, necessary for the performance of the actual job of
the organization.

iii.            
Senior Management Level: This is the level is concerned with the
strategic decision making and broad objectives of the organization.

CONCLUSION AND LESSONS LEARNT

In conclusion, in the
course of this research, we discovered a coherent and stable macroeconomic
environment is a pre-requisite for sustained growth. It prevents the negative
impact of uncertainty and enables businesses to plan their production,
investment and consumption activities; most underdeveloped countries are
amongst the countries with highest policy rates. Ghana came first with a policy
rate of 25.5%; followed by Argentina, 24.75%; Malawi, 24%; Mozambique, 23.25%.
Nigeria is 18th with our policy rate of 14%. As you approach the lower end,
countries like Austria, Belgium, Luxembourg, Spain, and France show up with
policy rates of 0%. Yes 0% interest rates. Japan, Sweden, Denmark, and
Switzerland have negative policy rates of -0.10%, -0.50%, -0.65%, and -0.75%
respectively. USA and UK have policy rates of 0.75% and 0.25% respectively.
This showed that the management of their economy is top notch.

The Central Bank of
Nigeria’s (CBN) monetary policy decisions and actions have prioritized price
stability. In 2015, it introduced a ban on forty-one (41) goods and services
from accessing foreign exchange in the inter-bank foreign exchange rate market
though the policy was temporal. In 2016, it moved to curb inflation by raising
the MPR by two percentage points to 14% in the middle of the year. The CBN is
currently supporting growth in the rest of the economy through its dedicated
support to MSMEs and the agricultural sector, through initiatives such as the
Anchor Borrowers Programme which allowed participants in the agricultural value
chain to access credit at single digit rates of interest. Furthermore, the CBN
is in the process of improving the implementation of its current policies,
aimed at achieving a market-determined exchange rate regime to build confidence
and encourage foreign exchange inflows.

Nigeria has learnt
that as a country, they need to build their reserve buffers and save more. We
now know that oil producing countries with hefty reserves have coped better and
are able to borrow easily even in a recession or a period of high interest
rate. New policies are now being promulgated that will focus on supporting SMEs
in the real sector to grow capacity for exports of value-added products and
services whilst gradually detaching the country off import-dependence. We have
to produce our staple foods and exports must increase in order to earn more
foreign reserves.

On the whole, Nigeria
is expected to witness stability in exchange rate and the entire macroeconomic
environment. The country would also witness a major improvement in economic
performance which should result in the following, amongst others – reduction in
importation of food items and refined petroleum products, improved power
supply, higher quality transport infrastructure, expansion in the level of
industrial production, improved competitiveness, greater availability of
foreign exchange, job creation, reduction in poverty and greater inclusiveness
in the spread of the benefits of economic growth. Finally we as a country need
to invest on long-term structural change especially in education to infuse
necessary knowledge into our industrial development plan.

MECHANISTIC AND ORGANIC STRUCTURE

The different
elements making up organizational structures in the form of formalization,
centralization, number of levels in the hierarchy, and departmentalization
often coexist. As a result, we can talk about two configurations of
organizational structures, depending on how these elements are arranged.

 

1.    
Mechanistic
structures are those that resemble a bureaucracy. These structures are highly
formalized and centralized. Communication tends to follow formal channels and
employees are given specific job descriptions delineating their roles and
responsibilities. Mechanistic organizations are often rigid and resist change,
making them unsuitable for innovativeness and taking quick action. These forms
have the downside of inhibiting entrepreneurial action and discouraging the use
of individual initiative on the part of employees. Not only do mechanistic
structures have disadvantages for innovativeness, but they also limit individual
autonomy and self-determination, which will likely lead to lower levels of
intrinsic motivation on the job (Burns & Stalker, 1961; Covin & Slevin,
1988; Schollhammer, 1982; Sherman & Smith, 1984; Slevin & Covin, 1990).

 

Despite these
downsides, however, mechanistic structures have advantages when the environment
is more stable. The main advantage of a mechanistic structure is its
efficiency. Therefore, in organizations that are trying to maximize efficiency
and minimize costs, mechanistic structures provide advantages. For example,
McDonald’s has a famously bureaucratic structure where employee jobs are highly
formalized, with clear lines of communication and specific job descriptions.
This structure is an advantage for them because it allows McDonald’s to produce
a uniform product around the world at minimum cost. Mechanistic structures can
also be advantageous when a company is new. New businesses often suffer from a
lack of structure, role ambiguity, and uncertainty. The presence of a
mechanistic structure has been shown to be related to firm performance in new
ventures (Sine & Kirsch, 2006).

 

2.    
In
contrast to mechanistic structures, organic structures are flexible and
decentralized, with low levels of formalization. In Organizations with an
organic structure, communication lines are more fluid and flexible. Employee
job descriptions are broader and employees are asked to perform duties based on
the specific needs of the organization at the time as well as their own
expertise levels. Organic structures tend to be related to higher levels of job
satisfaction on the part of employees. These structures are conducive to
entrepreneurial behavior and innovativeness (Burns & Stalker, 1961; Covin
& Slevin, 1988). An example of a company that has an organic structure is
the diversified technology company 3M. The company is strongly committed to
decentralization. At 3M, there are close to 100 profit centers, with each
division feeling like a small company. Each division manager acts autonomously
and is accountable for his or her actions. As operations within each division
get too big and a product created by a division becomes profitable, the
operation is spun off to create a separate business unit. This is done to
protect the agility of the company and the small-company atmosphere.

 

Mechanistic

Organic

Individual specialization: Employees work
separately
and specialize in one task

Joint Specialization: Employees work
together and
coordinate tasks

Simple integrating mechanisms: Hierarchy of
authority well-defined

Complex integrating mechanisms: Task forces
and teams are primary integrating mechanisms

Centralization: Decision-making kept as
high as possible.
Most communication is vertical.

Decentralization: Authority to control
tasks is delegated.
Most communication lateral

Standardization: Extensive use made of
rules & Standard Operating Procedures

Mutual Adjustment: Face-to-face contact for
coordination. Work process tends to be unpredictable

Informal status in org based on size of empire

Informal status based on perceived brilliance

Organization is a network of positions, corresponding
to tasks. Typically each person corresponds to one task

Organization is network of persons or teams.
People work in different capacities simultaneously and over time

Much written communication

Much verbal communication

 

The structure of an
organization will dictate how people interact with each other and their
relationship of roles in the organization. If a structure is out-dated or not
implemented correctly in a business, it will lead to many problems. These
include conflict among employees or departments, confusion of employee roles,
and lack of communication / coordination among departments.

In the past managers
have simply tried to reorganize or work with the current structure of a
business rather than addressing the necessary issues. This could lead to
greater complexity rather than solving structural flaws

A good way to start
problem solving regarding organizational structure in a business is to ask 3
important questions:

1 – Is the problem
the structure or the way management is managing it?

2 – Does the
structure match out strategy?

3 – Has organization
design been compromised due to accommodating to personalities?

 

Advantages and Benefit of Mechanistic
Organization

1.    
Benefit
of specialization: In mechanistic organization, activities are divided into
different groups on the basis of common nature. Works are divided among the
subordinates on the basis of their skills and efficiency. The use of specialization helps for proper
utilization of resources and maximization of productivity. In my previous post
I have written about the features and characteristic of mechanistic
organization.

2.    
Proper
discipline: In this organization structure, top level management has
centralized power. There is system of chain of command from top level to
subordinate levels. Subordinates are responsible for their immediate superiors.
Therefore, all the subordinates perform activities according to best of their
ability.

3.    
Minimize
supervision cost: In mechanistic organization, works are divided among the
employees on the basis of their specialization. It means right job is assigned
to the right person. It helps to minimize supervision cost as all the
subordinates perform activities according to best their capabilities.

4.    
Quick
decision and implementation: In this organization only top level management
involves in decision making process. It does not consult with subordinates in
decision making process. Therefore, quick decision and its implementation
become possible. And in this competitive market environment, quick decision and
its implementation is essential for business success.

5.    
Network
position There is the provision of network of position in management hierarchy.
Top level management provides instruction and guidance to middle level
managers, middle level managers to lower level managers and again lower level
managers to operating level employees. This network is taken into consideration
while communicating information. It helps for timely flow of information.

 

Advantages and Benefit Organic Organization

1.    
Free flow
of information: One of the advantages of organic structure is free flow of
information within organization. There is the system of two way communication.
Top level management provides information of instruction and guidance to
subordinates and similarly, subordinates provide information to the manager
about achievement and problems in work. Such two way communication helps to
solve problems and to bring smoothness to performance.

2.    
Feeling
of team work: Organic organizational structure emphasizes on team work. Works
are divided into different groups on the basis of common nature and each group
of work is assigned to team, members of which have diversified skills. They
work together for achieving common goals through mutual support.

3.    
Wide span
of control: Wide span of control is one of the advantages of organic
organization. It emphasizes on specialized team performance. Team members are
expert in their own area of performance. They are independent and responsible
for completion of given jobs. They do not require close supervision, only just
simple instruction and guidance can become sufficient to them. Thus it helps to
minimize supervision cost.

4.    
Adaptable
in dynamic environment: Flexibility is one of important advantages of organic
structure. It emphasizes on specialized jobs, but those jobs are not rigid and
can be changed on the basis of requirement. Work is frequently organized around
team of employees as it is needed. Such redefinition of tasks helps to adapt in
accordance of changing environment of the society.

5.    
Relief to
manager: Decentralization of authority is one of important component of organic
organization. Works are assigned to subordinates and on the basis of level of
responsibility they have given proper authority. Subordinates perform
activities independently and full of responsibility. Only strategic control of
manager over them becomes sufficient. Therefore, top level manager feel relief
in job and can involve in creative work such as planning, policy making,
development of new strategy etc.

6.    
Increase
efficiency: In this structure employees are highly trained and empowered to
handle various activities and problems independently. They need to consider
minimum formal rules and regulations and small direct supervision from
superiors. Since employees perform assigned job independently and it helps to
develop their working efficiency. The development of working efficiency of
employees automatically develops working efficiency of organization.

Conclusion:

The degree to which a
company is centralized and formalized, the number of levels in the company
hierarchy, and the type of departmentalization the company uses are key
elements of a company’s structure. These elements of structure affect the
degree to which the company is effective and innovative as well as employee
attitudes and behaviors at work. These elements come together to create
mechanistic and organic structures. Mechanistic structures are rigid and
bureaucratic and help companies achieve efficiency, while organic structures
are decentralized, flexible, and aid companies in achieving innovativeness.