Daft proposes that structure might be affected by strategy and it may also affect strategy formulation. For instance the Case of Minnesota Mining and Manufacturing (3M) mentioned by Needle (2004) where new organisational structure was created in-order to provide the company with drive in strategy.
The extent of authority division in organisation is termed as centralisation and decentralisation. Mintzberg (1979) opinion is that when decision making power rests with single individual – its centralisation, but power dispersed among many individuals in the organisation – its decentralisation. Shall an Organisation centralize or decentralize? Bloisi (2007) answers that large organisation like Microsoft, Intel picks decentralisation and devolves authority to individuals at lower level, the term associated with employee freedom and autonomy to act is “Empowerment”. Empowerment for Bennett (1997) is achieved through encouraging innovation, decision making, flexible response, and trusting employees. Bennett does mention problems like increased care that has to be taken while hiring employees since employees might misuse power which directly impact customers and company’s reputation but advantages reaped from empowerment overweigh its disadvantages.
Empowerment helps in quicker response to environment when decisions are made where and when need arises rather than waiting for head office approvals thus not only increasing organisational efficiency and effectiveness but power devolution has its implications on Human Resource (HR), referred in Hope and Fraser (1999) 58% respondents from Mckinsey survey identified one main reason why managers choose one firm over another is “freedom and autonomy”.
For Jones (2007) centralisation keeps organisation focused, and results in coordination of activities, adherence to rules and regulations without deviating from standards but centralised organisation vowing to empower its employees might have to re-structure its organisation.
An Important organisational concept referred as cry of the day is flexible working. Flexibility for employees is geographical mobility, carrying out different jobs and adapting variations in pay and attendance. Brooks (2006) identifies organisational flexibility, in terms of structure and employment conditions. Flexible working benefits for HR are identified by Dempsey (2005) to whom devising and delivering flexible working could attract top-notch talent that might not otherwise have worked for the company thus engendering loyalty and employee engagement plus it also helps tackle absenteeism as shown in Research from “Working Families charity and employee benefits company Accor” (Personnel Today, Article: “Flexible Working is key to tackling absenteeism”).
Flexible working has its share of disputes; Millar (2005) reports Chartered Institute of Personnel and Development (CIPD) disputing with Confederation of British Industry (CBI). CBI says that employers are reporting negative impact from family-friendly employment laws. CBI Report shows rise from 11% to 26% of employers reporting flexibility has negatively affected businesses. But Rebecca Clake, organisation and resourcing adviser at CIPD, said that three-quarters of employers say flexibility has positive effect on staff retention, and 70% say they improve motivation.
Types of Flexibility defined by Atkinson (Cited in Needle, 2004) are Numerical, affecting employee’s hours of work through overtime/homeworking/shift work. According to Brooks (2006) its need arises to meet with increased customer demands. Functional achieved when employees are able to perform a range of jobs and move jobs as on needed basis. Whereas Financial involves creation of different pay rates for full and part time workers, and most importantly it significantly help in linking incentives to develop multi-skilled labour.
Future worker needs enough flexibility to continually work across time zones, languages and cultures thus fading geographical boundaries emerges “Virtual Organisation”. Referring to structure of Virtual organisation and its vulnerability Brooks (2006) asserts that it can be intentionally short lived and because of its loose structure, withdrawing from a side can occur without protracted legal proceedings and requires high level trust to establish long relations and continued existence. Hence lacking people’s physical presence can harm development of shared values and norms plus also the process of knowledge sharing and learning may not be that effective in case of virtual organisation. McKenna (2006) identifies virtuality as efficient coordination of activities across boundaries of time and space, reduction in costs, flexible in combination of activities and simplification of management.
Structure can be divided into various types. First Functional Structure, according to Jones (2007) it groups people together on basis of their common expertise and experience or because they use same resources thus expertise and use of same resources can result in high quality products at competitive prices. Plus it offers employees a chance to learn from each other and become more specialised and productive thus helping organisation spend less on training and endorse development of norms, values, and group cohesiveness that promote high performance which helps in building loyalty and commitment thus contributing to organisational efficiency.
Baxter (2007) points to practical contribution functional structure can make in successfully diminishing risk, through looking at fundamental issues about how business runs profitably, assessing who does what and ensuring they are skilled or experienced for the job. Doing this, business will get most appropriate people who undertake activities for which they have skills, improving skills where needed, and empowering staff to understand responsibilities attached to each role.
According to Campbell et al (2005) Functional structures are employed by organisations based on single site, disadvantages arise when organisation grows in size and complexity resulting in co-ordinating and control problems between different functions meaning that different functions might develop their own targets and fail to integrate individual and corporate goals.
An obstacle to organisational effectiveness identified by Jones (2007) is measurement problems associated with functional structures, since it’s difficult to associate “Functional costs” with individual products, or contribution of each function to overall product profitability making it difficult to reward on positive recognition.
Moving to divisional structure, According to Jones (2007) it can solve control and co-ordination problems associated with production of different kinds of products at different locations for different types of customers. Stemming from failure of functional structure to coordinate business activities, divisional structure takes onto solve problems through opting for particular structure relating to problems faced by the organisation. For Jones control problems if associated with the product, can be solved if division is based on product structure but Mullins (2005) contradicts Jones and asserts the danger that divisions might become too autonomous, again presenting management with co-ordination and control problems.
Brooks (2006) spots senior management responsibility that advantages of divisions are not eroded by duplication and diseconomies of scale, to solve this problem Needle (2004) asserts that R&D and purchasing are often centralised so to benefit from economies of scale. Divisions are advantageous in focusing on specific kind of goods/service or customer, thus creating high-quality products resulting in improved customer service. Division based on similarities add advantage in form of improved communication, since it results in single focus and can reduce conflicts that might arise due to diversified focus thus helping in improved decision making and performance.
Problems associated with location are solved by division based on geography; Bloisi (2007) asserts it can help in local adaption and/or supplier condition. Thus resulting in organisation being well positioned to respond to local situations such as needs of regional customers, fluctuations in resources and find solutions to region-specific problems through use of available resources. Divisions due to their autonomy can contribute to employee’s motivation, reduce upward dependency and result in increased commitment, loyalty, and job satisfaction which is important to organisational effectiveness. On the downside Headquarters might face dilemma of maintaining image consistency plus decision on amount of freedom to allow managers in contrast to control. Since each division has its own set of sales managers, manufacturing managers, and so on which can result in high operating and managing costs plus divisions if not co-ordinated can result in competition for resources and may start to pursue divisional goals and objectives at the expense of organizational ones thus hindering quality of work and organisational life.
Another organisational form is holding company that according to Needle (2004) is associated with growth of firms by acquisition and through product diversification. Campbell et al (2005) indicates why an organisation opts for holding company and points to several reasons, business having interests in more than one product and market sector, holding company can have broader business portfolio, Holding companies subsidiaries are kept as separate by the parent and can easily dispose or acquire companies thus making the control easier as each subsidiary have autonomous status. Needle (2004) points to its disadvantages, one is cooperation, as subsidiaries work as separate entities. The other is independence, as parent has to decide on how much independence shall be given to child with regard to use of resources, decision making, structuring.
Organisation can opt for Project Teams, Buchanan and Huczynski (2004) identify it as a mean for tackling core activities of organisation, teams exist for series of projects and work autonomously under lines drawn by senior management. Needle (2004) refers to Project teams as mean to cope with diverse problems that are made possible through individual expertise, as project team involves people having diverse viewpoint, individual experience and knowledge and might involve members coming from various divisions which can help in creation of mutual trust, cooperation and understanding between employees.
Project teams can be costly and might leave members shelter less as where do members go after the project ends, if they don’t have any functional home thus might result in grievances among individuals resulting in disputes.
Next form of structure is Matrix, which for Mullins (2005) is combination of functional departments providing a stable base for specialised activities and permanent location for members of staff and units that integrate various activities of different functional departments on project, programme, geographical or system basis. Some of the advantages pointed by Buchanan and Huczynski (2004) are that it helps avoid duplication of costs as employees can contribute to different project or programmes which cements Needle (2004) assertion that it can also help in employees ability to transfer expertise where its wanted plus organisation having matrix can transfer resources between project.
Matrix Structure Involves employees reporting to more than one boss; Reality of the fact comes from Millar (2004) who quotes McDougall, HR Assistant Chief Executive at Hackneys Council.
"There had been a matrix structure that meant it was difficult to see who was accountable and where responsibilities lay. It was even difficult for public to work out where they needed to go for their services.”
Thus Reporting to more than one bosses results in divided loyalties, co-ordination problems. i-e likely to result in neglecting responsibilities/duties thus giving rise to blame culture as employees might find it reasonable to blame the other line of authority if they fail to satisfy the job.
A badly designed structure has its consequences; some identified by Furnham (2005) are “Illogical” structures that suit people’s aim rather than organisation, resulting in people getting more powerful than the position and organisation, thus resulting in power struggle and organisational politics,
“Stress Inducing”, as failure to provide clear definition of what is required from employees results in stress/tension, employee fail to perform his/her duties effectively and efficiently and they get blamed for poor results,
“Wasteful” as jobs fitted to members rather then members fitted to jobs will require new members to be trained in a way so to replace special personal experience thus resulting in fear of failure of person not being able to perform the job and also time consuming in finding replacements,
“In-Efficient” as organisation get based on personalities not on principles, thus if a person leave he/she leaves a gap hard to fill.
Child (2005) points the problems which are intensified due to deficient structure. It includes “Low Motivation and morale”, resulting from lack of job clarity and autonomy to work, which results in failure to get attached with the job and pressures from different parts of the organisation. “Late and inappropriate decisions” resultant of lack of relevant information, coordination and reflection on decisions thus also hindering learning of organisation as learning isn’t complete without reflection. “Conflict and Lack of Co-ordination” results due to irregular arrangement of jobs where people are stronger than jobs itself and finally the “Poor response to new opportunities and rising costs” attributed to failure to respond to environmental/market changes and proposing solutions to problems plus a long hierarchy with high number of senior positions will certainly have its effect on productivity as it will make decision making process slow.
Mullins (2005) criticizes structure as not being able to describe what really happens in organisation. Individuals differs and they bring their own believes and values to jobs. Thus the way structure is designed affects the way people behave within organization. Once an organization decides how it wants members to behave, the attitudes it wants to encourage, and what it wants its members to accomplish, it can structure and encourage development of cultural values and norms to obtain these desired attitudes, behaviours, and goals.
Conclusion
Structure serves as basis for orchestrating organisational activities. Organisations shall understand importance of structure in carrying out business operations and its relation to strategy. Above discussion shows that relationship between the two is evolutionary and is affected by change in organisation over the years, as chandler believed strategy affected structure and carried his study in 1960, Mintzberg in late 70’s said structure can have its affect on strategy.
Designing structure that fits company needs is a major challenge. Each structure has its advantages and disadvantages on how it contributes to its effectiveness, and organisation has to mull over the decision on what structures it follows, plus the autonomy organisations provide to its employees for purpose of decision making. Organisation can choose from variety of structure like, functional, divisional, project teams, holding companies and matrix structure. Failure to choose an effective structure has it consequences on organisation as it will not only affect health of the organisation it will also affect employees loyalty, motivation at work and job satisfaction, thus organisation when deciding for designing structure needs to take care of all aspects that relates to people and working of organisation.
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