1 of 43

2.2 Organizational Structures

IB Business Yr 1

2 of 43

Agenda

Terminology

delegation
span of control
levels of hierarchy
chain of command
bureaucracy
centralization
decentralization
de-layering
matrix structure

The following types of organization charts (AO2, AO4):

Flat or horizontal
Tall or vertical
By product, by function, or by region

Appropriateness of different organizational structures given a change in external factors (AO3)

Changes in organizational structures (for example, project-based organization, Charles Handy’s “Shamrock Organization”) (HL only) (AO3)

3 of 43

Let’s play Gimkit!

https://www.gimkit.com/view/6344a103ed13390021bbea4b

4 of 43

Kahoot?

https://create.kahoot.it/details/8eddefc9-4c30-4c98-84f4-c2a79dfca6a9

5 of 43

Why are organizational structures important?

6 of 43

7 of 43

Delegation Advantages?

8 of 43

Delegation Advantages

Motivate employees because skills, talents, and abilities recognized, valued, and feel empowered
Improve quality and speed of decision making

Employee working directly with issue may know best

Reduce manager workload
Improve skills and qualities of employees

Advantages of delegation

Delegation can motivate employees, as they feel valued and empowered. As American psychologist Abraham Maslow argued, recognition (of workers’ skills, talents and abilities) is a motivation factor as it helps to meet both the love/belonging and esteem needs to the employees.
Delegation can improve the quality and speed of decision-making, especially in large organizations. Delegation means that decisions can be made by employees who have a better understanding of their roles and the specific needs of customers, without having to refer all issues and problems to senior managers.
Effective delegation helps to reduce the workload of senior managers, especially if work is delegated to highly competent employees. This frees up valuable time for executives and directors to focus on the strategic direction of the business.
Delegation helps to improves the skills and qualities of employees throughout the business, so helps to prepares them for more senior roles within the organization. This helps to boost employee morale as well as staff retention.

9 of 43

Delegation Disadvantages?

10 of 43

Delegation Limitations

Maybe higher pay $
Invest $ in higher training and development
Not always motivating having more work or responsibility :(
Not my job
Unsuitable in many situations

Eg. low skilled, manual workers who need supervision

Delegation usually comes with additional pay or remuneration, but this is not always the case - it depends on the scale and scope of what is being delegated. If so, this will tend to increase the overall costs for the business.
Delegation often requires the business to invest in prior training and development of employees to ensure they have the necessary skills and qualifications to carry out the delegated tasks. This can be both time consuming and expensive for the business.
It should also be noted that delegation does not motivate everyone - not all workers are willing and/or able to take on extra workload or accountability.
Some workers might also feel disgruntled that they are doing the work of the manager especially if delegation takes place without additional pay and recognition.
Delegation is not a suitable in numerous situations, such as in organizations with low-skilled, manual workers who require supervision and direction or during a major crisis. In such situations, decision making is best left to experienced senior executives and directors.

11 of 43

Video 3 reasons you need to delegate more

12 of 43

What is the span of control of Mr. Michael Wen?

https://www.mdid.info/about-mingdao-international-department

13 of 43

Does MDID have a wide or narrow span of control?

14 of 43

Does Charlene have a wide or narrow span of control?

15 of 43

Is this a tall/vertical structure or is it a flat/horizontal structure?

16 of 43

What is the chain of command here and what does it tell us?

17 of 43

Why is bureaucracy good or bad?

18 of 43

Bureaucracy advantages

Helps managers have control in large and well-established companies
Centralized decision making with tall organizational structures

Bureaucracy refers to administrative systems within an organization. This includes the formal policies and procedures of the business. A bureaucratic organization is one that has a lot of formal rules, regulations and procedures. There is a lack of flexibility as the organization is set in the way it does things.

Typically, bureaucratic organizations involve a lot of paperwork to get tasks approved and accomplished. Auditing is also commonplace in order to show that rules, policies and procedures have been correctly followed. It is associated with clear hierarchical structures with employees fulfilling specific roles and being held accountable for their areas of responsibility. Hence, bureaucracy helps managers to ensure they have control of their business and its operations.

Bureaucracy is associated with organizations that are large and well-established, i.e. ones which have been in operation for many years. They are also more likely to have tall hierarchical structures, with a many layers of management. Hence, authority and decision-making tend to be centralized.

19 of 43

Bureaucracy disadvantages

Inflexible

Slow responding to change
Fixed rules and regulations

Creativity and Innovation discouraged
Slows decision making
Operational Inefficiencies

Lots of paperwork to get things approved

20 of 43

Why is centralization good or bad?

21 of 43

Centralization advantages

Rapid decision making
Strong control from management
Everyone in organisations follows business objectives of management

22 of 43

Centralization disadvantages

May decrease morale and productivity
Inflexible

Demotivating when cannot express opinions

Not suitable for creativity and autonomous decision making (tech)

However, as delegation rarely happens in centralized organizations, morale and productivity may be lower than otherwise. In addition, such structures are very rigid (inflexible), which can be demotivating for employees, who cannot express their opinions or suggestions. It also means that centralization is unsuitable for industries that rely on creativity and autonomous decision-making, e.g., the high-tech industry.

Whether an organization is centralized or decentralized (see below) partly depends on the dominant leadership style and the organizational culture. The decision to adopt a centralized organization may reflect the preferred style of leadership style of the business as senior executives and directors wish to retain authority and control of all business activities and operations. This can be beneficial in numerous circumstance, such as:

Situations when rapid decision making is required, such as during a major crisis than threatens the survival of the business.
In organizations where low-skilled workers form the vast majority of the workforce, so employees require direction and supervision to meet organizational objectives.
When centralization can lead to cost savings, such as fewer managerial positions throughout the organization or when buying decisions are made centrally (creating opportunities to benefit from purchasing economies of scale).

23 of 43

Decentralization

Flatter hierarchical structure

Wider spans of control

Greater autonomy and decision making

Democratic

Workers may feel valued and empowered

Flexible

Quicker

Upper management can focus more

24 of 43

Decentralization

Senior managers may not know all decisions

Challenging to control

May lose focus on business objectives

25 of 43

Should all organizations delayer?

26 of 43

Delayering

Cut costs

Remove bureaucracy and inefficiencies

Widens span of control

Shortens chains of command making communication easier

However, teams larger and may have more work per persons=

27 of 43

Activity: Look up an organization from the website below and comment on their organizational structure.

https://theorg.com/organizations

Can you tell anything about:

Levels of Hierarchy
Span of Control
Decision Process
Chain of Command
Delegation?

What are the benefits and limitations of them choosing this organizational structure?

28 of 43

Project based (Matrix) organization

Organizational structures are not static due to the dynamic nature of the global business environment and changes in the external environment. In reality, organizational structures are often more flexible and adaptable to change. A matrix structure is a flexible organizational structure based on the specific needs of a particular task, assignment or business venture to meet the changing needs of the organization.

Matrix organization involves getting teams of employees drawn from different functional areas (departments or divisions) of the organization working together for short-term or temporary projects, such as construction projects or innovative organizations working on a new project or product. These team members are often self-selected volunteers who express an interest in certain assignments, although it is quite common for workers to be working between several engagements in addition to their functional work (in designated departments or functional areas).

Each particular task or assignment is run by an assigned manager who is in charge of the team involved in the particular project. These team members may come from any part of the overall organization, such as accountants from the finance department, operations managers, and marketing experts. Once the project is completed, the team members disband and reassemble to begin another project or revert back to their own departments. Typically, several teams operate at the same time on as the organization has numerous projects happening at the same time, whicih implies the complexity of these tasks are not so elevated.

In the example below, there are three concurrent projects in the organization, led by three different project managers. Each project manager is in charge of eight different team members, who have been temporarily redeployed from other departments in the organization. The matrix structures enable senior managers to put together teams of individuals with the specialist expertise to focus on each project in hand, such as opening a new production facility overseas, acquiring a competitor in the market, and liquidating an unprofitable division of the organization.

This type of is task-oriented organizational structure is designed to allow firms to be responsive to changes in market demand for goods and services as well as changing needs of a business. As a temporary and flexible organizational structure, it can be used by any type of business in many different situations. Using experts from across the organization in a matrix structure can help to generate new and creative ideas, as well as improve productivity. The flexibility enables organizations to overcome limitations associated with traditional or hierarchical organizational structures.

However, matrix structures can isolate team members who work outside of their departments and ‘comfort zone’. Sub-cultures are formed which might unsettle some employees. There might also be conflicting interests, as employees report to two or more managers (their designated line manager and project managers in the matrix structure), so have to deal with uncertainties about prioritising different tasks. Conflict can result between managers and employees if there are divided loyalties, resulting in lower morale and productivity. Furthermore, matrix structures are complex so can be expensive to execute.

Similarly, some employees may feel demoralised due to the increased workload and pressures, especially if they are involved in numerous assignments happening at the same time. Finally, additional resources and finance are required to fund the different projects and project teams.

29 of 43

Project-based organizations

These firms organize their human resources around particular projects or development plans.
Examples of industries that use this type of organization chart include:

Construction
Software engineering
Entertainment
Aerospace
Oil exploration

Producer

Director

Cast

Art

Camera

Electric

Grips

Hair & make-up

Sound

Catering

Stunts

Special effects

Motion picture project

Using a movie of your choice, list the key people and departments involved in the production of a movie.*
Organize the departments into a project-based organization chart.

*You will find it helpful to search www.imdb.com to find out this information.

Example of an organization chart for producing a movie.

HIGHER LEVEL ONLY

BUSINESS MANAGEMENT

30 of 43

Advantages and disadvantages of project-based organizations

Advantages

Flexibility
Productivity
Efficiency
Motivational

Disadvantages

Discontinuity
Isolation
Inefficiencies
Conflicting interest and priorities

HIGHER LEVEL ONLY

BUSINESS MANAGEMENT

31 of 43

Organization by product

32 of 43

Organization by function

33 of 43

Organization by region

34 of 43

What is this organizational structure called and what are its benefits?

35 of 43

Handy’s Shamrock Organization

Charles Handy, an organizational behaviour and management expert, proposed that firms need to be able to adapt quickly to the dynamic changes that occur from the external environment.
He proposed that human resources should be organized into:

Core staff
Peripheral workers
Outsourced workers

HIGHER LEVEL ONLY

BUSINESS MANAGEMENT

36 of 43

Features of Handy’s Shamrock Organization

Core

staff

These are full time workers who handle the daily operations of the business.

They are crucial to the firm’s operations, survival and growth.

Peripheral workers

These are individuals or businesses paid to complete particular and specialized tasks.

They are hired for their expertise so the firm can focus on their core activities.

Outsourced workers

These are part-time, temporary and portfolio workers who are employed when needed.

This allows for flexibility in order to adapt to changes from the external environment.

HIGHER LEVEL ONLY

BUSINESS MANAGEMENT

37 of 43

38 of 43

Appropriateness of different organizational structures given a change in external factors

BUSINESS MANAGEMENT

39 of 43

Organization restructuring

Organization restructuring is the reorganizing of human resources of a firm into a new organizational structure.
This occurs when there is a need for change in order to remain competitive in a changing business environment.

Common reasons for restructuring a firm

To incorporate new job roles and eliminate redundant roles
To reduce costs/debt
To concentrate on key business activities
To incorporate new technology
To ensure the skills and expertise of employees are used effectively
To sell a part of the firm’s business activities
To merge with another company

BUSINESS MANAGEMENT

40 of 43

Jigsaw - Step 1: Specialization (15 min.)

You become “specialized” in your assigned Organizational Structure.

What is the organizational structure and for what types of organizations is it suitable?
What are the advantages and disadvantages of this organizational structure?
Provide a real life example along with the advantages and disadvantages

Comment on when applicable:

Levels of Hierarchy
Span of Control
Decision Process
Chain of Command
Delegation
Communication
Employee Motivation
Cost
No one leaves the group until everyone understands your organizational structure.

Flat (Horizontal) Organizational Structure
Tall (Narrow) Organizational Structure
Shamrock Organization
Organizational Structure By Product
Organizational Structure By Function
Organizational Structure By Region
Matrix (Project) Structure

41 of 43

Random Groups Generator

42 of 43

Jigsaw - Step 2: Sharing of the Wise (20 min)

Form new groups that has at least 1 “specialized person” of each organizational structure (must have at least one person from group 1, 2, 3, 4, 5, 6, 7).

What is the organizational structure and for what types of organizations is it suitable?
What are the advantages and disadvantages of this organizational structure?
Provide a real life example along with the advantages and disadvantages

Comment on when applicable:

Levels of Hierarchy
Span of Control
Decision Process
Chain of Command
Delegation
Communication
Employee Motivation
Cost

No one leaves the group until everyone understands your organizational structure.

43 of 43

Congratulations on finishing 2.2!