Typology Of Ion

UNIT 3 TYPOLOGY OF ORGANISATION STRUCTURES

Introduction to Microbes

Objectives After reading this unit, you should be able to : understand the characteristics of different organisation structures, explain the basis for evolving different types of organisation structures, examine the advantages and disadvantages of different types of organisation structures.

Structure 3.1

Introduction

3.2

Line Organisation

3.3

Line and Staff Organisation

3.4

Functional Organisation Structure

3.5

Product Organisation Structure/Divisional Structure

3.6

Hybrid Structure

3.7

Formal and Informal Organisation

3.8

Centralisation and Decentralisation

3.9

Vertical Structure

3.10

Horizontal Organisation

3.11

Project Organisation

3.12

Matrix Organisation

3.13

Virtual Organisation (Network Structure)

3.14

Boundaryless Organisation

3.15

Inverted Pyramid

3.16

Task Forces

3.17

Mechanistic and Organic Structures

3.18

Summary

3.19

Self-Assessment Questions

3.20

Further Readings

3.1 INTRODUCTION An organisation structure specifies the various job tasks and shows how the same are formally divided, grouped, and coordinated. It provides an appropriate framework for authority relationship. It indicates the hierarchy of authority and the reporting relationships. It is a means to help the management to achieve the organisational objectives. As the objectives of the organisation are derived from the overall strategy of the organisation, it is logical that an organisation structure is closely linked to its strategy. As such, if the management makes a significant change in the organisation’s strategy, the organisation’s structure needs to be modified to accommodate and support the change. There is considerable evidence to indicate that choice of an organisation’s strategy (stability strategy/growth strategy) is determined by three basic factors (contingency factors): (i) the organisation’s size, (ii) technology used by the organisation (for converting the 1

Organisational Design

financial, human and physical resources into products and services), and (iii) environmental uncertainty (external environment). Information technology and globalisation have had a tremendous impact on organisation structures. Many of today’s managers realise that the traditional organisation structures based on bureaucratic principles no longer provide solutions to the challenges posed by the new paradigm environment. The needs of flexibility, adaptability to change, creativity, innovation, knowledge and the ability to overcome environmental uncertainties are among the biggest challenges facing many of the organisations. The result has been that the vertical (tall) structures are being replaced by horizontal (flat) structures, the organisations with mechanistic structures are being transformed into ones with organic structure . These shifts reflect a clear departure from the practice of centralised decision-making to decentralised decision-making, from command to consensus based self-control. The new forms of organisation structure that have emerged are: taskforce, network, virtual, boundaryless structures. The salient features of these and other organisation structures are briefly described here to present an overview of different types of organisation structure and their suitability under different situations.

3.2 LINE ORGANISATION Line organisation is the simplest form of organisation structure. The line structure is based on the scalar principle, which states that authority and responsibility should flow in a direct line vertically from the highest level of the organisation to the lowest level. The primary emphasis in the line organisation is upon the superior-subordinate relationship. Every person in the organisation is in the direct chain of command. (Figure 1). Figure 1 : Line Organisation

‫‫‬

Manager r * && ( "&& & Production ( &&

General r* & & & " & ! Manager

Manager r + &% e' ! & Finance ) &&

Manager r * && g +&" % Marketing ) &&

Deputy Manager r * && Production ( "&& &

Deputy Manager r + &% Finance e' ! &

Deputy Manager r * && Marketing g +&" %

Foreman n ' &"

Accountants s ' %& % &

Officers ) " !!

s - %# Workers

(%%!% Assistants

(& & Salesman

One of the advantages of the line organisation is that it facilitates decision making and execution because there is a definite authority at each level of the hierarchy. However, the disadvantage is that if a wrong decision is made at the top level, the same is carried out simply without anybody down the line venturing to point out its deficiencies. 2

3.3 LINE AND STAFF ORGANISATION

Typology of Organisation Structures

Most business organisations, except the very small, have this type of structure. As the organisations have grown complex, the problems of line executives have become sufficiently complicated. The line executives being generalists, need the advice of personnel with specialised knowledge and functions to tackle these problems. For this purpose, the staff positions are created in the organisation. In line and staff organisation, the line authority remains the same as it does in the line organisation i.e. the authority flows from top to bottom; and the line executives perform the major functions; the staff functionaries support and advise the line executives. For example, for sound management of human resources, the line managers are provided specialised assistance through personnel/Human Resource managers. As staff functionaries are employed to perform supportive role, they do not have any power of command in the organisation (Figure 2). Figure 2 : Line and Staff Organisation
of (Directors &&" &!&"! Board

‫‫‬  &' ! &&&%and &! Financial Advisor  Accounts ) && " !(% %&& Chief Officer

+&&& Managing ( !" & Director

Manager  HR Manager Legal    Managing Director Assistant to

Manager r +&& Division-I ) %! %

Manager r * && Division-II I) ! %%

Manager r Division-II

denotes  ## Line # # #" #Authority #   y### # #" $# denotes Staff Authority

The main advantage of line and staff organisation is that the staff specialists relieve the line executives of the botheration of concentrating on specialised functions like selection, training, development, wage and salary administration, accounting, public relations etc. However, the disadvantage of this structure is that since functionaries are not accountable for the results, they may not be performing their duties effectively.

3.4 FUNCTIONAL ORGANISATION STRUCTURE This is the most widely used form of organisation structure because of its simple logic and commonsense appeal. Here the tasks are grouped together on the basis of common functions. So, all production activities or all financial activities are grouped into a single function which undertakes all the tasks required of that function. A typical chart of a functional organisation is presented in Figure 3. The functional structure suits best to the small to medium organisations producing one or a few products, where the goals of the organisation emphasise functional specialisation, efficiency and quality. 3

Organisational Design

Figure 3 : Functional Organisation Structure

Managing r%#$## $# Director

General ‫ ‫‬% #$#! # Manager

Chief  r %# #! Manager $!#$$ Production

Manager r$! " Production # "! "

Manager r#"" Purchase #" !

Chief  r %# #! Manager g&#! # Marketing

r#"" Manager Manager r#"" y$"! Quality Engineering g"""
" l#"! Control

r$"" Manager g$! " Marketing

r#"" Manager s"! Sales

Chief Manager Human Resources

Chief

 r $$ # Manager e$ #

Finance

Manager r#"" Ads. g#"!"

Manager r%#$ Employment %&$ #

Manager HRD

Manager Industrial Relations

Chief Manager R&D

Manager Wage & Salary Administration

The main advantages of this type of structure are that by grouping people together on the basis of their specialist expertise, the organisation can facilitate both their utilisation and their coordination in the service of the whole organisation. The functional grouping also provides opportunities for promotion and career development. One of the major disadvantages of this form of organisation is the growth of sectional interest which may conflict with the needs of the organisation as a whole. For example, the members of the production department will see their activities from the narrow perspective of their own department rather than viewing the same from the broader perspective of the entire organisation.

3.5 PRODUCT ORGANISATION STRUCTURE / DIVISIONAL STRUCTURE This form of organisation structure is adopted by large companies producing a wide range of products. Here, the activities are grouped on the basis of the Figure 4 : Product-based Organisation Structure Managing r&#$## $# Director

Director %! ##!# R&D

%! # Director e$ # Finance

General ‫ ‫‬r&###! # Manager $### Vaccines

Manager r&#$ $!$#$ Production

4

Manager   &&#$"$#! Salesg&#!and # Marketing

Director $ "# e$$!$ Corporate g&#! # Marketing

General ‫ ‫‬r%#$#! # Manager s%#! # Antibiotics

Manager r&## $##$ Accounts

General ‫ ‫‬r%"$""# Manager s% ##' Cosmetics

Manager r&## Human ‫‮‬ s%#' ## % Resource

Director %! # Human ‫‮‬ s%#' ## Resources

General ‫ ‫‬r Manager  es r i l e St Suppliers

individual products manufactured by the company. Thus, one finds autonomous “little companies within the company” adopting this type of organisation structure. As such, within each of these little independent units, we find all important functions viz. production, marketing, finance and human resources. The organisation structure of a large multi-product pharmaceutical company is illustrated in Figure 4.

Typology of Organisation Structures

One of the advantages of the product organisation is that it enables diversification of the products to take place with minimal effort. Another advantage is that it can cope better with technological change by grouping people with expertise and their specialised equipment in one major unit. The main disadvantage of the product organisation is that each product division may promote its own product group in a way that creates problems to other product divisions of the company.

3.6 HYBRID STRUCTURE The hybrid form combines features of both functional and divisional forms. When an organisation starts to get very large, it establishes some self-contained units. Functions that are considered important to each product are decentralised to the units; however, some functions like finance and accounting are centralised at headquarters for practical reasons (Figure 5). Figure 5 : A Hybrid Organisation Structure t( #&& President

Accounting ( &&' '

Finance e' " &

(! Vice t( #&& President ' #&" Auto (Parts

Sales s( %

Human n)' Resources s) &&'

( ! &%! ( # Vice President g( &&" & Engineering s*&"& Materials

Marketing g+&# &

The functional part of the organisation is reflected in the departments centralised at the corporate level. However, each of the product divisions has specialists in functional areas for necessary assistance. The important advantages of hybrid structure are: 1. The overall organisation enjoys the benefits of both functional and product (decentralised) structures. 2. It provides the opportunity to improve coordination both within and among divisions. 3. It enables the organisation to pursue an adaptive strategy within the product divisions while at the same time achieving efficiency in the functional departments. 4. It helps in proper alignment of corporate and divisional goals. A major disadvantage of the hybrid structure is that it often leads to excessive duplication of activities between functions and divisions. Another disadvantage is its tendency to create conflict between headquarters and divisional functions.

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Organisational Design

3.7 FORMAL AND INFORMAL ORGANISATION The formal organisation structure refers to a structure of clearly defined jobs, each bearing a definite amount of responsibility and authority. The formal organisation lays down formal procedures, rules and regulations, which guide the behaviour of individuals performing these jobs. The informal organisation is the outcome of social interaction that takes place between the individuals of the formal organisation. When people work together they tend to form informal work groups, often spontaneously, because of physical proximity, commonality of interest etc. These informal groups are collectively known as informal organisation. Unlike the formal organisation, the informal organisation is unstructured and not given. Generally, it is an unofficial organisation born out of a formal organisation. An informal organisation has its own structure, roles, procedures, norms and values which are unwritten and are evolved through consensus among the members of the informal groups. An informal organisation does not have a fixed chain of command. It is based on the sentiments of the members. The communication patterns are not fixed and as such communication may flow in any direction. In contrast to formal organisation analysis, the dysfunctional aspects of informal organisation such as conflicting objectives, restriction of output, resistance to change have received more attention than the functional ones. In other words, the informal organisation is often projected to be counter-productive to the formal organisation. In reality, however, the informal organisation can benefit the formal organisation in the following ways: 1. It serves as a useful channel of communication 2. It lightens the workload of the management, if the latter gives due importance to the informal workgroups 3. It reduces the undesirable effects of the rigidities of the formal organisation 4. It provides a safety valve for employee emotions. Activity A Briefly describe the informal workgroup that are prevailing in your organisation in terms of their leadership, their role and their contribution to the formal organisation. Substantiate your statements with illustrations. .......................................................................................................................... .......................................................................................................................... .......................................................................................................................... .......................................................................................................................... ..........................................................................................................................

3.8 CENTRALISATION AND DECENTRALISATION The term Centralisation refers to concentration of decision making at a single point in the organisation. In contrast, when the top management gives maximum, though not complete, discretion to the lower level personnel in the organisation to make decisions, then it can be said that there is decentralisation in the organisation.

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In a decentralised organisation, action can be taken more quickly to solve problems, and more people provide inputs into decisions. For firms having a number of plants, which are located at different places, decentralisation is more beneficial. With most of the large companies now preferring to make

organisations more flexible and responsive, there has been a marked change towards decentralised decision making.

Typology of Organisation Structures

The main advantages of decentralisation are: 1. It reduces the burden of the top management by freeing them from many operational decisions, and enables them to concentrate on their strategic responsibilities; and 2. It can contribute to staff motivation by enabling middle and lower level managements to get a taste of responsibility, and by encouraging the use of knowledge, innovation, and initiative by all employees. The main disadvantages of decentralisation are: 1. It requires greater coordination by senior management to ensure that individual units in the organisation are not working against the interests of the whole organisation; 2. It can lead to inconsistency of treatment of customers, clients or public, especially in service industries; and 3. Decentralisation does require a plentiful supply of capable and well-motivated managers, who are able to cope with increased responsibility which decentralisation brings about.

3.9 VERTICAL STRUCTURE A vertical organisation is that in which the size of the hierarchical chain of command is long i.e. the number of hierarchical levels are high. As such, more people have to communicate to the top management through the intervening layers of executives (Figure 6). Figure 6 : Vertical Organisation Structure

s ) !&# &# Levels &'" Hierarchical

The main advantages of the vertical organisation are: 1. They provide better communication of the organisation’s mission, values, and goals to all employees; and 2. These organisations have the ability to sustain a very high degree of specialisation of functions and roles. The principal disadvantages are: 1. Too many hierarchical levels consume more time for communication and the same may lead to delays in decision making; and

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Organisational Design

2. As the vertical structures go hand in hand with formality and standardisation, the scope for initiative and risk taking at operational levels becomes limited. Activity B Find out whether your organisation belongs to a centralised or decentralised form of organisation. Specify the recommendations you would make in order improve the present structure of your organisation. .......................................................................................................................... .......................................................................................................................... .......................................................................................................................... .......................................................................................................................... ..........................................................................................................................

3.10 HORIZONTAL ORGANISATION As the traditional vertical, hierarchical structures of the organisations are being considered inappropriate to the requirements of the changing environment, an increasing number of modern organisations are preferring the use of horizontal structures. For example in the US, corporate giants like AT& T, General Electric, Motorola and Xerox, among other firms, have moved to the principles of the horizontal structure of organisations. The horizontal structure facilitates cooperation, teamwork, and customer orientation rather than a functional orientation. Frank Ostroff, a McKinsey & Company consultant and his colleague Douglas Smith are given credit for developing guiding principles that describe the characteristics of the horizontal structure. 1. Horizontal structures are created around three to five core processes for the time rather than traditional departmental functions. 2. The vertical hierarchy is flattened to reduce the levels of supervision. This is done by combining the fragmented tasks, eliminating work that fails to add value, and by cutting to the minimum activities within each process. 3. Multi-disciplinary/ cross functional self-managed teams (composed of personnel from different functional areas like finance, marketing, human resource, quality control and operations) are created to handle the core processes, and each team is entrusted with a core process. 4. Customer satisfaction, net profits, is the primary driver and measure of performance. As such, for horizontal structure to work, employees are brought into direct contact with customers as well as suppliers. Where relevant, customers and suppliers may be brought in as full working members of the teams in charge of the core processes. 5. All employees should be provided with all data, and they should be trained for analysing and use the data to make effective decisions as team members. 6. All employees are encouraged to develop multiple skills; and those who develop are rewarded. 7. The horizontal organisations need to build a corporate culture of openness, cooperation and collaboration. 8

Typology of Organisation Structures

Figure 7 : Horizontal Organisation Structure

s ( "&# & Levels Hierarchical

Figure 7 gives an idea about the horizontal structure of an organisation. The main advantages of horizontal organisation are: 1. Decisions can be taken more quickly to solve problems; and 2. A horizontal structure has fewer problems of coordination. One of the disadvantages of the horizontal structure is the absence of proper reporting to superiors by the subordinates because of decentralisation.

3.11 PROJECT ORGANISATION When an organisation undertakes a big project or a number of small projects, it creates project organisation(s) for the completion of the same. This is done because the existing functional structure of the organisation may not be suitable to complete the projects which are time bound and are subject to high standards of performance as in the case of aero space and aircraft companies. A project organisation (See Figure 8) is separate from and independent of functional departments of the company. Headed by a Project Manager, every project organisation consists of a team of specialists drawn from different functional areas of the company or from outside. The size of the project team varies from one project to another. Again, within a project, the size of the group may change with the different phases of the work. A project organisation has a temporary set up, and as soon as the project is completed it will be disbanded. However, when the duration of the project is very long, the project organisation takes a permanent form and it may become a regular autonomous project division of the company. The role of the Project Manager is quite challenging. He is responsible for the completion of the project exacting to the time schedule and quality standards Figure 8 : Project Organisation General ‫‫‬ r* &&&$%" Manager

 I ' $'! I Project

 ( #'!& Project II

Project t( #' r+&' Manager Team Members %$ %) )

Product t ' $' Management * &' &'

Engineering g( ''! '

y*'% Quality l(' ' Control

M( HRM

Sales

Research

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Organisational Design

that are prescribed. The successful completion of the project depends on how well he coordinates the activities of the project team and how he utilises the advice and assistance of the internal experts (available within the company) and those belonging to external agencies / organisations. The project organisation is suitable when the company gets a one-time assignment or a huge contract or when the company faces a unique challenge. The main advantages of the project organisation are: 1. The participating specialists of the project team get opportunity for prompt, expeditious and effective accomplishment of the goals of the project. This motivates them to make maximum contribution to the execution of the project; 2. It facilitates speedy communication between the project manager and the team members; and 3. It provides flexibility in handling various tasks. The major disadvantages of the project organisation are: 1. The entire project becomes meaningless, if the project manager fails to coordinate the activities of the project properly; 2. The members of the project organisation have to sever the contacts with the mainstream organisational life. As such, they may be bypassed when opportunities arise in their respective fields for promotion; and 3. The job of the project manager becomes very difficult because he has to deal with specialists from a number of diverse fields.

3.12 MATRIX ORGANISATION The matrix organisation combines two forms of departmentalisation— functional and product. It is built around a project which is headed by a Project Manager. The Project Manager is also known as Product Manager as he is responsible for the output (product) of the project. The project teams comprise of employees (specialists) drawn from different functional departments such as the Human Resources, Finance, Production, Marketing, and Research & Development Departments of the Company. Thus, the employees of the matrix have two bosses: their Functional Departmental Managers (for example, the HR specialists of the project team have to report to the Manager, Human Resources Department) and their Project Manager. In other words, the matrix structure breaks the principle of unity-of-command which states that no person in the organisation should report to more than one boss. Figure 9 illustrates the Matrix Structure of an Engineering firm, which is composed of two projects, each having its specific objective and specific time for completion. The matrix organisation is different from the functional organisation. In the functional organisation, the project manager is given complete responsibility for the project as well as the resources needed for its completion. But in the matrix organisation, the Project Manager has to share the resources with the rest of the enterprise.

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The matrix structure is used in advertising agencies, aerospace firms, R & D laboratories, construction companies, hospitals, government agencies, universities, management consulting firms, and entertainment companies.

Typology of Organisation Structures

Figure 9: Matrix Structure of an Engineering Firm Managing r* &&&' "&' Director

General l )&' r * &' Manager

Manager r +&' Production ( #'' &

r +%' Manager n )& Human s)&&& Resource

r * &' Manager Finance e' "'

Manager g Marketing

Manager R & D

Project
I ( #'!I Manager r * &'

Production ( #'' & Specialists s''&&!

HR ( Specialists s('&&!

Finance e' "' Specialists s(&&&"

Marketing g Specialists

R & D Specialists


( #'!& Project II r * &' Manager

( #'' & Production s''&&! Specialists

( HR s('&&! Specialists

e' "' Finance s(&&&" Specialists

g Marketing Specialists

R & D Specialists

Some of the advantages of the matrix structure are: 1. It facilitates coordination when the organisation has multiple complex and interdependent activities; 2. It ensures the effective utilisation of the services of the people with highly specialised skills; and 3. The direct and frequent contact between the different functional specialists in the matrix ensures better communication and more flexibility. The major disadvantages of the matrix structure are: 1. This structure breaks the unity-of-command concept. Reporting to one boss introduces role conflict and role ambiguity; 2. It fosters power struggle between product (project) managers and functional managers who share the same set of resources; and 3. A matrix organisation incurs higher costs than an organisation with a conventional hierarchy.

3.13 VIRTUAL ORGANISATION (NETWORK STRUCTURE) A virtual organisation is a small, core organisation that outsources major business functions. It is highly centralised, with little or no departmentalisation. The virtual organisation creates network relationships with other organisations / agencies located anywhere in the world for the purpose of contracting out functions like manufacturing, distribution, marketing, R & D, etc. (Figure 10). The networking is done through the electronic technology. As such, the partnerships between the virtual organisation and other organisations (far-flung companies) are based on electronic contracts. The partners are less permanent, less formal, and more opportunistic. Each partner contributes to the virtual organisation its core capabilities. The managers of the virtual organisations spend most of their time in coordinating the various activities through the networking. Examples of virtual organisations include Ford, Harley Davidson, Nike, Rebok, Mobil Corp., IBM etc. 11

Organisational Design

Figure 10: Virtual Organisation Structure

R&D  ‫چ‬ ) ! ) !)!) ' Consulting Firm &"
"" ! &% & (located in New   ( &)! ( &" York, USA)

Manufacturing Company (Located in Bangkok, Thailand)

‫‫‬

)&& ##&!

Central (Core) * #' &' ! Organization n" &&% & (Located , ' %&in Sydney, ' &% "" Australia)

g*&' ' " &

Manufacturing y( ' + Company ‫‮‬ ,#&&%%" && (Located "&% in Pune, India)

Distributing Company (Located in Tokyo, Japan)

The major advantages of a virtual organisation are: 1. Through virtual organisation it is possible to create “best-of-everything” organisation because each partner brings its “core competence.” 2. A virtual organisation allows someone with an innovative idea and little money to successfully compete against large companies. This is possible because of flexible nature. The major disadvantages of the virtual structure are: 1. It reduces management’s control over the key parts of its business; and 2. The reliability of the partners may be doubtful.

3.14 BOUNDARYLESS ORGANISATION General Electric Chairman, Jack Welch, coined the term boundaryless organisation. The boundaryless organisation seeks to remove the vertical and horizontal boundaries within the organisation and to break down external barriers between the company and its customers and suppliers. Once the management removes the vertical boundaries, the structure of the organisation looks more like a silo than a pyramid. To break down the vertical boundaries, the management adopts the following strategies: i. Creating cross-hierarchical teams (which includes top executives, middle managers, supervisors, and operative employees); ii. Encouraging participative decision making; and iii. Making use of 360 degree performance appraisal (peers and others above and below the employee evaluate his / her performance). To reduce the barriers to the horizontal boundaries, the management adopts the following strategies: i. Replacing the functional departments with cross-functional teams and organising activities around processes; ii. Using lateral transfers; and 12

iii. Rotating people into and out of different functional areas.

The external boundaries can be reduced through practices like strategic alliances, customer- organisation linkages and telecommuting (mainly with the networked computers).

Typology of Organisation Structures

The major advantages of the boundryless organisation are: 1. It fosters teamwork among the employees; 2. It ensures speedy communication within the organisation (intra-organisational communication) and between the organisation and the customers and suppliers (inter-organisational communication); and 3. It can help competitiveness in the global economy. A principal drawback of this form of organisation is that it is difficult to clearly establish the relationship between superiors and subordinates in the organisation.

3.15 INVERTED PYRAMID Organisations with this type of structure put the customers at the top and give them the most important role in driving the business. The front-line employees like sales representatives, people in charge of help-desk, etc. who come in direct contact with the customers, are also given a similar position. The Chief Executive Officer of the organisation is at the bottom of the structure (Figure 11). Thus, in this form of organisation, the role of the management changes from a commanding one to a supporting one. Figure 11 : Inverted Pyramid Organisation Structure s ) &&# Customers

' #' ' "" " ! ' & Front-line employees

' ' ' ' Staff ' # "" Supporting

O( CEO

Some of the advantages of the inverted pyramid are: 1. This structure gives first preference to the customers. Therefore, it becomes easy for the organisation to know the customers’ choices, and to work out appropriate strategies to ensure customers’ satisfaction; and 2. In this form of organisation, the employees are given more responsibility and authority than the top management. A major disadvantage of the inverted pyramid relates to formulation of strategies. The frontline foremen are not quite equipped to formulate strategies regarding the organisation. This leaves sufficient ground within the organisation to doubt about their capabilities to make appropriate strategies. 13

Organisational Design

3.16 TASK FORCES A task force is a temporary structure comprising of specialists from different functional departments, formed primarily to accomplish a specific and complex task. It co-exists with the traditional structure. As such, it can be viewed as a scaled-down version of the temporary matrix. The members of a task force are transferred to another task force, once the goal of their task force is achieved. Ford Motor successfully experimented with the task force structure in the U.S. in the early 1980s. One of the advantages of the task force is that an organisation can enjoy the benefits of both the traditional structure and the task force simultaneously. The benefits are: stability, flexibility, and efficiency. The major disadvantage is that, if the management fails in its job of coordinating the activities of the task force and maintaining harmonious interpersonal relationship within the task force, the very purpose of creating the task force gets defeated.

3.17 MECHANISTIC AND ORGANIC STRUCTURES In a landmark study conducted in 20 British firms during the 1960s, Tom Burns and G.M.Stalker identified two types of organisations— mechanistic and organic. They observed that the mechanistic organisation was characterised by: rules, procedures, a clear hierarchy of authority, centralised decision making, and the control of incoming and outgoing communications from the top and a tendency for information to be provided on a need to know basis. By contrast, the organic organisation was characterised by: low formalisation, rules and regulations were not written or if written down were ignored, and open and widely used communication patterns which incorporate horizontal, diagonal as well as vertical channels. Burns and Stalker’s research work stressed the belief that the organisation could change its structure in relation to its environment. Thus, in a rapidly changing environment, an organisation tends to change to organic form from the mechanistic form in order to remain competitive. The mechanistic form of organisation structure is adopted when there is relative stability in the environment. According to Stephen P. Robbins, these forms of organisation structures represent two extremes of a continuum. While the mechanistic model is generally synonymous with the bureaucracy, the organic model looks more like the boundaryless organisation. The relation of one form to the other is elastic. As such, an organisation may oscillate from one end (mechanistic) to the other (organic) depending upon the nature of the environment and other factors like the overall strategy of the organisation, organisation size, and technology. Activity C Briefly describe the structure of your organisation. Find out which type of organisation structure it comes closer to. .......................................................................................................................... .......................................................................................................................... .......................................................................................................................... .......................................................................................................................... 14

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3.18 SUMMARY

Typology of Organisation Structures

We have briefly described the various types of organisation structures that have evolved over a period of time in response to the paradigm environment. The continuum of structures ranges from the traditional bureaucratic structure to the modern virtual organisation. Each type of structure has its advantages and disadvantages. As the traditional structures no longer proved to be adequate in the new paradigm environment, the modern horizontal, bounaryless, virtual organisations have emerged. Organisations’ needs for flexibility, adaptability to change, creativity, innovation, knowledge, and ability to overcome environmental uncertainties are among the biggest challenges facing the modern organisations. Some bureaucratic characteristics are in decline. But, bureaucracy is alive, and perhaps will be in vogue in the distant future.

3.19 SELF-ASSESSMENT QUESTIONS 1. Distinguish between the functional organisation and the product organisation. 2. What is a matrix structure? When is it used? 3. Briefly describe the horizontal, boundaryless and virtual organisation designs. Explain how they meet the challenges of the new environment. 4. Contrast the mechanistic organisation with the organic organisation.

3.20 FURTHER READINGS Tom Burns and G.M. Stalker, 1961. The Management of Innovation, London: Tavistock. K Harigopal, 2001, Management of Organisational Change: Leveraging Transformation, New Delhi: Response Books. Fremont E Kast. and James E. Rosenzweig , 1974. Organisation and Management, Tokyo: McGraw Hill Kogakusha Ltd. Fred Luthans, 2002. Organisational Behavior, Boston: McGraw Hill Irwin. V. Nilakant and S. Ramnarayan, 1988. Managing Organisational Change, New Delhi: Response Books. Robert A. Paton and James McCalman, 2000. Change Management, New Delhi: Response Books. V.S.P. Rao and P. S. Narayana, 1986. Organisational Theory and Behaviour, New Delhi: Vani Educational Books. Stephen P. Robbins, 2001. Organisational Behavior, New Delhi, Prentice Hall of India Private Limited, (9th Edition). B.P. Singh and T. N. Chhabra, 2002. Organisational Theory and Behaviour, Delhi: Dhanpat Rai & Co. (P) Ltd.

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