Importance of Organizational Structure - Management Perspectives

Summary

This module explores organizational structures, their importance, and various types like functional, multi-divisional, and matrix. It discusses the significance of organizational structures in defining authority, information flow, and control. The module also covers boundary-less structures like modular and virtual organizations. Criteria for choosing a structure include marketing advantage, parenting advantage, people test, and feasibility. Lastly, it touches on leadership theories, marketing, human resource management, and motivation.

Takeaways

• 🏫 Module Six focuses on the management perspective, covering organizational structures, leadership theories, marketing, human resource management, communication, and motivation.
• 📚 Despite being comprehensive, this module has not been heavily emphasized in exams, with questions constituting less than 5% of the syllabus over the past few years.
• 👥 Organizational structure is defined as the arrangement through which authority and information flow within an organization, including hierarchy and boundaries.
• 🔍 Importance of organizational structure includes defining responsibilities, communication paths, authority levels, control spans, and bureaucracy levels within a company.
• 🏢 Types of self-contained organizational structures discussed are functional, multi-divisional, holding company, matrix, transnational, team-based, and project-based.
• 🌐 Boundary-less organizational structures include follow, modular, outsourcing, offshoring, shared services, alliances, virtual, and collaborative.
• 📏 To choose an organizational structure, organizations should consider nine benchmarks related to objectives, marketing advantage, parenting advantage, people test, feasibility test, culture, difficult link, redundancy, accountability, and flexibility.
• 📈 The functional organizational structure aligns departments and divisions based on functions within the organization, like sales, finance, production, and marketing.
• 🌐 The transnational organizational structure aims to balance global scale with local responsiveness, often adopted by companies with international branches.
• 🔄 The matrix organizational structure combines functional structures with other organizational forms, creating dual authority lines within the organization.
• 🔑 The modular organizational structure involves outsourcing non-core processes and assembling components in-house, common in complex manufacturing like airplanes and cars.

Q & A

What is the main focus of Module Six in the syllabus?

Module Six focuses on the management perspective, covering topics such as organizational structures, leadership theories, marketing, human resource management, communication, and motivation.

Why might the examiner have examined less from this section of the syllabus?

The examiner might have examined less from this section because the content is more or less contained in the Level 1 business management and information system modules.

What is the definition of an organization according to the script?

An organization is defined as a social arrangement which pursues collective goals, controls its own performance, and has a boundary separating it from its environments.

What is organizational structure and why is it important for companies?

Organizational structure refers to the hierarchy of authority within an organization and the way authorities and information are routed. It is important because it shows the level of authority, the flow of information, who is responsible for what, and the span of control within the organization.

What are the two classifications of organizational structures mentioned in the script?

The two classifications of organizational structures are self-contained organizational structures and boundary-less organizational structures.

Can you explain the functional organizational structure?

A functional organizational structure is designed in relation to the various departments or functions within the organization, such as sales, finance, production, and marketing departments.

What is a multi-divisional organizational structure?

A multi-divisional structure is where an organization is divided into semi-autonomous divisions that may differ by territory, products, or markets, and is often adopted by companies that produce more than one product or operate in more than one territory.

How is a holding company structure different from other organizational structures?

A holding company structure is an extreme form of division where each division is a separate legal entity, similar to a parent-subsidiary relationship, with each division operating as a distinct entity under a parent company.

What is a matrix organizational structure and how does it work?

A matrix organizational structure attempts to ensure coordination across functional lines by embodying dual authority. It combines functional structures with other organizational structures, allowing individuals to have responsibilities in both a division and a functional department.

What is a transnational organizational structure and its key features?

A transnational organizational structure attempts to reconcile global scope and scale with local perspectives. Its key features include a response to global challenges and a high proportion of fixed responsibilities in a horizontal line of management.

What are the nine benchmarks that organizations have to follow to test which organizational structure will be suitable for them?

The nine benchmarks include marketing advantage, parenting advantage, people test, feasibility test, specialized culture, difficult link, redundancy, accountability, and flexibility.

What is a boundary-less organizational structure?

A boundary-less organizational structure includes various forms such as following, modular, outsourcing, offshoring, shared services, alliances, virtual organization, and collaborative organizational structures, which often involve collaboration with outside parties and flexibility in operations.

Outlines

00:00

🏢 Organizational Structure Overview

This paragraph introduces Module Six, focusing on the management perspective. It discusses the importance of understanding organizational structures, leadership theories, marketing, human resource management, communication, and motivation. The speaker highlights that although this module is comprehensive, it has been less emphasized in exams. The paragraph defines an organization as a social arrangement with collective goals and boundaries. Organizational structure is explained as the framework through which authority and information flow. It is crucial for defining responsibilities, communication, authority hierarchy, and control within a company. The paragraph also introduces different types of organizational structures, such as self-contained and boundary-less structures.

05:02

🔍 Types of Self-Contained Organizational Structures

This section delves into various self-contained organizational structures. It starts with the functional structure, which is based on departments and functions within an organization. It then moves on to the multidivisional structure, suitable for organizations with diverse products or operating in multiple territories. The holding company structure is described as an extreme form of division where each division is a separate legal entity. The matrix structure is explained as a combination of functional and other organizational structures, aiming for coordination across functional lines. The transnational structure is designed to balance global and local perspectives, and the team-based structure focuses on groups with specific skills to manage business processes. Lastly, the project-based structure is mentioned, where teams are formed to complete specific projects and then disbanded.

10:05

🛠 Choosing an Organizational Structure

Paragraph 3 discusses how organizations can determine the appropriate organizational structure. It introduces nine benchmarks proposed by Goold and Campbell, which are divided into two categories: organizational objectives and design principles. The benchmarks under organizational objectives include marketing advantage, parenting advantage, people test, and feasibility test. Design principles benchmarks cover specialized culture, difficult link, redundancy, accountability, and flexibility. The paragraph emphasizes the importance of these factors in assessing and choosing the right organizational structure for a company.

15:05

🌐 Boundary-Less Organizational Structures

The final paragraph explores boundary-less organizational structures, which include the follow-the-leader model, where organizations focus on core processes and outsource non-core ones. The modular structure is similar but involves outsourcing production processes and then assembling the components in-house. Other concepts mentioned are outsourcing, offshoring, shared services, alliances, virtual organizations, and collaborative structures. The paragraph concludes by summarizing the key points about organizational structures and looks forward to the next module.

Keywords

💡Organizational Structure

Organizational structure refers to the arrangement of tasks, people, and power within an organization. It defines how responsibilities, authorities, and information flow within the organization. In the video, it is central to understanding how companies are managed and how they operate. The script discusses various types of organizational structures such as functional, divisional, and matrix, each serving different management needs and objectives.

💡Leadership Theories

Leadership theories are frameworks or sets of principles that explain how leaders influence others. These theories help in understanding the dynamics of leadership and guide leaders in managing teams effectively. Although not explicitly detailed in the script, leadership theories would be foundational to the discussion of organizational structures as leaders often determine the structure's effectiveness.

💡Functional Organizational Structure

A functional organizational structure groups activities by function, such as sales, finance, or production. This structure is highlighted in the script as one where the organization is divided into departments based on similar skills or functions. It is used to streamline operations and improve efficiency within those functions.

💡Multi-Divisional Structure

The multi-divisional structure is characterized by the organization being divided into semi-autonomous divisions, often based on product, territory, or market. The script mentions this structure as one adopted by companies that produce multiple products or operate in different locations, allowing for decentralized decision-making and responsiveness to local markets.

💡Holding Company Structure

A holding company structure involves a parent company that owns subsidiaries, which are separate legal entities. The script uses the example of a conglomerate with various subsidiaries like insurance, banking, and electricity, each operating as a separate entity but under the umbrella of the parent company.

💡Matrix Organizational Structure

The matrix organizational structure combines functional and project-based elements, where employees report to both a functional manager and a project manager. The script describes this as an attempt to ensure coordination across functional lines by having dual authority in the organization.

💡Transnational Organizational Structure

A transnational organizational structure aims to balance global integration with local responsiveness. The script refers to this structure as having features that respond to global challenges and maintain a high proportion of fixed responsibilities in a horizontal line of management.

💡Team-Based Structure

A team-based structure involves organizing individuals into teams to manage specific business processes or tasks. The script explains that this structure is used when an organization needs to launch a new product, for example, by assembling a team with a mix of skills such as product development, sales, and finance.

💡Project-Based Structure

A project-based structure is similar to a team-based structure but is temporary,解散 once the project is completed. The script uses this concept to illustrate how organizations bring together individuals to undertake a specific project and then disband the team afterward.

💡Boundary-Less Organizational Structure

A boundary-less organizational structure is one that does not have rigid boundaries, often characterized by outsourcing, offshoring, and alliances. The script discusses this as a structure where organizations collaborate with external parties, making them more flexible and responsive to change.

💡Marketing Human Resource Management

Marketing and human resource management are mentioned in the script as areas that are affected by organizational structures. Marketing involves promoting and selling products or services, while human resource management deals with staffing, training, and managing people within the organization. The script implies that the organizational structure can impact how these functions are carried out and their effectiveness.

Highlights

Module Six focuses on management perspective, covering organizational structure, leadership theories, marketing, human resource management, and motivation.

The examiner has historically tested little from this section, possibly due to its overlap with Level 1 business management and information systems.

Understanding organizational structures is crucial as it outlines the hierarchy, authority, and information flow within a company.

Organizational structures are important for defining responsibilities, communication paths, authority levels, and control spans.

Self-contained organizational structures are independent and do not rely on external relationships for operations.

Boundary-less structures involve collaboration with external parties for flexibility during times of change.

Functional organizational structure is based on departments and functions within an organization.

Multi-divisional structure is adopted by companies that produce multiple products or operate in different territories.

Holding company structure treats each division as a separate legal entity with a parent-subsidiary relationship.

Matrix organizational structure combines functional structures with other organizational forms to ensure cross-functional coordination.

Transnational organizational structure reconciles global scope with local perspectives, as described by Professors Bartlett and Ghoshal.

Team-based structure forms groups of individuals with required skills to manage specific business processes.

Project-based structure assembles individuals to undertake a project, dissolving the team once the project is complete.

Good and Campbell's nine benchmarks help organizations determine the most suitable organizational structure.

Design principles such as culture, difficulty in linking departments, redundancy, accountability, and flexibility are crucial for implementing organizational structures.

Boundary-less structures like modular, outsourcing, offshoring, shared services, alliances, and virtual organizations are becoming more prevalent.

Collaborative organizational structures require information from the outside world to function.

Transcripts

hi there welcome to module six

management perspective this is by far

one of the most involving modules or

chapters in there syllables

however the examiner has done really

examined much from this section of the

syllabus I don't know why but maybe

because the modules are things here more

of less contained in the level 1

business management and information

system because here we are will be

discussing various types of

organizational structure we are going to

look at leadership theories and we look

at issues about marketing human resource

management communication motivation I

think the reason why the examiner has

normally tested and has been silenced

over the period there are some questions

that he has as from this session though

but the contents in here and the

question that has been asked in the past

is relatively very small less than like

5% or something like that in the past in

the last four or five years of managing

settings that I'm talking about to be

specific so manager perspective on the

end of this module you should be able to

understand the various types of

organizational structures you should be

able to understand the importance of

organizational structures you should be

able to explain the various leadership

Theory story will be going to you then

you should be able to explain the

concepts of marketing human resource

management among other stuff so let's

begin the journey what is organizational

structure but first before we define

what are the relational structure is

that is we have to look at what an

organization is so analyzation an

organization it simply define us as

social arrangements which pursues

collective goals which controls its own

performance and has a boundary

separating it from its environments so

an organization can be defined as what a

social arrangement a social arrangement

all right in that order but what is an

organizational structure an

organizational structure can simply be

defined as the various who

through which authorities information is

transported in within an organization or

the hierarchy of authority within an

organization to be able to understand

organizational structures there are

various things that we have to take into

consideration in that order

organizational structures are important

for companies because every company must

have the organizational structure the

CEO the Board of Directors the

departments and then under each

departments there are divisions ok

that's the organizational structure it

shows the level of authority it shows

the flow of information it shows who

responds towards it shows also the span

of control within the organization so

what are the importance of

organizational structure 1 it shows who

is responsible for what I've already

mentioned that it shows who communicate

with whom here as also I've also

mentioned that it shows the hierarchy of

authority and the subordinates yes

it shows the span of control in the

organization then it shows the level of

bureaucracy within the organization now

if we want to understand the issue about

organizational structure that are

basically what we call classification of

organizational structure there are two

classification of organizational

structure of the organizational

structure of company can be companies

can be categorized into what we call

self-contained organizational structure

and boundary-less

organizational structure you have to be

able to follow me well to understand

these two things when we say a

self-contained organizational structure

it is where the organization has the

ability to spontaneously arrange its

components and elements in purposeful

manner and that appropriate conditions

but without the help of external

agencies so with self-contained

organizational structure the

organization is

dependent it is form its own so does not

depend on any relationship outside in

the undertaking of its responsibilities

then the convenience organizational

structure this involves the organization

collaborating with the outside parties

to make it more flexible during times of

what changes right so let's now narrow

down our attention to look at the

various types of self-contained

organizational structure the first one

is called functional status this is

where the structure is designed in

relation to the various departments of

functions within the organization so if

you look into your study notes there I

have the functional organizational

structure where I have top management's

where I have the various department and

we're hard division so it is where we

design the flow of information we design

a span of control we design a flow of

information in relation to the flow of

Authority in relation to who does what

within the organization so based on the

functions so we are the sales department

we are the finance department we have

the production department we have the

marketing department those kind of

things okay in that order when it comes

to the functional organizational

structure the next one is called the

multi divisional structure this is where

the organization is defined in two semi

autonomous division that may be

different by territory products or

markets

so sometimes organization has very

divisions of territory so it can devise

it into the northern division into the

Saudi division or into yes so the

northern and the southern division so

that is it when we talk about a multi

division of strategy

normally this is adopted by companies

that produce more than one product and

all companies that operates in more than

one territory or locations as such the

ones and have various projects in these

locations so they want to bring all

those branches for those departments

into multi vision structures in that

order

again the holding company structure

this is an extreme form of division

where each division is a separate legal

entity so here it is like a divisional

ization but here each division is a

separate legal entity on each one so it

is more or less like a parent by a group

structure so you have the parents

company every other subsidiaries so like

back to my example of Jian or group

indium we have a group the parents

company then we have the group Jian

insurance do you have the GN bank then

we have the GN money whatever G and

everything G and in that order

GN electricity GN security GN

hospitalities and hotels that kind of

thing that is over if s was on the

holding company structure here each

revision is seen as a separate legal

entity on it also there is a

relationship like a parent-subsidiary

relationship in that order third the

next one is a matrix organizational

structure this structures attempts to

ensure coordination across functional

lines by embodiment of duong Authority

in organizational structures what does

this mean what it means is that for

instance somebody can be the head of the

division then can be also the head of a

function or a department in the entire

organization in a product so this is the

combination of functional structures

with other organizational structures now

so if you look at a diagram that I have

there you will see that I have fairly

difficult to read though my diagram then

yes so you will see that I have the

manufacturing there I have the various

departments so what a matrix

organizational structure tries to do is

to combine functional structures with

words other organizational structures so

you are performing a functional

structure as for instance the head of

the production department but you cannot

ascend to become the head of a division

okay in that order so that is what me by

the matrix organization

structure in that order then the next

one is a transnational organizational

structure this structure attempts to

reconcile global scope and scale with

what's local perspective now when we

talk about management and managers in

globalization two names come to mind

that is Professor a ballets

of Harvard Business School and then some

entre ghoshal they published a book

called managing across borders the

transnational solution and in that book

they describe that transnational

organizational structures have two

important features one in response to

specifically it respond specifically to

the challenges on the global level and

m2 it tends to have a high proportion of

fixed responsibilities in a horizontal

line of management of the organization

so that is only by the transnational

organizational structure here the

graduation has branches in other

countries so it's gonna have a

transnational organizational structure

the next one is for the team-based

structure since each organization or

business consists of various processes

this type of structure of the

organization to put together a group of

individual with required skills to

manage specific processes of what's the

business so this is when religion put

together a team of experts so we are

launching a new product or the

organization wants to launch a new

product it is going to put together a

research and development team in that

research and development team we will

have the products production manager

they will have the sales manager there

you gotta have the finance

we will have a member of the sales and

distribution there so we go to her that

is a team together to undertake a

specific objective of the organization

at the end of that the team continues to

exist in that product then we have a

project based structure now this is

similar to team up here we put together

individual to undertake a project and at

the end of the project

the team is what's dissolved in that

honor so that is these are some examples

of various types of organizational

structures that is that exist in what we

call self-contained organizational

structure the netting we want to

consider is choosing a design how can

organization determine or assess the

appropriate organizational structure how

can organizations say we want to look at

a function organizational structure we

want to look at a transnational

organizational structure how can they

meet a meander in to be able to answer

that we were to borrow the thought of

good and Campbell and they put together

nine benchmarks that organizations have

to follow to test which organizational

structure that will be well good for

them

these nine Pinterest has been subdivided

into two broad categories the first

category is according to the

organizational objectives and the

restraints it must consider so based on

the organizational objective good good

and good and Campbell says that in the

designing of organizational structure in

the two silicon organizational structure

or in the determination of

organizational structure for the company

based on the organizational objective

the organization has to look at their

marketing advantage so the proposed

structure must fist into the marketing

objectives of the organization to enable

the organization to gain competitive

advantage so based on our objective any

structure we are choosing must be able

to be fit into our marketing world

strategy as a company to parenting

advantage since a lot of companies have

subsidiaries across the structure must

support the parenting

played by all the Corporate Center that

is what I was talking about in relation

to something like the holding

organizational structure because there

has to be what we called parenting and

subsidiary relationships so the

organizational structure has to support

that scheme in that order next one is

people text people test the proposed

structure must suit the skills and

experience of the people that have to

function in narrative function or work

within it so we must look at the fact

that the new organizational structure

that we are implementing we have the

labor force there we have the technical

know-how they in relation to

successfully implementing and

successfully undertaking that

organizational structure by the

organization and then the last one based

on the organizational objective is the

feasibility test this simply talks about

other factors that has to be taken into

consideration such as loss stakeholders

opinion resource availability these are

referred to as other constraints of the

company so what's good and calm Bell is

talking about is that what we are

deciding which organizational structure

we have to use the run line benchmark

for of those benchmark relates to the

organizational objective that is the

marketing advantage of the company that

is the puritan advantage of the company

that is the people test whether we are

the employees and then the feasibility

test whether we have the resources

available what is the expectation of our

stakeholders and whether we really are

undertaking a strategy that falls within

the scope of the laws of the land aside

that good and Campbell said that we have

also considered methods of design

principles that these are issues that

have to be considered in relation to the

implementation and execution of all the

structure so aside now we've looked at

the marketing advantage it fits into a

magazine advantage we have look at the

furniture

there's no issue we look at our people

test years we have the employees there

we look at a disability test yes there

is no problem in relation to that but we

must look at the various factors have to

be considered so that when we implements

the organizational structure when we

execute an organizational structure it

will be well the first one is called the

specialized culture the organisation

already has a culture within which it

operates

and it's known to all stakeholders

however a proposed structure may change

the structure thus culture which may

result into a lot of friction or

disorders so the resident has to look at

the faulkner

people already understand how things are

done within the organisation proposal a

new organizational structure means there

is going to be a change in how things

are done within the organisation this

can result into a lot of friction a lot

of this order a lot of the rejection on

behalf of other parts of some stickiness

of the company the first one is the

difficult link now it is difficult to

combine some department because if you

are delivering something like the matrix

organizational structure when you are

combining some functional organizational

structure with the organizational

structure it is difficult to combine

some of the department into one single

department if you adopted a different

organizational structure so that has to

also be considered then redundancy

hierarchy proposed organizational

structure we mean that probably with all

of the technical know-how we now have

the people they employee so there has to

be new employees that must come on board

this may lead to redundancy within the

organization so the organization has to

also assess that then accountability

built into every organizational

structure there has to be a system of

accountability where we'll be able to

measure the performance of the

organizational structure and compare it

with what's the objective of the

organizational structure to see what

other organizational structure

implemented

it's affecting its objective the final

thing is that every organizational

structure adopted designed implemented

or executed must be flexible so that it

will allow for future changes to be

taken into consideration so these are

what we have to understand in relation

to designing or choosing an

organizational structure then the next

thing we want to talk about the next

thing we want to talk about in an aura

so the next thing we want to talk about

is the boundary less organizational

structures the boundary less

organizational structures these include

the following one follow organizational

structure with that structure the

organization classifies activities into

core processes and non core processes

and organization outsources know core

processes and focuses on course in these

there are any odds add value remember

what we did an evaluation analysis I

mentioned that the organization would

look at the primary activities and then

what the supporting activities so now

when I think I'm focused on what they

call activity so we're an organization

is only focusing on its core activities

and outsourcing or almost also popular

activities that it means the

organization is adopting what we call

the follow organizational structure the

next one is called the medulla

organizational structure now this is

similar to the model organizational

structure in that the organization

outsourced some parts of its production

process to special needs to provide and

then later assemblies their outsource

components in-house to produce the final

products this is usually used by

companies that produce airplanes that

produce cars that manufacture or build

ships in ship in that order

so in relation to the production of

those products like carbon factoring

companies they outsource parts of the

castle a company produces their engine

another company produces the ties

another company produce the windscreens

another company produces

maybe the seeds in that order so they

outsource these various component parts

of the major of the main product to

specialists then they now bring it

in-house and assemble all of them to

produce the finished product that is

what we refer to as the modular

organizational structure then other

modules that we can talk about in most

outsourcing offshoring shared services

alliances virtual organizational

structure destroyed organization doesn't

really have a location okay

you can't trace it it has a very

business and but usually that does

everything electronically in that order

collaborative organizational structure

this is where the organization requires

information and will go to the outside

world and adds them in that border so

these are what you have to understand

when it comes to money the perspective

of the organization and I'll see you in

the next module