Organisational Structure

The structure of the organisation determines how everyone in the organisation, and therefore the organisation itself, functions and operates.

The design of organisational structure takes a number of factors into account. These include:

  • What is the Strategic Vision and how can it be achieved
  • What are the Strategic Directions and Targets and what levels of decision making are required to be able to achieve them
  • What are the Policies and Procedures already in place, are they achieving their purpose and if not, how should they be changed

This forms the bedrock, or foundation, on which everyone in the organisation can play an integral part, and feel that they belong to. If one or more feel they are being excluded, either actually or just from one aspect e.g. decision informing, then this may be a structural weakness which has to be addressed.

Some of the modern organisational structures include:

Functional

This requires the organisation to determine the range of specialisms it wishes to have and set them up as specific Functions. This carries the implication for it’s stakeholders, both internal and external, that there will be an increasing focus on specialization which in turn leads to increasing operational efficiencies. This is the main reason why senior stakeholders turn to this type of structure as a purposive determination of strategic intent.

This also carries other implications. Senior decision makers will understand that it’s workers will become increasingly specialized in their chosen areas, but will also need to bear in mind factors including but not limited to:

  • Such workers will feel an implicit authority in being able to do. This authority has to be actualized as well as managed and this can lead to developmental needs in their supervisors and/or managers up the line.
  • The communication needs are different. If the senior decision makers still require a strict or semi strict chain of command, this will restrict and inhibit such communications. This may in turn lead to the specialists feeling stifled, frustrated and eventually leaving.
  • Such specialists will need to develop their skills to be at the leading edge (bleeding edge) or if already there, will need new challenges, otherwise they may feel bored.

There is a risk that the Functions in a functional organisation may be self contained and start to act to protect their boundaries. This territorial mindset is important to the decision makers, so that their territory is not reduced in size or diminished in nature. However this may not lead to organisational efficiencies and may indeed be counterproductive.

There may be one or more instances of infighting among Functions. This may cause delays, reduced commitment due to competing interests, wasted time, which may lead to projects falling behind schedule. This ultimately can bring down production levels overall, and reduce company-wide employee commitment toward meeting their strategic goals.

Divisional

When an organisation grows, it may take them to a level beyond that in which the Functional organisation structure is meeting their needs.

They may take the strategic decision that breaking the organisation into self contained divisions is the next, or best, way forward. Each Division so set up, will operate as a self contained business, with its own Board of Directors, and own distinct identity, as well as plan and business or profit center base of operations.

The Royal Mail set up their structure as a set of 9 Divisions, each having a number of Royal Mail District Offices, in the 1990s. These Divisions were under the strategic control of a Group Centre and Group Board of Directors. No doubt this structure was set up to enable authority to be delegated to as low a level as possible. This would lead to managers having higher perceived levels of authority, therefore greater freedom to do, to respond more flexibly and higher employee morale.

From the Group Centre perspective it is easier to:

  • Identify Divisional performance, comparing them to each other, those which are not performing to par and identify reasons why
  • Disseminate good or best practice
  • Apply organisation wide standards or changes to policy
  • Obtain regional or geographical specialization to benefit the customer through product variation, customer segmentation, and other measures to strengthen the customer relationship and experience

Each approach carries its own disadvantages. The Divisional Structure approach will naturally have a focus on the Division’s aims, objectives and targets. Steps taken to achieve these may come at the expense of achieving the overall Organisation’s targets and objectives.

This focus may indirectly, cause a divisional outlook in its managers, leading to conflicts and rivalries between Divisions, at the expense of overall Organisation’s targets and objectives. It may also lead to a need for specific specialist resources in each Division, whereas otherwise they may have been shared.

Flat Structure

With the actualization of the recession and increasing recessionary forces affecting and impacting, many organisations initiated cost cutting efficiency programmes. This had the effect of reducing the number of managers to workers, making a manager having to manage higher and higher numbers of workers. It also had the effect of:

  • Reducing the number of career points or steps available in particular career paths
  • Reduced loyalty in those laid off (if it happened to me once, it can easily happen again) and those left behind (if this is the way they were treated, I could be treated in the same way and I am now waiting for dead man shoes)
  • Increasing pressure on managers to achieve with less resource
  • Indirectly causing a focus on cutting corners to achieve rather than different ways to build in or retain quality

Network Structure

This is a structure where one or more parts of the operation are outsourced to providers who are specialized in that operation or set of operations. The decision to go down this path should not be taken lightly.

Not only is it necessary to obtain operational efficiencies, it is also necessary to ensure provenance, robustness of processes and communications, retained ownership throughout the supply chain and management oversight throughout. The temptation would be to devolve such operations to one or more other providers and the ownership of production and production practices would be similarly devolved.

We have only look at the 2013 fire in a Bangladeshi clothing factory, the ensuing deaths of its workers, the focus on unsafe working practices and a lack of health and safety, to see the impacts of this on related retail chains. Walmart, Gap, H&M and Benetton are amongst many who have taken steps to improve working conditions at clothing factories in Bangladesh. Additionally 70 retailers have agreed a plan to conduct inspections in such places to improve safety standards – Retailers agree Bangladesh garment factory inspections.

These and other examples serve to show the risks in outsourcing. Some organisations have reversed their earlier decision to outsource and have brought the relevant operation back in house. Lego is one example of a major company bringing manufacturing of one or more products back in house.

Virtual Structure

This is a structure evidenced by the likes of confused.com, comparethemarket.com and travelsupermarket.com. These organisations, and many others like them, have formed very close working relationships with suppliers and customers, such that although they are “middlemen”, the customer does not care as the customer is able to obtain same level services for less cost.

The boundary between the supplier and the customer has blurred to be almost non existent.

The facility to set up such an organisation and structure is being made easier through the accelerated expansion of mobile business – business conducted on mobiles through mobile apps.

Social Enterprise Structure

There are social enterprises which trade for a social or environmental purpose, as well as to make money.

Miss Macaroon is an example of such a social enterprise. Miss Macaroon provides a 4 week training course for 16- 25 year old marginalised young people in the Birmingham and surrounding areas. Trainees work in the kitchens in full Chef whites, creating butter creams from recipes and working on piping skills. By the end of the programme trainees will have made an Italian meringue and perfected their piping technique. The young people also spend a day on personal and social development skills, increasing their confidence and improving their team working skills. Trainees think about their futures, raise their aspirations and work on setting small achievable goals. Miss Macaroon also provides other training courses to marginalized young people.

Social Structure

It would be very easy to see this as a social lead organisation, or an organisation with social aims and objectives as its core. However the reality is different.

The Social Structure is an organisation type which recognises the value of the internal and external stakeholders and the value that they can bring. Its internal stakeholders, or employees, are not islands, devoid of feelings which they leave behind when they start their working day, and resume at the end of the working day. Those employees have feelings which have to be recognised and incorporated into mainstream decision making.

We look at Apple and the way Steve Jobs created the innovation environment, encouraging employees to take time out and come up with new ideas, where it was not a crime to have a failure…

The Social Structure encourages recognition of the way employees form informal relationships, work based but building strength in relationships and communications, and seeks to build a community where such employees belong to and grow together. Firebrand Training is an example of such an environment where communities of thought are encouraged, supported through various Yammer groups, and structured team developmental days.

External Stakeholders are recognised for the value they can bring. Their needs and expectations are taken into account whilst preparing for change. They are ignored at peril.

Coca Cola took a big risk in 1985, when on April 23, they announced that they were changing the formula for their cola drink and dropping the old formula. This caused such a furore amongst its customer base, both in the US and other countries, that the senior management team had to backtrack.

The Coca-Cola Company had intended to re-energize its Coca-Cola brand and the cola category in its largest market, the United States. They decided to bring back the original formula and gave it a new name, Coca Cola Classic, which we all see on the bottles and cans worldwide. This famous example illustrates the strength of brand association, a holy grail that companies work to worldwide.

With brand strength can come Brand Soul, Brand Vision, Brand Expansion and Brand Exploitation.


In this section we have looked at some typical and emerging organisation structures. There are many others, including the traditional structures of Bureaucratic, Formal, Family and Group, which have not been looked at here.

Whatever the aims of its founders or key drivers, any company chooses to have an organisational structure which is best placed to achieve them, or one which may achieve them given time and a will to learn lessons from the mistakes which will inevitably happen.

If you wish to improve the way your company is structured, PLGA can help you to design and implement a structure best placed to help you.

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