2.1 and 2.1 Management Structures

IntroductionA management structure is a term used to describe

the ways in which parts of an organisation are formally arranged to achieve objectives.

All organisations have a formal structure.

A structure is important to coordinate work activities and to set out the roles and responsibilities of members within the organisation.

In general the structure is based upon the strategies that the organisation implements.

Management Hierarchy Hierarchy is the arrangement that provides increasing

authority at higher levels. Also referred to as the Vertical Specialisation.

Chain of Command and Span of Control

Chain of command is a system that determines the responsibility, supervision and accountability of members of the organisation.

Span of control refers to the number of people for whom a manager is directly responsible.

Changes in Organisational Structure

Horizontal Specialisation

Horizontal specialisation refers to the groupings of people within the organisation.

The basic forms of horizontal specialisation are:

Functional Structure Divisional Structure Matrix Structure

Functional StructureInvolves grouping employees according to

function or job. Eg Sales, Marketing Operations, HR, Finance, etc.

Functional Structure

Advantages Disadvantages

• Defined career pathway for employees• Task specialisation• Opportunity for skill and knowledge development•Efficient use of resources

• Lack of flexibility and cooperation between departments• Departments may have a narrow focus rather than an organisational wide focus.• Empire building and competition between departments for resources.

Divisional Structure

Groups employees together according to divisions.

These divisions may include:◦Customer: according to customers being served.◦Geography: According to location.◦Products: Based on products or services offered.◦Processes: grouping employees who are part of

the same process.

Divisional Structure - Customer

Divisional Structure - Geography

Divisional Structure - Products

Divisional Structure - Processes

Divisional Structure – Ads and Disads

Advantages Disadvantages

• Direction of expertise at specific customers, products, regions and processes.• Encouragement of cooperation between departments.• Greater flexibility in adapting to change.

• Reduced benefits of economies of scale because work may be duplicated.•Possible rivalry between divisions.

Matrix Structure

Most complex structure.

Combines specialisation of Functional and Divisional Structures.

Involves bringing together specialists from different parts of the organisation to solve specific problems or to undertake specific projects in teams.

All staff are assigned to a function and a project.

Matrix Structure

Matrix Structure – Ads and Disads

Advantages Disadvantages

• Enhanced flexibility• Enhanced communication, cooperation and teamwork.• Enhanced decision making• Expertise spread across organisation.• Horizontal and vertical career pathways for employees.

• Decisions can undermine chain of command.• Generally more complex to set up.• Possible conflicts between function heads and project leaders.

Questions may ask you to...

Define key terms.Describe key structures.Identify structures from words and

diagrams.Draw basic structures.Provide advantages and disadvantages of

structures.Recommend and justify structures for

case studies.