Organisational Structure - Essay Example

Organisational Structure Introduction An organisation structure is generally a setup of how different departments within an organisation are connected (Aquinas, 2008). On the other hand, an organisation strategy is the plan for the entire business which outlines how the resources of an organisation will be utilized. Basically, an organisation structure should be designed in consideration with the organisation’s strategy. In fact, before a business entity chooses the organisational structure to adopt, it must develop a strategy.

Therefore, an organisational strategy lays the platform for the structure to adopt by the business. Organisation strategy can be condensed to any of the three generic strategies; cost leadership, focus and differentiation. Organisational structures and porter’s generic strategies An organisational structure like the team-based structure allows the application of the Porter’s generic strategies. When members in an organisation work as a team, innovation is enhanced through sharing of ideas.

Team- based organisational structure promotes horizontal relation and also helps to overcome various challenges like disagreement between workers and overloading few people with work. Teamwork ensures that the employees remain focused to attain the objectives of the organisation. With a team-based structure, the organisation can be able to produce at low cost and therefore apply the cost leadership strategy in the market. Innovation of new methods of production fostered by teamwork, allows a firm to operate or produce at a low cost and therefore set the lowest possible market prices (Rao, 2001).

Consequently, the firm might sell at a lower price than the competing firms in the industry and end up owing a large market share which accompanied by huge profit. Porter argues that, cost leadership strategy focuses on ensuring a low cost of production and to sell at the lowest price possible in the market. Low production cost would allow a firm to seller at the prevailing market price or at a low price and still make profit. Organisational structure like the Functional structure, may aid in concentrating the porter’s generic strategies and thus ensure low production cost.

Functional organisation structure enables an organisation to ensure efficiency of the various departments. In essence, functional organisational structure enhances specialization and this allows introduction of new technology, improvement in operations, access of lower cost inputs through market research by procurement department and many others. Introduction of new technology can lead to production of a unique product. Production of unique products works in line with porter’s differentiation strategy.

The function unit entrusted with procurement aids in identifying less costly inputs. Low cost of inputs result in low production cost and thus the firm may adopt the cost leadership strategy. Advantages of organisational structures; Matrix organisational structures Advantages In matrix structure, the organisation positions the employees in accordance to the function and the product. This encourages specialization in the area of occupation and thus good performance. Additionally, matrix structure encourages use of teams in carrying out activities.

Teamwork facilitates timely completion of tasks. Consequently, teamwork help the employees to improve skills and become more innovative since working in a team gives room for sharing experiences and learning from others. Additionally, matrix structure encourages efficient dissemination of information within the organisation. The various departments are well connected and associate with each other in solving problems that may arise. Smooth communications between departments enhance quick decision making and improved productivity.

Smooth flow of information allows the managers to respond instantly to the customer needs. Disadvantages Matrix structure may result in internal complexity. For instance, the employees might be confused in executing their task. For example, an employee may obtain different instruction regarding the same subject from managers in different departments and end up getting confused. Additionally, Matrix structure is expensive to run. The double management system involved in matrix structure can be very expensive.

The extra salaries incurred cause a strain on the organisation’s resources. Consequently, the practices of sharing employees in the matrix structure might cause detrimental competition between the managers within the organisation. Indeed, competition for resources in the organisation might arouse hostility in the workplace and negatively affect production. Functional organisation structure Advantages According to Takahara, & Mesarovic (2003), functional structure encourages job specialisation.

This is because the firm is divided into various functional units based on the core task executed. Each unit is led by an expert manager. Specilisation of managers and employees in their area of occupation, enhance efficiency and quality production. Additionally, managerial efficiency is enhanced since the work routine is recurrent. Consequently, functional structure ensures negligible duplication of efforts. For instance, the function of marketing is only executed by the marketing department.

In fact, the structure eliminates the need for establishing several departments performing a similar task. It facilitates maximum utilization of the human resource in each department. Functional structure ensures smooth coordination in a firm. Employees working in the same field are placed in one department. In fact, all employees operating within a department are specialist in their particular jobs. Disadvantages Functional areas may extensively concentrates on the departmental goals and forget about the overall objective of the company.

Additionally, as the functional units grow, they may expand too much resulting in communication problems. Divisional organisation structure Advantage Divisional structures help to build future executive managers. Divisional managers learn to develop short and long term plans. The skills learnt at divisional level, can be used to run complex enterprises in future. Additionally, job satisfaction is promoted which boost performance. Disadvantages Competition among various divisions might result in unhealthy relations.

For instance, one department may act to harm the other. Additionally, divisional organisational structure can be expensive to run. Note: Organisation focus is connected to the organisation structure by the objectives and the vision of the organisation Effects of organisational structure on creativity and innovation According to Moore (2007) the organisational structure can influence creativity and innovation in the business. An organisational structure that enhances teamwork and specialization fosters innovation and creativity in that people are able to reason critically to come up with new ideas.

Specialization gives an individual ample time to work on a certain line of production and possibly device new way of doing the same work. An organisation structure that gives the employees freedom to work enhances creativity and innovation. In fact, an organisation becomes innovative when the employees are offered opportunities to bring in their creative ideas in the business. Conclusion A business cannot run without a suitable organisational structure. The central cause of success or failure in any business organisation is the organisational structure.

Different businesses are suited by different organisational structures. It is necessary to carefully examine a structure before applying it. Bibliography: Aquinas, P., 2008. Organization structure and design: applications and challenges. New Delhi: Excel Books. Moore, D., 2007.Project Management: Designing Effective Organizational Structures in Construction .Oxford: John Wiley & Sons. Rao, D., 2001. Organizational structure of science. New Delhi: Discovery Pub. House. Takahara, Y. & Mesarovic M., 2003.Organization structure: Cybernetic systems foundation.

London: Kluwer Academic/Plenum.