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Unformatted text preview: O Wk 5 ORGANISAT IONAL DESIGN AND STRUCTURE Focuses on the role of constraints and incentives. Although corporate management may not make decisions directly, they can influence decisions by way of the administrative context in which decisions are made. That is, senior management creates an administrative context that shapes the definition, championing and approval of decisions by managers throughout the organisation. The administrative context should consider : 1) Information theory. There are two types of knowledge- General/explicit knowledge (easily & cheaply transmitted within and organisation. E.g. data, facts).- Specific/tacit knowledge (difficult and expensive to transmit. E.g. know-how, understanding of customers idiosyncracies). 2) Agency theory.- Individuals act in their own self interest and systems/processes should take this into account. Organisation Structure- describes the arrangements, both formal and informal, by which a firm divides up its critical tasks, specifies how its managers and employees make decisions, and establishes routines and information flows to support continuing operations. (Besanko)- No one size fits all. Types of Organisation Structures 1) Unita ry Functional Structure- A single dept is responsible for basic business function such as finance, marketing, manufacturing- Benefits: Facilitates division of labour and economies of scale. (Evident in 20 th century growth).- Disadvantages: Coordination across departments may be difficult. 2) Multidivisional Structure- Organised by product line, related business units, geography, or customer type.- Benefits: Improves efficiency by division of labour between strategic (top management) and operational decisions (division management); reduce agency costs by linking pay, performance and the creation of an internal capital market; may be possible to coordinate across markets (geographic/product) more effectively.- Disadvantages: Coordination across departments may be difficult. 3) Matrix Structure- Organised along multiple dimensions at once (e.g. product groups and client groups)....
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- Three '09