Page 206 - DCOM506_DMGT502_STRATEGIC_MANAGEMENT

Strategic Management

Notes Organisational structure is a tool that managers use to harness resources for getting things done.
It is defined as:
1. The set of formal tasks assigned to individuals and departments.

2. Formal reporting relationships, including lines of authority, responsibility, number of
hierarchical levels and span of manager’s control.
3. The design of systems to ensure effective coordination of employees across departments.

The set of formal tasks and formal relationships provides a framework for vertical control of the
organisation.
There are two different aspects of the organisational structure:

1. Superstructure
2. Infrastructure
1. Superstructure: This is the highly visible part of the organisational structure. This depicts
how people are grouped into different divisions, departments and sections and how they
are related to each other. The superstructure also indicates the principal ways in which the
organisational operations are integrated and coordinated. By showing their levels, it
indicates which groups have relatively more strategic importance.
2. Infrastructure: This is comparatively less visible part of the organisational structure. It is
concerned with issues like delegation of authority, specialization, communication,
information systems and procedures. The infrastructure enables the organisation to engage
in a number of disparate activities and still keep them coordinated.
The design of organisational structure is a critical task of the top management of an organisation.
It is the skeleton of the whole organisation. It provides relatively more durable organisational
arrangements and relationships.
Thus an organisational structure fulfils two fundamental and opposing requirements:
1. Division of labour into various tasks
2. Coordination of these tasks to accomplish effective control of an organisation.
However, as an organisation grows and becomes more complex, it needs appropriate changes
in its design.

11.1 Basic Principles of Organisational Structure

There are several important principles of organisation, which need to be understood before
building an organisation’s structure. They are:
1. Hierarchy: Hierarchy defines who reports to whom and the span of control. Span of
control is the number of people reporting to a supervisor. It determines how closely a
supervisor can monitor subordinates. Tall structures have many levels in the hierarchy
and a narrow span. Communication up and down the hierarchy becomes difficult. Flat
structures are horizontally dispersed having fewer levels in the hierarchy. The trend in
recent years has been towards flat structures allowing for wider spans of control as a way
to facilitate better communication and co-ordination.
2. Chain of Command: The chain of command is an unbroken line of authority that links all
persons in an organisation and shows who reports to whom. It has two underlying
principles. Unity of command means that each employee is held accountable to only one
supervisor. The scalar principle means a clearly defined line of authority in the organisation.
Authority and responsibility for different tasks should be distinct. All persons in the

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