Page 208 - DCOM506_DMGT502_STRATEGIC_MANAGEMENT

Strategic Management

Notes 7. Departmentalization: Another fundamental characteristic of organisational structure is
departmentalization, which means grouping positions into departments and departments
into the total organisation.

Did u know? What is organisational design?
The process of designing an organisation’s structure to match with its situation is called
organisational design. The best design for an organisation is determined by many aspects
of its situation, viz. the size, technology, environment and strategy. Managers make choices
about how to use the chain of command to group people together to perform their work.
The functional, divisional and matrix structures are traditional approaches that rely on the
chain of command to define departmental groupings and reporting relationships along
the hierarchy. Newer approaches such as teams, networks and virtual organisations have
emerged to meet changing organisational needs in an increasingly global, knowledge-
based business environment.

Caselet Reinventing Organisation Design

rganisation design is not a mere exercise in changing structures and processes in
a company. Companies must break away from the dogma of structure and process,
Obut focus more on values. Structures are meant only to serve a chosen purpose.
What is important is that people are enabled to achieve that chosen purpose. The prime
objective of organisation design is to create a business entity around a strong foundation
of shared values and goals. The basic criterion is that purpose and values must be reflected
in all the activities of the organisation.
The concept of organisation design is simple in theory but highly complex in practice
because of two reasons. First, the sheer number and variety of elements that make up an
organisation and their inter-relationships are immense. Managing this complexity is a
logistical nightmare beyond the wit of majority of managers.
Second, the central factor in any organisation is people; and people defy logic and common
sense. Everyone is an individual and expects to be recognised and treated as such. No two
persons are similar. Everyone brings to work his/her own attitudes, aspirations, and
problems.
Superimposing these two factors – the unpredictable and irrational nature of people, and
the complexity associated with the number of elements in an organisation – this overlay
presents a phenomenal challenge. As the needs of the individual take on greater importance
in the knowledge economy, the difficulty is compounded requiring an altogether different
dimension of organisation design. Recognising that organisation design is a process, and
not an outcome is important. It is a journey, and not a destination.

Source: thehindubusinessline.com

11.2 Relation between Strategy and Structure

Strategic management posits that the strategy and the organisation structure of the firm must
match. In a classic study of large U.S. corporations such as DuPont, General Motors, Sears, and
Standard Oil, Alfred Chandler concluded that structure follows strategy. This means that changes

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