DESIGNING ORGANISATION STRUCTURES

John van Rijn

INDEVELOPMENT

INDEVELOPMENT:

Designing Organisation Structures

DESIGNING ORGANISATION STRUCTURES

Any part of this publication may be fully reproduced or translated provided that the source and
author are fully acknowledged.
Edition 2004.

INDEVELOPMENT:

Designing Organisation Structures

Table of Contents:
1 Introduction ............................................................................................................... 4
2 Typical Structures...................................................................................................... 5
3 Designing Structures ............................................................................................... 11
3.1
Locating authority ........................................................................................... 13

INDEVELOPMENT:

Designing Organisation Structures

INTRODUCTION

The structure of the organisation describes the functions, tasks and

authorities of the departments, divisions and individual employees and
the relationships between them (line of command, communication and
procedures). It also describes the number of employees in each
division, unit and department.
On the one hand the structure divide departments, divisions and
individuals on basis of tasks, functions and authorities. On the other
hand the structure coordinates these units through lines of
communication and command. Only when the different units work in
conjunction, the organisation is able to function as a whole.
The organisation structure has to facilitate the different processes in the
organisation. A general rule of the thumb is that the organisation
structure should enhance the progress of the processes. It is not
recommendable to breakdown processes unnecessarily because of the
structure of the organisation. The structure has to provide coordination
mechanism if the process is divided over more units.
This document provides descriptions of typical structures and some
guidelines for designing structures.

INDEVELOPMENT:

Designing Organisation Structures

TYPICAL STRUCTURES

Organisations can be structured in different ways. Usually the structure

is based on splitting and grouping of tasks. The grouping of tasks can
be done on basis of 6 different criteria and the final structure is often a
combination of these six criteria:
1. Outputs (goods/services)
2. Functions
3. Target groups
4. Skills
5. Geographical areas
6. Work shifts
Grouping criteria

The method of grouping depends on a number of issues. First of all the

grouping should facilitate the processes in the organisation and not
disturb them. The faster the processes progress and the cheaper the
organisation can produce the better. Progress may stagnate and result
in cost overruns due to inappropriate coordination of activities. The
structure should facilitate coordination to reduce problems between
officers who needs each others work. Ideally the structure would fully
utilise every officer and piece of equipment. The structure influences
the motivation of the staff. If the staffs feel that their work is
monotonous or they have to carry out to many tasks below their level,
they may become dissatisfied with their work. The nature and level of
activities should match as close as possible with the capacities of the
employees. Furthermore the span of control of the managers is not
unlimited. In other words the span of control affects the number of units.
The output and function grouping are the most common form of
grouping forms.
Output, target group and geographical area structure primarily groups
tasks on basis of the connections between activities. All activities are
combined in one group that produces the output, or related to meet the
demands of the target group or take place at a specific location.
A typical example of grouping on output is presented below. The
university is organised in faculties. Each faculty representing a group of
outputs (study programs).

Grouping on function has the major advantage that it standardises the

processes. The officers are grouped on basis of similarity in activities.
The production process is split up in sub processes. Each sub process
produces a semi-finished product and requires a group of people and

INDEVELOPMENT:

Designing Organisation Structures

equipment with specific skills, education and personal characteristics

that are of little use to the other groups. Each group tends to operate
more or less independently of each other.
A typical example of functional grouping is the provincial road agency.
These agencies are often organised in five departments, each with their
specific functions.

Standardisation of the process can also be achieved through grouping

on skills. In a way grouping of skills is variation of functional grouping.
Each unit provide specialised skills and work on a specific process. For
example:

Structuring the organisation on basis of functions or skills/knowledge

has a number of advantages and disadvantages:

Disadvantages

Because of the economics of scale, it is more likely that the utilisation

degree of staff and equipment of function and skill oriented groups is
high. This means that these forms of structures are more conducive to
investments in expensive specialists, up-to-date skill development
programs and the latest technology.
Furthermore the officers become more efficient in their operation, as
they develop routines and do not have start and ending difficulties.
However the officers may perceive the tasks as monotonous.
The main disadvantage of the functional structures is that because of
the independent character of each unit, the units tend to operate as
independent companies with little interaction with the other units. This
may result in mismatches between the expectations of the semifinished product producing and receiving unit.
The utilisation degree of equipment or personnel in output based
structures like universities are usually lower, but these structures have

INDEVELOPMENT:

Designing Organisation Structures

also a number of advantages:

Faster progression of production due to optimal location of
equipment and persons
Less problems due to easier communication between the
different individuals of different backgrounds
Coordination

Organisations structures not just group tasks and functions in units,

divisions or department, but also regulate the coordination between
them. There are basically three ways of coordination:
1. Mutual adjustment
2. Supervision
3. Standardisation

Mutual adjustment

Mutual adjustment coordinates work by (informal) communication.

Mutual adjustment can be regulated through horizontal and diagonal
links.
Supervision achieves coordination by having one person take
responsibility for the work of others. The manager thinks how to use the
hands of others, give the workers instructions and monitor their
performance. The vertical lines of command present supervision.
It is also possible to coordinate the work through standardisation.
Standardisation allows coordination to take place on the drawing board,
before the action takes place. Standardisation cannot be presented in
an organisation structure.

Supervision

Standardisation

Line organisations

The above-presented charts are all so-called line organisations. The

line organisation is the most basic form of organisation. The line
organisation present all the management levels and operational
functions of the organisation, but does not contain advisory functions.
The lines of command and communication in a line organisation are
typically vertical lines. However the structure may have developed in
several layers, resulting in long communication lines. The top of the
organisation also has to take many decisions for the low level echelons.
In many organisations the managers of the different units or their
subordinates have to consult each other about specifics. The
hierarchical lines will become overloaded, when all communication
would flow over these lines.
The line organisations may develop horizontal and diagonal contact
lines in the organisation to facilitate the consultation and coordination
process. The fat lines present the horizontal and diagonal relationships
between the different Design & Implementation divisions. When the
consultation process does not result in positive results the different
units may pursue the hierarchical lines to get a workable solution.

INDEVELOPMENT:

Designing Organisation Structures

Contact Passerelle

Staff organisation

Another form of organisation is the staff organisation. The staff

organisation is similar to the line organisation but includes units which
role is only to advice. These advisory units do not have hierarchical
responsibilities and authorities. The advisory units are usually experts
with regard to policy development. They are authorised to issue advice
at all times and are not limited to requests. But only the line units can
transform the advice in action. The advisory units are usually expensive
and often it is cheaper to procure expertise externally. An important
precondition is that the advisory unit keep in contact with the line units
and are able to sell their ideas to the line agencies.

A special form of advisory unit is a unit that give binding advice to line
agencies. The binding advice is often operational of nature and
formulated in legal documents like procedures, by-laws, the law, etc.
These advisory units do not direct the line units but tell them if they
want to pursue in a certain direction they have to do the following.
And often these advisory units not only provide the binding advice but
also implement it. Typical examples are the admin & financial
departments and the human resource departments. Unfortunately quite
a few of these advisory units have translated their role into a controlling
one. They no longer provide advice to the line units and do not
implement it. These additional control lines frustrate many line units.
The more the binding advisory unit is involved in implementation, the
higher the acceptance of its role. In the chart below presents the human
resource development department as an advisory unit.

INDEVELOPMENT:

Designing Organisation Structures

Functional organisation

A more complex structure is the functional organisation. Where the

advisory unit in the staff organisation is only able to advice in the
functional organisation these specialists have a limited, clearly defined
scope of authority and are able to give directions. In 1999 the
International Labour Organisation worked with this structure. Technical
backstoppers at headquarters or in the so-called Multi-Disciplinary
Teams had to direct technical activities of all operational offices.
This structure is often misunderstood and result in power conflicts
between the traditional line-managed units and these specialists.

Project and matrix

organisations

One of the characteristics of a project is the limited duration in which a

particular output has to be created or problem has to be solved. Large
projects, like donor-funded projects may last several years before it is
completed. Such projects may set up a full-time project team for the
duration of the project. The members of the project team may be
permanently employed and seconded to the project from the
department or division or may be specially recruited for the project and
given a fixed term contract.
There are also organisations that continuously carry out a range of
smaller projects. The composition of the project team may vary during
the duration of the projects and often the team members tend to work
on several projects at the time. These organisations often adopt a
matrix structure. The specialist sections become resource pools and
the project manager and the head of the resource pool make

INDEVELOPMENT:

Designing Organisation Structures

agreements about the resource allocation to specific projects. The

specialist section may also have sanction authority over the project
result. However this authority often leads to conflicts with the project
managers. The manager of the specialist section usually has to develop
the capacities of his/her staff.

Charts and descriptions

It is seldom enough to present the organisation on a chart. The chart

does not provide information about the contents of the function of each
unit, the tasks that have to be carried out, the authorities of the unit and
a description of the relationships with other units. If the unit is not an
individual, it also needs description about the number and composition
of its staff members and a description of its intra structure.

10

INDEVELOPMENT:

Designing Organisation Structures

DESIGNING STRUCTURES

Evolving organisations

Organisation structures are seldom designed from scratch. An

organisation usually starts small and hopefully becomes more
successful and grows. Because it grows, it needs to structure itself.
Most organisations do not grow from a one-person operation to a
hundred-person operation overnight. They evolve and so does the
organisation structure. The larger organisations are able to take larger
expansion-steps. These steps may have more impact on the
organisation structure. However after some time most organisations
conclude that something went seriously wrong with its structure and
decide to reorganise it. Because reorganisations are often associated
with staff reductions they are very sensitive processes. A part of the
sensitivity can be overcome to reorganise during years with low
unemployment rates and to work actively to find job prospects
elsewhere.

Why reorganisations

The reorganisation often has as objective to improve the effectiveness

and/or efficiency. It also may be initiated to enhance the ability of the
organisation to adapt itself to changing environments, to become more
flexible. Reorganisations are often initiated to enhance the capacity of
the organisation to sustain its activities.

Basic functions of
organisations

Besides earlier given considerations the structure should reserve place

for all the organisation functions. Henry Mintzbergs identified 5 main
functions that each organisation has to fulfil. The so-called Basic Parts
are:
1. Core Operations
2. Support Operations
3. Technostructure
4. Strategic Apex;
5. Middle Line Management

Mintzbergs Basic Parts

Core operations

Support operations

Technostructure

Strategic Apex

Middle Line Management

The core operations are the actual production processes. It contains

activities like purchasing, operating machines, assembling, sales and
shipping.
Support operations facilitate the core operations. For example: legal
counselling, public relations, Industrial relations, research &
development, pricing, pay roll, reception, mailroom and cafeteria.
The Technostructure maintains and develops the efficiency and
effectiveness of primary and support operations, including
development, standardisation, monitoring and evaluation. Typical
technostructure units are; strategic planning, controller, Personnel
training, Operations Research, Production Scheduling, and workstudies.
The Strategic Apex formulates and controls strategies for the whole
organisation. Typical examples of the strategic apex are board of
directors, president, and executive committees.
The middle line management connects the strategic apex with the rest

11

INDEVELOPMENT:

Designing Organisation Structures

of the organisation. Typical examples of middle line managers are plant

managers, regional sales managers, foremen and district managers.
In smaller organisations one unit may carry out more than one of these
functions, but nonetheless every organisation has to carry out these
functions.
Goods & services

The starting point for the design of the organisation process is typically
the identification of the main outputs that the organisation intends to
deliver and the locations of delivery. Where do the costumers live or
operate. Do the costumers go to the sales point or does the
organisation go to the costumers? If the costumers go to the sales point
the sales points should be as close as possible to the costumers. If the
sales point is too far and competitors have sales points closer to
potential costumers the organisation may lose a part of its market.
However each sales point should attract enough costumers to be
feasible. Large organisations often have several sales departments at
different locations. Depending on the production process (technology)
and the transport costs for both inputs and outputs, the organisation
may also geographically distribute the production units. This is common
for service providing organisations. The services are produced at same
location as they are distributed.
Certain organisations depend on others for the delivery of their outputs
and realisation of their objectives. For example the projects of the
International Labour Organisation (ILO) are paid for by donor
organisations. The employees working on these projects have fixed
term contracts for the duration of the project and are laid off after the
project is completed. The core operation of the ILO in the countries is to
formulate and mobilise funding for project proposals and to supervise
the projects. The ILO has chosen for this set up in order to be able to
provide assistance as many member states as possible and to be as
flexible as possible.

Breakdown production
process

Activities

For the design of the structure it is necessary to analyse the production

process of each output. It may be possible to identify sub-outputs that
break the production process like semi-finished products that are
produced in-house and are an input in one of the outputs.
Subsequently all the activities to produce and deliver the outputs have
to be identified. Furthermore the activities lead times and possible links
need to be described. The linkages will be limited due to a number of
factors like;
Procedures of organisation
Previous investments in equipment and buildings
Available technology on the market
In particular public organisations have to follow certain procedures. The
procedures often affect the (decision) processes and therefore affect
the activities and there linkages.
Organisations will only offer expensive equipment items and buildings
for an organisation structure when the organisation structure results in
12

INDEVELOPMENT:

Designing Organisation Structures

higher returns. Because these comparisons are extremely difficult, most

organisations adapt their structure to the existing equipment and
building items.
The available technology is not only concerned with the hardware like
equipment and tools but is also concerned with human ware like skills
and knowledge. The structure should not be based on unreal
equipment items or human resources. After all there are not many civil
engineers that also have a degree in social science.
Resources

In addition it is necessary to identify for every activity the inputs in terms

of manpower and equipment, expressed both in quantity and quality.
Finally the required support operations are identified and similarly
analysed.
These activities are repeated for the Strategic Apex and the
Technostructure.
After collecting and analysing of all the necessary data, the design
process starts. The design process is often similar to a planning
process. The activities are put in a time frame and connected with
relationships.
While doing so, the designer assigns tasks to certain persons. The
designer may adjust the planning to accommodate the available human
resources and equipment. After all the designer want to avoid that
resources are overloaded or under-utilised and want to create
interesting job descriptions for the different officers.

3.1

LOCATING AUTHORITY

An important question is who receives the authority to take decisions

and about which issues? To answer the question the organisation has
to answer the following sub- questions:
Who has the information to take the decision and who can
obtain such information quickly?
Who has the skills and knowledge to take the decision?
Does the issue relate to an emergency and is the decision
urgent?
Is coordination with other locations or other units, divisions or
departments required?
What is the impact of the decision?
What is workload of the qualified officers?
Is it possible to motivate employees by giving them decision
authority?
Hierarchical problems

If the authorities are not well divided it may result in a number of

problems. For example:
Capacities of units and persons are under-utilised
The authority goes beyond the capacity of the person
The control over the resources is insufficient to carry out the

13

INDEVELOPMENT:

Designing Organisation Structures

tasks efficiently
The unit has more control of the resources than its
tasks/function requires
Conflict over the allocation of resources if two or more units
have control over them
Conflict between formal and informal powers & responsibilities
The decision process takes too long
The decisions miss out on particular interests

14