14. Operating models

Question 1

Name 2 of the 4 main Organisational structures

Answer 1

Functional
Divisional
Matrix
Team-based

Question 2

What is a functional Organisation structure?

Answer 2

A structure where activities and people are grouped into departments according to similarities in their work, profession, expertise, goals and resources used

Question 3

What are some traditional functions in a Functional organisation structure?

Answer 3

Sales
Marketing
Purchasing
HR
IT
Finance

Question 4

What is a Divisional Organisation structure?

Answer 4

A structure where activities and people are grouped into self contained entities or ‘divisions’ based on their Outputs, Geographical area, Customer type

Each division may then contain functional departments

Question 5

What is a matrix organisation structure

Answer 5

A combination of two different types of organisational structure with two simultaneous reporting relationships and a dual chain of command

Groups employees by both function and product

An example of this is often found in BAs who report to their Lead BA and project manager

Question 6

What are some advantages and disadvantages to a matrix structure?

Answer 6

Advantages
+ Improves upon ‘Silo’ critique of functional management
+ Diminishes vertical structure of functional management and creates a more horizontal structure, allowing spread of information much easier
+ Allows for specialism that can increase depth of knowledge and allow individuals to be chosen according to project needs

Disadvantages

• Increase in complexity of command, confusing for employees to understand the chain of command
• Higher management to worker ratio, results in conflicting loyalties of employees

Question 7

Why would you utilise a horizontal structure?

Answer 7

Horizontal structures aim to eliminate the silo effect of traditional functional and divisional structures, which have rigid boundaries, by integrating departments with cross functional business processes and eliminating internal boundaries.

Organised by workflow processes not task
Flatter hierarchies using teams to manage everything
Leads to team-based structures

Working together to get to the end goal

Question 8

What is a team-based structure?

Answer 8

Teams are used to implement a horizontal structure, team leaders manage internal team processes and coordinate work
Team members have differing expertise e.g. Marketing, Finance, HR

Most implementations consist of cross functional teams
e.g. Software development teams, Project teams

Question 9

What is a boundaryless organisation?

Answer 9

One with permeable boundaries (filtering boundaries, think colander letting out water but keeping in pasta)
These reduce the silo effect
Has integrated business processes
Flexible and responds more quickly to change however can be chaotic

Question 10

What is outsourcing and why may it be done?

Answer 10

Contracting out internal processes to an external organisation that were previously supplied internally e.g. commonly done for IT support

Giving company opportunity to concentrate on core activities

Question 11

What is Offshoring and why may it be done?

Answer 11

Using providers in another country e.g. overseas
This occurs when a business process or a product is supplied organisation by a firm located in a different country

This can be used to reduce costs

Question 12

What is a ‘Hollow’ organisation

Answer 12

One that outsources all core processes, leaving the company free to concentrate on core activities that lead to value creation e.g. research, design, marketing

Question 13

What is a ‘Modular’ organisation

Answer 13

One that outsources production of parts of the total product

• Based on product modules
• Produced internally and externally
• Internal and external contractors supply component parts that the company assembles itself
• a company can then break down its product design into chunks that are then supplied by both its internal divisions and external contractors

Question 14

What is the difference between a Strategic partner and a Joint venture

Answer 14

Strategic partner - Two or more firms achieving specific objectives by cooperating with each other while remaining independent (can include competitors)

Joint venture - Establishment of a new jointly owned company

Question 15

Why do organisations create Joint ventures or Strategic partnerships?

Answer 15

Allows organisations to specialise

• core competencies
• core business

Question 16

What would describe an organisational structure based on the products and services offered?

Answer 16

Divisional

Question 17

How would you describe an organisation that outsources all non-core processes?

Answer 17

Hollow