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2.2.3 Changes in Organizational Structure

This document discusses two changes in organizational structure: project-based organizations and shamrock organizations. It explains that project-based organizations create temporary project teams made up of members from different departments to complete specific projects. This is common in industries like construction and IT. It then describes shamrock organizations, proposed by Charles Handy, which have a small core of permanent employees and outsource non-essential functions. The core is supported by contract employees for necessary functions and temporary peripheral workers for flexible needs. This allows businesses to reduce costs while remaining adaptable.

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141 views

2.2.3 Changes in Organizational Structure

This document discusses two changes in organizational structure: project-based organizations and shamrock organizations. It explains that project-based organizations create temporary project teams made up of members from different departments to complete specific projects. This is common in industries like construction and IT. It then describes shamrock organizations, proposed by Charles Handy, which have a small core of permanent employees and outsource non-essential functions. The core is supported by contract employees for necessary functions and temporary peripheral workers for flexible needs. This allows businesses to reduce costs while remaining adaptable.

Uploaded by

Ivan Shmuckovats
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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2.

2 Organizational Structure
2.2.3
Changes in Organizational Structure
Learning Outcome - Day 3
Explain changes in organizational structures (AO2), such as:
○ Project-based organization
○ Handy’s “Shamrock Organization”

As well as the standard types of organizational structure (from 2.2.2), some businesses have attempted to adapt their
structure to take account of changes in the business environment. Two examples of this are project-based organization
and shamrock organization.

Project-based Organization

● Project-based organizational structure is a temporary structure which is created to facilitate the execution of a
specific project. It can exist within all types of organizations.

○ Project managers run teams of employees focusing on individual projects.


○ After the project is completed, the team is split up and reassembled to begin another project.
○ Each team “borrows” members of different departments to complete the project such as accountants,
operations managers, and marketing specialists.

● This type of business structure is common in construction or IT, where businesses are often under contract to run a
number of different projects at the same time.

Also known as a matrix structure as often the organizational teams are shown as a matrix (see below).
Shamrock Organizations

● Based on a model suggested by the Irish management theorist Charles Handy (1989).

○ Businesses could be more flexible by taking advantage of


the changes in the external environment and its impact on
the workforce planning.

○ Businesses can reduce costs, gain competitive advantage,


and increase response time by trimming their workforce to
retain only a multiskilled core, which is concerned with
the creation or delivery of a good or service.
■ Wherever possible, businesses should outsource
supporting, non-central functions to the periphery.

Core Employees ● Core managers, technicians and employees who are necessary for the business to fulfil its core
(professional core) mission and deliver on its Unique Selling Point (USP).

Contract Employees ● Activities that are not at the core of the business but which are nevertheless necessary.
(outsourced workers) ● These activities should be sub-contracted out to specialist businesses.
● For example, many businesses subcontract payroll services out to special contractors.

Temporary Workers ● They constitute a flexible workforce composed of part-time, temporary, and seasonal workers.
(peripheral workers)

Additional Information: Factors influencing Organisational Structure


A range of factors determine the internal structure of the organization:
1. The size of the business and the number of employees.
2. The style of leadership and culture of management. More in topic 2.3.
3. The external environment (ex. an economic recession or increased competition might lead to delayering to
reduce costs, which would reduce levels of hierarchy and shorten the chain of command)
4. Corporate objectives (ex. if one of the long-term objectives of the business is to expand in other countries, then
the organizational structure must be adapted to allow for some decentralization)
5. New technologies (especially IT; can lead to a reduced need for certain employee types).
Additional Resources: Kognity – section 2.2.3
Hoang textbook 3rd edition – pages 154-156
Hoang textbook 4th edition – pages 163-165
Tutor2u reference pages (Matrix structures)

Questions:
Using the reading and additional resources provided, answer the questions below in your own words.

Analyze the changes in organizational structures.


Type of
Definition Advantages Disadvantages
Structure
Project-
based
organization
(AKA matrix
organization)

Shamrock
organization

*analyze: Break down in order to bring out the essential elements or structure.

Apply Charles Handy’s theory: How would a school (like MIS) be organized if it were to
use a shamrock organizational structure?
Draw the shamrock – Who might be core? Who would the temporary workers be? Who
might be contractual?

*apply: Use an idea, equation, principle, theory or law in relation to a given problem or issue.
*draw: Represent by means of a labelled, accurate diagram.
Additional Practice Question:

Turners
Turners is a famous hotel located in a large city. It is positioned as having the highest quality of customer
service and most of the employees have worked for Turners for over ten years. Regular customers like
knowing the employees at reception and other areas of the hotel. Many customers have commented on the
unique style of customer service at Turners. They like the fact that the people in the photographs used in
promotional materials are actually the people they interact with when staying at Turners.
Turners has an expensive, award-winning restaurant. Turners had used a price skimming strategy with room
rates at over $1000 per night. However, new competition from three other recently opened hotels and other
changes in the external environment have resulted in revenue becoming more cyclical. Profits are falling.
Surprisingly, the General Manager, Shane Peterson, also received some negative customer feedback from a
random sample of customers. Firstly, they claim that Turners’ online booking system is slow and unreliable.
Customers complain of an overbooked restaurant and untidy leisure facilities. Business customers argue that
the newer competing hotels offer better customer service, high-speed internet and other business services for
no extra charge. As a result, Shane is reviewing Turners’ marketing mix.
Shane has to focus on improving customer service as well as reducing costs. He is considering two options:
 Reducing labour costs by implementing Handy’s shamrock organization.
 Outsourcing Turners’ staff training programme. Currently, it uses an internal, on-the-job staff
training programme where experienced staff train new employees.
The cost savings from using Handy’s shamrock organization would reduce salaries and wages by 7%.
Outsourcing Turners’ staff training programme would reduce training costs by 9%. These combined savings
could allow Turners to offer high-speed internet and other business services for no extra charge to customers.

Explain the usefulness (+/–) for Turners of using Handy’s shamrock organization.

*explain: Give a detailed account including reasons or causes.

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