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Organisational structure

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A business is what you do, and an organisation is how you do it.

Stan Davis

In this section we look at the ways in which firms organise their human resources. We will learn to construct and describe different types of organisation structure and analyse the effects of changing structure on the firm. We will introduce specific terminology to classify organisation structures and examine how types of structure may influence the motivation and performance of the employees. Finally we will analyse the reasons for moving some of a firm's human resources to external organisations.

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Formal and informal organisation

The formal organisation is a deliberately planned structure of roles, authority relationships and communication channels. Its purpose is usually set out in writing, with formal rules and regulations that leave little discretion for interpretation. The organisation can be represented by an organisation chart.

The informal organisation is a network of personal and social relationships or friendships that arise as people associate with other people in the work environment. This network is not planned or official, but develops spontaneously. The network is not shown on the firm's organisation chart.