PART III: Organizing 5

Learning Outcomes After this class, I will be able to:

1. Identify and define the six elements of organization structure .

1. Identify and define the six elements of organization structure .

2. Describe the advantages and disadvantages of work specialization .

2. Describe the advantages and disadvantages of work specialization .

3. Contrast authority and power .

3. Contrast authority and power .

4. Identify the five different ways by which management can departmentalize .

4. Identify the five different ways by which management can departmentalize .

5. Contrast mechanistic and organic organizations.

5. Contrast mechanistic and organic organizations.

6. Summarize the effect of strategy, size, technology, and environment on organization structures.

6. Summarize the effect of strategy, size, technology, and environment on organization structures.

7. Contrast the divisional and functional structures.

7. Contrast the divisional and functional structures.

8. Explain the strengths of the matrix structure.

8. Explain the strengths of the matrix structure.

9. Describe the boundaryless organization and what elements have contributed to its development.

9. Describe the boundaryless organization and what elements have contributed to its development.

10 Explain what is meant by the term learning organization .

10 Explain what is meant by the term learning organization .

11. Describe the key variables for creating a customer-responsive culture.

11. Describe the key variables for creating a customer-responsive culture.

12. Describe what is meant by the term organization culture .

12. Describe what is meant by the term organization culture .

The Elements of Structure Organization design A process in which managers develop or change their organization’s structure. Work specialization A component of organization structure that involves having each discrete step of a job done by a different individual rather than having one individual do the whole job.

Organization design

A process in which managers develop or change their organization’s structure.

Work specialization

A component of organization structure that involves having each discrete step of a job done by a different individual rather than having one individual do the whole job.

Economies and Diseconomies of Work Specialization Exhibit 5.1

Organizational Structure: Control Chain of command The continuous line of authority that extends from upper organizational levels to the lowest levels and clarifies who reports to whom. Unity of Command The management principle that no person should report to more than one boss. Span of control The number of subordinates a manager can direct efficiently and effectively.

Chain of command

The continuous line of authority that extends from upper organizational levels to the lowest levels and clarifies who reports to whom.

Unity of Command

The management principle that no person should report to more than one boss.

Span of control

The number of subordinates a manager can direct efficiently and effectively.

Chain of Command Exhibit 5.2

Organizational Structure: Control (cont’d) Authority The rights inherent in a managerial position to give orders and expect them to be obeyed. Power An individual’s capacity to influence decisions. Responsibility An obligation to perform assigned activities.

Authority

The rights inherent in a managerial position to give orders and expect them to be obeyed.

Power

An individual’s capacity to influence decisions.

Responsibility

An obligation to perform assigned activities.

Types of Organizational Authority Line authority The position authority (given and defined by the organization) that entitles a manager to direct the work of operative employees. Staff authority Positions that have some authority (e.g., organization policy enforcement) but that are created to support, assist, and advise the holders of line authority.

Line authority

The position authority (given and defined by the organization) that entitles a manager to direct the work of operative employees.

Staff authority

Positions that have some authority (e.g., organization policy enforcement) but that are created to support, assist, and advise the holders of line authority.

Line Versus Staff Authority Exhibit 5.3

Authority Versus Power: Authority Exhibit 5.4a

Authority Versus Power: Power Exhibit 5.4b

Types of Power Coercive power Power based on fear. Reward power Power based on the ability to distribute something that others value. Legitimate power Power based on one’s position in the formal hierarchy. Expert power Power based on one’s expertise, special skill, or knowledge. Referent power Power based on identification with a person who has desirable resources or personal traits. Exhibit 5.5

Centralization And Decentralization Centralization A function of how much decision-making authority is pushed down to lower levels in an organization; the more centralized an organization, the higher the level at which decisions are made Decentralization The pushing down of decision-making authority to the lowest levels of an organization

Centralization

A function of how much decision-making authority is pushed down to lower levels in an organization; the more centralized an organization, the higher the level at which decisions are made

Decentralization

The pushing down of decision-making authority to the lowest levels of an organization

Types of Departmentalization Functional Product Customer Geographic Process Exhibit 5.6

Departmentalization Functional departmentalization The grouping of activities by functions performed Product departmentalization The grouping of activities by product produced Customer departmentalization The grouping of activities by common customers Geographic departmentalization The grouping of activities by territory Process departmentalization The grouping of activities by work or customer flow

Functional departmentalization

The grouping of activities by functions performed

Product departmentalization

The grouping of activities by product produced

Customer departmentalization

The grouping of activities by common customers

Geographic departmentalization

The grouping of activities by territory

Process departmentalization

The grouping of activities by work or customer flow

Contingency Variables Affecting Structure Mechanistic organization The bureaucracy; a structure that is high in specialization, formalization, and centralization

Mechanistic organization

The bureaucracy; a structure that is high in specialization, formalization, and centralization

Contingency Variables Affecting Structure Organic organization An adhocracy; a structure that is low in specialization, formalization, and centralization Structure follows strategy

Organic organization

An adhocracy; a structure that is low in specialization, formalization, and centralization

Structure follows strategy

Mechanistic versus Organic Organizations Rigid hierarchical relationships Fixed duties Many rules Formalized communication channels Centralized decision authority Taller structures Collaboration (both vertical and horizontal) Adaptable duties Few rules Informal communication Decentralized decision authority Flatter structures Exhibit 5.7

Rigid hierarchical relationships

Fixed duties

Many rules

Formalized communication channels

Centralized decision authority

Taller structures

Collaboration (both vertical and horizontal)

Adaptable duties

Few rules

Informal communication

Decentralized decision authority

Flatter structures

Technology and Structure Unit production Production in terms of units or small batches

Unit production

Production in terms of units or small batches

Technology and Structure Mass production Production in terms of large batch manufacturing

Mass production

Production in terms of large batch manufacturing

Technology and Structure Process production Production in terms of continuous processing

Process production

Production in terms of continuous processing

Organization Design Applications Simple structure An organization that is low in specialization and formalization but high in centralization Functional structure An organization in which similar and related occupational specialties are grouped together Divisional structure An organization made up of self-contained units

Simple structure

An organization that is low in specialization and formalization but high in centralization

Functional structure

An organization in which similar and related occupational specialties are grouped together

Divisional structure

An organization made up of self-contained units

Functional Structure Exhibit 5.8

Divisional Structure Exhibit 5.9

Other Organizational Structures Matrix structure An organization in which specialists from functional departments are assigned to work on one or more projects led by a project manager Team-based structure An organization that consists entirely of work groups or teams Boundaryless organization An organization that is not defined or limited by boundaries or categories imposed by traditional structures

Matrix structure

An organization in which specialists from functional departments are assigned to work on one or more projects led by a project manager

Team-based structure

An organization that consists entirely of work groups or teams

Boundaryless organization

An organization that is not defined or limited by boundaries or categories imposed by traditional structures

Sample Matrix Structure Exhibit 5.10

Virtual Organization

Learning Organization An organization that has developed the capacity to continuously adapt and change because all members take an active role in identifying and resolving work-related issues. Organization design Information sharing Leadership Organizational culture

An organization that has developed the capacity to continuously adapt and change because all members take an active role in identifying and resolving work-related issues.

Organization design

Information sharing

Leadership

Organizational culture

Characteristics of a Learning Organization Exhibit 5.11 Source: Based on P. M. Senge, The Fifth Discipline: The Art and Practice of Learning Organizations (New York: Doubleday, 1990); and R. M. Hodgetts, F. Luthans, and S. M. Lee, “New Paradigm Organizations: From Total Quality to Learning to World Class.” Organizational Dynamics (Winter 1994), pp. 4–19.

Organization Culture Organization culture A system of shared meaning within an organization that determines, to a large degree, how employees act Shared values are shown in cultural elements: Stories, rituals, material symbols, and language unique to the organization Results from the interaction between: The founders’ biases and assumptions What the first employees learn subsequently from their own experiences.

Organization culture

A system of shared meaning within an organization that determines, to a large degree, how employees act

Shared values are shown in cultural elements:

Stories, rituals, material symbols, and language unique to the organization

Results from the interaction between:

The founders’ biases and assumptions

What the first employees learn subsequently from their own experiences.

10 Characteristics of Organization Culture Member identity Group emphasis People focus Unit integration Control Risk tolerance Reward criteria Conflict tolerance Means-end orientation Open-systems focus Exhibit 5.12

Member identity

Group emphasis

People focus

Unit integration

Control

Risk tolerance

Reward criteria

Conflict tolerance

Means-end orientation

Open-systems focus