chapter ten
Managing Organizational
Structure and Culture

McGraw-Hill/Irwin
Contemporary Management, 5/e

Copyright © 200...
Learning Objectives
• Identify the factors that influence
managers’ choice of an organizational
structure.
• Explain how m...
Learning Objectives
• Explain why managers must coordinate
jobs, functions, and divisions using the
hierarchy of authority...
Organizational Structure
• Organizational Architecture
– The organizational structure, control
systems, culture, and human...
Designing Organizational Structure
• Organizing
– The process by which managers establish
working relationships among empl...
Designing Organizational Structure
• Organizational design
– The process by which managers create a
specific type of organ...
Factors Affecting Organizational Structure

Figure 10.1

10-8
The Organizational Environment
The Organizational Environment
– The quicker the environment changes, the
more problems fac...
The Organizational Environment
Strategy
– Different strategies require the use of
different structures.
• A differentiatio...
The Organizational Environment
Technology
– The combination of skills, knowledge, tools,
equipment, computers and machines...
The Organizational Environment
Technology
– Technology can be measured by:
• Task variety: the number of new
problems a ma...
The Organizational Environment
Human Resources
– Highly skilled workers whose jobs require
working in teams usually need a...
The Organizational Environment
• Human Resources
– Managers must take into account all four
factors (environment, strategy...
The Organizational Environment
The way an organization’s structure works
depends on the choices managers
make about:
1. Ho...
Job Design
• Job Design
– The process by which managers decide
how to divide tasks into specific jobs.
– The appropriate d...
Question?
What is the process of reducing the tasks
each worker performs?
A. Job simplification
B. Job enlargement
C. Job ...
Job Design
• Job Simplification
– The process of reducing the tasks each
worker performs.
• Too much simplification and bo...
Job Design
• Job Enlargement
– Increasing the number of different tasks in a
given job by changing the division of labor

...
Job Enrichment
1. Empowering workers to experiment to
find new or better ways of doing the job
2. Encouraging workers to d...
The Job Characteristics Model

Source: Adapted from J. R. Hackman and G. R. Oldham,
Work Redesign (Reading, MA: Addison-We...
Job Characteristics Model
Job Characteristic
Skill variety

Employee uses a wide range of skills.

Task identity

Worker i...
Grouping Jobs into Functions
• Function
– Group of people, working together, who
possess similar skills or use the same ki...
Grouping Jobs into Functions
• Functional Structure
– An organizational structure composed of all
the departments that an ...
Functional Structure
• Advantages
– Encourages learning from others doing
similar jobs.
– Easy for managers to monitor and...
Functional Structure
• Disadvantages
– Difficult for departments to communicate
with others.
– Preoccupation with own depa...
The
Functional
Structure of
Pier 1
Imports

Figure10.3

10-27
Divisional Structures
• Divisional Structure
– Managers create a series of business units
to produce a specific kind of pr...
Product,
Market, and
Geographic
Structures

Figure 10.4

10-29
Types of Divisional Structures
• Product Structure
– Managers place each distinct product line or
business in its own self...
Product Structure
• Allows functional managers to specialize
in one product area
• Division managers become experts in
the...
Types of Divisional Structures
• Geographic Structure
– Divisions are broken down by geographic
location

• Global geograp...
Types of Divisional Structures
• Global Product Structure
– Each product division takes responsibility
for deciding where ...
Global Geographic and
Global Product Structures

Figure 10.5
10-34
Types of Divisional Structures
• Market Structure
– Groups divisions according to the particular
kinds of customers they s...
Matrix Design Structure
• Matrix Structure
– An organizational structure that
simultaneously groups people and
resources b...
Matrix Structure

Figure 10.6

10-37
Discussion Question?
Which is the most effective and efficient
organizational structure?
A. Matrix structure
B. Divisional...
Product Team Design Structure
• Product Team Structure
– Does away with dual reporting relationships
and two-boss managers...
Product Team Design Structure
• Product Team Structure
– Cross-functional team is composed of a
group of managers from dif...
Product Team Structure

Figure 10.6

10-41
Hybrid Structures
• Hybrid Structure
– The structure of a large organization that
has many divisions and simultaneously
us...
Federated’s Hybrid Structure

Figure 10.7
10-43
Question?
What is the power vested in a manager to
make decisions?
A. Power
B. Influence
C. Authority
D. Control

10-44
Coordinating Functions:
Allocating Authority
• Authority
– The power vested in a manager to make
decisions and use resourc...
Coordinating Functions:
Allocating Authority
• Hierarchy of Authority
– An organization’s chain of command,
specifying the...
Allocating Authority
• Line Manager
– Someone in the direct line or chain of
command who has formal authority over
people ...
The
Hierarchy
of Authority
and Span
of Control
at
McDonald’s
Corporatio
n

Figure 10.8

10-48
Tall and Flat Organizations
• Tall structures have many levels of
authority and narrow spans of control.
– As hierarchy le...
Tall Organizations

Figure 10.9
10-50
Tall and Flat Organizations
• Flat structures have fewer levels and
wide spans of control.
– Structure results in quick co...
Flat Organizations

Figure 10.9
10-52
Minimum Chain of Command
• Minimum Chain of Command
– Top managers should always construct a
hierarchy with the fewest lev...
Centralization and Decentralization of
Authority
• Decentralizing authority
– giving lower-level managers and nonmanageria...
Decentralizing Authority
• Disadvantages
– Teams may begin to pursue their own goals
at the expense of organizational goal...
Integrating Mechanisms

Figure 10.10
10-56
Organizational Culture
• Organizational culture
– shared set of beliefs, expectations, values,
and norms that influence ho...
Sources of an Organization’s Culture

Figure 10.11
10-58
Characteristics of Organizational
Members
• Ultimate source of organizational culture
is the people that make up the
organ...
Organizational Ethics
• Organizational Ethics
– moral values, beliefs, and rules that
establish the appropriate way for an...
Employment Relationship
• Human resource policies:
– Can influence how hard employees will
work to achieve the organizatio...
Organizational Structure
• In a centralized organization:
– people have little autonomy
– norms that focus on being cautio...
Organizational Structure
• In a flat, decentralized structure:
– people have more freedom to choose and
control their own ...
Strong, Adaptive Cultures Versus
Weak, Inert Cultures
• Adaptive cultures
– values and norms help an organization to
build...
Strong, Adaptive Cultures Versus
Weak, Inert Cultures
• Inert cultures
– Those that lead to values and norms that
fail to ...
Movie Example: Apollo 13
What organizational
structure does
NASA use
to handle a moon
launch?

10-66
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Infosheet5 organizationalstructure

  1. 1. chapter ten Managing Organizational Structure and Culture McGraw-Hill/Irwin Contemporary Management, 5/e Copyright © 2008 The McGraw-Hill Companies, Inc. All rights reserved.
  2. 2. Learning Objectives • Identify the factors that influence managers’ choice of an organizational structure. • Explain how managers group tasks into jobs that are motivating and satisfying for employees. • Describe the types of organizational structures managers can design, and explain why they choose one structure over another. 10-3
  3. 3. Learning Objectives • Explain why managers must coordinate jobs, functions, and divisions using the hierarchy of authority and integrating mechanisms • List the four sources of organizational culture and differentiate between a strong, adaptive culture and a weak, inert culture 10-4
  4. 4. Organizational Structure • Organizational Architecture – The organizational structure, control systems, culture, and human resource management systems that together determine how efficiently and effectively organizational resources are used. 10-5
  5. 5. Designing Organizational Structure • Organizing – The process by which managers establish working relationships among employees to achieve goals. • Organizational Structure – Formal system of task and reporting relationships showing how workers use resources. 10-6
  6. 6. Designing Organizational Structure • Organizational design – The process by which managers create a specific type of organizational structure and culture so that a company can operate in the most efficient and effective way 10-7
  7. 7. Factors Affecting Organizational Structure Figure 10.1 10-8
  8. 8. The Organizational Environment The Organizational Environment – The quicker the environment changes, the more problems face managers. – Structure must be more flexible (i.e., decentralized authority) when environmental change is rapid. 10-9
  9. 9. The Organizational Environment Strategy – Different strategies require the use of different structures. • A differentiation strategy needs a flexible structure, low cost may need a more formal structure. • Increased vertical integration or diversification also requires a more flexible structure. 10-10
  10. 10. The Organizational Environment Technology – The combination of skills, knowledge, tools, equipment, computers and machines used in the organization. – More complex technology makes it harder for managers to regulate the organization. 10-11
  11. 11. The Organizational Environment Technology – Technology can be measured by: • Task variety: the number of new problems a manager encounters. • Task analyzability: the availability of programmed solutions to a manager to solve problems. 10-12
  12. 12. The Organizational Environment Human Resources – Highly skilled workers whose jobs require working in teams usually need a more flexible structure. – Higher skilled workers (e.g., CPA’s and doctors) often have internalized professional norms and values. 10-13
  13. 13. The Organizational Environment • Human Resources – Managers must take into account all four factors (environment, strategy, technology and human resources) when designing the structure of the organization. 10-14
  14. 14. The Organizational Environment The way an organization’s structure works depends on the choices managers make about: 1. How to group tasks into individual jobs 2. How to group jobs into functions and divisions 3. How to allocate authority and coordinate functions and divisions 10-15
  15. 15. Job Design • Job Design – The process by which managers decide how to divide tasks into specific jobs. – The appropriate division of labor results in an effective and efficient workforce. 10-16
  16. 16. Question? What is the process of reducing the tasks each worker performs? A. Job simplification B. Job enlargement C. Job enrichment D. Job enhancement 10-17
  17. 17. Job Design • Job Simplification – The process of reducing the tasks each worker performs. • Too much simplification and boredom results. 10-18
  18. 18. Job Design • Job Enlargement – Increasing the number of different tasks in a given job by changing the division of labor • Job Enrichment – Increasing the degree of responsibility a worker has over a job 10-19
  19. 19. Job Enrichment 1. Empowering workers to experiment to find new or better ways of doing the job 2. Encouraging workers to develop new skills 3. Allowing workers to decide how to do the work 4. Allowing workers to monitor and measure their own performance 10-20
  20. 20. The Job Characteristics Model Source: Adapted from J. R. Hackman and G. R. Oldham, Work Redesign (Reading, MA: Addison-Wesley, 1980). Figure 10.2 10-21
  21. 21. Job Characteristics Model Job Characteristic Skill variety Employee uses a wide range of skills. Task identity Worker is involved in all tasks of the job from beginning to end of the production process Task significance Worker feels the task is meaningful to organization. Autonomy Employee has freedom to schedule tasks and carry them out. Feedback Worker gets direct information about how well the job is done. 10-22
  22. 22. Grouping Jobs into Functions • Function – Group of people, working together, who possess similar skills or use the same kind of knowledge, tools, or techniques to perform their jobs 10-23
  23. 23. Grouping Jobs into Functions • Functional Structure – An organizational structure composed of all the departments that an organization requires to produce its goods or services. 10-24
  24. 24. Functional Structure • Advantages – Encourages learning from others doing similar jobs. – Easy for managers to monitor and evaluate workers. – Allows managers to create the set of functions they need in order to scan and monitor the competitive environment 10-25
  25. 25. Functional Structure • Disadvantages – Difficult for departments to communicate with others. – Preoccupation with own department and losing sight of organizational goals. 10-26
  26. 26. The Functional Structure of Pier 1 Imports Figure10.3 10-27
  27. 27. Divisional Structures • Divisional Structure – Managers create a series of business units to produce a specific kind of product for a specific kind of customer 10-28
  28. 28. Product, Market, and Geographic Structures Figure 10.4 10-29
  29. 29. Types of Divisional Structures • Product Structure – Managers place each distinct product line or business in its own self-contained division – Divisional managers have the responsibility for devising an appropriate business-level strategy to allow the division to compete effectively in its industry 10-30
  30. 30. Product Structure • Allows functional managers to specialize in one product area • Division managers become experts in their area • Removes need for direct supervision of division by corporate managers • Divisional management improves the use of resources 10-31
  31. 31. Types of Divisional Structures • Geographic Structure – Divisions are broken down by geographic location • Global geographic structure – Managers locate different divisions in each of the world regions where the organization operates. – Generally, occurs when managers are pursuing a multi-domestic strategy 10-32
  32. 32. Types of Divisional Structures • Global Product Structure – Each product division takes responsibility for deciding where to manufacture its products and how to market them in foreign countries worldwide 10-33
  33. 33. Global Geographic and Global Product Structures Figure 10.5 10-34
  34. 34. Types of Divisional Structures • Market Structure – Groups divisions according to the particular kinds of customers they serve – Allows managers to be responsive to the needs of their customers and act flexibly in making decisions in response to customers’ changing needs 10-35
  35. 35. Matrix Design Structure • Matrix Structure – An organizational structure that simultaneously groups people and resources by function and product. • Results in a complex network of superiorsubordinate reporting relationships. • The structure is very flexible and can respond rapidly to the need for change. • Each employee has two bosses (functional manager and product manager) and possibly cannot satisfy both. 10-36
  36. 36. Matrix Structure Figure 10.6 10-37
  37. 37. Discussion Question? Which is the most effective and efficient organizational structure? A. Matrix structure B. Divisional structure C. Market structure D. Geographic structure 10-38
  38. 38. Product Team Design Structure • Product Team Structure – Does away with dual reporting relationships and two-boss managers – Functional employees are permanently assigned to a cross-functional team that is empowered to bring a new or redesigned product to work 10-39
  39. 39. Product Team Design Structure • Product Team Structure – Cross-functional team is composed of a group of managers from different departments working together to perform organizational tasks. 10-40
  40. 40. Product Team Structure Figure 10.6 10-41
  41. 41. Hybrid Structures • Hybrid Structure – The structure of a large organization that has many divisions and simultaneously uses many different organizational structures 10-42
  42. 42. Federated’s Hybrid Structure Figure 10.7 10-43
  43. 43. Question? What is the power vested in a manager to make decisions? A. Power B. Influence C. Authority D. Control 10-44
  44. 44. Coordinating Functions: Allocating Authority • Authority – The power vested in a manager to make decisions and use resources to achieve organizational goals by virtue of his position in an organization 10-45
  45. 45. Coordinating Functions: Allocating Authority • Hierarchy of Authority – An organization’s chain of command, specifying the relative authority of each manager. • Span of Control: the number of subordinates who report directly to a manager 10-46
  46. 46. Allocating Authority • Line Manager – Someone in the direct line or chain of command who has formal authority over people and resources • Staff Manager – Managers who are functional-area specialists that give advice to line managers. 10-47
  47. 47. The Hierarchy of Authority and Span of Control at McDonald’s Corporatio n Figure 10.8 10-48
  48. 48. Tall and Flat Organizations • Tall structures have many levels of authority and narrow spans of control. – As hierarchy levels increase, communication gets difficult creating delays in the time being taken to implement decisions. – Communications can also become distorted as it is repeated through the firm. – Can become expensive 10-49
  49. 49. Tall Organizations Figure 10.9 10-50
  50. 50. Tall and Flat Organizations • Flat structures have fewer levels and wide spans of control. – Structure results in quick communications but can lead to overworked managers. 10-51
  51. 51. Flat Organizations Figure 10.9 10-52
  52. 52. Minimum Chain of Command • Minimum Chain of Command – Top managers should always construct a hierarchy with the fewest levels of authority necessary to efficiently and effectively use organizational resources 10-53
  53. 53. Centralization and Decentralization of Authority • Decentralizing authority – giving lower-level managers and nonmanagerial employees the right to make important decisions about how to use organizational resources 10-54
  54. 54. Decentralizing Authority • Disadvantages – Teams may begin to pursue their own goals at the expense of organizational goals – Can result in a lack of communication among divisions 10-55
  55. 55. Integrating Mechanisms Figure 10.10 10-56
  56. 56. Organizational Culture • Organizational culture – shared set of beliefs, expectations, values, and norms that influence how members of an organization relate to one another and cooperate to achieve organizational goals 10-57
  57. 57. Sources of an Organization’s Culture Figure 10.11 10-58
  58. 58. Characteristics of Organizational Members • Ultimate source of organizational culture is the people that make up the organization • Members become similar over time which may hinder their ability to adapt and respond to changes in the environment 10-59
  59. 59. Organizational Ethics • Organizational Ethics – moral values, beliefs, and rules that establish the appropriate way for an organization and its members to deal with each other and people outside the organization 10-60
  60. 60. Employment Relationship • Human resource policies: – Can influence how hard employees will work to achieve the organization’s goals, – How attached they will be to it – Whether or not they will buy into its values and norms 10-61
  61. 61. Organizational Structure • In a centralized organization: – people have little autonomy – norms that focus on being cautious, obeying authority, and respecting traditions emerge – predictability and stability are desired goals 10-62
  62. 62. Organizational Structure • In a flat, decentralized structure: – people have more freedom to choose and control their own activities – norms that focus on being creative and courageous and taking risks appear – gives rise to a culture in which innovation and flexibility are desired goals. 10-63
  63. 63. Strong, Adaptive Cultures Versus Weak, Inert Cultures • Adaptive cultures – values and norms help an organization to build momentum and to grow and change as needed to achieve its goals and be effective 10-64
  64. 64. Strong, Adaptive Cultures Versus Weak, Inert Cultures • Inert cultures – Those that lead to values and norms that fail to motivate or inspire employees – Lead to stagnation and often failure over time 10-65
  65. 65. Movie Example: Apollo 13 What organizational structure does NASA use to handle a moon launch? 10-66
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