2. Formal Reporting Relationships
◦ Number of levels
◦ Span of control
Grouping of Individuals
◦ Creation of departments
Design of Systems
◦ Communication, coordination, and integration of efforts
Horizontal information and coordination reflected in organization
chart
3.
4. Vertical and horizontal information flow
◦ Traditional organization designed for efficiency?
Centralized authority focused on top level decision-
making
◦ Learning organization which emphasizes communication
and collaboration
Decentralized authority focused on shared tasks and
decisions
7. 15-7
The formal configuration between
individuals and groups with respect to the
allocation of tasks, responsibilities, and
authorities within organizations.
9. Organizational Structure
How job tasks are formally divided, grouped, and
coordinated
Key Elements:
1. Work specialization
2. Departmentalization
3. Chain of command
4. Span of control
5. Centralization and decentralization
6. Formalization
10. The degree to which tasks in the organization are
subdivided into separate jobs
Division of Labor
◦ Makes efficient use of employee skills
◦ Increases employee skills through repetition
◦ Less between-job downtime increases
productivity
◦ Specialized training is more efficient
◦ Allows use of specialized equipment
Can create greater economies and efficiencies
11. Specialization can reach a point of diminishing
returns
Then job enlargement gives greater efficiencies
than does specialization
12. The basis by which jobs are grouped
together
Grouping Activities by:
◦ Function
◦ Product
◦ Geography
◦ Process
◦ Customer
15. 15-15
Chain of Command
◦ The unbroken line of authority that extends from the top
of the organization to the lowest echelon and clarifies
who reports to whom
Authority
◦ The rights inherent in a managerial position to give
orders and to expect the orders to be obeyed
Unity of Command
◦ A subordinate should have only one superior to whom he
or she is directly responsible
16. The number of subordinates a
manager can efficiently and
effectively direct
Wider span of management control
increases organizational efficiency
Drawbacks of narrow span of control:
1. Expense of additional layers of
management
2. Increased complexity of vertical
communication
3. Encouragement of overly tight
supervision and discouragement
of employee autonomy
17.
18. Centralization
◦ The degree to which decision making is
concentrated at a single point in the organization.
Decentralization
◦ The degree to which decision making is spread
throughout the organization.
19. The degree to which jobs within the organization
are standardized.
◦ High formalization
Minimum worker discretion in how to get the
job done
Many rules and procedures to follow
◦ Low formalization
Job behaviors are nonprogrammed
Employees have maximum discretion
20. Simple Structure
◦ A structure characterized by a low degree of
departmentalization, wide spans of control,
authority centralized in a single person, and
little formalization
21. Bureaucracy
A structure of highly
routine operating tasks
achieved through
specialization, very
formalized rules and
regulations, tasks that are
grouped into functional
departments, centralized
authority, narrow spans of
control, and decision
making that follows the
chain of command
22. ◦ Results in economies of
scale
◦ Minimum duplication
of personnel and
equipment
◦ Enhanced
communication
◦ Centralized decision
making
◦ Subunit conflicts with
organizational goals
◦ Obsessive concern with
rules and regulations
◦ Lack of employee
discretion to deal with
problems
Strengths Weaknesses
24. Activities grouped by common function
All specific skills and knowledge are
consolidated
Promotes economies of scale
Slow response to environmental changes
Prevalent approach but few companies can
respond in today’s environment without
horizontal linkages
25.
26. Product structure or strategic business units
Divisions organized according to products,
services, product groups
Good for achieving coordination across
functional departments
Suited for fast change
Loses economies of scale
Lacks technical specialization
27.
28.
29. Organizing to meet needs of users/customers
by geography
Many multinational corporations are
organized by country
Focuses managers and employees on specific
geographic regions
Strengths and weaknesses similar to
divisional organization
30.
31. Multifocused with strong horizontal
linkage
Conditions for Matrix:
1. Share resources across the organization
2. Two or more critical outputs required: products and
technical knowledge
3. Environment is complex and uncertain
Allows organization to meet dual demands
Largest weakness is that employees have
two bosses and conflicting demands
32.
33. Need for shared and flexible use of people
across products
Two or more critical outputs like new
products and technical knowledge
The environment is complex and uncertain
34.
35. Organization around core
processes
Processes refers to tasks and activities
Shift towards horizontal structure
during reengineering
Eliminates vertical hierarchy and
departmental boundaries
36.
37. Structure is created around cross-functional
processes
Self-directed teams, not individuals, are dominant
players
Process owners are responsible for entire process
People on the team are given authority for
decisions
Can increase organization’s flexibility
Customers drive the organization, measured by
customer satisfaction, employee satisfaction, and
financial contribution
Culture is one of openness, trust, and
collaboration; focus on continuous improvement
39. Extend horizontal coordination beyond the
boundaries of the organization
Most common strategy is outsourcing
• Contract out certain tasks/functions
Virtual or modular structures subcontract
most of its major functions to separate
companies
The virtual network organization serves as a
central hub with contracted experts
40.
41.
42. Combination of various structure approaches
Tailored to specific needs
Often used in rapidly changing environments
Greater flexibility
43. Each structure meets different needs and is
a tool that can help managers be more
effective
Structural alignment aligns structure with
organizational goals
Symptoms of Structural Deficiency:
◦ Decision making is delayed or lacking quality
◦ Organization cannot meet changing needs
◦ Employee performance declines, needs are not
meet
◦ Too much conflict
44. Structure must provide a framework, linking
organization into whole
Provide vertical and horizontal linkages
Variety of alternatives for grouping
Virtual network extends horizontal
coordination
Matrix structure attempts to achieve balance
Managers must find right balance
The purpose of the organization chart is to
encourage and direct activities
45. 1. Strategy
◦ Innovation Strategy
A strategy that emphasizes the introduction of major
new products and services
Organic structure is best for the implementation of this
strategy
◦ Cost-minimization Strategy
A strategy that emphasizes tight cost controls, avoidance
of unnecessary innovation or marketing expenses, and
price cutting
Mechanistic model is best for the implementation of this
strategy.
◦ Imitation Strategy
A strategy that seeks to move into new products or new
markets only after their viability has already been proven
Mixture of the organic and mechanistic structure is best
for the implementation of this strategy
46. 2. Organizational Size
As organizations grow, they become more mechanistic,
more specialized, with more rules and regulations
3. Technology
How an organization transfers its inputs into outputs
The more routine the activities, the more mechanistic
the structure, and the greater the formalization
Custom activities need an organic structure
4. Environment
Institutions or forces outside the organization that
potentially affect the organization’s performance
Three key dimensions: capacity, volatility, and
complexity
47.
48. Impossible to generalize due to individual differences in the
employees
Research findings
◦ Work specialization contributes to higher employee
productivity, but it reduces job satisfaction
◦ The benefits of specialization have decreased rapidly as
employees seek more intrinsically rewarding jobs
◦ The effect of span of control on employee performance is
contingent upon individual differences and abilities, task
structures, and other organizational factors
◦ Participative decision making in decentralized
organizations is positively related to job satisfaction
People seek and stay at organizations that match their
needs.
49. Culture and Organizational Structure
◦ Many countries follow the U.S. model
◦ For many Indian managers, individual leadership is the
most important reason for the success or failure of an
organization
Culture and Employee Structure Preferences
◦ Cultures with high-power distance may prefer
mechanistic structures
Culture and the Boundryless Organization
◦ May be a solution to regional differences in global firms
◦ Breaks down cultural barriers, especially in strategic
alliances
◦ Telecommuting also blurs organizational boundaries
50. 15-
50
Structure impacts both the attitudes and behaviors of the people
within it
Impact of Technology
Makes it easier to change organizational structure to fit employee
and organizational needs
Associated
with
Organizational structure depicts how job tasks are formally divided, grouped, and coordinated. The key elements of organizational structure include work specialization, departmentalization, chain of command, span of control, centralization and decentralization, and formalization.
A key part of organizational structure is understanding the degree to which tasks are divided into separate jobs or work specialization. The division of labor is helpful in creating the most efficient way to utilize employee skills, increase their skills, and maximize their input. When division of labor is utilized an organization can more effectively use specialized training and specialized equipment to accomplish their desired productivity and quality goals.
Work specialization can cause greater economies, but in some cases it can cause diminishing returns due to repetition which can lead to boredom. Job enlargement can be effective in creating greater efficiencies than specialization does.
Departmentalization defines how jobs are grouped together. There are a number of options to choose from when grouping jobs – you could organize around function, product, location, process, or customer. When jobs are grouped, departments are formed.
The chain of command represents the line of authority present in decision making. Embedded in the chain of command is the inherent right of a manager to give orders and expect the orders to be followed. Unity of command is the idea that a subordinate should have only one superior to report to so that directions and the chain of command are clear.
The fourth element of structure is span of control. This concept looks at how many workers a manager can effectively direct toward organizational goals. Wider span allows for more efficiency because you need fewer managers. However, it can also limit the amount of time and direction a manager can give to their employees. A narrow span can allow for more direction but can add layers of management, increase the complexity of the vertical communication, and encourage overly tight supervision, limiting employee autonomy.
The graph on this slide depicts different spans of control.
The fifth aspect of structure deals with centralization and decentralization. Centralization is the degree to which decision making is concentrated at a single point in the organization, typically at the top. Decentralization represents an organization that spreads decision making throughout the organization.
Formalization is the degree to which jobs within the organization are standardized. When there is high formalization, workers have very little control over how they do their work and they will be required to follow a number of rules and procedures. Lower formalization will tend to allow for different job behaviors to get the job done, giving workers more control over their work.
There are a number of organizational structures available to companies. We will look at a number of options over the next several slides. The first and most basic structure is the simple structure. This structure has a low degree of departmentalization, wide spans of control, and centralized decision making with little formalization in job design.
Another type of organizational design is bureaucracy. In a bureaucratic organization, there will be a great deal of structure. The tasks will be completed through specialization and they tend to be formalized through rules and regulations. Departments will be highly defined and authority is centralized. Decision making will follow a strict chain of command and there will be narrow spans of control. The bureaucratic organization will be one that is highly defined and very controlled.
Bureaucracies have both strengths and weaknesses. They tend to offer economies of scale that are beneficial to the organization. This structure will minimize duplication of personnel and equipment through organization of jobs and departments. Communication will be strong and decision making is centralized. However, this type of structure is not without its weaknesses. In a bureaucratic environment, conflict often arises around organizational goals and unit goals, people can become obsessive about rules and regulations, and employees don’t always know how to deal with problems because employees are not empowered to make decisions.
Structures differ for a number of reasons. The first is that structure is set up to facilitate the strategy of the organization. If your organization is focusing on innovation as a key value, then they may be best served by an organic structure. Whereas, if they are looking at minimizing costs as their strategy, they will find that a mechanistic structure will work better. Strategy should always dictate structure instead of structure dictating strategy.
Structures will also differ by organization size – the larger they get, they tend to become more mechanistic. They will differ by how much technology is used – the more routine the activities, the more mechanistic the structure should be. Structures will also differ based on the environment in which they exist. The more dynamic the environment, the more organic the structure will need to be to facilitate quick decisions and fast turnaround.
The mechanistic model is contrasted with the organic model in the slide above. These are two extreme structures organizations can choose from. The mechanistic model is set up to facilitate high specialization, a clear chain of command, and a large degree of formalization. The organic model, in contrast, is set up to facilitate teams, the free flow of information, decentralized, empowerment, and very little formalization. It is not that one structure is better than the other, rather each organization needs to see what will work best with their workforce and product.
Organizational designs are not a good predictor of employee behavior. Research has shown that work specialization can lead to increased productivity but lower job satisfaction. Specialization has not been popular as employees are seeking more intrinsically rewarding jobs. Span of control has mixed results depending on individual differences in employees and organizational factors. Participative decision making has been found to be positively related to job satisfaction.
Various factors will influence workers in their job satisfaction and their willingness to stay with an organization.
Most countries follow the U.S. model for organizational structure. However, this may be changing as the U.S. model can be too individualistic. Structural effectiveness will vary in countries based on their cultural preferences. In India, many managers believe individual leadership to be the most important reason for the success or failure of an organization.
The boundaryless organization will most likely grow as the economy continues to globalize. This structure tends to break down barriers and increase effectiveness across international boundaries.
Structure does have an impact on both the attitudes and behaviors of the people within the organization so it is important that managers effectively select and utilize structure within their organizations.
