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Organizations and Structures
Roadmap
• Organizing and organizations
• Structure of organizations
• Matrix organizations
• Networked organizations
• Lea...
What Is Organizing?
• Organizing
– Arranging the
activities of the
enterprise in such
a way that they
systematically
contr...
Depicting the Organization
• Organization Chart
– A chart that shows the
structure of the
organization including
the title...
Organization Chart
In fo r m a tio n S e r v ic e s G ro u p
C a ta lo g e r
C a ta lo g e r
C u s to m e r L ia is o n
T ...
Organization Design and
Structure
• Organization design
– A process in which managers develop or
change their organization...
LIS580- Spring 2006 7
Economies of Work
Specialization
Prentice Hall, 2002
Stages of Organizational
Development
• Simple structure
– An organization that is low in specialization
and formalization ...
Stages of Organizational
Development (cont’d)
• Matrix structure
– An organization in which specialists from functional
de...
Mechanistic and Organic
Organizations
• Mechanistic organization
– The bureaucracy; a structure that is high in
specializa...
Structure Variables
• Principles
– Chain of command
– Span of control
– Authority
– Power
– Responsibility
• Departmentali...
Organizational Structure: Control
• Chain of command
– The management principle that no person should report to
more than ...
Chain of Command
Tall And Flat Organizations, And
The Span Of Control
• Span of Control
– The number of subordinates reporting directly to ...
FIGURE 6–9
Spans of Control in Country-Based
Organization
Types of Organizational Authority
• Line authority
– The position authority (given and defined by
the organization) that e...
Authority Versus Power
Types of Power
Legitimate
Power based on one’s position in
the formal hierarchy
Coercive Power based on fear
Reward
Power ...
Departmentalization:
Creating Departments
• Departmentalization
– The process through which an
organization’s activities a...
Departmentalization
• Functional
– The grouping of activities by functions performed
• Product
– The grouping of activitie...
Organizing Departments by
Function
• Functional Departmentalization
– A form of organization that groups a
company’s activ...
Functional Departmentalization
FIGURE 6–1
Organizing Departments by Self-
Contained Divisions/Purposes
• Product Departmentalization
– Grouping departments around a...
Divisional Organization
for a Pharmaceuticals Company
FIGURE 6–2
FIGURE 6–3
Customer Departmentalization,
Grayson Steel Company
April 18, 2006
FIGURE 6–4
Marketing Channel
Departmentalization
FIGURE 6–5
Divisional Organizations
Facilitate Coordination
Checklist 6.1
Functional vs. Divisional Organizations
 Functional Organization Advantages
1. It is simple, obvious, and l...
Checklist 6.1 (cont’d)
Functional vs. Divisional Organizations
 Divisional Organization Advantages
1. The product or serv...
Checklist 6.1 (cont’d)
Functional vs. Divisional Organizations
 Divisional Organization
Disadvantages
1. It creates dupli...
Creating Matrix Organizations
• Matrix Organization
– An organization structure in which
employees are permanently attache...
FIGURE 6–6
Matrix Organization
Departmentalization
Matrix Organizations
Advantages
• Access to expertise.
• Stability of
permanent
department
assignments for
employees.
• Al...
Departmentalization in Practice:
A Hybrid
• Why mix the types of departmentalization?
– Hierarchical considerations
• The ...
When Organizing:
Always Keep Your Goals in Mind
• Business environments are in a constant state
of change.
• An organizati...
Checklist 7.1
What Determines Organization Structure
 Environment. Fast-changing environments
require organic structures;...
Abolishing Organizational
Boundaries
• Boundaryless Organization
– An organization in which management
strips away the “wa...
FIGURE 0–3
The Four Organizational Boundaries
That Matter
Source: Reprinted by permission of Harvard Business Review. “The...
Centralization and
Decentralization
• Centralization
– A function of how much decision-making
authority is pushed down to ...
Decentralize?
• Decentralized Organization
– Organizational authority for most departmental
decisions is delegated to the ...
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Departmentalization

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Departmentalization

  1. 1. Organizations and Structures
  2. 2. Roadmap • Organizing and organizations • Structure of organizations • Matrix organizations • Networked organizations • Learning organizations • Challenges in organizations
  3. 3. What Is Organizing? • Organizing – Arranging the activities of the enterprise in such a way that they systematically contribute to the enterprise’s goals.
  4. 4. Depicting the Organization • Organization Chart – A chart that shows the structure of the organization including the title of each manager’s position and, by means of connecting lines, who is accountable to whom and who has authority for each area.
  5. 5. Organization Chart In fo r m a tio n S e r v ic e s G ro u p C a ta lo g e r C a ta lo g e r C u s to m e r L ia is o n T a x o n o m y D e s ig n e r K n o w le d g e A r c h ite c tu r e L e a d D e v e lo p e r D e v e lo p e r S y s te m s A d m in S e a r c h /S y s te m s L e a d A s s is ta n t D e s ig n e r D e s ig n L e a d K n o w le d g e A rc h ite c tu r e M a n a g e r
  6. 6. Organization Design and 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
  7. 7. LIS580- Spring 2006 7 Economies of Work Specialization Prentice Hall, 2002
  8. 8. Stages of Organizational Development • 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
  9. 9. Stages of Organizational Development (cont’d) • 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
  10. 10. Mechanistic and Organic Organizations • Mechanistic organization – The bureaucracy; a structure that is high in specialization, formalization, and centralization • Organic organization – An adhocracy; a structure that is low in specialization, formalization, and centralization • Structure follows strategy
  11. 11. Structure Variables • Principles – Chain of command – Span of control – Authority – Power – Responsibility • Departmentalization – Functional – Divisional • Product • Customer • Geographic • Process
  12. 12. Organizational Structure: Control • Chain 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 • Authority – The rights inherent in a managerial position to give orders and expect them to be obeyed • Responsibility – An obligation to perform assigned activities • Power – An individual’s capacity to influence decisions
  13. 13. Chain of Command
  14. 14. Tall And Flat Organizations, And The Span Of Control • Span of Control – The number of subordinates reporting directly to a supervisor. • Wide spans: larger number of direct reports. • Narrow spans: fewer number of direct reports. • Tall vs. Flat Organizations – Tall organizations: more management layers and more hierarchical controls. – Flat organizations: fewer management layer and decision making closer to the customer.
  15. 15. FIGURE 6–9 Spans of Control in Country-Based Organization
  16. 16. 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
  17. 17. Authority Versus Power
  18. 18. Types of Power Legitimate Power based on one’s position in the formal hierarchy Coercive Power based on fear Reward Power based on the ability to distribute something that others value Expert Power based on one’s expertise, special skill, or knowledge Referent Power based on identification with a person who has resources or traits
  19. 19. Departmentalization: Creating Departments • Departmentalization – The process through which an organization’s activities are grouped together and assigned to managers; the organizationwide division of work.
  20. 20. Departmentalization • Functional – The grouping of activities by functions performed • Product – The grouping of activities by product produced • Customer – The grouping of activities by common customers • Geographic – The grouping of activities by territory • Process – The grouping of activities by work or customer flow
  21. 21. Organizing Departments by Function • Functional Departmentalization – A form of organization that groups a company’s activities around essential functions such as manufacturing, sales, or finance.
  22. 22. Functional Departmentalization FIGURE 6–1
  23. 23. Organizing Departments by Self- Contained Divisions/Purposes • Product Departmentalization – Grouping departments around a firm’s products or services, or each family of products or services; also referred to as a “divisional” organization. • Customer Departmentalization – Self-contained departments are organized to serve the needs of specific groups of customers.
  24. 24. Divisional Organization for a Pharmaceuticals Company FIGURE 6–2
  25. 25. FIGURE 6–3 Customer Departmentalization, Grayson Steel Company
  26. 26. April 18, 2006 FIGURE 6–4 Marketing Channel Departmentalization
  27. 27. FIGURE 6–5 Divisional Organizations Facilitate Coordination
  28. 28. Checklist 6.1 Functional vs. Divisional Organizations  Functional Organization Advantages 1. It is simple, obvious, and logical. 2. It fosters efficiency. 3. It can simplify executive hiring and training. 4. It can facilitate the top manager’s control.  Functional Organization Disadvantages 1. It increases the workload on the executive to whom the functional department heads report. 2. It may reduce the firm’s sensitivity to and service to the customer. 3. It produces fewer general managers.
  29. 29. Checklist 6.1 (cont’d) Functional vs. Divisional Organizations  Divisional Organization Advantages 1. The product or service gets the single- minded attention of its own general manager and unit, and its customers may get better, more responsive service. 2. It’s easier to judge performance. 3. It develops general managers. 4. It reduces the burden for the company’s CEO.
  30. 30. Checklist 6.1 (cont’d) Functional vs. Divisional Organizations  Divisional Organization Disadvantages 1. It creates duplication of effort. 2. It may diminish top management’s control. 3. It requires more managers with general management abilities. 4. It can breed compartmentalization.
  31. 31. Creating Matrix Organizations • Matrix Organization – An organization structure in which employees are permanently attached to one department but also simultaneously have ongoing assignments in which they report to project, customer, product, or geographic unit heads.
  32. 32. FIGURE 6–6 Matrix Organization Departmentalization
  33. 33. Matrix Organizations Advantages • Access to expertise. • Stability of permanent department assignments for employees. • Allows for focus on specific projects, products, or customers. Disadvantages • Confusion of command. • Power struggles and conflicts. • Lost time in coordinating. • Excess overhead for managing matrix functions.
  34. 34. Departmentalization in Practice: A Hybrid • Why mix the types of departmentalization? – Hierarchical considerations • The relationship of top level departments to their subsidiary departments. – Efficiency • Product, customer, and territorial departments tend to result in duplicate sales, manufacturing, and other functional departments. – Common sense • Departmentalizing is still more an art than a science.
  35. 35. When Organizing: Always Keep Your Goals in Mind • Business environments are in a constant state of change. • An organization’s strategy must be adapted to changes in its competitive environment. • Structure follows strategy. – Strategic change creates the need for restructuring the organization to acquire new and different knowledge, skills and abilities.
  36. 36. Checklist 7.1 What Determines Organization Structure  Environment. Fast-changing environments require organic structures; slowly changing environments favor mechanistic structures.  Technology. Unit and continuous production processes favor organic structures. Mass production processes favor mechanistic structures.  Goals. Ask, “What are the main goals we want to achieve via this organization?”  Pros and cons. Each approach to departmentalization has pros and cons.  Logic and common sense.
  37. 37. Abolishing Organizational Boundaries • Boundaryless Organization – An organization in which management strips away the “walls” which typically separate organizational functions and hierarchical levels, through the widespread use of teams, networks, and similar structural mechanisms.
  38. 38. FIGURE 0–3 The Four Organizational Boundaries That Matter Source: Reprinted by permission of Harvard Business Review. “The Four Organizational Boundaries that Matter,” from “The New Boundaries of the Boundaryless Company,” by Larry Hirschorn and Thomas Gilmore, May–June 1992. Copyright © 1992 by the President and Fellows of Harvard College. All rights reserved.
  39. 39. 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
  40. 40. Decentralize? • Decentralized Organization – Organizational authority for most departmental decisions is delegated to the department heads. – Control for major companywide decisions is maintained at the headquarters office. • Decentralization Rules: – Decentralize decisions that affect only one division or area and that would take a long time for upper management to make. – Centralize decisions that could adversely affect the entire firm and that upper management can fairly quickly and easily.

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