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Chapter 05
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Organizational Theory,
Design, and Change
Sixth Edition
Gareth R. Jones
Chapter 5
Designing
Organizational
Structure: Authority
and Control
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Authority: How and Why
Vertical Differentiation Occurs
The hierarchy begins to emerge
when the organization experiences
problems in coordinating and
motivating employees
Division of labor and specialization
make it hard to determine how well
an individual performs
Almost impossible to assess
individual contributions to
performance when employees
cooperate
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Authority: How and Why Vertical
Differentiation Occurs (cont.)
To deal with coordination and
motivation problems, the
organization can:
Increase the number of managers
it uses to monitor, evaluate, and
reward employees
Increase the number of levels in its
managerial hierarchy, thereby
making the hierarchy of authority
taller
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Authority: How and Why Vertical
Differentiation Occurs (cont.)
Size and height limitations
Tall organization: an organization in
which the hierarchy has many levels
relative to the size of the organization
Flat organization: an organization that
has few levels in its hierarchy relative to
its size
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Figure 5.1: Flat and Tall
Organizations
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Authority: How and Why Vertical
Differentiation Occurs (cont.)
By the time an organization has 1,000
members, it has 4 levels in its
hierarchy
At 3,000 members, it likely has 7 levels
Between 10,000 to 100,000,
organizations have 9 or 10 levels
Increase in size of the managerial
component is less than proportional to
increase in size of the organization
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Figure 5.2: Relationship Between
Organizational Size and Number of
Hierarchical Levels
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Figure 5.3: Types of
Managerial Hierarchies
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Figure 5.4: Relationship Between Organizational
Size and the Size of the Managerial Component
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Authority: How and Why Vertical
Differentiation Occurs (cont.)
Problems with tall hierarchies:
Communication problems: communication
takes longer and is likely to be distorted
Information may be manipulated to serve
managers’ own interests
Motivation problems: as hierarchy
increases, the relative difference in the
authority possessed managers at each level
decreases, as does their area of responsibility
Less responsibility and authority could
reduce motivation
Increased bureaucratic costs: managers
cost money
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Authority: How and Why Vertical
Differentiation Occurs (cont.)
Parkinson’s Law Problem
Argues that the number of managers
and hierarchies are based on two
principles
A manager wants to multiply subordinates,
not rivals
Managers make work for one another
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Authority: How and Why Vertical
Differentiation Occurs (cont.)
Ideal number of hierarchical levels
determined by:
Principle of minimum chain of
command: an organization should
choose the minimum number of
hierarchical levels consistent with its goals
and the environment in which it operates
Span of control: the number of
subordinates a manager directly manages
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Figure 5.5: Spans of Control
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Authority: How and Why Vertical
Differentiation Occurs (cont.)
Factors that determine the appropriate
span of control
There seems to be a limit to how wide a
manager’s span of control should be
Dependent on the complexity and
interrelatedness of the subordinates’ tasks
Complex and dissimilar tasks – small span of
control
Routine and similar tasks (e.g., mass
production) – large span of control
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Figure 5.6: The Increasing Complexity of a
Manager’s Job as the Span of Control
Increases
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Figure 5.7: Factors Affecting
the Shape of the Hierarchy
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Control: Factors Affecting the
Shape of the Hierarchy
Horizontal differentiation: an
organization that is divided into subunits
has many different hierarchies, not just
one
Each function or division has its own
hierarchy
Horizontal differentiation is the principal
way an organization retains control over
employees without increasing the
number of hierarchical levels
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Figure 5.8: Horizontal Differentiation
into Functional Hierarchies
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Figure 5.9: Horizontal Differentiation
Within the R&D Functions
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Control: Factors Affecting the
Shape of the Hierarchy (cont.)
Centralization: with decentralization,
less direct managerial supervision is
needed
Authority is delegated to the lower
levels
Decentralization does not eliminate the
need for many hierarchical levels in
large, complex organizations
Assists relatively tall structures to be more
flexible and reduces the amount of direct
supervision needed
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Control: Factors Affecting the
Shape of the Hierarchy (cont.)
Standardization: reduces the need
for levels of management because
rules substitute for direct supervision
Gain control over employees by making
their behavior and actions more
predictable
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The Principles of Bureaucracy
Max Weber designed a hierarchy so
that it effectively allocates decision-
making authority and control over
resources
Bureaucracy: a form of
organizational structure in which
people can be held accountable for
their actions because they are
required to act in accordance with
rules and standard operating
procedures
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Max Weber, German Sociologist
“The purely bureaucratic form of
administrative organization, that is the
monocratic variety of bureaucracy, is, as
regards the precision, constancy,
stringency, and reliability of its
operations, superior to all other forms of
administrative organization.”
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The Principles of Bureaucracy
(cont.)
Principle one: a bureaucracy is
founded on the concept of rational-
legal authority
Rational-legal authority: the authority
a person possesses because of his or her
position in an organization
Hierarchy should be based on the needs
of the task, not on personal needs
People’s attitudes and beliefs play no part
in how the bureaucracy operates
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The Principles of Bureaucracy
(cont.)
Principle two: Organizational roles
are held on the basis of technical
competence, not because of social
status, kinship, or heredity
Principles one and two establish the
organizational role as the basic
component of organization structure
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The Principles of Bureaucracy
(cont.)
Principle three: A role’s task
responsibility and decision-making
authority and its relationship to other
roles in the organization should be clearly
specified
Role conflict: when two or more people
have different views of what another person
should do, and as a result, make conflicting
demands on that person
Role ambiguity: the uncertainty that
occurs for a person whose tasks or authority
are not clearly defined
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The Principles of Bureaucracy
(cont.)
Principle four: the organization of
roles in a bureaucracy is such that
each lower office in the hierarchy is
under the control and supervision of
a higher office
Organizations should be arranged
hierarchically so that people can
recognize the chain of command
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The Principles of Bureaucracy
(cont.)
Principle five: rules, standard
operating procedures, and norms
should be used to control the behavior
and the relationships among roles in an
organization
Rules and SOPs are written instructions
that specify a series of actions intended
to achieve a given end
Norms are unwritten
Rules, SOPs, and norms clarify people’s
expectations and prevent
misunderstanding
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The Principles of Bureaucracy
(cont.)
Principle six: administrative acts,
decisions, and rules should be
formulated and put in writing
Bureaucratic structure provides an
organization with memory
Organizational history cannot be altered
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Uniform Written Rules and Policies
Set by board and management.
Rights and duties of employees and
managers; who can give orders to
whom.
Limit arbitrary behavior. A structure
with an obsession of control.
“At every Holiday Inn, the best surprise is
no surprise.”
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“When I was president of this big corporation,
we lived in a small Ohio town, where the main
plant was located. The corporation specified
who you could socialize with, and on what level.
(His wife interjects: “Who were the wives you
could play bridge with.”) The president’s wife
could do what she wants, as long as it’s with
dignity and grace. In a small town they didn’t
have to keep check on you. Everybody knew.
There are certain sets of rules.”
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Obsession with control also explains
the frequent proliferation of support
staff. Purchasing staff services (e.g.
law office, factory cafeteria) from
outside suppliers exposes the
bureaucracy to the uncertainties of the
open market. So it “makes” rather
than “buys.”
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Standardized Procedures
Govern how employees are to perform
tasks.
“You are not supposed to think. There
are other people paid for thinking around
here.”
Frederick Taylor
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Standardized Procedures (cont.)
When written down and stored as official
documents, they increase the intelligence
expressed in organizations by instituting a
“memory” of lessons learned.
Standardize actions to be learned where
frequent employee turnover occurs.
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The Professional Career
Lifetime career of advancing to higher
levels in the chain of command.
Rising in ranks: Increase in power and
status symbols.
Lure of rising in hierarchy and security of
professional career: Aid success of
bureaucracy.
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Impersonal Relations
Role to role, not person to person.
Holder of particular role expected to
carry out its responsibilities in a rational
and unemotional manner.
Prevents feeling of
friendship/family/pity etc. get in the
way of tough decisions and enforcing
rules.
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Role of Managers
Handling the disturbances that arise
among the highly specialized workers
of the operating core.
By virtue of their design, Machine
Bureaucracies are structures ridden
with conflict; the control systems are
required to contain it.
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“Ya know, nothing happens in this place until we produce
something.”
Production executive
“Wrong, nothing happens until we design something!”
R&D manager
“What are you talking about? Nothing happens here
until we sell something!” Marketing executive
“It doesn’t matter what you produce, design or sell. No
one knows what happens until we tally up the results!”
Accounting manager
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Advantages of Bureaucracy
It lays out the ground rules for designing an
organizational hierarchy that efficiently controls
interactions between organizational members
Each person’s role in the organization is clearly
spelled out and they can be held accountable
Written rules regarding the reward and
punishment of employees reduce the costs of
enforcement and evaluating employee
performance
It separates the position from the person
It provides people with the opportunity to
develop their skills and pass them on their
successors
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The Problems of Bureaucracy
Managers fail to properly control the
development of the organizational hierarchy
Organizational members come to rely too
much on rules and standard operating
procedures (SOPs) to make decisions
Such overreliance makes them unresponsive
to the needs of customers and other
stakeholders
Slow response to changing customer tastes, foreign
competition, technological innovation, etc.
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Chuang-tzu, Chinese Sage, 4th century B.C.
As Tzu-gung was travelling through the
regions north of river Han, he saw an old man
working in his vegetable garden. He had dug
an irrigation ditch. The man would descend
into the well, fetch up a vessel of water in his
arms, and pour it out into the ditch. While his
efforts were tremendous, the results appeared
to be very meager.
Tzu-gung said, “There is a way whereby you
can irrigate a hundred ditches in one day, and
whereby you can do much with little effort.
Would you not like to hear of it?”
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Then the gardener stood up, looked at
him, and said, “And what would that be?”
Tzu-gung replied, “You take a wooden
lever, weighted at the back and light in
front. In this way you can bring up water
so quickly that it just gushes out. This is
called a draw-well.”
Then anger rose up in the old man’s face,
and he said, “I have heard my teacher say
that whoever uses machines does all his
work like a machine. He
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who does his work like a machine grows a
heart like a machine, and he who carries
the heart of a machine loses his simplicity.
He who loses his simplicity becomes
unsure in the strivings of his soul.
Uncertainty in the striving of the soul is
something which does not agree with
honest sense. It is not that I do not know
of such things; I am ashamed to use
them.”
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Bureaupathic Pathologies
Bureaupathic behaviour: Tendency of
employees to become more interested in the rules
and their enforcement than in their purposes and
goals of the organization.
Bureautic behaviour: Seen in large
bureaucracies. Frustrated employees, bottled up by
high formalization, resort to sabotage, absenteeism,
etc. to express their alienation and powerlessness.
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Bureaupathic Pathologies (cont.)
Groupthink: Tendency of groups or organizations
for people to go along with the suggestions or
directives of a dominant elite, even if they have
doubts about them.
Lack of personal growth: Large organizations
treat people like children, reducing opportunities for
personal growth and maturity.
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Bureaupathic Pathologies (cont.)
Failure to acknowledge the informal
organization: The bureaucracy disregards the
influence of the informal power system, e.g.
coffee room, gossip mill, grapevine.
Outdated systems of control and authority:
Formal authority is obsolete in relation to
knowledge workers, who may know more about
how to do a job than their bosses.
Poor conflict resolution technology: “Win-
lose” strategies in bureaucracies lead to
dysfunction.
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Bureaupathic Pathologies (cont.)
Distorted communications: Upward,
downward, horizontal communications are
distorted to achieve goals important to
senders.
Mistrust, fear of reprisals: Common
wherever people are preoccupied with self-
safety strategies and staying within their job
descriptions.
E.g. “It’s not my job to worry about that,” “I’m
here to do what I’m told,” “That’s his
responsibility, not mine.”
Organization man syndrome: Tendency
to marry the organization, getting one’s
personal rewards there and becoming
dependent on the bureaucracy and rewards
its dispenses.
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Conditions of the Bureaucracy
Found in environments that are simple
and stable.
Typically found in the mature
organization, large enough to have the
volume of operating work needed for
repetition and standardization, and old
enough to have been able to settle on the
standards it wishes to use.
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The Influence of the
Informal Organization
Decision making and coordination frequently
take place outside the formally designed
channels as people interact
Rules and norms sometimes emerge from
the interaction of people and not from the
formal rules blueprint
Managers need to consider the informal
structure when they make changes as it may
disrupt informal norms that work
Informal organization can actually enhance
organizational performance
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Charles Handy, The Age of
Unreason
The Shamrock Organization
Contingent workers: workers who are
employed temporarily by an organization and
who receive no indirect benefits such as health
insurance or pensions