Organizational structure in Organization

1. ORGANISATION
AL STRUCTURE

2. 13-2
Organizational
Structure;
Organizational structure
defines how job task are
divided, grouped and
coordinated.

3. 13-3
Key Elements of
Organizational Structure
Elements ofElements of
OrganizationalOrganizational
StructureStructure
Span ofSpan of
ControlControl
CentralizationCentralization
andand
DecentralizationDecentralization
DepartmentalizatioDepartmentalizatio
nn
FormalizationFormalization
Division ofDivision of
labourlabour
Chain ofChain of
CommandCommand

4. 13-4
Division of Labor
 Subdividing work into separate
jobs assigned to different
people
 It is limited by ability to
coordinate work
 Increases work efficiency

5. 13-5
Departmentalization
Specifies how employees and their activities
are grouped together
Three functions of departmentalization
1. Establishes chain of command
2. Creates common mental models, measures of
performance, etc
3. Encourages coordination through informal
communication

6. 13-6
Span of Control
Number of people directly
reporting to the next level
• Assumes coordination through
direct supervision
Wider span of control possible
when:
• Other coordinating
mechanisms present
• Routine tasks
• Low employee
interdependence

7. 13-7
Formalization
 The degree to which organizations standardize
behavior through rules, procedures, formal training,
and related mechanisms.
 Formalization increases as firms get older, larger,
and more regulated
 Problems with formalization
• Reduces organizational flexibility
• Discourages organizational learning/creativity
• Reduces work efficiency
• Increases job dissatisfaction and work stress

8. 13-8
Formal decision making authority is heldFormal decision making authority is held
by a few people, usually at the topby a few people, usually at the top
Centralization
Decision making authority is
dispersed throughout the organization
Decentralization
Centralization and
Decentralization

9. 13-9
Chain of command
It is an unbroken line of authority
It flows from top to bottom
It clarifies who reports to whom
Authority and unity of command are the two
complimentary concepts. Without these we cannot
discuss chain of command.

10. 13-10
AUTHORITY AND UNITY OF
COMMAND
Authority-It is the position to give orders and
expect the given orders to be obeyed
Unity of Command- It is an idea that one
subordinate should have only one superior

11. 13-11
Coordinating Work Activities
1. Informal communication
• Sharing information, forming common mental
models
• Allows flexibility
• Vital in non routine and ambiguous situations
• Easiest in small firms
• Applied in team-based structures
• Includes integrator roles

12. 13-12
Coordinating Work Activities
2. Formal hierarchy
• Direct supervision
• Assigns formal (legitimate) power to manage
others
• Coordination strategy for departmentalization
2. Standardization
a)Standardized processes (e.g., job descriptions)
b)Standardized outputs (e.g., sales targets)
c) Standardized skills (e.g., training)

13. 13-13
Organizes employees around specific knowledge
or other resources (e.g., marketing, production)
CEOCEO
FinanceFinance ProductionProduction MarketingMarketing
Functional Organizational Structure

14. 13-14
Evaluating Functional
Structures
 Benefits
• Economy of scale
• Supports professional identity and career paths
• Easier supervision
 Limitations
• More emphasis on subunit than organizational
goals
• Higher dysfunctional conflict
• Poorer coordination -- requires more controls

15. 13-15
Organizes employees around outputs,
clients, or geographic areas
Divisional Structure
CEOCEO
HealthcareHealthcare
LightingLighting
ProductsProducts
ConsumerConsumer
LifestyleLifestyle

16. 13-16
Divisional Structure
 Different forms of divisional structure
• Geographic structure
• Product structure
• Client structure
 Best form depends on environmental diversity
or uncertainty
 Movement away from geographic form
• Less need for local representation
• Reduced geographic variation
• More global clients

17. 13-17
Evaluating Divisional Structures
 Benefits
• Building block structure -- accommodates growth
• Focuses on markets/products/clients
 Limitations
• Duplication, inefficient use of resources
• Specializations are dispersed--silos of knowledge
• Politics/conflict when two forms of equal value

18. 13-18
Team-Based Structure
 Self-directed work teams
 Teams organized around work processes
 Typically organic structure
• Wide span of control – many employees work
without close supervision
• Decentralized with moderate/little formalization
 Usually found within divisionalized structure

19. 13-19
Evaluating Team-Based
Structures
 Benefits
• Responsive, flexible
• Lower admin costs
• Quicker, more informed decisions
 Limitations
• Interpersonal training costs
• Slower during team development
• Role ambiguity increases stress
• Problems with supervisor role changes
• Duplication of resources

20. 13-20
Audio DeptAudio Dept
LeaderLeader
SoftwareSoftware
Dept LeaderDept Leader
Art DeptArt Dept
LeaderLeader
Game1Game1
Project LeaderProject Leader
Game2Game2
Project LeaderProject Leader
Game3Game3
Project LeaderProject Leader
Matrix Structure (Project-based)
CEOCEO
Employees ( ) are temporarily assigned to a specific
project team and have a permanent functional unit

21. 13-21
Evaluating Matrix Structures
 Benefits
• Uses resources and expertise effectively
• Improves communication, flexibility, innovation
• Focuses specialists on clients and products
• Supports knowledge sharing within specialty
• Solution when two divisions have equal importance
 Limitations
• Increases goal conflict and ambiguity
• Two bosses dilutes accountability
• More conflict, organizational politics, and stress

22. 13-22
Effects of Organizational Size
As organizations grow, they have:
 More division of labor (job specialization)
 Greater use of standardization
 More hierarchy and formalization
 More decentralization

23. 13-23
Technology and Structure
 Technology refers to mechanisms or
processes by which an organization turns out
its product or service
 Two contingencies:
• Variability -- the number of exceptions to standard
procedure that tend to occur.
• Analyzability -- the predictability or difficulty of the
required work

24. 13-24
Organizational Strategy
 Structure follows strategy
• Strategy points to the environments in which the
organization will operate
• Leaders decide which structure to apply
 Differentiation strategy
• Providing unique products or attracting clients who
want customization
 Cost leadership strategy
• Maximize productivity in order to offer competitive
pricing