This chapter discusses the fundamentals of organization design, outlining the basic elements of organizing like specialization, standardization, authority and coordination. It then examines the potential benefits and pitfalls of different types of departmentalization including functional, place, product and customer departmentalization. Finally, it covers principles of coordination and effective delegation within an organizational structure.

1. Chapter 10
Fundamentals of Organization
Design
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2. 10.1
Learning Objectives
After reading this chapter, you should be able to:
Explain several of the main ingredients of organization design
Outline the features of four basic types of departmentalization
Describe three of the principles for achieving coordination within
and between departments
Discuss the fundamental concepts of authority in organization
design
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3. 10.2
Basic Elements of Organizing
Specialization
Specialization Standardization
Standardization
Authority
Authority Coordination
Coordination
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Adapted from Figure 10.1

4. 10.3
Potential Benefits of Functional Departmentalization
Supports skill specialization
Reduces duplication of resources and increases coordination
within the functional area
Enhances career development and training within the
department
Allows superiors and subordinates
to share common expertise
Promotes high-quality technical decision making
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5. 10.4
Potential Pitfalls of Functional Departmentalization
Inadequate communication between departments
May create conflict over product priorities
Difficulty with interdepartmental coordination
Focuses on departmental rather than organizational issues and
goals
Develops managers who are experts in narrow fields
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6. 10.5
Potential Benefits of Place Departmentalization
Equipment used for products is all in one place, saving time and
costs
Develop expertise in solving problems unique to one location
Gaining an understanding of customers’ problems and desires
Getting production closer to raw materials and suppliers
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7. 10.6
Potential Pitfalls of Place Departmentalization
Duplication of functions at each regional or individual unit
location
May cause conflicts between each location’s goals and
organization goals
Adds levels of management and extensive use of rules and
regulations to coordinate and ensure uniformity of quality
among locations
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8. 10.7
Potential Benefits of Product Departmentalization
Permits fast changes in a product
Allows greater product visibility
Fosters a concern for customer demand
Clearly defines responsibilities
Develops managers who can think across functional lines
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9. 10.8
Potential Pitfalls of Product Departmentalization
Poor utilization of skills and resources
Doesn’t foster coordination of activities across product lines
Fosters politics and conflicts in resource allocation across
product lines
Limits career mobility for personnel outside
their product line
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10. 10.9
Potential Benefits of Customer Departmentalization
Encourages greater customer focus
Clearly identifies key customers
Enables understanding of customer need
Develops managers and employees who become customer
advocates
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11. 10.10
Potential Pitfalls of Customer Departmentalization
Doesn’t foster coordination between divisions organized by
customer group
Fosters politics and conflicts in resource allocation between
divisions
Employees feel pressure
from customer
to give them privileges
Restricts problem solving to single type of customer
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12. 10.11
Principles of Coordination
Unity of command principle
• An employee should have only one manager
Scalar principle
• A clear, unbroken chain of command should link every employee with
someone at a higher level
Span of control principle
• Limited number of people reporting to any one manager
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13. 10.12
Effective Delegation
Establish goals and standards
Ensure clarity
Involvement
Expect completed work
Provide training
Timely feedback
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