The document discusses various topics related to organizational structure. It defines key terms like organic vs mechanistic structures, differentiation and integration. It also covers vertical and horizontal structures, including functional, divisional and matrix forms. Delegation and centralization vs decentralization are addressed. The document emphasizes that high differentiation and integration can help organizations succeed in dynamic environments, and that developing core competencies and being responsive to customers can improve organizational agility.

1. McGraw-Hill/Irwin 6-1
Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved.

2. Learning Objectives
 L01: Define characteristics of organization structure:
 Organic or mechanistic
 Differentiation
 Integration
 L02: Summarize how authority operates – who
holds top authority in a company.
 L03: Discuss how span of control affects structure
and management effectiveness.
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3. Learning Objectives (cont’d)
 L04: Explain how to delegate effectively.
 L05: Distinguish between centralized and
decentralized organizations.
 L06: Define basic types of organization structures
and summarize their strengths.
 L07: Describe mechanisms used to coordinate
work.
 L08: Discuss how organizations can improve their
agility through strategy, commitment to customers
and use of technology.
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4. Traditional Organizing
 Organization chart
 reporting structure and division of labor in an
organization
 Organization Types
 Mechanistic – formal structure intended to promote
internal efficiency
 Organic - organizational form that emphasizes
flexibility characterized by:
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5. Organic - Modern Organizing
 Broader responsibilities that change as need arises
 Communication through advice and information
 Decentralized decision-making and influence
 Highly valued expertise
 Emphasizes judgment rather than rules
 Commitment to organizational goals is more important
than obedience to authority.
 Increased interdependence
 Relationships more informal and personal.
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6. Fundamentals of Organizing
 Differentiation
 aspect of organization’s internal environment created
by job specialization and division of labor.
 Integration
 Degree to which differentiated work units work
together and coordinate efforts.
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7. Differentiation is…
 High
 many subunits and specialists who think differently
 Created through
 Division of labor – when work of organization is
subdivided into smaller tasks.
 Specialization – different people or groups perform
specific parts of larger task.
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8. Coordination
 Procedures that link various parts of organization to
achieve organization’s overall mission.
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9. Integration
 Degree to which differentiated work units work
together and coordinate efforts.
 Accomplished through structural mechanisms
 Any job activity that links work units
 High differentiation and high integration leads to
success in dynamic environments.
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10. Differentiation
 Vertical authority within organization
 Board of directors
 Chief Executive Officer
 Hierarchical levels.
 Horizontal
 Functional
 Divisional
 Matrix organizations.
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11. The Vertical Structure
 Authority
 legitimate right to make decisions and to tell other
people what to do.
 Types of Authority
 Formal
 Based on formal position, e.g. BOD, CEO
 Informal
 Based on expertise, experience, or personal qualities, e.g.,
scientists, computer-savvy employees
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12. Span of Control
 Number of direct reports an executive or supervisor
manages
 Optimal span of control maximizes effectiveness by
balancing two considerations:
 Maintain control without overcontrol
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13. When should span be wide?
1. Work is clearly defined and unambiguous
2. Highly trained employees with access to
information
3. Manager is highly capable and supportive
4. Jobs are similar and performance measures are
comparable
5. Employees prefer autonomy to close supervisory
control
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14. Delegation
 Assignment of new or additional responsibilities
 Fundamental feature of management at all levels
 Requires communication with manager about
effectiveness of assignment implementation
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15. Is this delegation?
Call Tom Burton at Nittany Office Equipment. Ask him to
give you the price list on an upgrade for our personal
computers. I want to move up to a Core 2 Duo processor
with 4 gigs of RAM and at least a 500-gigabyte hard drive.
Ask them to give you a demonstration, and let them try it
out. Have them write up a summary of their needs and the
potential applications they see for the new systems. Then
prepare me a report with the costs and specifications of the
upgrade for the entire department. Oh, yes, be sure to ask
for information on service costs.
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16. Responsibility and Accountability
 Responsibility
 A person is assigned a task that an employee is
supposed to carry out – within their power or
control.
 Accountability
 Expectation that employees will perform a job, take
corrective action when necessary, and report upward
on the status and quality of their performance – be
answerable.
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17. Advantages of Delegation
 Leverages the manager’s energy and talent and those of
his or her subordinates
 Conserves a manager’s time
 Develops effective subordinates
 Subordinate gains an opportunity to develop new skills
and demonstrate potential for additional responsibilities
 Promotes a sense of being an important, contributing
member of the organization leading to stronger
commitment, task performance, and innovation.
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18. Steps in Effective Delegation
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19. Centralized vs. Decentralized
Decision-Making
 Centralized:
 High-level executives make most
decisions and pass them to lower levels
for implementation.
 Decentralized
 Lower level managers make important
decisions.
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20. The Horizontal Structure
 Line departments
 those who have responsibility for the principal
activities of the firm
 Staff departments
 those who provide specialized or professional
skills that support line departments
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21. Functional Organizations
 Departmentalization around specialized skill sets
and activities
 Advantages
 Economies of scale
 Monitoring of the environment is more effective
 Performance standards are better maintained
 Greater opportunity for specialized training and in-
depth skill development
 Technical specialists are relatively free of
administrative work
 Decision making and lines of communication are
simple and clearly understood
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22. Functional Organizations
 Disadvantages
 People may care more about their own function than
about the company as a whole
 Managers develop functional expertise but lack
knowledge of the other areas of the business
 Promotes functional differentiation not functional
integration
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23. Divisional Organization
 Groups all functions into a single division and
duplicates functions across divisions.
 Act like separate businesses or profit centers and
work autonomously to accomplish the goals of the
entire enterprise.
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24. The Divisional Organization
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25. Functional vs. Divisional Examples
Functional Organization Divisional Organization
Central purchasing department Purchasing unit for each
Separate companywide division
marketing, production, Each product group’s own
design, and engineering experts in marketing, design,
departments production, and engineering
Central city health department Separate health units for the
Plantwide inspection, school district and the prison
maintenance, and supply Inspection, maintenance, and
departments supply conducted by each
production team
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26. Ways to set up a divisional structure
 Product divisions
 all functions that contribute to a given product are
organized under one product manager.
 Customer divisions
 built around groups of customers
 Geographic divisions
 structure around geographic regions
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27. Matrix Organization
 An organization composed of dual reporting
relationships in which some managers report to two
superiors:
 functional manager
 divisional manager or project manager
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28. Matrix Organizational
Structure
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29. Managing High
Information-Processing Demands
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30. Organizational Agility
 Agility
 Ability to act, and act fast, to meet customer needs
and respond to other outside pressures.
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31. Organizing around core competencies
 Identify existing core competencies
 Acquire or build core competencies that will be
important for the future
 Keep investing in competencies
 Extend competencies to find new applications and
opportunities for future markets
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32. Managing core competencies
 Accumulate the right resources; discard the
wrong resources
 Combine resources to sustain organization
capabilities
 Leverage or exploit resources
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33. Strategic Alliances
 Definition
 Formal relationship created among independent
organizations with purpose of joint pursuit of mutual goals
 Success Criteria
 Individual excellence: both partners add value
 Importance: both partners want the relationship to work
 Interdependence: Partners need each other
 Investment: Partners devote financial and other resources to relationship
 Information: Partners communicate openly
 Integration: Partners develop shared ways of operating
 Institutionalization: Relationship has formal status with clear responsibilities
 Integrity: Both partners are trustworthy and honorable
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34. An organizations’ ability to learn, and
translate that learning into action rapidly, is
the ultimate competitive advantage.
-- Jack Welch
Former CEO, General Electric
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35. Learning Organizations
 Definition
 Organization skilled at creating, acquiring, and
transferring knowledge
 Can modify behavior to reflect new knowledge and
insights.
 Ingredients
 People engage in disciplined thinking and attention to details
 Search constantly for new knowledge and ways to apply it
 Review successes and failures carefully
 Benchmark best practices of other organizations
 Share ideas throughout organization
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36. Downsizing
 Planned elimination of positions.
 Becoming a normal business practice as:
 global competition puts pressure on costs
 mergers cause functions to be consolidated
 new technologies and new ways of doing business
 Done appropriately can make firms more agile
 Can be traumatic for an organization and its
employees
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37. Effective Downsizing?
 Use downsizing only as a last resort
 Engage in careful analysis and strategic thinking in
choosing positions to eliminate
 Train people to cope with new situation
 Identify and protect talented people
 Give special attention and help to those who have lost
jobs
 Communicate constantly with people about process
 Invite ideas for alternative ways to operate more
efficiently
 Identify how the organization will operate more effectively
in the future, and emphasize positive future and the
remaining employees’ new roles in attaining it
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38. Organizing for Quality Improvement
 Total Quality Management (TQM)
 An integrative approach to management that supports
the attainment of customer satisfaction through a
wide variety of tools and techniques that result in
high-quality goods and services
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39. Deming’s 14 points of Quality
1. Create constancy of 1. Drive out fear
purpose 2. Break down barriers
2. Adopt new philosophy among departments
3. Cease dependence on 3. Eliminate slogans and
mass inspection exhortations
4. End practice of awarding 4. Eliminate numerical
business on price tag quotas
5. Improve system of 5. Remove barriers to pride
production and service in workmanship
constantly 6. Institute vigorous program
6. Institute training and of education and retraining
retraining 7. Take action to accomplish
7. Institute leadership transformation
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40. ISO 9001
 A series of quality standards developed by a
committee working under the International
Organization for Standardization to improve total
quality in all businesses for the benefit of producers
and consumers in more than 150 companies
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41. 8 Principles of ISO 9001
1. Customer focus 1. Continual
2. Leadership improvement
3. Involvement of people 2. Factual approach to
decision making
4. Process approach
3. Mutually beneficial
5. System approach to
supplier relationships
management
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42. Organizing for Flexible Manufacturing
 Mass customization
 Production of varied, individually customized products
at low cost of standardized, mass-produced products
 Computer-integrated manufacturing
 Computerized production efforts, including computer-
aided design (CAD) and computer-aided
manufacturing (CAM)
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43. Lean Manufacturing
 An operation that strives to achieve highest possible
productivity and total quality, cost-effectively, by
eliminating unnecessary steps in production process
and continually striving for improvement.
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44. Conditions for Lean Manufacturing
 People are broadly trained
 Communication is informal and horizontal among
line workers
 Equipment is general purpose
 Work is organized in teams or cells
 Supplier relationships are long-term and
cooperative
 Product development is concurrent, not
sequential, and is done by cross-functional
teams
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45. Just-in-Time (JIT) Operations
 A system that calls for subassemblies and
components to be manufactured in very small lots
and delivered to the next stage of the production
process just as they are needed
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46. Organizing for Speed
 JIT is a companywide philosophy oriented toward
eliminating waste and improving materials
throughout all operations.
 Offers efficiency only when costs of storing items are
greater than costs of frequent delivery
 Simultaneous engineering incorporates the issues
and perspectives of all functions from beginning of
process
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47. 6-47

48. YOU should be able to
 L01: Define the characteristics of organization
structure: organic or mechanistic, differentiation, and
integration.
 L02: Summarize how authority operates and who
generally holds top authority in a company.
 L03: Discuss how span of control affects structure
and management effectiveness.
6-48

49. YOU Explain how be able effectively.
 L04:
should to delegate to
 L05: Distinguish between centralized and
decentralized organizations.
 L06: Define basic types of organization
structures, and summarize their strengths.
 L07: Describe important mechanisms used to
coordinate work.
 L08: Discuss how organizations can improve
their agility through strategy, commitment to
customers and use of technology.
6-49

50. Test Your Knowledge
In the study by Lawrence and Lorsch,
companies in complex, dynamic
environments developed _____ levels of
differentiation; and _____ levels of
integration
A) low; low
B) intermediate; high
C) high; high
D) low; high
E) high; low
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51. Test Your Knowledge
 Define authority
 Who holds top authority in an organization?
6-51

52. Test Your Knowledge
A wide span of control builds a ______________
organization.
A) flat
B) narrow
C) tall
D) bureaucratic
E) formal
6-52

53. Test Your Knowledge
 Discuss the concepts of responsibility,
authority, and accountability.
 What should a manager do when he/she has
more responsibility than authority
 Why is this a problem?
6-53

54. Test Your Knowledge
Ruby recently accepted a job with a large insurance firm as an internal
auditor. Ruby has found that her new job is quite different than the
internship she had at an accounting consulting firm. The insurance firm
has strictly defined job responsibilities and lines of communication. It
seems that for every decision that Ruby needs to make, approval must
be obtained from upper management! Overall, she has found the
atmosphere to be quite formal as compared to the internship. Ruby
has concluded that the insurance firm has:
A) a wide span of control.
B) a high degree of centralization.
C) decentralized authority.
D) a matrix design.
E) an ineffective structure.
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55. Test Your knowledge
Sports International (SI) began business by making shoes for
athletes. They soon expanded into making shoes for non-
athletic purposes. They now manufacture and distribute
clothing, sporting equipment and protective sports gear
worldwide. They are departmentalized by products sold to
serious athletes, products sold to "weekend" athletes and
products sold to sports teams. SI has utilized which form of
departmentalization?
A) Geographic
B) Functional
C) Matrix
D) Customer
E) Product
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56. Test Your Knowledge
Michael Shaffer's job as a representative of
CommuniCo is to handle communications
between the organization and the local
community. Michael is best described as
a(n):
A) mutual adjustment officer.
B) program manager.
C) individual task force.
D) liaison.
E) none of the above.
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57. Test Your Knowledge
Flexible factories have the following advantages
EXCEPT:
A) Providing more production options.
B) Having much shorter production runs.
C) Being organized around products, in work cells
or teams.
D) Good for standardized products.
E) Quicker to adapt to change.
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