Management to achieve goals

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Chapter 8 (11)
Organizational Structure
& Design

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Organizing
Management function that involves
arranging and structuring work to
accomplish the organization’s goals.
Organizational Structure
The formal arrangement of jobs within
an organization.

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• Divides work to be done into specific jobs and
departments.
• Assigns tasks and responsibilities associated
with individual jobs.
• Establishes formal lines of authority.
• Establishes relationships among individuals,
groups, and departments.
• Allocates and deploys organizational resources.
Purposes of Organizing

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Organizational Design
Creating or changing an organization’s
structure.
A process involving decisions about six
key elements:
Work specialization
Departmentalization
Chain of command
Span of control
Centralization and decentralization
Formalization

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Work Specialization (division of labor)
The degree to which tasks in the
organization are divided into separate jobs
with each step completed by a different
person. Examples
TODAY’S VIEW
Overspecialization can result in human
diseconomies from boredom, fatigue, stress,
poor quality, increased absenteeism, and
higher turnover.

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Departmentalization
Departmentalization: How jobs are grouped together is
called departmentalization.
Functional
Grouping jobs by functions performed
Product
Grouping jobs by product line
Geographical
Grouping jobs on the basis of territory or geography

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Departmentalization by Type
Process
Grouping jobs on the basis of product
flow
Customer
Grouping jobs by type of customer and
needs

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Geographical Departmentalization

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Product Departmentalization

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Process Departmentalization
+ More efficient flow of work activities
– Can only be used with certain types of products

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Process Departmentalization

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Customer Departmentalization

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TODAY’S VIEW
• Most large organizations continue to use
combinations of most or all of these types of
departmentalization.
• Pearson Education, publisher of this textbook,
arranges its business by educational market segment
(Pre K–12, higher education, and professional) and
its customers (students, professors, and workplace
educators), and arranges its sales function around
customers and geographic regions (for example, the
United States, Europe, and Asia)

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Chain of Command
The continuous line of authority that
extends from upper levels of an
organization to the lowest levels of the
organization and clarifies who reports to
whom.
To understand the chain of command, you
have to understand three other important
concepts: authority, responsibility, and unity
of command

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Authority
The rights inherent in a managerial position
to tell people what to do and to expect
them to do it.
Line authority: Authority that entitles a
manager to direct the work of an employee
Staff authority: Positions with some authority
that have been created to support, assist, and
advise those holding line authority

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Unity of Command
The concept that a person should have one
boss and should report only to that person.

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Today’s View?
• Although early management theorists (Fayol,
Weber, Taylor, Barnard, and others) believed
that chain of command, authority (line and
staff), responsibility, and unity of command
were essential, times have changed.
• Those elements are far less important today.

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Span of Control
The number of employees who can be
effectively and efficiently supervised
by a manager.

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Today’s View?
• The trend in recent years has been toward
larger spans of control, which is consistent with
managers’ efforts to speed up decision making,
increase flexibility, get closer to customers,
empower employees, and reduce costs.
Managers are beginning to recognize that they
can handle a wider span when employees know
their jobs well and when those employees
understand organizational processes

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Centralization
The degree to which decision making
is concentrated at upper levels in the
organization.
Organizations in which top
managers make all the decisions
and lower-level employees simply
carry out those orders.

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Decentralization
Organizations in which decision making is
pushed down to the managers who are
closest to the action.

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Today’s View?
• As organizations have become more flexible
and responsive to environmental trends,
there’s been a distinct shift toward
decentralized decision making.

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Employee Empowerment
Increasing the decision-making authority
(power) of employees.

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Formalization
The degree to which jobs within the
organization are standardized and the
extent to which employee behavior is
guided by rules and procedures.

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Formalization
Highly formalized jobs offer little
discretion over what is to be done.
Low formalization means fewer
constraints on how employees do their
work.

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• High specialization
• Rigid departmentalization
• Clear chain of command
• Narrow spans of control
• Centralization
• High formalization
• Cross-functional teams
• Cross-hierarchical teams
• Free flow of information
• Wide spans of control
• Decentralization
• Low formalization

33. Contingency Factors
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Structural decisions are influenced by:
Overall strategy of the organization
Organizational structure follows
strategy.
Size of the organization
As an organization grows larger, its
structure tends to change from organic
to mechanistic with increased
specialization, departmentalization,
centralization, and rules and

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Structural decisions are influenced by:
Technology use by the organization
Firms adapt their structure to the
technology they use.
Degree of environmental uncertainty
Dynamic environments require organic
structures; mechanistic structures need
stable environments.

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Technology and Structure
Organizations adapt their structures to
their technology.

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Technology and Structure
Woodward’s classification of firms based on
the complexity of the technology employed:
Unit production of single units or small
batches
Mass production of large batches of
output
Process production in continuous
process of outputs

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Technology and Structure
Routine technology = mechanistic
organizations
Non-routine technology = organic
organizations

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Environmental Uncertainty and Structure
Mechanistic organizational structures
tend to be most effective in stable and
simple environments.
The flexibility of organic organizational
structures is better suited for dynamic
and complex environments.

40. Common Organizational
Designs
40

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Traditional Designs
Simple structure
Low departmentalization, wide spans of
control, centralized authority, little
formalization

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Traditional Designs
Functional structure
Departmentalization by function
Operations, finance, marketing,
human resources, and product
research and development

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Traditional Designs
Divisional structure
Composed of separate business units
or divisions with limited autonomy
under the coordination and control the
parent corporation.

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Strengths and Weaknesses of Traditional
Organizational Designs

45. Contemporary
Organizational Designs
45

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Team structures
The entire organization is made up of
work groups or self-managed teams
of empowered employees.

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Boundaryless Organization
An flexible and unstructured organizational design that is
intended to break down external barriers between the
organization and its customers and suppliers.
Removes internal (horizontal) boundaries:
Eliminates the chain of command
Has limitless spans of control
Uses empowered teams rather than departments
Eliminates external boundaries:
Uses virtual, network, and modular organizational
structures to get closer to stakeholders.

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Virtual Organization
An organization that consists of a small core of full-
time employees and that temporarily hires specialists
to work on opportunities that arise.
Network Organization
A small core organization that outsources its major
business functions (e.g., manufacturing) in order to
concentrate on what it does best.
Modular Organization
A manufacturing organization that uses outside
suppliers to provide product components for its final
assembly operations.