The document discusses organizational structure and its key components. It describes 7 main components that determine structure: work specialization, departmentalization, hierarchy levels, chain of command, span of control, decision making regarding centralization and decentralization, and level of formalization. It provides examples of different types of departmentalization and discusses considerations for optimal organizational design such as functional vs. divisional vs. matrix structures.

2. Organizational Structure

3. Organizational Structure
-How jobs/tasks are Formally Divided, Grouped, and Coordinated.
1. Work Specialization
2. Departmentalization
3. Hierarchy Levels
4. Chain of Command
5. Span of control
6. Decision Making (Centralization and Decentralization)
7. Formalization
are components which determine organizational structure.

4. 1. Work specialization
-The degree to which tasks in the organization are subdivided into separate jobs
1. Division of Labor
o Makes efficient use of employee skills
o Increases employee skills through repetition
o Specialized training is more efficient
o Allows use of specialized equipment
2. Can create greater economies and efficiencies – but not always…

5. 3. The essence of work specialization is that, rather than an entire job being done by
one individual, it is broken down into a number of steps, each step being completed
by a separate individual. In essence, individuals specialize in doing part of an activity
rather than the entire activity.

6. Example
 Every Ford worker was assigned a specific, repetitive task. For
instance, one person would just put on the right-front wheel and
someone else would install the right-front door. By breaking jobs up
into small standardized tasks.

7. 2. Departmentalization
The basis by which jobs are grouped together • Grouping
Activities by:
 Function
 Product
 Geography
 Customer

8.  Functions
 Most popular ways to group activities is by functions performed. A
manufacturing manager might organize his or her plant by
separating engineering, accounting, manufacturing, personnel, and
purchasing specialists into common departments.
Departmentalization by function can be used in all types of
organizations.

9. Functional: Strengths & Weaknesses
9

10.  Product
 Tasks can also be departmentalized by the type of product the
organization produces.
 Petroleum Products, for instance, each of the three major product
areas in the corporation (fuels, lubricants and waxes, and chemicals)
is placed under the authority of a vice president who is a specialist
in, and responsible for, everything having to do with his or her
product line. Each, for example, would have his or her own
manufacturing and marketing group..

11.  The major advantage to this type of grouping is increased
accountability for product performance, since all activities related to
a specific product are under the direction of a single manager

12.  Geography
 To departmentalize is on the basis of geography or territory. The
sales function, for instance, may have western, southern,
Midwestern, and eastern regions. Each of these regions is, in effect,
a department organized around geography.

13. Sample Geographic Structure
t.
13

14.  Customer
 A final category of departmentalization is to use the particular type
of customer the organization seeks to reach. The sales activities in
an office supply firm, for instance, can be broken down into three
departments to service retail, wholesale, and government customers.

15. 3. Chain of command
 The chain of command is an unbroken line of authority that extends
from the top of the organization to the lowest echelon and clarifies
who reports to whom. It answers questions for employees such as
 “To whom do I go if I have a problem?”
 and
 “To whom am I responsible?”

16. Two complementary concepts
Authority and unity of command.
 Authority refers to the rights inherent in a managerial
position to give orders and expect the orders to be obeyed.
To facilitate coordination, each managerial position is
given a place in the chain of command and each manager
is given a degree of authority in order to meet his or her
responsibilities

17. 4. Unity-of-command
 The unity-of-command principle helps preserve the concept of an
unbroken line of authority.
 It states that a person should have one and only one superior to
whom he or she is directly responsible.
 The concepts of chain of command, authority, and unity of
command have substantially less relevance today because of
advancements in
 Computer technology
 The trend toward empowering employees.

18. 5. Span of control
How many subordinates can a manager efficiently and
effectively direct?
This question of span of control is important because, to a
large degree, it determines the number of levels and
managers an organization has.
All things being equal, the wider or larger the span, the
more efficient the organization.

19.  Assume that we have two organizations, both of which have
approximately 4,100 operative-level employees. if one has a
uniform span of four and the other a span of eight, the wider span
would have two fewer levels and approximately 800 fewer
managers. If the average manager made $40,000 a year, the wider
span would save $32 million a year in management salaries!
Obviously, wider spans are more efficient in terms of cost. However,
at some point wider spans reduce effectiveness. That is, when the
span becomes too large, employee performance suffers because
supervisors no longer have the time to provide the necessary
leadership and support.

21. 6. Centralization and Decentralization
 Centralization The degree to which decision making is concentrated
at a single point in the organization.
 It includes only formal authority, that is, the rights inherent in one’s
position.
 Typically, it’s said that if top management makes the organization’s
key decisions with little or no input from lower-level personnel, then
the organization is centralized.

22. Decentralization Decision discretion is pushed down to
lower-level employees.
In a decentralized organization, action can be taken more
quickly to solve problems, more people provide input into
decisions, and employees are less likely to feel alienated
from those who make the decisions that affect their work
lives.

23. 7. Formalization
The degree to which jobs within the organization are standardized.
 High formalization
o Minimum worker discretion in how to get the job done
o Many rules and procedures to follow
 Low formalization
o Job behaviors are non-programmed
o Employees have maximum discretion

24. Simple structure
A structure characterized by a low degree of
departmentalization, wide spans of control, authority
centralized in a single person, and little formalization.

25. A Sample Organization Chart

26. Organizational Design Alternatives

27. Required work activities
Organizations typically define new departments or divisions as a
way to accomplish tasks deemed valuable by the company.
Reporting relationships
Once required work activities and departments are defined, the next
question is how these activities and departments should fit together
in the organizational hierarchy

28. Departmental grouping options
1. Functional grouping
2. Divisional grouping
3. Multi-focused grouping
4. Horizontal grouping
5. Virtual network grouping
6. Hybrid structure

29. o Functional grouping: the placing together of employees who
perform similar functions or work processes or who bring similar
knowledge and skills to bear on a task.
o Divisional grouping: a grouping in which people are organized
according to what the organization produces
o Multi-focused grouping: a structure in which an organization
embraces structural grouping alternatives simultaneously

30. o Horizontal grouping: organizing of employees around core
work processes rather than by function, product or geography
o Virtual network grouping: organization that is a loosely
connected cluster of separate components. In essence departments
are separate organizations that are electronically connected for the
sharing of info and completion of tasks

32. 1. Functional Structure
Strengths
 Quick decision making
 Enables in-depth knowledge and skill development
 Able to accomplish functional goals
 Works best with one or a few products
 Chain of command is very clear
 Clear responsibilities

33. Weaknesses
 Slow response to environmental changes
 Decisions pile up
 Poor horizontal coordination
 Less innovation
 If the company has a wide range of products and services, each department
may get overworked and confused, with no possibility of transferring tasks
to other departments.

34. 2. Divisional structure
The structuring of the organization according to individual
products, services, product groups, major projects, or profit centres
also called product structure or strategic business units

36. Strengths
 Suited to fast change in unstable environment
 Leads to customer satisfaction because product responsibility and contact points
are clear
 degree of independence in decision making for their specific product
 Allows units to adapt to differences in products, regions,
 in large organizations with several products
 Decentralizes decision making
 clear view of the productivity and profit of each different product line

37. Weaknesses
 The unhealthy competition that could develop between departments
 Leads to poor coordination across product lines
 Eliminates in-depth competence and technical specialization
 Makes integration and standardization across product lines difficult

38. 3. Matrix Structure
A strong form of horizontal linkage in which both product and
functional structures are implemented simultaneously

40. Three conditions for Matrix structure:
 Pressure exists to share scarce resources across product
lines. The organization is typically medium sized and has a
moderate number of product lines. It feels pressure for the
shared and flexible use of people and equipment across
those products

41.  Environmental pressure exists for two or more critical outputs, such
as for in depth technical knowledge (functional structure) and
frequent new products (divisional structure). This dual pressure
means a balance of power is needed between functional and product
sides of the organization and a dual authority structure is needed to
maintain that balance
 The environmental domain of the organization is both complex and
unstable. Frequent external changes and high interdependence
between departments require a large amount of coordination and
information processing in both vertical and horizontal directions

42. Strengths
 Can meet dual demands of customers
 Flexible sharing of human resources across departments
 Adapt to frequent changes in unstable environment
 Opportunity for functional and product skill development
 Best in medium organizations with multiple products

43. Weaknesses
 Dual authority can be frustrating and confusing
 Participants need good interpersonal skills and extensive training
 Very time-consuming
 Requires a lot of effort to maintain power balance

44. 4. Horizontal structure
The chain of command in a horizontal organizational structure is small,
communication is often faster and more effective. However, employees may end
up with more than one boss and their functions can become confused with
someone else within or outside the department. Similarly, since there are fewer
levels of management in this kind of organizational structure, there is more
flexibility when it comes to decision making which also leads to confusion among
employees on who to go with what.

46. Characteristics:
 Self-directed teams, not individuals, are the basis of organizational
design and performance
 Process owners have responsibility for each core process in its
entirety
 Teams have the freedom to think creatively and respond flexibly to
new challenges that arise

47.  People on the team are given the skills, tools, motivation, and authority to
make decisions central to the team’s performance. Team members are
cross trained to perform one another’s jobs, and the combined skills are
sufficient to complete a major organizational task
 Customers drive the horizontal corporation. Effectiveness is measured by
end of process performance objectives (based on the goal of bringing value
to the customer), as well as customer satisfaction, employee satisfaction,
and financial contribution
 Culture is one of openness, trust, and collaboration, focused on continuous
improvement. The culture values employee empowerment, responsibility,
and well being

48. Strengths
 It allows clear communication
 It promotes faster decision making
 Promotes a focus on teamwork and collaboration
 Improves quality of life for employees by offering them the
opportunity to share responsibility, make decisions, and be
accountable for outcomes
 It is cost efficient

49. Weaknesses
 Management can easily lose control
 Work-Relationship could struggle
 It can create power struggle
 There is less motivation
 Requires significant training of employees to work effectively in a
horizontal team environment
 Can limit in-depth skill development

50. 5. Virtual network structure
The firm subcontracts many or most of its major
processes to separate companies and coordinates their
activities from a small headquarters organization

52. Strengths
 Enables even small organizations to obtain talent and resources
world wide
 Gives a company immediate scale and reach without huge
investments in factories, equipment, or distribution facilities
 Enables the organization to be highly flexible and responsive to
changing needs
 Reduces administrative overhead costs

53. Weaknesses
 Managers do not have hands on control over many activities and
employees
 Requires a great deal of time to manage relationships and potential
conflicts with contract partners
 There’s a risk of organizational failure if a partner fails to deliver or goes
out of business
 Employee loyalty and organizational culture might be weak because
employees feel they can be replaced by contract services

54. 6. Hybrid Structure
Combines the characteristics of functional, divisional, geographical,
horizontal and/or network structures into a hybrid structure that is
tailored to specific needs Tend to be used in rapidly changing
environments Popular hybrid model combines characteristics of
functional and divisional structures

56. Strength
 As there are divisions and different departments, they run in a
smooth and flexible manner.
 The goal is achieved in a competent and experienced manner.
Weakness
 Conflicts arise between the department heads as everyone has been
given the right of authority.

57. Applications of Structural Design
Structures are applied in different situations to meet different needs.
STRUCTURAL ALIGNMENT
The most important decision managers must make is the right mix of
vertical (control, goals) and horizontal (flexibility, innovation) that is
right for the firm.

58. Symptoms of Structural Deficiency
Signs of the organization structure being out of alignment, including:
 Delayed/poor decision-making
 Organization does not respond innovatively to a changing
environment
 Employee performance declines when goals are not being met
 Too much conflict is evident

59. THANK YOU!