John R. Schermerhorn, Jr.

1 Daniel G. Bachrach

Introduction to
1 Management
th
13 edition

CHAPTER 11
FUNDAMENTALS OF ORGANIZING
 PLANNING AHEAD — KEY TAKEAWAYS

❑ Describe organizing as a management function

and the difference between formal and informal
organization structures.
❑ Identify the traditional organizational structures,
and the strengths and weaknesses of each.
❑ Identify newer horizontal organizational structures,
and the strengths and weaknesses of each.
❑ Explain how organizational designs are changing
in the modern workplace.

Copyright ©2015 John Wiley & Sons, Inc.

 CHAPTER 11 OUTLINE
1. Organizing as a Management Function
a) What is organization structure?
b) Formal structures
c) Informal structures
2. Traditional Organization Structures
a) Functional structures
b) Divisional structures
c) Matrix structures

Copyright ©2015 John Wiley & Sons, Inc.

 CHAPTER 11 OUTLINE
3. Horizontal Organization Structures
a) Team structures
b) Network structures
c) Boundaryless structures
4. Organizational Designs
a) Contingency in organizational design
b) Mechanistic and organic organization
designs
c) Trends in organizational designs

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ORGANIZING AS A MANAGEMENT FUNCTION
Organizing as a management function
⚫ Organizing
Arranges people and resources to work together to
accomplish a goal
⚫ Organization structure
The system of tasks, reporting relationships, and
communication linkages

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FIGURE 11.1 ORGANIZING VIEWED IN RELATIONSHIP WITH
THE OTHER MANAGEMENT FUNCTIONS

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ORGANIZING AS A MANAGEMENT FUNCTION
An organization chart is a diagram describing
reporting relationships and the formal
arrangement of work positions within an
organization. It includes:

The division Supervisory Communicati Major Levels of

of work relationships on channels subunits management

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ORGANIZING AS A MANAGEMENT FUNCTION
Informal structures …
⚫ The set of unofficial relationships between
organization members
⚫ Social network analysis
Identifies informal structures and social
relationships in the organization

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ORGANIZING AS A MANAGEMENT FUNCTION
Informal structures and social networks
⚫ Potential advantages of informal structures:
Allow people to make contacts with others who can
help them get things done
Stimulate learning as people work and interact
together
Sources of emotional support and friendship that
satisfy members’ social needs

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 ORGANIZING AS A MANAGEMENT FUNCTION
Potential disadvantages of informal
structures:

Diversion of
Presence of May carry May breed work efforts Feeling of
Susceptibilit
“In and out inaccurate resistance from alienation
y to rumor
groups” information to change important by outsiders
objectives

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TRADITIONAL ORGANIZATION STRUCTURES

Traditional organization structures

Function Divisiona
Matrix
al l

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 TRADITIONAL ORGANIZATION STRUCTURES
Functional structures
⚫ People with similar skills and performing
similar tasks are grouped together into formal
work units
⚫ Members work in their functional areas of
expertise
⚫ Are not limited to businesses
⚫ Work well for small organizations producing
few products or services

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FIGURE 11.2 FUNCTIONAL STRUCTURES IN A BUSINESS, BRANCH
BANK, AND COMMUNITY HOSPITAL

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 TRADITIONAL ORGANIZATION STRUCTURES

Potential advantages of functional

structures:
⚫ Economies of scale
⚫ Task assignments consistent with expertise
and training
⚫ High-quality technical problem solving
⚫ In-depth training and skill development
⚫ Clear career paths within functions

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TRADITIONAL ORGANIZATION STRUCTURES

Potential disadvantages of functional

structures:
Functional chimneys
Difficulties in problem
pinpointing • Sense of cooperation and
responsibilities common purpose break down
• Narrow view of performance
objectives

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 TRADITIONAL ORGANIZATION STRUCTURES
Divisional structures
⚫ Group together people who work on the same
product or process, serve similar customers,
and/or are located in the same area or
geographical region
⚫ Common in complex organizations
⚫ Avoid problems associated with functional
structures

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FIGURE 11.3 DIVISIONAL STRUCTURES BASED ON PRODUCT,
GEOGRAPHY, CUSTOMER, AND PROCESS

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TRADITIONAL ORGANIZATION STRUCTURES

Potential advantages of divisional

structures:
⚫ More flexibility in responding to environmental
changes
⚫ Improved coordination
⚫ Clear points of responsibility
⚫ Expertise focused on specific customers,
products, and regions
⚫ Greater ease in restructuring

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 TRADITIONAL ORGANIZATION STRUCTURES

Potential disadvantages of divisional

structures:
Emphasis on
Competition
Duplication of divisional
and poor
resources and goals at
coordination
efforts across expense of
across
divisions organizational
divisions
goals

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 TRADITIONAL ORGANIZATION STRUCTURES
Matrix structure
⚫ Combines functional and divisional structures
to gain advantages and minimize
disadvantages of each
⚫ Used in:

Multi-nation
Manufacturi Service Professional Non-profit al
ng industries fields sector corporation
s

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FIGURE 11.4 MATRIX STRUCTURE IN A SMALL,
MULTI-PROJECT BUSINESS FIRM

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 TRADITIONAL ORGANIZATION STRUCTURES
Potential advantages of matrix structures:
⚫ Better cooperation across functions
⚫ Improved decision making
⚫ Increased flexibility in restructuring
⚫ Better customer service
⚫ Better performance accountability
⚫ Improved strategic management

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 TRADITIONAL ORGANIZATION STRUCTURES

Potential disadvantages of matrix

structures:
Two-boss
Increased
Two-boss system can
Team costs due to
system is create task Team may
meetings adding
susceptible confusion develop
are time team
to power and conflict “groupitis ”
consuming leaders to
struggles in work
structure
priorities

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 HORIZONTAL ORGANIZATION STRUCTURES
Team structures
⚫ Extensively use permanent and temporary
teams to solve problems, complete special
projects, and accomplish day-to-day tasks
⚫ Often use cross-functional teams composed
of members from different functional
departments
⚫ Project teams are convened for a specific task
or project and disbanded once completed

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FIGURE 11.5 HOW A TEAM STRUCTURE USES CROSS-FUNCTIONAL
TEAMS FOR IMPROVED LATERAL RELATIONS

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HORIZONTAL ORGANIZATION STRUCTURES
Potential advantages of team structures:
⚫ Eliminates barriers between operating
departments
⚫ Improved morale
⚫ Greater sense of involvement and
identification
⚫ Increased enthusiasm for work
⚫ Improved quality and speed of decision
making

Copyright ©2015 John Wiley & Sons, Inc.

HORIZONTAL ORGANIZATION STRUCTURES

Potential disadvantages of team

structures:
Effective use of time
depends on quality
Conflicting loyalties Excessive time of interpersonal
among members spent in meetings relations, group
dynamics, and team
management

Copyright ©2015 John Wiley & Sons, Inc.

 HORIZONTAL ORGANIZATION STRUCTURES

Network structures
⚫ Uses information technologies to link with
networks of outside suppliers and service
contractors
⚫ Own only core components and use strategic
alliances or outsourcing to provide other
components

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FIGURE 11.6 A NETWORK STRUCTURE FOR A
WEB-BASED RETAIL BUSINESS

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 HORIZONTAL ORGANIZATION STRUCTURES

Potential advantages of network structures:

⚫ Firms can operate with fewer full-time
employees and less complex internal systems
⚫ Reduced overhead costs and increased
operating efficiency
⚫ Permits operations across great distances

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 HORIZONTAL ORGANIZATION STRUCTURES

Potential disadvantages of network

structures:
Control and Potential
coordination Potential loss lack of Excessively
problems of control loyalty aggressive
may arise over among outsourcing
from outsourced infrequently can be
network activities used dangerous
complexity contractors

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 HORIZONTAL ORGANIZATION STRUCTURES
Boundaryless organizations
⚫ Eliminate internal boundaries among
subsystems and external boundaries with the
external environment
⚫ A combination of team and network
structures, with the addition of
“temporariness”

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 HORIZONTAL ORGANIZATION STRUCTURES

Boundaryless organizations
⚫ Key requirements:
Absence of hierarchy
Empowerment of team members
Technology utilization
Acceptance of
impermanence

Copyright ©2015 John Wiley & Sons, Inc.

 HORIZONTAL ORGANIZATION STRUCTURES

Boundaryless organizations
⚫ Encourage creativity, quality, timeliness,
flexibility, and efficiency
⚫ Knowledge sharing is both a goal and
essential component

Copyright ©2015 John Wiley & Sons, Inc.

 HORIZONTAL ORGANIZATION STRUCTURES

Virtual organization
⚫ A special form of boundaryless organization
⚫ Operates in a shifting network of external
alliances that are engaged as needed, using
IT and the Internet

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FIGURE 11.7 THE BOUNDARYLESS ORGANIZATION
ELIMINATES INTERNAL AND EXTERNAL BARRIERS

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 ORGANIZATIONAL DESIGNS

Organizational design
⚫ Process of creating structures that accomplish
mission and objectives
⚫ A problem-solving activity that should be
approached from a contingency perspective

Copyright ©2015 John Wiley & Sons, Inc.

 ORGANIZATIONAL DESIGNS
Bureaucracy
⚫ A form of organization based on logic, order,
and the legitimate use of formal authority
⚫ Bureaucratic designs feature …
Clear-cut division of labor
Strict hierarchy of authority
Formal rules and procedures
Promotion based on competency

Copyright ©2015 John Wiley & Sons, Inc.

 ORGANIZATIONAL DESIGNS

Contingency perspective on bureaucracy

asks the questions:
⚫ When is bureaucracy a good choice for an
organization?
⚫ When it isn’t, what alternatives are available?

Copyright ©2015 John Wiley & Sons, Inc.

 ORGANIZATIONAL DESIGNS

Environment determines the most

appropriate design
⚫ Mechanistic designs work in a stable
environment
⚫ Organic designs work in a rapidly changing
and uncertain environment
Adaptive organizations operate with a minimum of
bureaucratic feature and encourage worker
empowerment and teamwork

Copyright ©2015 John Wiley & Sons, Inc.

 ORGANIZATIONAL DESIGNS

Mechanistic Designs Organic Designs

• Predictable goals • Adaptable goals

• Centralized authority • Decentralized authority
• Many rules and • Few rules and
procedures procedures
• Narrow spans of control • Wide spans of control
• Specialized tasks • Shared tasks
• Few teams and task • Many teams and task
forces forces
• Formal and impersonal • Informal and personal
means of coordination means of coordination

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 FIGURE 11.8 A CONTINUUM OF ORGANIZATIONAL DESIGN
ALTERNATIVES: FROM BUREAUCRATIC TO ADAPTIVE ORGANIZATIONS

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 ORGANIZATIONAL DESIGNS
Contemporary organizing trends include:
⚫ Fewer levels of management
Shorter chains of command
Less unity of command
⚫ Wider spans of control
⚫ More delegation and empowerment
⚫ Decentralization with centralization
⚫ Reduced use of staff

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 TRENDS IN ORGANIZATIONAL DESIGNS

Chain of command
• Links all employees with successively higher
levels of authority

Span of control
• The number of persons directly reporting to a
manager
Organizing trend:
• Organizations are being “streamlined” by
cutting unnecessary levels of management
• Flatter structures are viewed as a competitive
advantage

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 TRENDS IN ORGANIZATIONAL DESIGNS

More delegation and empowerment

• A common management failure is
unwillingness to delegate
• Delegation leads to empowerment
Organizing trend:
• Managers are delegating more and
finding more ways to empower people at
all levels

Copyright ©2015 John Wiley & Sons, Inc.

 TRENDS IN ORGANIZATIONAL DESIGNS

More delegation and empowerment

⚫ Delegation is the process of distributing and
entrusting work to other persons
⚫ The manager assigns responsibility, grants
authority to act, and creates accountability
⚫ Authority should be commensurate with
responsibility

Copyright ©2015 John Wiley & Sons, Inc.

 ORGANIZATIONAL DESIGNS
Three Steps in Delegation:

Create
Assign Grant
accountability
responsibility authority –
– require
– explain task allow others to
others to
and make decisions
report back on
expectations and act
results

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 ORGANIZATIONAL DESIGNS

Decentralization with centralization

Centralization is the
concentration of
authority for making
most decisions at Decentralization is the
the top levels of the dispersion of authority
organization to make decisions
throughout all levels of
the organization

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 ORGANIZATIONAL DESIGNS

Decentralization with centralization

• Centralization and decentralization not
an “either/or” choice

Organizing trend:
• Delegation, empowerment, and
horizontal structures contribute to more
decentralization in organizations
• Advances in information technology
allow for the retention of centralized
control Copyright ©2015 John Wiley & Sons, Inc.
 ORGANIZATIONAL DESIGNS
Reduced use of staff

• Staff positions provide technical expertise

for other parts of the organization
• No one best solution for dividing line-staff
responsibilities
Organizing trend:
• Organizations are downsizing
• Organizations are lowering costs and
increasing efficiency by employing fewer
staff personnel and using smaller staff
units
Copyright ©2015 John Wiley & Sons, Inc.