Foundations of Group Behavior

Dr. Shobitha Poulose

Assistant Professor
Department of Management Studies
National Institute of Technology Tiruchirappalli
Organizational
Structure
Learning Outcomes

1 2 3
Describe six key Define What factors Compare and
elements of affect organizational contrast traditional
designing structure? and contemporary
organizational organizational
structure. designs.
Defining Organizational
Structure
• Formal system of task and reporting relationships that
coordinates and motivates organizational members so
that they work together to achieve organizational goals
• Designing organization structure involves decisions
about six key elements:
1. Work specialization
2. Departmentalization
3. Chain of command
4. Span of control
5. Centralization and decentralization
6. Formalization
 Work Specialization

The degree to which tasks in the organization are

divided into separate jobs

Overspecialization can result in human diseconomies

from boredom, fatigue, stress, poor quality,
increased absenteeism, and higher turnover
Work Specialization

Division of Labor
• Makes efficient use of employee skills
• Increases employee skills through repetition
• Less between-job downtime increases productivity
• Specialized training is more efficient
• Allows use of specialized equipment
Departmentalization by Type

Functional Product Geographical Customer

Grouping jobs by Grouping jobs by Grouping jobs Grouping jobs by
functions product line based on territory type of customer
performed or geography and needs
 • The continuous line of authority
that extends from upper levels of
an organization to the lowest
levels of the organization and
Chain of Command clarifies who reports to whom
Chain of Command
Authority

• The rights inherent in a managerial position to tell people what to do and to expect them to do it

Responsibility

• The obligation or expectation to perform. Responsibility brings with it accountability (the need to report
and justify work to manager’s superiors)

Unity of Command

• The concept that a person should have one boss and should report only to that person

Delegation

• The assignment of authority to another person to carry out specific duties

Organizational Design (cont’d)
Span of Control
• The number of employees who can be effectively and efficiently supervised by a manager
• Width of span is affected by:
• Skills and abilities of the manager and the employees
• Characteristics of the work being done
• Similarity of tasks
• Complexity of tasks
• Physical proximity of subordinates
• Standardization of tasks
• Sophistication of the organization’s information system
• Strength of the organization’s culture
• Preferred style of the manager
Contrasting Spans of Control
Members at Each Level

(Highest) Assuming Span of 4 Assuming Span of 8

1 1 1
2 4 8
Organizational Level

3 16 64
4 64 512
5 256 4096
6 1024
7 4096

(Lowest)
Span of 4: Span of 8:
Employees: = 4096 Employees: = 4096
Managers (level 1–6) = 1365 Managers (level 1–4) = 585
Organizational Design (cont’d)
Centralization
• The degree to which decision making is concentrated at a single point in the organization
• Organizations in which top managers make all the decisions and lower-level
employees simply carry out those orders
Decentralization
• The degree to which lower-level employees provide input or actually make decisions
• Employee Empowerment
• Increasing the decision-making discretion of employees
 • More Centralization
• Environment is stable
Factors that • Lower-level managers are not as capable or
experienced at making decisions as upper-level
Influence the managers
• Lower-level managers do not want to have a say
Amount of in decisions
• Decisions are significant
Centralization • Organization is facing a crisis or the risk of
company failure
• Company is large
• Effective implementation of company strategies
depends on managers retaining say over what
happens
 • More Decentralization
Factors that • Environment is complex, uncertain
• Lower-level managers are capable and
Influence the experienced at making decisions
• Lower-level managers want a voice in decisions
Amount of • Decisions are relatively minor
Decentralization • Corporate culture is open to allowing managers to
have a say in what happens
• Company is geographically dispersed
• Effective implementation of company strategies
depends on managers having involvement and
flexibility to make decisions
Organizational Design (cont’d)
• Formalization
• The degree to which jobs within the organization are standardized and the
extent to which employee behaviour is guided by rules and procedures.
Factors Affecting Organizational Structure
 • Simple Structure
• A structure characterized by a low degree of
departmentalization, wide spans of control, authority
centralized in a single person, and little formalization

Common
Organization
Designs
Common Organization Designs (cont’d)
Bureaucracy
A structure of highly operating routine tasks achieved through
specialization, very formalized rules and regulations, tasks that
are grouped into functional departments, centralized authority,
narrow spans of control, and decision making that follows the
chain of command
 An organizational structure composed of all the
departments that an organization requires to
produce its goods or services.

Functional Advantages

Structure Encourages learning from others doing

similar jobs.
Easy for managers to monitor and
evaluate workers.

Disadvantages
Difficult for departments to Preoccupation with own department
communicate with others. and losing sight of organizational goals.
 Functional Structure

CEO

Human Finance &

Engineering Production Marketing
Resources Accounting

+ Efficiencies from putting together similar specialties

and people with common skills, knowledge, and
orientations
+ Coordination within functional area
+ In-depth specialization
– Poor communication across functional areas
– Limited view of organizational goals
 • An organizational structure composed of
separate business units within which are the
functions that work together to produce a
specific product for a specific customer.
• Divisions create smaller, manageable
parts of a firm.
Divisional • Divisions develop a business-level
Structures strategy to compete.
• Divisions have marketing, finance, and
other functions.
• Functional managers report to divisional
managers who then report to corporate
upper management.
 • Product Structure
• Customers are served by self-contained
divisions that handle a specific type of
Types of product or service.
Divisional • Allows functional managers to specialize
in one product area.
Structures • Division managers become experts in
their area.
• Removes need for direct supervision of
division by corporate managers.
• Divisional management improves the
use of resources.
 Product Structure
+ Allows specialization in
particular products and services
+ Managers can become experts
in their industry

+ Closer to customers

– Duplication of functions

– Limited view of organizational

goals
 • Geographic Structure
• Each regional or a country or area with
Types of customers with differing needs is served by a
local self-contained division producing
Divisional products that best meet those needs.
Structures • Global geographic structure
(cont’d) • Different divisions serve each world region
when managers find different problems or
demands across the globe.
• Generally, this structure is adopted when
managers are pursuing a multi-domestic
strategy.
Geographic
Structure + More effective and efficient handling of specific
regional issues that arise
+ Serve needs of unique geographic markets better
– Duplication of functions
– Can feel isolated from other organizational areas
 • Market (Customer) Structure
• Each kind of customer is served by a
Types of self-contained division
Divisional • Global market (customer) structure
Structures • Customers in different regions buy
similar products so firms can locate
(cont’d) manufacturing facilities and product
distribution networks where they
decide is best.
• Firms pursuing a global strategy will
use this type of structure.
 Market Structures

+ Customers’ needs and problems can be met by

specialists
– Duplication of functions
– Limited view of organizational goals
Process Departmentalization

Plant
Superintendent

Sawing Planing and Assembling Lacquering Finishing Inspection &

Department Milling Department and Sanding Department Shipping
Manager Department Manager Department Manager Department
Manager Manager Manager

+ More efficient flow of work activities

– Can only be used with certain types of products
 • Matrix Structure
• An organizational structure that
simultaneously groups people and resources
by function and product.
Matrix Design • Results in a complex network of superior-
Structure subordinate reporting relationships.
• The structure is very flexible and can
respond rapidly to the need for change.
• Each employee has two bosses
(functional manager and product
manager) and possibly cannot satisfy
both.
Matrix Structure
Tall and Flat Organizations

• Tall structures have many levels of authority and narrow spans of control.
• As hierarchy levels increase, communication gets difficult, creating
delays in the time being taken to implement decisions.
• Communications can also become garbled as it is repeated through
the firm.
• Flat structures have fewer levels and wide spans of control.
• Structure results in quick communications but can lead to overworked
managers.
Tall Organizations
Flat Organizations
Organizational
Culture
• Shared values, principles,
traditions, and ways of doing
things that influence the way an
organization’s members act
Where culture comes from
How do employees learn the
culture?
Sources of an Organization’s Culture