Management 11e

John Schermerhorn

Chapter 10 Organization Structures and Design

Planning Ahead Chapter 10 Study Questions

1. What is organizing as a management function? 2. What are the traditional organization structures? 3. What are the types of horizontal organization structures? 4. How are organizational designs changing the workplace?

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Study Question 1: What is 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, workflows, reporting relationships, and communication channels that link together diverse individuals and groups

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Figure 10.1 Organizing viewed in relationship with the other management functions

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Study Question 1: What is organizing as a management function?

Formal structures
The structure of the organization in its official state

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Study Question 1: What is 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 of work

Supervisory relationships

Communication channels

Major subunits

Levels of management

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Study Question 1: What is 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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Study Question 1: What is organizing as a management function?

Informal structures
Potential advantages of informal structures:
Helping people accomplish their work Overcoming limits of formal structure Gaining access to interpersonal networks Informal learning

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Study Question 1: What is organizing as a management function?

Potential disadvantages of informal structures:

May work against best interests of entire organization Diversion of work efforts from important objectives

Susceptibility to rumor

May carry inaccurate information

May breed resistance to change

Feeling of alienation by outsiders

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Study Question 2: What are the traditional types of organization structures?

Traditional organization structures

Departmentalization
Groups people with and jobs into work units or formal teams These formal teams are linked to create three major types of traditional organizational structures

Functional

Divisional

Matrix

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Study Question 2: What are the traditional types of 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 10.2 Functional structures in a business, branch bank, and community hospital

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Study Question 2: What are the traditional types of 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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Study Question 2: What are the traditional types of organization structures?

Potential disadvantages of functional structures:

Difficulties in pinpointing responsibilities Functional chimneys problem Sense of cooperation Narrow view of Excessive and common performance upward referral purpose break objectives of decisions down

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Study Question 2: What are the traditional types of 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 10.3 Divisional structures based on product, geography, customer, and process

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Study Question 2: What are the traditional types of organization structures?

Types of divisional structures and how they group job and activities:
Product structures
focus on a single product or service

Geographical structures
focus on the same location or geographical region

Customer structures
focus on the same customers or clients

Process structures
focus on the same processes
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Study Question 2: What are the traditional types of 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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Study Question 2: What are the traditional types of organization structures?

Potential disadvantages of divisional structures:

Duplication of resources and efforts across divisions

Competition and poor coordination across divisions

Emphasis on divisional goals at expense of organizational goals

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Study Question 2: What are the traditional types of organization structures?

Matrix structure
Combines functional and divisional structures to gain advantages and minimize disadvantages of each Used in:
Manufacturing Service industries Professional fields Non-profit sector Multi-national corporations

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Figure 10.4 Matrix structure in a small multi-project business firm

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Study Question 2: What are the traditional types of 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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Study Question 2: What are the traditional types of organization structures?

Potential disadvantages of matrix structures:

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

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Study Question 3: What are the types of 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 10.5 How a team structure uses cross-functional teams for improved lateral relations

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Study Question 3: What are the types of horizontal organization structures?

Potential advantages of team structures:

Eliminates difficulties with communication and decision making Eliminates barriers between operating departments Improved morale Greater sense of involvement and identification Increased enthusiasm for work Improved quality and speed of decision making

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Study Question 3: What are the types of horizontal organization structures?

Potential disadvantages of team structures:

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

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Study Question 3: What are the types of 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 10.6 A network structure for a Web-based retail business

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Study Question 3: What are the types of 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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Study Question 3: What are the types of horizontal organization structures?

Potential disadvantages of network structures:

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

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Study Question 3: What are the types of 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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Study Question 3: What are the types of horizontal organization structures?

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

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Study Question 3: What are the types of horizontal organization structures?

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

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Study Question 3: What are the types of 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 10.7 The boundaryless organization eliminates internal and external barriers

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Study Question 4: How are organizational designs changing the workplace?

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

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Study Question 4: How are organizational designs changing the workplace?

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

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Study Question 4: How are organizational designs changing the workplace?

Contingency perspective on bureaucracy asks the questions:

When is a bureaucratic form a good choice for an organization? What alternatives exist when it is not a good choice?

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Study Question 4: How are organizational designs changing the workplace?

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
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Study Question 4: How are organizational designs changing the workplace?

Mechanistic Designs Predictable goals Centralized authority Many rules and procedures Narrow spans of control Specialized tasks Few teams and task forces Formal and impersonal means of coordination
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Organic Designs Adaptable goals Decentralized authority Few rules and procedures Wide spans of control Shared tasks Many teams and task forces Informal and personal means of coordination
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Figure 9.8 A continuum of organizational design alternatives: from bureaucratic to adaptive organizations

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Study Question 4: How are organizational designs changing the workplace?

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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Study Question 4: How are organizational designs changing the workplace?

Shorter chains of command

The line of authority that vertically links all persons with successively higher levels of management

Organizing trend:
Organizations are being streamlined by cutting unnecessary levels of management Flatter structures are viewed as a competitive advantage
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Study Question 4: How are organizational designs changing the workplace?

Less unity of command

Each person in an organization should report to one and only one supervisor

Organizing trend:
Organizations are using more cross-functional teams, task forces, and horizontal structures Organizations are becoming more customer conscious Employees often find themselves working for more than one boss
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Study Question 4: How are organizational designs changing the workplace?

Wider spans of control

The number of persons directly reporting to a manager

Organizing trend:
Many organizations are shifting to wider spans of control as levels of management are eliminated Managers have responsibility for a larger number of subordinates who operate with less direct supervision
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Study Question 4: How are organizational designs changing the workplace?

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
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Study Question 4: How are organizational designs changing the workplace?

More delegation and empowerment

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

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Study Question 4: How are organizational designs changing the workplace?

Three Steps in Delegation:

Assign responsibility explain task and expectations

Grant authority allow others to make decisions and act

Create accountability require others to report back on results

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Study Question 4: How are organizational designs changing the workplace?

Decentralization with centralization

Centralization is the concentration of authority for making most decisions at the top levels of the organization

Decentralization is the dispersion of authority to make decisions throughout all levels of the organization

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Study Question 4: How are organizational designs changing the workplace?

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

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Study Question 4: How are organizational designs changing the workplace?

Reduced use of staff

Staff positions provide technical expertise for other parts of the organization Line and staff managers may disagree over staff authority Advisory authority Functional authority No one best solution for dividing line-staff responsibilities

Organizing trend:
Organizations are reducing staff size Organizations are seeking increased operating efficiency by employing fewer staff personnel and smaller staff units
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Chapter 10 Case

Nike: Spreading out to stay together

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