CHAPTER 6

ORGANIZATIONAL STRUCTURE AND

DESIGN
 DEFINITION
• Organizing
– The function of management that creates the
organization’s structure.
• Organization Design
– When managers develop or change the
organization’s structure.
 ELEMENTS IN ORGANIZATIONAL
DESIGN
• Work specialization
• Departmentalization
• Authority and Responsibility
• Span of control
• Centralization versus Decentralization
• Formalization
 WORK SPECIALIZATION
• Dividing work activities into separate job
tasks.
• Also known as division of labor.
• Allows organizations to efficiently use the
diversity of skills that workers have.
DEPARTMENTALIZATION
 AUTHORITY AND RESPONSIBILITY
• Chain of command
– The line of authority extending from upper
organizational levels to lower levels, which
clarifies who reports to whom.
• Authority
– The rights to inherent in a managerial position to
give orders and expect the orders to be obeyed.
• Responsibility
– An obligation to perform assigned duties.
 AUTHORITY AND RESPONSIBILITY
(cont…)
• Types of authority
– Line authority: entitles manager to direct the work
of an employee.
– Staff authority: functions to support, assist,
advise, and generally reduce some of their
informational burdens.
• Unity of command
– Structure in which each employee reports to only
one manager.
 AUTHORITY AND RESPONSIBILITY
(cont…)
• Authority versus Power
– Authority: it is a right. Its legitimacy is based on an
authority figure’s position in the organization. It
goes with the job.
– Power: an individual’s capacity to influence
decisions.
 SPAN OF CONTROL
• The number of employees a manager can
efficiently and effectively supervise.
• The more training and experience employees
have, the less direct supervision they need.
 SPAN OF CONTROL (cont…)
• Contingency variables:
– Similarity of employee tasks.
– The complexity of those tasks.
– The physical proximity of employees.
– The degree to which standardized procedures are in
place.
– The sophistication of the organization’s management
information system.
– The strength of the organization’s value system.
– Preferred managing style of the manager.
 CENTRALIZATION AND
DECENTRALIZATION
• Centralization
– The degree to which decision making takes place
at upper levels of the organization.
• Decentralization
– The degree to which lower level managers provide
input or actually make decisions.
 FORMALIZATION
• How standardized an organization’s jobs are
and the extent to which employee behavior is
guided by rules and procedures.
• Highly formalized organizations:
– Explicit job descriptions
– Numerous organizational rules
– Clearly defined procedures covering work
processes
– Little discretion
 FORMALIZATION (cont…)
• Low formalization:
– Employees have more discretion in how they do
their work.
 2 GENERIC ORGANIZATION
STRUCTURE MODELS
• Mechanistic Organization/Bureaucracy
– A bureaucratic organization; a structure that’s high
in specialization, formalization, and centralization.
• Organic Organization
– Highly adaptive form that is as loose and flexible
as the mechanistic organization is rigid and stable.
– Low in specialization, formalization, and
centralization.
 CONTINGENCY FACTORS FOR
ORGANIZATIONAL DESIGN
• Strategy
• Size
• Technology
• Environment
 STRATEGY
• Certain structural designs work best with
different organizational strategies.
• Eg: Flexibility and free flowing information of the
organic structure works well when an
organization is pursuing a meaningful and unique
innovations.
• Eg: mechanistic organization with its efficiency,
stability, and tight controls work best for
companies wanting to tightly control costs.
 SIZE
• Large organizations considered to be those
more than 2000 employees tend to have more
specialization, departmentalization,
centralization, and rules and regulations than
small organizations.
• Basically, the bigger the organization, the
more mechanistic the organization structure
will be.
 TECHNOLOGY
• Organization uses some form of technology to
covert its inputs into outputs.
• Eg: employees at FedEx Kinko’s do custom
design and print jobs for individual customers.
 ENVIRONMENT
• Mechanistic organizations are most effective in
stable environments.
• Organic organizations are best matched with
dynamic and uncertain environments.
• Dynamic environmental forces:
– Global competition
– Accelerated product innovation by competitors
– Knowledge management
– Increased demands from customers for higher quality
and faster deliveries
COMMON ORGANIZATIONAL DESIGNS
• Simple structure
– Organizational design with low
departmentalization, wide spans of control,
authority centralized in a single person, and little
formalization.
• Functional structure
– Organizational design that groups similar or
related occupational specialties together and
applied to the entire organization.
COMMON ORGANIZATIONAL DESIGNS
(cont…)
• Divisional structure
– An organization structure made up of separate
business units or divisions.
 CONTEMPORARY ORGANIZATIONAL
DESIGNS
• Team structure
– The entire organization is made up of work teams that
do the organization’s work.
– Employee teams design and do work that they think is
best and held responsible for their work.
• Matrix-Project structure
– Assigns specialists from different functional
departments to work on a projects led by a project
manager.
– When finish, they go back to their functional
departments.
 CONTEMPORARY ORGANIZATIONAL
DESIGNS (cont…)
• Matrix structure
– Project structure: Which employees continuously
work on projects.
– Has no formal departments where employees
return at the completion of a project.
– Employees take their specific skills, abilities, and
experiences to other projects.
 CONTEMPORARY ORGANIZATIONAL
DESIGNS (cont…)
• Boundaryless organization
– Which an organization whose design is not
defined by, or limited to, the horizontal, vertical,
or external boundaries imposed by a predefined
structure.
– Two types:
• Internal
• External
 CONTEMPORARY ORGANIZATIONAL
DESIGNS (cont…)
• Internal
– The horizontal ones imposed by work
specialization and departmentalization and the
vertical ones that separate employees into
organizational levels and hierarchies.
• External
– The boundaries that separate the organization
from its customers, suppliers, and other
stakeholders.
– Eg: Virtual and network organization
 CONTEMPORARY ORGANIZATIONAL
DESIGNS (cont…)
• Virtual organization
– Consists of a small core of full time employees and
outside specialists temporarily hired as needed to
work on projects.
• Network organization
– Which is one that uses its own employees to do
some work activities and networks of outside
suppliers to provide other needed product
components or work process.
 ORGANIZATIONAL DESIGN
CHALLENGES
• Employees connected
• Managing global structural issues
• Building a learning organization
• Designing flexible work arrangements
 EMPLOYEES CONNECTED
• Managers is finding a way to keep widely
dispersed and mobile employees connected to
the organization.
• Technologies such as:
– Handheld devices with e-mail, calendars and contacts.
– Videoconferencing using broadband networks and
webcams.
– Giving employees key fobs to log onto corporate
network to access e-mail and company data.
– Cell phones switch between cell networks and
corporate Wi-Fi.
 MANAGING GLOBAL STRUCTURAL
ISSUES
• Researchers concluded that structures and
strategies of organizations worldwide are
similar, while the behavior between teams is
maintaining its cultural uniqueness.
• So basically, when designing or changing
structures, managers need to think about
cultural implications.
BUILDING A LEARNING ORGANIZATION
• Learning organization
– An organization that has developed the capacity
to continuously learn, adapt, and change.
– Employees are practicing knowledge management
by continually acquiring and sharing new
knowledge and are willing to apply that
knowledge in making decisions or performing
their work.
 ORGANIZATIONAL DESIGN
• Employees are free to work together and
collaborate in doing the organization’s work the
best way they can, and learn from each other.
• Employees work in teams on whatever activities
need to be done, and these employee teams are
empowered to make decisions about their work
or resolving issues.
• Managers serve as facilitators, supporters, and
advocates.
 INFORMATION SHARING
• Information must be shared among members
meaning, employees must engage in
knowledge management by sharing
information openly, timely manner, and as
accurately as possible.
• Environment is conducive to open
communication and extensive information
sharing.
 LEADERSHIP
• Important functions:
– Facilitating the creation of a shared vision for the
organization’s future and then keeping
organizational members working toward that
vision.
– Support and encourage the collaborative
environment that’s critical to learning.
 ORGANIZATIONAL CULTURE
• Everyone agrees on a shared vision and everyone
recognizes the inherent relationships among the
organization’s processes, activities, functions, and
external environment.
• Foster strong sense of community, caring for each
other, and trust.
• Employees feel free to communicate openly,
share, experiment, and learn without fear of
criticism or punishment.
 DESIGNING A FLEXIBLE WORK
ARRANGEMENTS
• Telecommuting
– Which employees work at home and linked to
workplace by computer.
• Compressed workweeks
– Which employees work longer hours per day but
fewer days per week.
• Flextime
– Scheduling system in which employees are required to
work a specific number of hours a week but are free
to vary those hours within certain limits.
 DESIGNING A FLEXIBLE WORK
ARRANGEMENTS (cont…)
• Job sharing
– The practice of having two or more people split a
full time job.
• Contingent workers
– Temporary, freelance, or contract workers whose
employment is contingent upon demand for their
services.