Management

ORGANIZING

Designing Organizational Structure

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 Learning Objectives
11.1

Describe six key elements in organizational design.

11.2 Contrast mechanistic and organic structures.
11.3 Discuss the contingency factors that favor either the
mechanistic model or the organic model of
organizational design.
11.4 Describe traditional organizational design options.
11.5 Discuss organizing for flexibility in the twenty-first
century.
 Elements of Organizational
Design
• Organizing: management function that involves arranging and
structuring work to accomplish the organization’s goals
• Organizational structure: the formal arrangement of jobs
within an organization
• Organizational chart: the visual representation of an
organization’s structure
• Organizational design: creating or changing an organization’s
structure
 Exhibit 11.1 Purposes of
Organizing
Divides work to be done into specific jobs and departments.
Assigns tasks and responsibilities associated with individual jobs.
Coordinates diverse organizational tasks.
Clusters jobs into units.
Establishes relationships among individuals, groups, and
departments. Establishes formal lines of authority.
Allocates and deploys organizational resources.
 Work Specialization

• Work specialization: dividing work activities into separate job

tasks
 Exhibit 11.2 Economies and
Diseconomies of Work Specialization

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 Departmentalization

• Departmentalization: the basis by which jobs are grouped

together
Exhibit 11.3 The Five Common Forms of
Departmentalization (1 of 3)

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Exhibit 11.3 The Five Common Forms of
Departmentalization (2 of 3)

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Exhibit 11.3 The Five Common Forms of
Departmentalization (3 of 3)

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 Today’s View on
Departmentalization
• Two trends are:
– Cross-functional teams: a work team composed of
individuals from various functional specialties. This has
become more popular as tasks become more complex.
– Customer departmentalization: emphasizes monitoring
and responding to customers’ needs
 Chain of Command

• Chain of command: the line of authority extending from

upper organizational levels to the lowest levels, which clarifies
who reports to whom
 Authority

• Authority: the line of authority extending from upper

organizational levels to the lowest levels, which clarifies who
reports to whom
• Line authority: authority that entitles a manager to direct the
work of an employee
• Staff authority: positions with some authority that have been
created to support, assist, and advise those holding line
authority
 Responsibility

• Responsibility: the obligation or expectation to perform any

assigned duties
• Unity of command: the management principle that each
person should report to only one manager
 Span of Control

• Span of control: the number of employees a manager can

efficiently and effectively manage
Exhibit 11.4 Contrasting Spans of Controls

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 Centralization and
Decentralization
• Centralization: the degree to which decision making is
concentrated at upper levels of the organization
• Decentralization: the degree to which lower-level employees
provide input or actually make decisions
 Exhibit 11.5 Centralization or
Decentralization
More Centralization More Decentralization
Environment is stable. Environment is complex, uncertain.
Lower-level managers are not as capable or Lower-level managers are capable and
experienced at making decisions as upper-level experienced at making decisions.
managers.
Lower-level managers do not want a say in Lower-level managers want a voice in
decisions. decisions.
Decisions are relatively minor. Decisions are significant.
Organization is facing a crisis or the risk of Corporate culture is open to allowing
company failure. managers a say in what happens.
Company is large. Company is geographically dispersed.
Effective implementation of company strategies Effective implementation of company
depends on managers retaining say over what strategies depends on managers having
happens. involvement and flexibility to make decisions.

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 Employee Empowerment

• Employee empowerment: giving employees more authority

(power) to make decisions
 Formalization

• Formalization: how standardized an organization’s jobs are

and the extent to which employee behavior is guided by rules
and procedures
Mechanistic and Organic Structures

• Mechanistic organization: an organizational design that’s rigid

and tightly controlled
• Organic organization: an organizational design that’s highly
adaptive and flexible
Exhibit 11.6 Mechanistic Versus Organic Organizations

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 Strategy and Structure

• An organization’s structure should facilitate goal achievement.

Because goals are an important part of the organization’s
strategies, it’s only logical that strategy and structure are
closely linked.
 Size and Structure

• There’s considerable evidence that an organization’s size

affects its structure, but once an organization grows past a
certain size, size has less influence on structure.
 Technology and Structure

• Unit production: the production of items in units or small

batches
• Mass production: the production of items in large batches
• Process production: the production of items in continuous
processes
 Exhibit 11.7 Woodward’s Findings on
Technology and Structure
blank Unit Production Mass Production Process
Production
Structural Low vertical Moderate vertical High vertical
characteristics: differentiation differentiation differentiation
blank Low horizontal High horizontal Low horizontal
differentiation differentiation differentiation
blank Low formalization High formalization Low
formalization
Most effective Organic Mechanistic Organic
structure:

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 Environmental Uncertainty
and Structure
• In stable and simple environments, mechanistic designs can
be more effective.
• The greater the uncertainty, the more an organization needs
the flexibility of an organic design.
 Traditional Organizational
Design Options
• Simple structure: an organizational design with little
departmentalization, wide spans of control, centralized
authority, and little formalization
• Functional structure: an organizational design that groups
together similar or related occupational specialties
• Divisional structure: an organizational structure made up of
separate, semiautonomous units or divisions
 Exhibit 11.8 Traditional Organizational Designs

A summary of the strengths and weaknesses of

each type of organizational design can be found
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 Team Structures

• Team structure: an organizational structure in which the

entire organization is made up of work teams
 Matrix and Project Structures

• Matrix structure: an organizational structure that assigns

specialists from different functional departments to work on
one or more projects
• Project structure: an organizational structure in which
employees continuously work on projects
Exhibit 11.9 Example of a Matrix
Organization

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 The Virtual Organization

• Virtual organization: an organization that consists of a small

core of full-time employees and outside specialists
temporarily hired as needed to work on projects
• Sometimes called “Network” or “Modular” organization
 Telecommuting

• Telecommuting: a work arrangement in which employees

work at home and are linked to the workplace by computer
 Compressed Workweeks, Flextime, and Job
Sharing

• Compressed workweek: a workweek where employees work

longer hours per day but fewer days per week
• Flextime (or flexible work hours): a 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
• Job sharing: the practice of having two or more people split a
full-time job
 The Contingent Workforce

• Contingent workers: temporary, freelance, or contract

workers whose employment is contingent on demand for
their services
 Review Learning Objective
11.1
• Describe six key elements in organizational design.
1. Work specialization
2. Departmentalization
3. Chain of command
4. Span of control
5. Centralization/decentralization
6. Formalization
 Review Learning Objective
11.2
• Contrast mechanistic and organic structures.
– Mechanistic structure: rigid, tightly controlled
– Organic structure: highly adaptable, flexible
 Review Learning Objective
11.3
• Discuss the contingency factors that favor either the
mechanistic model or the organic model of organizational
design.
– An organization’s structure should support the strategy.
– Structure can be affected by size and technology.
– Organic structure is most effective with unit production
and process production technology.
– Mechanistic structure is most effective with mass
production technology.
 Review Learning Objective
11.4
• Describe traditional organizational design options.
– Simple structure: little departmentalization, wide spans of
control, authority centralized in one person, and little
formalization
– Functional structure
– Divisional structure
 Review Learning Objective
11.5
• Discuss organizing for flexibility in the twenty-first century.
– Structures:
• Team
• Matrix
• Project
– Virtual organization
– Compressed workweeks, flextime, job sharing
– Contingent workforce