Chapter 10
Structuring Organizations
Learning Objectives
 Explain how differentiation and integration define
performance cultures
 Describe how managers vertically organize processes
and teams to centralize decision making
 Describe how mangers horizontally organize processes
and teams to distribute decision making throughout the
organization
 Show how managers combine vertical and horizontal
approaches to organizational design in order to be more
adaptive
 Identify additional resources that contemporary
managers use to increase organizational adaptability
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The Basics (p. 256)
 Hierarchy
• Vertically organized structure of power
relationships, where the top level holds the most
power and resources
• Every organization needs some type of structure in
place to be successful
• Unites the different units of a company
• Brings units in tune with the company’s
underlying principles, core purposes, goals, and
objectives
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The Basics (cont.)
 Hierarchy comes in many states
Figure 10.1
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The Basics (cont.)
 Designing performance cultures (p. 256)
• Through the creation of an organizational culture,
managers can, consciously or unconsciously, design
a performance culture
• Differentiation – process through which managers
divide labor based on tasks and functions (p. 257)
• Integration – horizontal coordination between
functions, departments, and organizational activities
 Organizations must strike a balance between
differentiation and integration
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The Basics (cont.)
 Structure must be modified to adapt to changes
in the internal and external environments
• Organic organization – highly adaptive structure
defined by horizontal integration, distributed
decision making, and employees with a high
degree of generalization (p. 257)
• Span of control – the optimum number of direct
reports that a person can manage effectively
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The Basics (cont.)
 Specialization (p. 258)
• Form of differentiation
• Focusing a group or individual’s activities based
on strengths, aptitudes, or skills
 Coordination
• Synchronization of an organization’s functions to
ensure efficient use of resources in pursuit of goals
and objectives
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The Basics (cont.)
 To give clarity to the integration process,
managers should rely on:
• Standardization – performance context where
policies and procedures seek to create uniform
results (p. 258)
• Formalization – degree to which policies and
procedures determine specific jobs and functions
• Delegation – when a manager grants power and
authority
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Vertical Approach (p. 259)
 Vertical organization structure
• Characterized by hierarchical authority and
communication channels
• Authority – implicit and explicit power that a
manager or employee has to fulfill an organizational
function or role
• Chain of command – predefined structural order of
authority that determines how decisions are made
and communicated
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Vertical Approach (cont.)
Figure 10.2
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Vertical Approach (cont.)
Corporate governance (p. 261)
•Compendium of polices intended to ensure
transparency and fulfillment of duties to stakeholders
Broker
•Trusted intermediary that facilitates mutually-agreed
upon outcomes for two or more parties
Organization chart
•Visual document that communicates how a company
is organized
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Vertical Approach (cont.)
 Vertical model at work (p. 261)
• Network organization – a group of independent
companies that organize themselves to appear as a
larger entity (p. 262)
 Changing organizational structure
• Unity-of-command principle – each employee
reports to and is accountable to only one manager
(p. 263)
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Horizontal Approach (p. 264)
 Decentralized structure
• Relies on all employees to collect and
communicate information in order to make
decisions and recommend changes
 Researching organizational structures
• Departmentalization – groups together processes
and jobs based on functions, products or customers
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Horizontal Approach (cont.)
 Functional organization (p. 265)
• Hierarchical structure where employees are
managed through clear levels of authority
• Autonomy – level of individual discretion that an
employee has to make decisions
 Divisional organization
• Processes and jobs are grouped based on clearly
defined market segments or geography
 Matrix organization
• Facilitates horizontal integration and collaboration
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Beyond the Organization: Free Agents
and Virtual Teams (p. 268)
Flexible work arrangements
•Free agents - independent workers that supply
organizations with talent for projects or time-bound
objectives
•Telecommuting - employee given flexibility in
terms of work location and, often, work hours too
•Virtual team – group of employees who work
across barriers consisting of time, distance, and
organizational boundaries (p. 269)
Linked together by information and communication
technologies
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