Chapter 13
Organization
Structure and
Design
PowerPoint Presentation by Charlie Cook
Copyright © 2005 South-Western. All rights reserved.
Learning Objectives
After reading and studying this chapter and doing the
exercises, you should be able to:
1. Identify and define the foundation concepts of organization
structure, including the informal organization.
2. Specify the basic features of the bureaucratic form of
organization structure, including how it is divided into
departments.
3. Describe three key modifications of a bureaucratic structure:
matrix, flat, and outsourcing.
4. Describe the two contemporary organizational designs
referred to as horizontal structures and network structures.
5. Specify the criteria for an effective organization design.
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Learning Objectives (cont’d)
After reading and studying this chapter and doing the
exercises, you should be able to:
6. Understand why a new type of organization chart called an
organigraph can contribute to understanding organization
structure.
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Organizations
• Organization
 Is a collection of people working together to achieve a
common purpose (or simply a big group).
• Organization structure
 Is the arrangement of people and tasks to accomplish
organizational goals.
• Organizational design
 Is the process of creating a structure that best fits a
purpose, strategy, and environment.
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Types of Organizational Structures
• Mechanistic organizations
 Hierarchical bureaucracies that:
 Emphasize specialization and control
 Engage in vertical communications
 Rely heavily on rules, policies, and procedures.
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Types of Organizational Structures
• Organic structures
 Networks designed to respond to rapid changes in the
environment by emphasizing:
 Horizontal
specialization and personal coordination
 Extensive
informal communications
 Loose
rules, policies, and procedures
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Organizational Structures (cont’d)
• Formal organizational structure
 Is an official statement of the reporting relationships,
rules, and regulations that guide and govern the
conduct of business by the organization.
• Informal organizational structure
 Is a set of unofficial working relationships providing
the flexibility to take care of events and transactions
not covered by the formal structure.
 Is revealed using social network analysis to trace
informal social relationships and communication
channels.
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Organizational Structures (cont’d)
• Formalization
 Is the degree to which expectations regarding the
methods of work are specified, written down, and
enforced.
 Produces
an organization with a highly specialized
labor and high delegation of authority.
 Is associated with mechanistic (bureaucratic)
organizations.
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Organizational Structures (cont’d)
• Centralization
 Is the extent to which executives delegate authority to
lower organizational units.
 Less
delegation = more centralization.
 Strategic decisions are more likely to be centralized
than operational decisions.
 The use of functional units is a feature of
centralization.
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Organizational Structures (cont’d)
• Complexity
 Refers to the number of different job titles and
organizational units in an organization.
 Complexity increases the difficulty of managing an
organization and typically increases with the size of
the organization.
• Differentiation
 A horizontally differentiated organization will have
many different job titles.
 A vertically differentiated organization will have many
different levels.
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Organizational Structures (cont’d)
• Coupling
 Is the extent to which organizational parts are
interdependent.
 Tight coupling between parts is indicated if a minor
change in one part produces a large change in an
associated part.
 Has increased due to the increasing interdependence
of the parts or subsystems of organizations today.
 Organizational design is influenced by coupling
and the increased necessity for flexibility to meet
changing market conditions.
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Weber’s Ideal Organization: the Bureaucracy
1.
Rules and procedures controlling the organizational
structure
2.
A high degree of differentiation among organizational
functions
3.
A high degree of job specialization
4.
An organization of offices determined by hierarchy, with
each unit reporting to a higher unit
5.
A heavy emphasis on rules and norms to regulate behavior
6.
Interpersonal relations characterized by impersonality in
place of favoritism
7.
Selection and promotion based on merit
8.
All administrative actions recorded in writing
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Forms of Bureaucratic Organizations
• Machine bureaucracy
 Uses standardized work processes and is efficient.
 Best use is in large organizations.
• Professional bureaucracy
 Standardizes skills for coordination and is composed
of a core of highly trained professionals.
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The Bureaucratic Form of Organization
EXHIBIT 13-1
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Bureaucratic Organizations
• Contributions
 Large-scale accomplishments
 Accountability for results
 Managers with precious skills and expertise
 Valuable organizational memory
• Potential dysfunctions
 Suppression of innovation and decision making
 Lower productivity
 Inconvenience and inefficiency
 High worker frustration and low satisfaction
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Departmentalization
• The process of subdividing work into specialized
departments.
 Advantageous
in enhancing product growth or
service to customers.
• Types of departmentalization:
 Functional
 Territorial
 Product or service
 Customer
 Hybrid
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Departmentalization (cont’d)
• Functional departmentalization
 Grouping people according to their expertise
 Most common type of organization
• Territorial departmentalization
 Grouping subunits according to the geographic
areas that they serve.
 Internationalization
of business has increased the
need for organizing subunits territorially.
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Functional Departmentalization within
the Davenport Machine Company
EXHIBIT 13-2
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Departmentalization (cont’d)
• Product/Service departmentalization
 Is arranging units by the product or service they
provide.
• Customer departmentalization
 Creates a structure based on customer needs.
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Product/Service Departmentalization at
GE Capital
EXHIBIT 13-3
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Other Organizational Structures
• Hybrid (or Mixed) organization structure
 Combines the advantages of different organizational
types.
 Both specialized and self-contained units are included
within the organizational structure.
• Line versus staff
 Line groups are responsible for the primary purposes
of the firm whereas staff groups are responsible for
secondary purposes.
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Hybrid Organization Structure
EXHIBIT 13-4
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Matrix Organization
• A project structure superimposed on a functional
structure to take advantage of new opportunities
and solve special problems.
 Projects are temporary groups of specialists working
under one manager to accomplish a fixed objective
such as launching a new product.
 Matrix
structure creates a dual reporting
challenge—the involved employees may have to
report to two bosses.
 A key advantage is its ability to implement projects
quickly.
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Matrix Organization
in an Electronics
Company
EXHIBIT 13-5
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Organizational Structures (cont’d)
• Flat organization
 Has relatively few levels
 Is less bureaucratic because:
 There
are fewer managers available to review and
approve decisions.
 The
short chain-of-command creates less concern
about authority differences among people.
 Are more efficient than tall organizations.
 Downsizing to a flatter structure has strong effects on
surviving employees.
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Outsourcing as an Organizational
Arrangement
• Outsourcing
 Is having work done by other organizations as a
method of dividing the work between groups on the
outside with groups on the inside.
 Reduces
the need for employees and physical
assets and reduce payroll costs.
 Can
create ethical dilemmas for companies who
have no control over the actions of their
outsourcing supplier.
 Can
cause conflict with unions over outsourcing.
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Leading-Edge Organization Structures
• The horizontal structure
 Is the arrangement of work by teams that are
responsible accomplishing a process.
 Is a structure in which employees take collective
responsibility for customers.
• Reengineering
 Is the radical redesign of work to achieve substantial
improvements in performance.
 Searches for the most efficient way to perform a task.
 Organizes work horizontally rather than vertically.
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A Horizontal Structure
EXHIBIT 13-6
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The Network Structure
• Network structure (or Virtual organization)
 Is a temporary association of otherwise independent
firms that are linked by technology to share resources
and markets.
 Is horizontally oriented.
 Requires that its members
trust one another.
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Nine Criteria for an Effective Organization
Design
Source: Diagram developed from text information presented in Michael Gould and Andrew Campbell,
“Do You Have a Well-Designed Organization?” Harvard Business Review, March 2002, pp. 117–124.
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EXHIBIT 13-7
13–30
Organigraphs: Drawing How Companies
Really Work
• Organigraphs
 A map that provides an overview of the company’s
functions and the way people organize themselves at
work.
 Help
in the understanding of organizational
functioning.
 Assist
in expanding into new markets and
identifying opportunities.
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