Chapter 8
Designing Organizational Structures
Prepared by
Norm Althouse
University of Calgary
Copyright © 2011 by Nelson Education Ltd.
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Learning Outcomes
1 Identify the five structural building blocks that managers use to design
organizations.
2 Examine the tools companies use to establish relationships within their
organizations.
3 Show how the degree of centralization/decentralization can be altered to
make an organization more successful.
4 Describe the differences between a mechanistic and organic organization.
5 Discuss the contemporary organizational structures companies are using.
6 Summarize why companies are using team-based organizational structures.
Chapter 8
7 Explain how the informal organization affects the performance of the
company.
8 List some of the trends that are influencing the way businesses organize.
Copyright © 2011 by Nelson Education Ltd.
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Organizational Structures
Chapter 8
Organizational
Structures
Copyright © 2011 by Nelson Education Ltd.
In today’s dynamic business
environment, business
structures need to be designed
so that the organization can
quickly respond to new
competitive threats and
changing customer needs.
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Building Organizational Structures
Span of Control
Chapter 8
Division
of Labour
Centralization
of
Decision Making
Departmentalization
Copyright © 2011 by Nelson Education Ltd.
Delegation
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Structural Building Blocks
1.
2.
3.
4.
Chapter 8
5.
Division of Labour
– specialization of tasks
Departmentalization
– creating an organization chart
Delegation (formerly: Managerial Hierarchy)
– chain of command
– delegation of authority
Span of Control
– narrow span
– wide span
Centralization of Decision Making
– degree of centralization vs. decentralization
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Chapter 8
Five Types of Departmentalization
Functional
Based on the primary
functions performed
Product
Based on the goods/services
produced or sold
Process
Based on the production
process used
Customer
Based on the primary type of
customer served
Geographic
Based on the geographic
segmentation of organizational units
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Chapter 8
Functional Organization
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Thomson Canada Limited
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Chapter 8
Product (or Service) Organization
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Chapter 8
Organization by Process
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Chapter 8
Organization by Customer
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Chapter 8
Geographic Organization
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Chapter 8
Organizational Chart Example
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Managerial Hierarchy
Top
Management
Power
Middle
Management
Chapter 8
Supervisory
Management
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Employees
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Chain of Command
Chapter 8
Chain of Command
Copyright © 2011 by Nelson Education Ltd.
The line of authority that
extends from one level
of an organization’s
hierarchy to the next,
from top to bottom,
and makes clear who
reports to whom.
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Span of Control
Chapter 8
Span of Control
(span of management)
Narrow Span:
few subordinates
Copyright © 2011 by Nelson Education Ltd.
The number of employees
a manager directly
supervises; also called
span of management.
Wide Span:
many subordinates
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Optimal Span of Control
Factors Determining
Optimal Span of Control
Nature of the task
Location of the workers
Ability of the manager
to delegate responsibility
Chapter 8
Amount of interaction and feedback
between workers and manager
Level of skill and motivation
of the workers
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Chapter 8
Degree of Centralization
Centralization
The degree to which
formal authority is
concentrated in one
area or level of an
organization.
Decentralization
The process of pushing
decision-making
authority down the
organizational hierarchy.
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Chapter 8
Mechanistic Versus Organic Organization
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Chapter 8
Flat Versus Tall Organizational Structures
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Chapter 8
Common Organizational Structures
Line Organization
An organizational structure with
direct, clear lines of authority
and communication flowing
from the top managers downward.
Line-and-Staff
Organization
An organizational structure
that includes both line and
staff positions.
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Line versus Staff Positions
Line Position
Chapter 8
Staff Position
Copyright © 2011 by Nelson Education Ltd.
All positions in the organization directly
concerned with producing goods and services
and that are directly connected from
top to bottom
Positions held by individuals who provide
the administrative and support services that
the line employees need to achieve the
firm’s goals
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Chapter 8
Common Organizational Structures
Matrix Organization
An organizational structure that combines
functional and product departmentalization
by bringing together people from different
functional areas to work on a special project.
Committee Structure
An organizational structure in which
authority and responsibility are held by a
group rather than an individual.
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Chapter 8
Matrix Structure
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Teams
Work Groups:
Groups that share resources and coordinate efforts
to help members better perform their individual
jobs.
Chapter 8
Work Teams:
Similar to work groups, but also requires the
pooling of knowledge, skills, abilities, and
resources to achieve a common goal.
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Matrix Structure
 Advantages
 Disadvantages
teamwork
– power struggles
efficient use of resources – confusion among team
members
flexibility
– lack of cohesiveness
ability to balance
conflicting objectives
– higher performance
– opportunities for personal
and professional growth
Chapter 8
–
–
–
–
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Chapter 8
Group Decision Making
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Chapter 8
Types of Teams
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Problem-Solving Teams
Generate ideas and alternatives and
may recommend a course of action
Self-Managed Work Teams
Manage themselves without formal
supervision, take responsibility for
goal setting, planning work activities
Cross-Functional Teams
Made up of employees from same
hierarchical level, but different functional areas
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Functions of the Informal Organization
 Source of friendships and social contact
 Helps employees feel better informed and
connected with what is going on
 Provides informal status and recognition
Chapter 8
 Aids the socialization of new employees
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Trends in Organizational Structures
Re-engineering Organizational Structure
Virtual Corporation
Virtual Teams
Chapter 8
Outsourcing
Structuring for Global Mergers
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