The Basic Elements of Organizing Copyright © Houghton Mifflin Company. All rights reserved. 11–1 The Elements Organizing • Organizing – Deciding how to best group organizational activities and resources. Here are the main elements we will cover: • Job Design • Departmentalization • Chain of Command • Span of Management • Authority • Centralization vs. Decentralization • Tall vs. Flat Organizations Copyright © Houghton Mifflin Company. All rights reserved. 11–2 Job Design-• Job Specialization (Division of Labor) The degree to which the overall task of the organization is broken down and divided into smaller component parts. – Benefits of Specialization • • • • Workers can become proficient at a task. Transfer time between tasks is decreased. Specialized equipment can be more easily developed. Employee replacement becomes easier. – Limitations of Specialization • boredom and dissatisfaction with mundane tasks. • Anticipated benefits do not always occur. Copyright © Houghton Mifflin Company. All rights reserved. 11–3 Adam Smith’s Example of Job Specialization Making a pin (nail) requires 18 tasks 1 worker doing all 18 tasks might make 20 pins (nails) a day. 20 workers = (20 x 20) = 400 pins ______________________________ With specialization: 20 workers make 100,000 pins a day. 1 worker = 5,000 pins 20 pins vs. 5,000 pins per worker Copyright © Houghton Mifflin Company. All rights reserved. 11–4 Alternatives to Specialization • Job Rotation – Systematically moving employees from one job to another in an attempt to reduce employee boredom. • Job Enlargement – An increase in the total number of tasks workers perform. • Job Enrichment – Increasing both the number of tasks the worker does and the control the worker has over the job. Copyright © Houghton Mifflin Company. All rights reserved. 11–5 Alternatives to Specialization Job Characteristics Approach: suggests jobs should be diagnosed and improved along 5 core dimensions. – Core Dimensions • Skill variety—the number of tasks a person does in a job. • Task identity—the extent to which the worker does a complete or identifiable portion of the total job. • Task significance—the perceived importance of the task. • Autonomy—the degree of control the worker has over how the work is performed. • Feedback— the extent to which the worker knows how well the job is being performed. Copyright © Houghton Mifflin Company. All rights reserved. 11–6 Alternatives to Specialization • Work Teams – An alternative to job specialization that allows the entire group to design the work system it will use to perform an interrelated set of tasks. Copyright © Houghton Mifflin Company. All rights reserved. 11–7 Grouping Jobs: Departmentalization • Departmentalization – The process of grouping jobs according to some logical arrangement. • Rationale for Departmentalization – Organizational growth exceeds the ownermanager’s capacity to personally supervise all of the organization. – Additional managers are employed and assigned specific employees to supervise. Copyright © Houghton Mifflin Company. All rights reserved. 11–8 Departmentalization (cont’d) • Functional Departmentalization – Grouping jobs involving the same or similar activities. • Product Departmentalization – Grouping activities around products or product groups. • Customer Departmentalization – Grouping activities to respond to and interact with specific customers and customer groups. • Location Departmentalization – The grouping of jobs on the basis of defined geographic sites or areas. Copyright © Houghton Mifflin Company. All rights reserved. 11–9 Bases for Departmentalization Copyright © Houghton Mifflin Company. All rights reserved. 11–10 Reporting Relationships Chain of Command A clear and distinct line of authority among the positions in an organization. Span of Management (Span of Control) The number of people who report to a particular manager. Determined by many factors: • Competence of manager and subordinate • Extent of Standardized Procedures • Degree of required interaction • Amount of non-supervisory work in manager’s job Copyright © Houghton Mifflin Company. All rights reserved. 11–11 Tall Versus Flat Organizations Wide spans of management result in flat organizations which can improve communication and flexibility. Copyright © Houghton Mifflin Company. All rights reserved. 11–12 Distributing Authority • Authority – Power that has been legitimized by the organization. • Delegation – The process by which managers assign a portion of their total workload to others. • Reasons for Delegation – To enable the manager to get more work done by utilizing the skills and talents of subordinates. – To foster development of subordinates by having them participate in decision making and problem. Copyright © Houghton Mifflin Company. All rights reserved. 11–13 Decentralization and Centralization • Decentralization – Systematically delegating power and authority throughout the organization to middle- and lowerlevel managers. • Centralization – Systematically retaining power and authority in the hands of higher-level managers. • Factors Determining Choice of Centralization – External environment’s complexity and uncertainty – History of the organization – Nature (cost and risk) of the decisions to be made. Copyright © Houghton Mifflin Company. All rights reserved. 11–14 The Nature of Organization Design • Organization Design – The overall set of structural elements and the relationships among those elements used to manage the total organization. – A means to implement strategies and plans to achieve organizational goals. • Organization Design Concepts – Organizations are not designed and then left intact. – Organizations are in a continuous state of change. – Designs for larger organizations are extremely complex and have many nuances and variations. Copyright © Houghton Mifflin Company. All rights reserved. 12–15 The Bureaucratic Model of Organization Design • Bureaucratic Model (Max Weber) – A logical, rational, and efficient organization design based on a legitimate and formal system of authority. – Characteristics • A division of labor with each position filled by an expert. • A consistent set of rules that ensure uniformity in task performance. • A hierarchy of positions which creates a chain of command. • Impersonal management; with the appropriate social distance between superiors and subordinates. • Employment and advancement is based on technical expertise, and employees are protected from arbitrary dismissal. Copyright © Houghton Mifflin Company. All rights reserved. 12–16 Situational View of Organization Design • Assumes that the optimal design depends on a set of relevant situational factors. Four Basic Factors: 1. Technology 1. 2. 3. Unit or Small Batch Large-Batch or Mass Production Continuous-Process Technology 2. Environment 1. 2. Stable environments that remain constant over time. » Mechanistic – similar to bureaucratic, most frequently found in stable environments Unstable environments subject to uncertainty and rapid change » Organic – flexible and informal; usually found in unstable and unpredictable environments 3. Size 4. Organizational Life Cycle Copyright © Houghton Mifflin Company. All rights reserved. 12–17 Basic Forms of Organization Design • Functional or U-form (Unitary) Design – Organizational members and units are grouped into functional departments such as marketing and production. – Coordination is required across all departments. – Design approach resembles functional departmentalization in its advantages and disadvantages. Copyright © Houghton Mifflin Company. All rights reserved. 12–18 Functional or U-form Design for a Small Manufacturing Company Copyright © Houghton Mifflin Company. All rights reserved. 12–19 Basic Forms of Organization Design (cont’d) • Conglomerate or H-form (Holding) Design – Organization consists of a set of unrelated businesses with a general manager for each business. – Holding-company design is similar to product departmentalization. – Coordination is based on the allocation of resources across companies in the portfolio. – Design has produced only average to weak financial performance; has been abandoned for other approaches. Copyright © Houghton Mifflin Company. All rights reserved. 12–20 Conglomerate (H-form) Design at Samsung Copyright © Houghton Mifflin Company. All rights reserved. 12–21 Basic Forms of Organization Design (cont’d) • Divisional or M-form (Multidivisional) Design – Multiple businesses in related areas operating within a larger organizational framework. – Results from a strategy of related diversification. – Some activities are decentralized down to the divisional level; others are centralized at the corporate level. – M-form design advantages are the opportunities for coordination and sharing of resources. – Successful M-form organizations can out perform U-form and H-form organizations. Copyright © Houghton Mifflin Company. All rights reserved. 12–22 Multidivisional (M-form) Design at Limited Brands Copyright © Houghton Mifflin Company. All rights reserved. 12–23 Basic Forms of Organization Design (cont’d) • Matrix Design – Two overlapping bases of departmentalization: • A set of product groups or temporary departments are superimposed across the functional departments. – Employees in the matrix belong to their departments and the project team: • A multiple command structure in which an employee reports to both departmental and project managers. – A matrix design is useful when: • There is strong environmental pressure. • There are large amounts of information to be processed. • There is pressure for shared resources. Copyright © Houghton Mifflin Company. All rights reserved. 12–24 A Matrix Organization Copyright © Houghton Mifflin Company. All rights reserved. 12–25 Basic Forms of Organization Design (cont’d) • Hybrid Designs – Based on two or more common forms of organization design—may have a mixture of related divisions and a single unrelated division. – Most organizations use a modified form of organization design that permits them to have sufficient flexibility to make adjustments for strategic purposes. Copyright © Houghton Mifflin Company. All rights reserved. 12–26 Emerging Issues in Organization Design • The Team Organization – Relies almost exclusively on project-type teams, with little or no underlying functional hierarchy. • The Virtual Organization – Has little or no format structure with few permanent employees, leased facilities, and outsourced basic support services. – May conduct its business entirely on-line and exists only to meet for a specific and present need. • The Learning Organization – Works to facilitate the lifelong learning and development of its employees while transforming itself to respond to changing demands and needs. Copyright © Houghton Mifflin Company. All rights reserved. 12–27