Question 1. An entrepreneur employs 20 people, which he personally supervises. However,
the company will likely employ over 200 people in production, sales, engineering and
administration within a few years due to the growing success of the company's new
products. The entrepreneur likes the current structure and wants to avoid other forms of
departmentalization. Explain to the entrepreneur why his company would be more
effective through forms of departmentalization as it grows larger.
(p. 388). As an organization grows, departmentalization into a functional or divisional form
becomes necessary to better coordinate work activities as the number of employees increases.
Most other forms of departmentalization (e.g. functional, divisional, matrix, hybrid) form
departments that establish a system of common supervision among positions and units within the
organization. Departmentalization typically determines which positions and units must share
resources. Thus, it establishes interdependencies among employees and subunits.
Departmentalization usually creates common measures of performance. Members of the same
department, for example, share the same departmental or team goals. Common budgets and other
resources also provide a means by which the performance of subunits may be compared.
Departmentalization encourages coordination through informal communication among people
and subunits. With common supervision and resources, members within each configuration
typically work in close proximity. This encourages frequent, informal communication among
employees so that they may coordinate work activities.
Question 2. What role does organizational strategy play in designing organizations?
(p. 408). Organizational strategy basically has two roles in designing organizations. First,
organizational strategy has an intervening effect because the size, environment and technology
contingencies shape management's thinking about the best structure for the organization.
Organizational size, environment and technology shape organizational structure only to the
extent that they influence organizational strategy. Organizational leaders change organizational
structures only after they decide to do so. This happens through strategy, not automatically
through the contingencies of design.
The second role of strategy is that it may reshape the contingency factors which, in turn,
influence organizational structure. For example, if leaders find their organization in a hostile or
complex environment, they may decide to shift the organization's mandate and resources into
areas where there is more munificence and simplicity. To the extent that the organization is able
to move into different environments, organizational strategy shapes organizational