Ch 8 Outline
Organizational Structure &
Design
1. Defining Organizational Structure
2. Organizational Design Decisions
3. Common Organizational Designs
A. Traditional Designs
B. Contemporary Designs
4. The Learning Organization
1
Defining Organizational
Structure
• Organizing – the process of creating an
organization’s structure
• Organizational structure – the formal
framework by which job tasks are divided,
grouped and coordinated (often represented by an
organizational chart)
• Organizational design – the process of
developing or changing an organization’s structure
– It involves six key elements
2
Organizational Design
Involves decisions about six key elements:
1.
2.
3.
4.
5.
6.
Work specialization
Departmentalization
Chain of command
Span of control
Centralization/decentralization
Formalization
3
Departmentalization
The way jobs are grouped together:
1. Functional – groups jobs by functions performed
2. Product – groups jobs by the product line
3. Geographical – groups jobs on the basis of
territory or geography
4. Process – groups jobs on the basis of product or
customer flow
5. Customer – groups jobs on the basis of common
customers
4
Span of Control
• Refers to the number of subordinates who
report directly to an executive or supervisor
• The differences in the span of control have
direct implications on the shape of the
organization
– Tall organizations – span of control remains constant,
or narrow
– Flat organizations – span of control is wide with
fewer reporting levels
5
Span of Control
• Organizations must find the optimal span of control to be
effective
– Narrow enough to permit manages to maintain control over
subordinates
– Wide enough so that the possibility of micromanaging is
minimized
• The optimal span of control is dependant on the following
factors
– Is the work clearly defined
– Are subordinates highly trained and do they have access to
information
– Is the manager highly capable and supportive
– Are jobs similar and performance measures comparable
– Do subordinates prefer autonomy to close supervisory control
6
Decentralization
• Organizations in which high-level executives make
most decisions and pass them down to lower levels for
implementation are known as Centralized
organizations
• Decentralized organizations allow lower-level
managers to make important decisions
• Decentralization:
– Can speed the decision making process
– Allows the people who are most affected by the decision to
make the decision
– Allows individuals with the most relevant information, and
who can best foresee the consequences of the decision, to
make the decision
7
Formalization
• The degree to which jobs within the
organization are standardized.
– Standardization – removes the need for
employees to consider alternatives
• The extent to which employee behavior is
guided by rules and procedures.
– Explicit job descriptions
– Clearly defined procedures
8
Common Organizational Designs
• Traditional Designs
- Simple Structure – low
departmentalization, wide spand of control,
authority centralized in a single person, and
little formalization
- Functional Structure – groups similar or
related occupational specialties together
(e.g. engineering, accounting, etc.)
9
Common Organizational Designs
• Divisional Structure – composed of separate
divisions
– Each division has limited autonomy
– Parent corporation acts as an external overseer
to coordinate and control the divisions
• Parent corp. also provides support services
10
The Divisional Organization
• In a divisional organization,
departmentalization will group units around
products, customers, or geographic regions
11
Common Organizational Designs
• Team-Bases Structures – entire organization is
made up of work teams
– Employee empowerment is crucial (teams may be selfdirected/managed—no straight-line authority from top down)
– Teams are responsible for all work activity and
performance
– Complements functional or divisional structures in
large orgs.
– Allows efficiency of a bureaucracy
– Provides flexibility of teams
12
The Matrix Organization
• A matrix organization is a hybrid form of organization
in which functional and divisional forms overlap;
managers and staff personnel report to two bosses – a
functional manager and a divisional manager
13
The Matrix Organization
• Advantages of the Matrix
organization include
– Decision making is
decentralized
– Communication networks
process large amounts of
information
– Decentralization keeps higher
management from becoming
overloaded
– Employees learn to
collaborate
– More career options for
employees
• Disadvantages of the matrix
organization include
– Subordinates may become
confused regarding their
primary responsibility
– Power struggle between
managers
– Thinking that matrix
management is the same thing
as group decision making
– Too much democracy can lead
to not enough action
14