Ch. 10
Organization
Structure and Design
Learning Objectives
•
Organization structure and design
•
Work specialization – traditional and contemporary views
•
Five types of departmentalization
•
Cross-functional teams
•
Chain of command, authority, responsibility, unity of command
•
Span of control
•
Centralization vs. decentralization
•
Formalization
•
Mechanistic vs. organic designs
•
Relationship between strategy and structure
•
Organizational size and structure
•
Technology and structure
•
Environmental uncertainty and structure
•
Simple, functional, divisional, matrix, team-based structures
What Type of Organizational
Structure Do You Prefer?
I prefer to work in an organization where:
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
1 = Strongly disagree
2 = Inclined to disagree
3 = Neither agree or disagree
4 = Inclined to agree
5 = Strongly agree
Goals are defined by those at higher levels.
Clear job descriptions exist for every job.
Top management makes important decisions.
Promotions and pay increases are based as much on length of service as on level of
performance.
Clear lines of authority and responsibility are established.
My career is pretty well planned out for me.
1 have a great deal of job security.
I can specialize.
My boss is readily available.
Organization rules and regulations are clearly specified.
Information rigidly follows the chain of command.
There is a minimal number of new tasks for me to learn.
Work groups incur little turnover in members.
People accept authority of a leader's position.
I am part of a group whose training and skills are similar to mine.
What Type of Organizational
Structure Do You Prefer?
60 – you prefer a mechanistic design
Below 45 – you prefer organic design
Between 45 and 60 – no clear
preference
Remember which you prefer!
Organization
Structure
Organization
Design
The formal
The process of
arrangement
developing or
of jobs within
changing an
an
organization’s
organization
structure
Elements of
Organizational Design
• Work specialization
• Departmentalization
• Chain of command
• Span of control
• Centralization and decentralization
• Formalization
Specialization
• To what degree are activities divided
into separate jobs?
• Traditional vs. contemporary views
Departmentalization –
Five Types
Line Authority:
The Chain of Command
Chief Executive
Officer
Executive
Vice President
Vice
President
Vice
President
Region
1
District
A
District
B
Region
2
District
C
President
Vice
President
Region
3
District
D
Executive
Vice President
Vice
President
Region
4
District
E
Vice
President
Region
5
District
F
District
G
Contrasting Spans of Control
Members at Each Level
Organization Level
(Highest)
Assuming Span of 4
Assuming Span of 8
1
1
1
2
4
8
3
16
64
4
64
512
5
256
4,096
6
1,024
7
4,096
(Lowest)
Span of 4:
Span of 8:
Operatives:
= 4,096 Operatives:
= 4,096
Managers (levels 1-6) = 1,365 Managers (levels 1-4) = 585
Centralized vs. Decentralized Structures
Formalization
• How standardized are the jobs?
• How much discretion do employees
have?
• How “rule-bound” are people?
What Type of Organizational
Structure Do You Prefer? Scoring
•
Scores above 60 suggest that you prefer a mechanistic design (stable, ruleoriented, more bureaucratic organizations).
•
Scores below 45 indicate a preference for an organic design (small,
innovative, flexible, team-oriented organizations.
•
Scores between 45 and 60 suggest no clear preference.
Recent trend has been toward more organic designs.
But, are few pure organic structures. Many organizations are somewhat
bureaucratic.
Very low score – you may be frustrated by overly rigid structures of rules,
regulations, and boss-centered leadership
Very high score – you may be frustrated by loose, informal, vague, boss-less
organization
Mechanistic vs. Organic
Organizations
•
•
•
•
•
•
•
•
High specialization
Rigid departmentalization
Clear chains of command
Narrow spans of control
Highly centralized
Highly formalized
“Bureaucracy”
“Well-oiled machine”
•
•
•
•
•
•
•
•
Cross-functional teams
Cross-hierarchical teams
Free flow of information
Wide spans of control
Decentralized
Low formalization
“Adhocracy”
Adaptable “amoeba”
Strategy
Contingency
Factors and
Organization
Design
Environmental
Uncertainty
Size
Technology
Strategy and Structure
Strategy
• Cost minimizers
• Differentiation
(innovation)
• Imitator
Structure
• Mechanistic
• Organic
• Both
Size and Structure
Mechanistic
Structure
Organic
10
300 500
2000
Size
2500
Environmental Uncertainty
and Structure
Environment
• Stable, simple
environment
• Unstable,
complex
environment
Structure
• Mechanistic
structure
• Organic
structure
Technology and Structure
Italian suits,
furniture
restoration,
high-tech
Structure
Organic
Mechanistic
Oil, chemicals, beer,
water filtration
Autos, computers
Mass
Process
Technology
Unit
Design Your Restaurant
(the one that will make you rich and famous)
•
•
•
•
•
•
•
•
•
•
Environment – stable vs. uncertain (Who is your clientele? How
stable are their tastes?
Strategy? – cost, differentiator, both?
Technology? Mass, batch?
Size? – how many employees?
Span of control? How many employees per manager?
Specialization? What job titles? How many? How narrow/specialized
will each job title be?
Chain of command? – Who will report to who? How many bosses
Centralization/decentralization – Who will make decisions? What
decisions will they make?
Formalization? How strict/rule-bound will the organization be? What
will the rules be?
Overall - Organic or mechanistic?
Some Popular Types of
Structures






Simple
Functional
Divisional
Team
Matrix
Project
Simple Structure




Low departmentalization
Wide spans of control
Commonly used by small businesses
Strengths


Fast, flexible, inexpensive, clear accountability
Weaknesses


Impractical as organizational grows
Reliance on one person risky
Functional Structure


Groups occupational specialties
(functions) together
Strengths


Economies of scale
Weaknesses

Formation of functional “silos” that lose
sight of what’s best for organization
overall
Divisional Structure




Separate business units or divisions
All functions under one roof
Each has P/L responsibility
Strengths


Focused on results
Weaknesses

Duplication of activities and resources
Team Structure




Entire organization made up of work teams
Employee empowerment crucial
Authority rests in team, not chain of command
Strengths:



Employees more involved and empowered
Reduced barriers among functional areas
Weaknesses



No clear chain of command
Pressure on teams to perform
Can take YEARS to develop!
Matrix Structure

Matrix Structures



Specialists from functions work on projects
as needed
Dual chain of command – two managers!
Strengths



Better use of resources
Fluid and flexible
Weaknesses

Complexity of having two bosses
Project Structures



No formal departments
Employees jump from project to
project!
Fluid and flexible
Santa Clara Division Restructuring
GM
R&D
Mktg.
GM
Lasers
Manuf.
Clocks
R&D
Mktg.
Manuf.
Before
After
Counters