Principles and Practices for Tomorrow’s Leaders
Gary Dessler
CHAPTER
7
Designing Organizational
Structures
The Environment of Managing
PowerPoint Presentation by Charlie Cook
Copyright © 2004 Prentice Hall, Inc. All rights reserved.
Chapter Objectives
After studying this chapter and the case exercises at
the end, you should be able to:
1. Explain what the situation calls for in terms of
organizing the firm’s lines of authority,
departmentalization, degree of specialization of
jobs, delegation and decentralization, and span
of control.
2. Design an organization structure for a
company.
3. Reorganize a company from its current
structure to that of a “learning organization.”
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7–2
Chapter Objectives (cont’d)
4. Explain why a company is not achieving
coordination and how you would correct the
situation.
5. Explain what the manager is doing wrong
about delegating authority and how you would
correct the situation.
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7–3
Henri Fayol’s Principles of Management
• Division of work
• Authority and
responsibility
• Discipline
• Unity of command
• Unity of direction
• Subordination of
individual interests
• Remuneration of
personnel
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•
•
•
•
•
Centralization
Scalar chain
Order
Equity
Stability of tenure of
personnel
• Initiative
• Esprit de corps
7–4
Organization and Environment: The
Burns and Stalker Study
• Mechanistic Organization
 An organizational structure characterized by close
adherence to the established chain of command,
highly specialized jobs, and vertical communications.
• Organic Organization
 An organizational structure characterized by flexible
lines of authority, less specialized jobs, and
decentralized decisions.
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7–5
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7–6
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7–7
When Organizing:
Always Keep Your Goals in Mind
• Business environments are in a constant state of
change.
• An organization’s strategy must be adapted to
changes in its competitive environment.
• Structure follows strategy.
 Strategic change creates the need for restructuring
the organization to acquire new and different
knowledge, skills and abilities.
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7–8
Back in the
Corporate
Fold
Note: Saturn’s president once
reported to GM’s president and
oversaw the entire Saturn
operation. Now the Saturn
president reports to a GM vice
president and runs its factories.
Design, engineering, and
marketing report to other GM
executives.
Source: Keith Bradsher, “The Reality Behind the
Slogan,” New York Times, 23 August, 2001, p.
C1, and General Motors.
Copyright © 2004 Prentice Hall. All rights reserved.
FIGURE 7–1
7–9
Checklist 7.1
What Determines Organization Structure
 Environment. Fast-changing environments require
organic structures; slowly changing environments
favor mechanistic structures.
 Technology. Unit and continuous production
processes favor organic structures. Mass production
processes favor mechanistic structures.
 Goals. Ask, “What are the main goals we want to
achieve via this organization?”
 Pros and cons. Each approach to
departmentalization has pros and cons.
 Logic and common sense.
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7–10
What Are Learning Organizations?
1. Adopt an organic, networked organizational
form.
2. Encourage their employees to learn and to
confront their assumptions
3. Have employees who share a common vision
4. Have the capacity
•
•
•
•
to adapt to unforeseen situations
to learn from their own experiences
to shift their shared mindsets
to change more quickly, broadly, and deeply than
ever before.
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7–11
Two Experimental Communications Networks
Source: Harold Leavitt, “Some Effects of Certain Communication Patterns on Group
Performance, ” Journal of Abnormal and Social Psychology 46, 1972, p. 11.
Copyright © 2004 Prentice Hall. All rights reserved.
FIGURE 7–2
7–12
Abolishing Organizational Boundaries
• Boundaryless Organization
 An organization in which management strips away
the “walls” which typically separate organizational
functions and hierarchical levels, through the
widespread use of teams, networks, and similar
structural mechanisms.
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7–13
Organizational Boundaries
• Authority Boundary
 The boundary created by differences in organizational
level or status across which communications may be
distorted or constrained due to the status difference.
• Task Boundary
 The boundary created by
the tendency of employees
to focus on their own
specialized tasks.
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7–14
Organizational Boundaries (cont’d)
• Political Boundary
 The boundary created special interests or agendas
within an organization that may oppose each other
• Identity Boundary
 The boundary created by identifying with those
groups with which one has shared experiences and
with which one believes one shares fundamental
values.
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7–15
The Four Organizational Boundaries That Matter
Source: Reprinted by permission of Harvard Business Review. “The Four Organizational Boundaries that Matter,”
from “The New Boundaries of the Boundaryless Company,” by Larry Hirschorn and Thomas Gilmore, May–June
1992. Copyright © 1992 by the President and Fellows of Harvard College. All rights reserved.
Copyright © 2004 Prentice Hall. All rights reserved.
FIGURE 0–3
7–16
Managing Learning Organizations
• How to Streamline Organizational Decision
Making
 Downsize
 Reduce management layers
 Establish miniunits
• How to Cultivate Employees’ Personal Mastery
 Provide continuous learning opportunities.
 Foster inquiry and dialogue.
 Establish mechanisms to ensure that the organization
is continuously aware of and can interact with its
environment.
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7–17
Union Pacific Railroad Hierarchy:
Before and After
Source: From Liberation Management by Tom Peters. Copyright © 1992 by Excel,
a California Limited Partnership. Reprinted by permission of Alfred A. Knopf, Inc.
Copyright © 2004 Prentice Hall. All rights reserved.
FIGURE 7–4
7–18
Part of the
“Independent
Integrator”
Challenge
Facing the
Homeland
Security
Director
Source: Alison Mitchell, “Disputes Erupt over Ridges Needs
for His Job,” New York Times, 9 November 2001, p. B7.
FIGURE 7–5
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7–19
Methods for Achieving Coordination
• Mutual Adjustment
 Achieving coordination
through face-to-face
interpersonal interaction.
• Use Rules and
Procedures
• Standardize
• Exercise Direct
Supervision: Use the
Chain of Command
• Divisionalize
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•
•
•
•
Appoint Staff Assistants
Appoint Liaisons
Appoint Committees
Organize Independent
Integrators
 An individual or a group
that coordinates the
activities of several
interdependent
departments, but is
independent of them.
7–20
Checklist 7.2
How to Achieve Coordination
 Consider all available tools.
 Ask, “How unpredictable is the task?”
 Ask, “How differentiated are the units we
want to coordinate?”
 Use logic and common sense.
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7–21
Managing Organizational Conflict
• Line–Staff Conflict
 Disagreements between a line manager and the
staff manager who is giving him or her advice.
• How to Organize to Reduce Interunit Conflict
 Appeal to power and the chain of command
 Reduce interdependence
 Exchange personnel
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7–22
Types of Interdependence
Source: Based on James Thompson, Organizations in Action
(New York: McGraw-Hill, 1967), Chapter 2.
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FIGURE 7–6
7–23
Delegation
• Delegation
 The act of passing down authority from supervisor to
subordinate.
• Sources of Authority
 Organizational position
 Personal traits (charisma) and abilities (expertise)
 Acceptance by employees
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7–24
Checklist 7.3
Principles of Delegation
 The manager can delegate authority but cannot
delegate responsibility.
 Clarify the assignment.
 Delegate, don’t abdicate.
 Know what to delegate.
 Specify the subordinate’s range of discretion.
 Authority should equal responsibility.
 Make the person accountable for results.
 Beware of backward delegation.
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7–25
Decentralize?
• Decentralized Organization
 Organizational authority for most departmental
decisions is delegated to the department heads.
 Control for major companywide decisions is
maintained at the headquarters office.
• Decentralization Rules:
 Decentralize decisions that affect only one division or
area and that would take a long time for upper
management to make.
 Centralize decisions that could adversely affect the
entire firm and that upper management can fairly
quickly and easily.
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7–26