Types of Organizational Structures
Formal versus Informal Structures
Bureaucratic versus Adaptive Structures
In bureaucracies (Weber):
•Everyone knows what is expected of them
(specific job descriptions)
•Everyone knows to whom they report
(hierarchy of authority)
•Everyone has impersonal rules to guide them
(company manuals, procedures etc)
Benefits of Bureaucracy
Helps us handle complexity
 Gives us identity
 Adds structure and routine to our lives

The Process of Organizing
1. Grouping similar activities together.
(Horizontal differentiation)
2. Assigning a manager to each group
(Vertical differentiation)
3. Provide for coordination
(Integration)
I. Horizontal Differentiation
1. Departmentation
2. Establish Support Units
Type of
Activity
Line
Staff
Types of Departmentation
Departmentation and Structural Types
1. Functional Structure
Uses departmentation by function
Advantages
- Greater efficiency
through economies
of scale
- Strong control at top
Disadvantages
-As complexity
increases,harder
to coordinate
-Lack of general
managers
Amgen’s Organizational Structure
CEO
VP
VP
Develop. Finance
VP
Intellectual
Property
VP
VP
VP
Sales &
Operations
Human
Marketing
Resources
VP
VP
Product Research
Develop.
VP
General
Counsel
Structural Types:
continued
2. Divisional Structure
Departmentation by Product
Departmentation by Geography
Departmentation by Customer
Product Structure: Microsoft 2005 Reorganization
CEO
Platform
Products &
Services
Windows
Server & Tools
MSN
Business
Business
Software
Entertainment &
Devices
XBox
Videogames
Mobile Phones
Product Structure: GE 2008 Reorganization
CEO
Technology
Infrastructure
Energy
Infrastructure
GE Capital
NBC Universal
Does not include the consumer and industrial division which GE intends to
sell or spin-off.
Product Structure: GE Update 2011
CEO
Global
Growth &
Operations
Energy
GE
Capital
Home &
Business
Solutions
GE
Healthcare
Aviation
Transport
- ation
Reflects the sale of NBC and the fact they were unable to sell all of their consumer and Industrial division
Product Structure: ConAgra1
CEO
Agri- Beatrice Beef FoodProd- Foods
Co.s Service
ucts
Co.
Grocery
Products
Co.s
Refrig.
Prepared
Foods
Co.s
1 Prior to restructuring in 2000
Frozen Poultry
Prep.
Co.
Foods
Trading
& Processing
Co.s
Swift
& Co.
ConAgra Brands
Act II
Eckrich
Armour
Fleischman’s
Banquet
Healthy
Blue Bonnet
Choice
Butterball
Hunt’s
Country
LaChoy
Orville Reddenbacher’s
Each generates over $100 million in sales
Peter Pan
Slim Jim
Swift
Premium
Swiss Miss
Van Camp
Wesson
Geographic Structure: Macy’s
CEO
Macy’s
East
Macy’s
Florida
Macy’s
MidWest
Macy’s
North
Macy’s
NW
Macy’s
South
Macy’s
West
Macy’s
.Com
Customer Structure: ConAgra after 2000
CEO
Food
Service
(restaurants)
Retail
(Grocery
stores)
Agricultural
Products
Divisional Structures
Advantages
Disadvantages
-Profit Centers can be
used to push responsibility
for profits lower in the org.
-Less efficient due to
duplication of
activities
-More responsive to change
-Increased demand
for coordination
-Good training for general
managers
-Loss of control at
the top
Structural Types:
continued
3. Matrix Structure
CEO
Production
A
Finance
Marketing
PA
FA
MA
B
PB
FB
MB
C
PC
FC
MC
Matrix Structures
Advantages
-Increased flexibility
& adaptability
-Improved coordination
-Empowered workforce
Disadvantages
-Dual reporting
relationships
-Potential power
struggles
-Problems
associated with
working in
groups
Structural Types:
continued
4. Team Structure
Use of task forces, cross functional
teams
5. Network Structure
Extreme Network Structure: The Virtual Org.
Our Org.
Manufacturing
Marketing
Finance
(done by an
Asian Co.)
(done by a
European Co)
(done by an
Indian Co.)
Network Structure
Advantages
Disadvantages
-allows org. to compete
even globally with few
resources
-Employee
morale,
commitment?
-Flexibility - can add/
drop subcontractors
easily
-Greater
uncertainty
due to lack of
hands on
control
Structural Types Summary
5 Types of Structures
Types of Departmentation
Functional
by function
Divisional
by product
by geography
by customer
Matrix
by function & product &/or
customer - simultaneously
Team
Network
temporary departments
by function using other co.s
Summary Slide
Bureaucratic Structures
Functional
Adaptive Structures
Divisional
Matrix
Team,
Network
***Exact location on this continuum will depend on other structural dimensions
Other Forms of Departmentation
- Departmentation by Time
- Departmentation by Process or
Equipment
- Departmentation by Simple Number
- Hybrid Departmentation
Hybrid: Pepsi Cola
CEO
PepsiCo
Americas
Foods
Frito-Lay
North
America
Quaker
Foods
North
America
PepsiCo
Americas
Beverages
Latin
America
Food &
Snacks
PepsiCo
Europe
PepsiCo
Asia Middle
East & Africa
Types of Departmentation: Review
Departmentation can be done by:
Function
Product
Geography
Customer
Time
Process/Equip.
Simple Number
Hybrid
Composite
Functions of Staff
1. Service
2. Advise
3. Control
4. Initiation
5. Innovation
II. Vertical Differentiation
Deals with 5 authority related issues:
1. How firmly should one adhere to the hierarchy of
authority?
2. How many subordinates should each manager
have?
3. What is the nature of authority in organizations?
4. Where should decisions be made in organizations?
5. To what degree should authority relationships
be written down?
Vertical Differentiation:
1. Short-Circuiting
B
C
continued
A
Short-Circuiting: continued
Why it happens:
- Need for speed and accuracy
- To prevent executive isolation
- To protest unfair supervision
Problems:
Short Circuiting: depends on
- Importance of subject matter
- Nature of contact
- Degree intermediary level is
kept informed
II. Vertical Differentiation:continued
Deals with 5 authority related issues:
1. How firmly should one adhere to the hierarchy of
authority?
2. How many subordinates should each manager
have?
3. What is the nature of authority in organizations?
4. Where should decisions be made in organizations?
5. To what degree should authority relationships
be written down?
Vertical Differentiation: continued
2. Span of Control (Span of Management)
Depends on:
- Nature of the work
- Nature of the executive
- Nature of the subordinates
- Methods of management used
II. Vertical Differentiation: continued
Deals with 5 authority related issues:
1. How firmly should one adhere to the hierarchy of
authority?
2. How many subordinates should each manager
have?
3. What is the nature of authority in organizations?
4. Where should decisions be made in organizations?
5. To what degree should authority relationships
be written down?
Vertical Differentiation: continued
3. Sources of Authority
-Formal Authority Theory
-Acceptance Theory of Authority
(Psychological Contract)
-Competence Theory of Authority
-Charismatic Theory of Authority
Types of authority in Organizations
Line Authority
P
Staff Authority
Functional
Authority
R&D
A
B
X
Y
Z
C
II. Vertical Differentiation: continued
Deals with 5 authority related issues:
1. How firmly should one adhere to the hierarchy of
authority?
2. How many subordinates should each manager
have?
3. What is the nature of authority in organizations?
4. Where should decisions be made in organizations?
5. To what degree should authority relationships
be written down?
Vertical Differentiation: continued
4. Centralization vs. Decentralization
-Costliness of Decisions
-Need for uniformity of policies
-Growth history
-Availability of qualified managers
-Environmental influences
5. Formalization
III. Integration
A. Basic Management Techniques
Goal Setting
SOPs
Referral up the Hierarchy
Techniques to supplement
basic coordination techniques
Referral up the Hierarchy
Integration:
continued
A. Basic Management Techniques
Goal Setting
SOPs
Referral up the Hierarchy
B. Reduce the need to
process information
-Create slack resources
-Create self contained
units
Integration:
continued
A. Basic Management Techniques
Goal Setting
SOPs
Referral up the Hierarchy
B. Reduce the need to
process information
-Create slack resources
-Create self contained
units
C. Increase the capacity
to process information
-Invest in vertical
information systems
-Establish lateral
relations
Types of Lateral Relations
Direct Contact
Liaison Roles
Committees/Task Forces
Integrator Roles
Matrix Structure
More
Formal,
More
Costly
Structure Summary
Departmentation
Use of Staff
Hierarchy
Span of Control
Source of Authority
Locus of Authority
Formalization
Integration
Job Design
Work Group
Types of Structures
Bureaucratic
Adaptive
Mechanized
Organic
Functional
Divisional, Team,
Network
Large/Diversified Small/
Concentrated
Strict Adherence Short-circuiting
Narrow
Wide
Position
Expertise
Centralized
Decentralized
High
Low
Basic Techniques Supplemental
Simple/Repetitive Multi-skilled
Formal Admin.
Teams
Unit
Which Type of Structure is Best?
It Depends!!!
Depends on what???
Contingency Factors of Org. Design
1. Organizational Strategy
e.g.
Strategy
Structure
Domain Defender
Cost Leader
Concentration
Enthusiastic Prospector
Differentiation
Conglomerate Divers.
More
Mechanistic
More
Adaptive
2. The Nature of the Environment
Structure
Bureaucratic Adaptive
Stable
Environ.
Good Fit,
Maximizes
efficiency
Poor Fit,
Dynamic Structure too
tight, ineffect.
Poor Fit,
Structure too
loose, ineffic.
Good Fit,
Enhances
effectiveness
3. Nature of Technology
Joan Woodward
Type of Technology Structure
Unit/Small Batch
Mass Production
Continuous
Production
Adaptive
Why?
# Exceptions
is high
Mechanistic Maximizes
efficiency
Adaptive
Consequences
of an except.
are high.
James Thompson
Type of
Technology
Type of
Interdependence
Type of
Coordination
Mediating
Pooled
Standardization
Long-Linked
Sequential
Planning
Intensive
Reciprocal
Mutual
Adjustment
Summary Statements on Structure
1. Recognition of the external environment
and its influence.
2. Need to match structure with the
situation (Contingency factors)
3. Recognition that different parts of an
organization may face different situations
and, therefore, be structured differently.
4. Recognition that organizations may
choose to alter the situation to fit its
structure.
Strategy
Environment
Structure
Technology
OR
Strategy
Environment
Technology
Structure
Popular Structural “Buzzwords”
Downsizing
Restructuring
Reengineering