Chapter 7
Designing Adaptive
Organizations
Major Concerns in Organizing
 Division
of Labor (Differentiation)
 Coordination (Integration)
In Reference to the Organizational
Chart, Organizing Involves:
VERTICAL STRUCTURE
Coordination from Top to Bottom
HORIZONTAL STRUCTURE
Departmentalization (Who works together?)
Work Specialization
 Degree
to which tasks are subdivided
into individual jobs
 A highly specialized job is narrow in
scope
 Increases efficiency up to a point
 With extreme specialization, workers
tend to become bored and alienated
Chain of Command
The line of authority, shown in the
organization chart, that links all persons
and shows who reports to whom.
CEO
VP Marketing
VP Production
VP Finance
Authority
Managers have authority because of the positions
they hold (not who they are)
 To be effective, it must be accepted by
subordinates.

Responsibility
Duty to perform the task an employee has been
assigned
 Authority should be commensurate with
responsibility.

Delegation
 Process
to transfer authority and
responsibility to positions below
 Delegation does not reduce responsibility
 Benefits both the organization and the
individual employee
Common Practice is to:
 CENTRALIZE
–
–
–
–
(authority at top)
Accounting
Finance
Human Resources Management
Information Systems
 DECENTRALIZE
– Production
– Marketing
(much delegation)
Span of Management
 Number
of employees reporting to a
supervisor
 Tradition has recommended a span of
management of four to seven
subordinates
 What is best depends on the situation
Departmentalization
Basis for grouping job positions into departments and departments
into the total organization.
 Internal Operations Oriented
– Functional
– Network (Virtual)

Output Oriented
– Divisional
» Product
» Geographic
» Customer
– Team (Cluster)

Combinations
– Hybrid (different types at different places in
an org.)
– Matrix (different types at simultaneous at
the same places in an org.)
Functional Approach
Departments based on similar activities, skills
and resource use.
Advantages:
Disadvantages:
 Efficient

use of
resources
 Economies of Scale
 In-depth skill
specialization


Poor communication
among departments
Slow response to
external changes
Loyalty more to function
than customer or the
whole organization
Divisional Approach
 Departments
are grouped together based
on organizational outputs (e.g., product,
geography, customer)
 Functions (e.g., marketing) are split
among the divisions
 Its advantages and disadvantages tend to
be the opposite of those of the functional
approach
Divisions
Advantages:
Disadvantages:
 Quicker
 Duplication
changes in
an unstable
environment
 More in touch with
customers
– Competition for
resources among
divisions
– More managers
needed
 Less
professional
specialization
Matrix Approach
 Functional
and divisional chains of
command simultaneously
 Violates the unity of command concept.
Matrix Structure - Why?
 To
get the advantages of both Functional
and Divisional Structures
 Sophisticated technology, fast-changing
environment
 Diverse products and geographical areas
Disadvantages of Matrix
 Many
meetings to coordinate activities
 High conflict between two sides of matrix
 Need for extensive human relations
training
Team Approach
 Cross-functional
teams (Clusters) consist
of employees from various functional
departments
 Teams typically have more decision
making power than previously held by
workers at their levels.
Team Approach
 Advantages
– Quicker response time
– Better morale
– Reduced administrative overhead
 Disadvantages
– Conflict
– Time and resources spent on meetings
Network (Virtual) Approach
 Organization
divides major functions
among separate companies brokered by
a small headquarters organization
 Somewhat like a functional organization.
Network Approach
Advantages
– Increases competitiveness, especially of
small firms
– Flexibility
– Reduced Costs
 Disadvantages
– No hands-on control
– Loyalty weakened.
Mechanistic vs. Organic
Organizations
Vertical vs. Horizontal Structural Dominance
 Rigid vs. Flexible
 Specialized Jobs vs. Unspecialized
 Boss Control vs. Self-Control
 Centralized Decisions vs. Decentralized
 Bureaucratic vs. Non-bureaucratic

Departmentalization Types
(From most Mechanistic to most Organic)
 Functional
 Functional with integrators, crossfunctional committees, etc.
 Matrix
 Divisional
 Team
When the Mechanistic (Vertical)
Approach is most Appropriate:
External Environment is: Stable
Growth and Innovation Goals are:
Few or Nonexistent (Internal Stability)
The Organization’s Size is: Large
The Technology is: Mass Production (or
involving low-level skills)
When the OrganicApproach is
most Appropriate:
External Environment is: Unstable
Growth and Innovation Goals are: Numerous
Technology is:
Small Batch
Continuous Process
Flexible Manufacturing (Computer Assisted)
Service, especially professional service jobs.
Service Technology
 Tends
to be more Organic (Horizontal)
than manufacturing
 Employees have direct contact with
customers
 Output of the firm is intangible
 Production and consumption are
simultaneous