Chapter 14
Foundations of
Organization Structure
1
Organization Structure:
How jobs, tasks and people are
formally divided, grouped, and
coordinated throughout a company.
2
Elements of Structure
• Specialization (of work duties)
• Standardization (or formalization)
• Centralization (of decision making)
----------------------------------------------------• Chain of command
• Span of control
• Departmentalization
3
Work Specialization
To what degree are activities subdivided into separate jobs?
• Also called Division of Labor
• Degree to which work and other activities are
partitioned into separate, individual tasks,
duties and assignments for each employee.
4
Standardization (Formalization)
To what degree will there be rules and regulations to
direct employees and managers?
• Degree to which jobs are
managed using highly
specified and rigid rules,
policies, procedures, etc.
(see: micromanagement !)
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Centralization (of Decisions)
Where will organizational decision making authority reside?
• Centralization:
Degree to which
decision making is
concentrated at a single
point in the organization
(usually higher up and in
the center of the org.
chart/hierarchy).
• Decentralization:
Degree to which lowerlevel employees provide
input and have actual
authority or discretion to
make decisions for the
organization.
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Chain of Command
To whom do individuals and groups report?
• Refers to the line of authority (or command)
from the top of the organization to the lowest
“ranks”; clarifies who reports to whom.
• Should (ideally) follow the “unity of command”
principle.
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Span of Control
How many direct reports can a manager effectively
and efficiently direct?
• Number of levels of managerial hierarchy:
- Current trend is toward wider/larger spans of control
(by using teams, etc.)
- Wider spans are consistent with efforts to:
o
reduce costs
o
cut overhead
o
speed up decision making
o
increase flexibility
o
get closer to customers
o
empower employees
8
Contrasting Spans of Control
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Departmentalization
On what basis will organizational entities be grouped?
Basis on which units are “grouped” together:
• by Function?
• by Product?
• by Geography?
• by Process?
• by Customer?
• other?
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Common Organization Structures
1. Simple Structures (are characterized by):
•
•
•
•
low formalization
centralized authority in a single person
low departmentalization
wider spans of control
A Simple Structure:
Gold’s Appliance Store
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Common Structures (cont.)
2. Bureaucratic (Mechanistic) Structures:
• high specialization
• highly centralized decision
making
• highly standardized policies,
procedures, rules & regulations
• extensive departmentalization,
typically by function
• narrow spans of control
• decision making that follows
tight chain of command
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Why Don’t Bureaucracies Die?
Weaknesses:
• Increased subunit conflicts
• More rigid and inflexible:
- Obsessive concern for enforcing
rules and regulations
- Lack of employee discretion to
deal with problems
- Increased time to act
• Encourages autocratic
leadership styles
• Fosters Q1/Q2 cultures
Strengths:
• Gives you more control!
(especially with bigger size)
• Centrally coordinated
decision making preferred
• Economies of scale
• Environmental turbulence
can be largely managed
• Enhanced management of
communication & info.
• Technology can mitigate
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Common Structures (cont.)
3. Matrix: A “hybrid” of departmentalization.
Combines (usually) the following approaches
to departmentalization:
• Functional
• Product
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Example: A Matrix Structure
Approach for a College of Business
M. Stevens
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Common Structures (cont.)
4. Team Structures: Use of teams as the central
device to manage and coordinate work activities (a
“simpler” structure for large organizations).
Characteristics:
• Breaks down departmental barriers.
• Decentralizes decision making to the team level.
• Requires employees to be generalists as well as specialists.
• Creates a “flexible bureaucracy.”
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Common Structures (cont.)
Team (Organic, Empowered) Structures:
• low specification (formalization)
• low specialization (lots of cross-training)
• highly decentralized, participative decision-making
based on genuinely empowered employees
• uses cross-functional and cross-hierarchical teams
• flatter hierarchies and reporting structures
• comprehensive sharing of information networks
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The Two Extremes of Structure
E X H I B I T 14 – 6
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Newer Approaches to Structure
• Virtual Organizations
• Boundaryless Organizations
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Which Structure Is Best?
• What is the organization’s size?
• What technology is being used?
• How much environmental uncertainty?
• What is the firm’s business strategy:
– Creativity and Innovation?
– Cost-Minimization?
– Imitation?
• What is the organization’s culture?
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