Management Principles
Chapter 9
Designing Adaptive Organizations
Craig W. Fontaine, Ph.D.
What Is Organizational Structure?
Organizational Structure
How major organizational
work activities are formally
divided, grouped, and
coordinated.
Key Elements:
• Work specialization
• Departmentalization
• Chain of command
• Span of control
• Centralization and
decentralization
• Formalization
Key Design Questions and Answers for Designing
the Proper Organization Structure
The Key Question
The Answer Is Provided By
1. To what degree are tasks
subdivided into separate jobs?
Work specialization
2. On what basis will jobs be grouped
together?
Departmentalization
3. To whom do individuals and groups
report?
Chain of command
4. How many individuals can a manager
efficiently and effectively direct?
Span of control
5. Where does decision-making
authority lie?
Centralization
and decentralization
6. To what degree will there be rules
and regulations to direct employees
and managers?
Formalization
What Is Organizational Structure?
Work Specialization
The degree to which tasks in the organization are
subdivided into separate jobs.
Division of labor:
• Makes efficient use of employee skills
• Increases employee skills through repetition
• Specialized training is more efficient.
• Allows use of specialized equipment.
What Is Organizational Structure?
Departmentalization
Grouping Activities By:
The basis by which jobs
are grouped together.
• Function
• Product
• Geography
• Process
• Customer
Key Concepts in Organizational Structure
Authority
The rights inherent in a managerial position to give orders and to
expect the orders to be obeyed.
Chain of Command
The unbroken line of authority that extends from the top of the
organization to the lowest echelon and clarifies who reports to whom.
Unity of Command
A subordinate should have only one superior to whom he or she is
directly responsible. (Matrix organizations violate this rule)
Span of Control
The number of subordinates a manager can efficiently and effectively
direct.
Contrasting Spans of Control
Key Concepts in Organizational Structure
Centralization
The degree to which decision making is concentrated at a
single point in the organization.
Decentralization
The degree to which decision making is spread
throughout the organization.
Formalization
The degree to which jobs within the
organization are standardized.
Dimensions of Organizational Structures
• Organizational structures have two dimensions: vertical and horizontal
• The vertical dimension refers to the number of hierarchical levels in the
company: “tall structures” have many more levels then “flat structures”
• Tall structures typically have a “narrow” (less people) span of control
and flat structures have “wider” span of control (more people).
• Tall structure are characterized by centralized decision making at the
top, flat structures normally have more local decentralized decision
making.
• The horizontal dimension is the organization structure element which
divides work into specific jobs/tasks and assigns jobs into units such as
departments. (These are described in detail later in the presentation)
VerticaL Dimension (Tall or Flat)
Tall or Flat – Advantages and Disadvantages
Advantages of Tall Structures
Advantages of Flat Structures
Close supervisory control
Flexible and better able to adapt to changes
Clearly defined roles and responsibilities
More direct and effective communication
Obvious chain of command
Faster decision making
Decision making centralized at the top
Greater autonomy and decision making for staff
Clear progression and promotion ladder
Less hording of information at the top
More mentoring
More democratic
Disadvantages of Tall Structures
Disadvantages of Flat Structures
High management costs
Less clear specific job functions
Slow decision making
Less opportunity for promotion
Ineffective and slow communication
High managerial work load
Employees are less motivated, innovation suffers
More difficult to coordinate between subordinates
Less rewards are given to staff, de-motivational
Less close relationship between superior & staff
Subordinates have less freedom and responsibility
Produces more generalists than specialists
Horizontal Dimension
• The horizontal dimension defines how work/jobs are grouped or
Departmentalization.
• Popular approaches to departmentalization are:
• By function – Functional Departmental Structure
• By product, service or customer type – Divisional Departmental
Structure
• When customers or jobs are scattered over a large geographic area
and have similar needs based on their location, a Geographic
organizational structure (a type of Divisional Structure) might be
appropriate.
• Less common is the Matrix organizational structure, which combines
two structures. In a matrix structure; product, project or client/regional
managers, borrow talent from the specialized functional areas in
achieve tasks.
Functional
Advantages
Disadvantages
High degree of efficiency
Develops specialized employees
Cross functional communication poor
Diminished responsiveness to customers’ needs
Slow response to external environmental
changes
Allows economies of scale to be achieved
Fosters a professional identity within
functions
Accountability and roles are clear
Clear career path
Fosters restricted view of the organization
Creates allegiance to functions, not the
organization
Develops specialists not generalists
Divisional
Divisional Structures can also
be by customer type:
• Consumer Products
• Commercial Products
• Military Products
Advantages
Disadvantages
Fast response to environment
Duplication of resources
Fast response to customer needs
Reduced specialization
Fosters high coordination across functions
Competition among divisions
Develops general managers and executive skills
Makes standardization across divisions difficult
Clear responsibility for all activities in the division
Poor coordination across divisions
Geographic (Type of Divisional)
Advantages
Disadvantages
Local hiring improves knowledge of local culture
Duplication of personnel (home and regions)
Provides greater customer knowledge
Competition between different areas
Customer feels more comfortable
Difficult to maintain core company beliefs
Faster more nuanced decisions
Potential feeling of division within the company
Fosters customized solutions
Different metrics and policies for each region
Teams can help
Team Structure
The use of teams as the central device to coordinate
work activities.
Characteristics:
• Breaks down departmental barriers/silos.
• Decentralizes decision making at the team level.
• Requires employees to be generalists as well as
specialists.
• Creates a “flexible bureaucracy.”
Matrix
Advantages
Disadvantages
Efficient utilization of scare expensive specialists
Dual chain of command repercussions
Allows for rapid start of new projects/products
Requires good interpersonal skills
Develops cross-functional skills by employees
Conflict of between managers over priorities
Increased employee involvement in decision making
Too much time spend coordinating
Achieves coordination to meet customer needs
Places stress on individuals
Differing Models of Structure
Mechanistic Model
A structure characterized by extensive
departmentalization, high formalization,
a limited information network, and
centralization.
Organic Model
A structure that is flat, uses crosshierarchical and cross-functional teams,
has low formalization, possesses a
comprehensive information network, and
relies on participative decision making.
Why Do Structures Differ? – Strategy
Innovation Strategy
A strategy that emphasizes the introduction of major new
products and services.
Cost-minimization Strategy
A strategy that emphasizes tight cost controls, avoidance of
unnecessary innovation or marketing expenses, and price
cutting.
Imitation Strategy
A strategy that seeks to move into new products or new
markets only after their viability has already been proven.
The Strategy-Structure Relationship
Strategy
Structural Option
Innovation
Organic: A loose structure; low
specialization, low formalization,
decentralized
Cost minimization
Mechanistic: Tight control; extensive
work specialization, high formalization,
high centralization
Imitation
Mechanistic and organic: Mix of
loose with tight properties; tight
controls over current activities and
looser controls for new undertakings
Organization Structure: Its Determinants
and Outcomes
Implicit Models of
Organizational Structure
Perceptions that people hold
regarding structural variables
formed by observing things around
them in an unscientific fashion.
Boundaryless Organization
An organization in which chains of command are
eliminated, spans of control are unlimited, and rigid
departments give way to empowered teams.
Modular Organization: An organization that
surrounds itself by a network of other organizations
to which it regularly outsources noncore functions.
Virtual Organization: A highly flexible, temporary
organization formed by a group of companies that
join forces to exploit a specific opportunity.
Modular Organization
Pros and Cons of Modular Structures
Virtual Organization
Pros and Cons of Virtual Structures
Job Design
Job Design
• The design of work involves determining the
appropriate task content, sequences,
interrelationship and context of jobs
• Redesigning work can increase worker
performance and satisfaction
• Approaches include:
•
•
•
•
Work simplification
Job Rotation
Job enlargement
Job enrichment
Work Simplification
• Work Simplification refers to the process of
reducing a job to its component parts than
reassembling those parts into the most
efficient work process, it includes:
•
•
•
•
Mechanical pacing
Repetitive work
Fractionalization
Enhanced tools and techniques
• Can cause significant dysfunction!
Job Design: Creating Meaningful Jobs
•
Job Rotation
•
Job Enlargement
•
Job Enrichment
– The periodic shifting of a worker from one task to another.
– Reduces boredom and increases motivation through
diversifying the employee’s activities.
– The horizontal expansion of jobs.
– Attacks the lack of diversity in overspecialized jobs; does
little to instill challenge or meaningfulness to a worker’s
activities.
– The vertical expansion of jobs.
• Employee does a complete activity
– Expands the employee’s freedom and independence, increases
responsibility, and provides feedback.
What people want from their jobs &
design principles
•
•
•
•
•
•
Reasonably demanding
work with some variety
Opportunity to learn
Some decision making
Social support and
recognition
Significance & meaning
Some desirable future
Job design principles
At the level of the individual
 Respect
 Contribution to product
 Quantity & quality - feedback results
quickly
 Meaningful whole task
 A whole job - plan, do, evaluate
 Variety
 Optimum cycle times
The Job Characteristics Model
Source: Adapted from J. R. Hackman and G. R. Oldham,
Work Redesign (Reading, MA: Addison-Wesley, 1980).
Job Characteristics Model
Job Characteristic
Skill variety
Employee uses a wide range of skills.
Task identity
Worker is involved in all tasks of the job
from beginning to end of the production
process
Task significance
Worker feels the task is meaningful to
organization.
Autonomy
Employee has freedom to schedule tasks
and carry them out.
Feedback
Worker gets direct information about how
well the job is done.
Types of Flexible Scheduling
•
•
•
•
Compressed workweek/year
Flextime
Job Sharing
Telecommuting
Employee Responses to Flexible Work
Arrangements
• 94 percent are very satisfied with their work arrangements
• 70 percent reported less stress
• 81 percent said they were more effective at balancing work
and their outside lives
• 48 percent use flex work to deal with family responsibilities
and child and/or elder care
• 36 percent said they would leave the company if flex work
were not available
• 78 percent said their opportunities for advancement were the
same or better than when they worked a traditional schedule