Lim Sei Kee @ cK
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All businesses have to organize what they
do
A clear structure makes it easier to see
which part of the business does what
Organization Structure - How job tasks are
formally divided, grouped and coordinated
The key question
The answer is provided by
1. To what degree are activities
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
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The
degree
to
which
activities
in
the
organization are subdivided into separate jobs.
Efficient use of employees skills
Efficient use of organizational resources
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The basis by which jobs are grouped together.
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Functional
◦ The grouping of activities by functions performed
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Product
◦ The grouping of activities by product produced
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Customer
◦ The grouping of activities by common customers
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Geographic
◦ The grouping of activities by territory
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Process
◦ The grouping of activities by work or customer flow
OBM Company
Engineering
Reliability
Manufacturing
Distribution
Finance
Public
Relations
Human
Resources
Purchasing
OBM Company
Small
Household
Appliances
Large
Household
Appliances
Commercial
Appliances
Building
Materials and
Products
Lawn and
Garden
Products
Automotive
Products
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The unbroken line of authority that extends from
the top of the organization to the lowest level and
clarifies who reports to whom.
Authority – the rights inherent in a managerial position to
give orders and to expect the orders to be obeyed
Unity of command – a subordinate should have only one
superior to whom he or she is directly responsible
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The number of subordinates a manager can
efficiently and effectively direct.
Narrow - can maintain close supervision
Expensive, as they add levels to management
Vertical communication more complex
Encourage tight supervision and discourage employee
autonomy
Wider – reduce costs, cut overhead, speed up
decision making, increase flexibility
Investing heavily on training
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The
degree
to
which
decision
making
is
concentrated at a single point in the organization
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The degree to which decision making requires
multiple parties to make their own independent
decisions.
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The degree to which jobs within the organization
are standardized.
High – minimum amount of discretion over what is to be
done, when it is to be done, and how he/she should do it
Low – non-programmed job, employees have a great deal
of freedom to exercise discretion in their work.
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Simple structure
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Bureaucracy
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Matrix structure
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A structure characterized by a low degree of
departmentalization, wide spans of control,
authority centralized in a single person, and
a little formalization.
Owner Manager
Salesperson
Salesperson
Salesperson
Salesperson
Cashier
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Strength
Fast, flexible and accountability is clear
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Weakness
As organization grows, it become inadequate
◦ A structure of highly
operating routine tasks
achieved through
specialization, very
formalized rules and
regulations, tasks that are
grouped into functional
departments, centralized
authority, narrow spans of
control, and decision
making that follows the
chain of command
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Strength
Ability to perform standardized activity in a highly
efficient manner
Economies of scale, minimum duplication of personnel
and equipment
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Weakness
Specialization creates subunit conflicts
Obsessive concern with following the rules
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Matrix Structure
◦ A structure that creates dual lines of authority and
combines functional and product departmentalization
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Key Elements
◦ Gains the advantages of functional and product
departmentalization while avoiding their weaknesses
◦ Facilitates coordination of complex and
interdependent activities
◦ Breaks down unity-of-command concept
(Director)
(Dean)
Employee
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Strength
Facilitate the efficient allocation of specialists and
sharing of specialized resources across products.
Facilitate coordination when the organization has a
multiplicity of complex activities
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Weakness
Creates confusion
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Team structure
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Virtual organization
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Boundaryless organization
The use of teams as the central device to coordinate
work activities.
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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Benefits
◦ Responsive, flexible
◦ Lower admin costs
◦ Quicker, more informed decisions
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Limitations
◦
◦
◦
◦
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Interpersonal training costs
Slower during team development
Role ambiguity increases stress
Problems with supervisor role changes
Duplication of resources
A small, core organization that outsources its major
business functions.
Highly centralized with little or no departmentalization.
Concepts:
Advantage: Provides maximum flexibility while
concentrating on what the organization does best.
Disadvantage: Reduced control over key parts of
the business.
An organization that seeks to eliminate the chain of
command, have limitless spans of control, and
replace departments with empowered teams.
T-form Concepts:
Eliminate vertical (hierarchical) and horizontal
(departmental) internal boundaries.
Breakdown external barriers to customers and
suppliers.
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Mechanistic organization
◦ The bureaucracy; a structure that is high in
specialization, formalization, and centralization
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Organic organization
◦ An adhocracy; a structure that is low in
specialization, formalization, and centralization
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Structure follows strategy
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Strategy
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Size
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Technology
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Environment
1.
Strategy
◦ Innovation Strategy
 A strategy that emphasizes the introduction of major new
products and services  Organic structure best
◦ Cost-minimization Strategy
 A strategy that emphasizes tight cost controls, avoidance
of unnecessary innovation or marketing expenses, and
price cutting  Mechanistic model best
◦ Imitation Strategy
 A strategy that seeks to move into new products or new
markets only after their viability has already been proven
 Mixture of the two types of structure
2.
3.
Organizational Size
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As organizations grow, they become more
mechanistic, more specialized, with more rules and
regulations
Technology
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How an organization transfers its inputs into outputs
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4.
The more routine the activities, the more mechanistic the
structure with greater formalization
Custom activities need an organic structure
Environment
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◦
Institutions or forces outside the organization that
potentially affect the organization’s performance
Three key dimensions: capacity, volatility, and
complexity