Chapter Ten
Organizing in the
Twenty-First Century
Chapter Objectives
• Explain the concept of contingency organization
design.
• Distinguish between mechanistic and organic
organizations.
• Discuss the roles that differentiation and
integration play in organization structure.
• Identify and briefly describe the five basic
departmentalization formats.
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Chapter Ten | 2
Chapter Objectives (cont’d)
• Describe how a highly centralized organization
differs from a highly decentralized one.
• Define the term delegation and list at least five
common barriers to delegation.
• Explain how the traditional pyramid organization is
being reshaped.
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Contingency Design
• Organizing
– The structuring of a coordinated system of authority
relationships and task responsibilities
• Contingency Design
– The process of determining the degree of
environmental uncertainty and adapting the
organization and its subunits to the situation
• How much environmental uncertainty is there?
• What combination of structural characteristics is most
appropriate?
– There is no single best organization design.
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The Burns and Stalker Model
• Mechanistic Organizations
– Are rigid in design, rely on formal communications, and
have strong bureaucratic qualities best suited to
operating in relatively stable and certain environments
• Organic Organizations
– Have flexible structures, have participative
communication patterns, and are successful in adapting
to change in unstable and uncertain environments
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Joan Woodward’s Study
• When task complexity is either high or low,
organizations with organic structures are more
effective.
• When task complexity is moderate, organizations
with mechanistic structures are more effective.
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The Lawrence and Lorsch Model
• A dynamic equilibrium exists between two opposing
structural forces and environmental complexity.
– Differentiation: The tendency of specialists to think and act in
restricted ways
– Integration: The collaboration among specialists needed to achieve
a common purpose
• A dynamic equilibrium between differentiation and
integration is necessary for a successful organization.
• Both differentiation and integration increase as
environmental complexity increases.
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Figure 10.1: Differentiation and Integration:
Opposing Organizational Factors
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Basic Structural Formats
• Departmentalization
– Grouping of related jobs or processes into major
organizational units
• Overcomes some of the effect of fragmentation caused by
differentiation (job specialization)
• Permits coordination (integration) to be handled in the least
costly manner
– Sometimes refers to divisions, groups, or units in large
organizations
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Basic Structural Formats (cont’d)
• Functional Departments
– Categorizing jobs according to the activity performed
• Product-Service Departments
– Grouping jobs around a specific product or service
• Geographic Location Departments
– Adopting a structural format based on the physical
dispersion of assets, resources, and customers
• Customer Classification Departments
– Creating a structural format centered on various
customer categories
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Figure 10.2: Alternative
Departmentalization Formats
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Figure 10.2: Alternative
Departmentalization Formats (cont’d)
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Figure 10.2: Alternative
Departmentalization Formats (cont’d)
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Basic Structural Formats (cont’d)
• Work Flow Process Departments in Reengineered
Organizations
– Creating horizontal organizations that emphasize
speedy work flow between two points:
• Identifying customer needs
• Satisfying customer needs
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Contingency Design Alternatives
• Span of Control (Management)
– Span of control is the number of people who report to a
manager.
– Narrow spans of control foster tall organizations with
many organizational/managerial layers.
– Flat organizations have wider spans of control.
• Is There an Ideal Span of Control?
– The right span of control efficiently balances too little
and too much supervision.
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Figure 10.3: Narrow and Wide Spans
of Control
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Contingency Design Alternatives (cont’d)
• The Contingency Approach to Spans of Control
– Both overly narrow and overly wide spans of control are
counterproductive.
– Situational factors dictate the width of spans of control.
• Wide spans of control are appropriate for departments where
many workers work closely together and do the same job.
• Narrow spans of control are best suited for departments where
the work is complex and/or the workers are widely dispersed.
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Figure 10.4: Situational Determinants
of Span of Control
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Contingency Design Alternatives (cont’d)
• Centralization
– The retention of decision-making authority by top
management
• Decentralization
– The sharing of decision-making authority by
management with lower-level employees
• The Need for Balance
– The challenge to balance the need for responsiveness
to changing conditions (decentralization) with the need
to create low-cost shared resources (centralization)
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Figure 10.5: Factors in Relative
Centralization/Decentralization
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Contingency Design Alternatives (cont’d)
• Decentralization Through Strategic Business
– Strategic business units (SBU) are organizational
subunits that:
•
•
•
•
Serve a specific market outside the parent organization
Face outside competitors
Are in a position of controlling their own destiny
Are profit centers, with their effectiveness measured in terms of
profit and loss
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Contingency Design Alternatives (cont’d)
• Line and Staff Organizations
– Line managers make decisions and staff personnel
provide advice and support.
– Personal staff are assigned to a specific manager in
supporting roles.
– Specialized staff constitute a reservoir of specialized
talent available to the entire organization.
– Functional authority gives staff temporary and limited
authority for specified tasks.
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Figure 10.6: A Line and Staff
Organization
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Matrix Organization
• Matrix Organization
– A structure with both vertical and horizontal lines of
authority
– Advantages
• Increases coordination
• Improves quantity of information flow
– Disadvantages
• Violates unity-of-command principle
• Creates an authority gap (lack of line authority) for project
managers
• Decreases quality of information flow
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Figure 10.7: A Simplified Matrix
Organization Chart
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Effective Delegation
• Delegation
– Assigning various degrees of decision-making authority
to lower-level employees
• Advantages of Delegation
– Frees up managerial time for other important tasks
– Serves as a training and development tool for lowerlevel managers
– Increases subordinates’ commitment by giving them
challenging assignments
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Effective Delegation (cont’d)
• Barriers to Delegation
–
–
–
–
–
–
–
–
–
Belief that only you can do the job right
Lack of confidence and trust in subordinates
Low self-confidence
Fear of being called lazy
Vague job definition
Fear of competition from subordinates
Reluctance to take risks that depend on others
Lack of early warning controls
Poor example of bosses who do not delegate
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Figure 10.8: The Delegation Continuum
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The Changing Shape of Organizations
• Characteristics of New Organizations
– Fewer organizational layers
– More teams
– Smallness within bigness
• New Organizational Configurations
– Hourglass organization: Three-layer structure with
constricted middle (management) layer
– Cluster organization: Collaborative structure in which
teams are the primary unit
– Virtual organizations: Internet-linked networks of valueadding subcontractors
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Figure 10.9: Reshaping the Traditional
Pyramid Organization
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Terms to Understand
•
•
•
•
•
•
•
•
•
•
Organizing
Contingency design/plan
Mechanistic organizations
Organic organizations
Differentiation
Integration
Departmentalization
Span of control
Centralization
Decentralization
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• Strategic business unit
• Line and staff
organization
• Functional authority
• Matrix organization
• Delegation
• Hourglass organization
• Cluster organization
• Virtual organization
Chapter Ten | 33