Chapter
12
Organization Structure
and Design
Fundamentals of
Organizational Behavior 2e
Andrew J. DuBrin
PowerPoint Presentation
by Charlie Cook
Learning Objectives
1. Identify and define the foundation concepts of
organization structure, including the informal
structure.
2. Specify the basic features of the bureaucratic form
of organization, including how it is divided into
departments.
3. Describe key modifications of a bureaucratic
structure: matrix, flat, and outsourcing.
4. Describe the two contemporary organizational
designs referred to as horizontal organizations and
network organizations.
5. Understand why a new type of organization chart
called an organigraph can contribute to
understanding organization structure.
A. J. DuBrin, Fundamentals of Organizational Behavior, Second Edition. Copyright © 2002 by South-Western.
12–2
Organizations
Organization
 Is a collection of people working together to achieve a
common purpose (or simply a big group).
Organization structure
 Is the arrangement of people and tasks to accomplish
organizational goals.
Organizational design
 Is the process of creating a structure that best fits a
purpose, strategy, and environment.
A. J. DuBrin, Fundamentals of Organizational Behavior, Second Edition. Copyright © 2002 by South-Western.
12–3
Foundation Concepts of Organizational
Structure
Mechanistic versus Organic
 Mechanistic organizations are hierarchical bureaucracies
with an emphasis on specialization, control, and vertical
communications. They rely heavily on rules, policies, and
procedures.
 Organic structures are laid out as networks and emphasize
horizontal specialization, personal coordination, and
extensive informal communications. They have loose rules,
policies, and procedures that allow for rapid responses to
changes in the environment.
A. J. DuBrin, Fundamentals of Organizational Behavior, Second Edition. Copyright © 2002 by South-Western.
12–4
Foundation Concepts of Organizational
Structure
Formal versus Informal Structure
 Formal organizational structure

Is an official statement of the reporting relationships,
rules, and regulations that guide and govern the conduct
of business by the organization.
 Informal organizational structure


Is a set of unofficial working relationships providing the
flexibility that take care of events and transactions not
covered by the formal structure.
Is revealed using social network analysis to trace informal
social relationships and communication channels.
A. J. DuBrin, Fundamentals of Organizational Behavior, Second Edition. Copyright © 2002 by South-Western.
12–5
Foundation Concepts of Organizational
Structure
Formalization
 Is the degree to which expectations regarding the methods
of work are specified, written down, and enforced.
 Produces an organization with highly specialized labor and
high delegation of authority.
 Is associated with mechanistic (bureaucratic) organizations.
A. J. DuBrin, Fundamentals of Organizational Behavior, Second Edition. Copyright © 2002 by South-Western.
12–6
Foundation Concepts of Organizational
Structure
Centralization
 Is the extent to which executives delegate authority to lower
organizational units. Less delegation = more centralization.
 Strategic decisions are more likely to be centralized than
operational decisions.
 The use of functional units is a feature of centralization.
A. J. DuBrin, Fundamentals of Organizational Behavior, Second Edition. Copyright © 2002 by South-Western.
12–7
Foundation Concepts of Organizational
Structure
Complexity
 Refers to the number of different job titles and
organizational units in an organization.
 Increases the difficulty of managing an organization.
 Typically increases with the size of the organization.
Differentiation
 A horizontally differentiated organization has many different
job titles.
 A vertically differentiated organization has many different
levels.
A. J. DuBrin, Fundamentals of Organizational Behavior, Second Edition. Copyright © 2002 by South-Western.
12–8
Foundation Concepts of Organizational
Structure
Tight versus Loose Coupling
 Coupling is the extent to which organizational parts are
interdependent.
 Tight coupling between parts is indicated if a minor change
in one part produces a large change in an associated part.
 The degree of coupling in businesses has increased due to
the increasing interdependence of the parts or subsystems
of organizations today.
 Organizational design is influenced by coupling and the
increased necessity for flexibility to meet changing market
conditions.
A. J. DuBrin, Fundamentals of Organizational Behavior, Second Edition. Copyright © 2002 by South-Western.
12–9
Weber’s Ideal Organization: Bureaucracy
1. Rules and procedures controlling the organizational
structure.
2. A high degree of differentiation among organizational
functions.
3. A high degree of job specialization.
4. An organization of offices determined by hierarchy, with
each unit reporting to a higher unit.
5. A heavy emphasis on rules and norms to regulate behavior
6. Interpersonal relations characterized by impersonality in
place of favoritism.
7. Selection and promotion based on merit.
8. All administrative actions recorded in writing.
A. J. DuBrin, Fundamentals of Organizational Behavior, Second Edition. Copyright © 2002 by South-Western.
12–10
The Bureaucratic Form of Organization
Machine Bureaucracy
 Uses standardized work processes and is efficient.
 Best use is in large organizations.
Professional Bureaucracy
 Standardizes skills for
coordination and is
composed of a core
of highly trained
professionals.
A. J. DuBrin, Fundamentals of Organizational Behavior, Second Edition. Copyright © 2002 by South-Western.
12–11
The Bureaucratic Form
of Organization
High
Few
TopLevel
Managers
Power and
Authority
Middle-Level
Number of
Employees
Managers
First-Level
Managers
Operative Employees
EXHIBIT
12-1
Low
A. J. DuBrin, Fundamentals of Organizational Behavior, Second Edition. Copyright © 2002 by South-Western.
Many
12–12
The Bureaucratic Form of Organization
The Contribution of Bureaucracy
 Makes possible large-scale accomplishments and
accountability for results.
 Bureaucratic layers contain managers with precious skills
and expertise. If eliminated, the organization may suffer.
 Restructuring may destroy valuable organizational memory.
Potential Dysfunctions of a Bureaucracy
 Carrying bureaucratic characteristics to extremes
suppresses innovation and decision making, lowers
productivity, and creates inconvenience and inefficiency.
 Workers experience high frustration and low satisfaction.
A. J. DuBrin, Fundamentals of Organizational Behavior, Second Edition. Copyright © 2002 by South-Western.
12–13
Sources of Individual and Subunit Power
Departmentalization
 Is advantageous in that it gives major attention to enhancing
product growth or service to customers.
 Is the process of subdividing work into specialized
departments.
 Functional Departmentalization

Is grouping people according to their expertise.
 Territorial Departmentalization


Is grouping subunits according to the geographic
areas that they serve.
Internationalization of business has increased the need
for organizing subunits territorially.
A. J. DuBrin, Fundamentals of Organizational Behavior, Second Edition. Copyright © 2002 by South-Western.
12–14
Sources of Individual and Subunit Power
Departmentalization (cont’d)
 Product/Service Departmentalization

Is arranging units by the product or service they provide.
 Customer Departmentalization

Creates a structure based on customer needs.
Hybrid (or Mixed) Organization Structure
 Combines the advantages of different organizational types.
Line versus Staff
 Line groups are responsible for the primary purposes of the
firm whereas staff groups are responsible for secondary
purposes.
A. J. DuBrin, Fundamentals of Organizational Behavior, Second Edition. Copyright © 2002 by South-Western.
12–15
Functional Departmentalization
President
Vice President
Marketing
Vice President
Operations
Vice President
Engineering
Vice President
Human
Resources
Vice President
Finance and
Chief Financial
Officer
EXHIBIT
12-2
A. J. DuBrin, Fundamentals of Organizational Behavior, Second Edition. Copyright © 2002 by South-Western.
12–16
Product-Service
Departmentalization
CEO
Vice President
Marketing
Vice President
Operations
Vice President
Engineering
Vice President
Human
Resources
Large
Appliance
Division
Small
Appliance
Division
Airplane
Engines
Division
Real Estate
Development
Division
Marketing
Operations
Engineering
Human Resources
EXHIBIT
12-3
A. J. DuBrin, Fundamentals of Organizational Behavior, Second Edition. Copyright © 2002 by South-Western.
12–17
Hybrid
Organization
Structure
CEO
Vice President
Vice President
Vice President
Desktop
Computers
Printers
Palm-Size
Computers
Marketing
and
Operations
Human
Resources
Sales
International
Domestic
Manufacturing
Logistics
Compensation
Training
and Development
EXHIBIT
12-4
A. J. DuBrin, Fundamentals of Organizational Behavior, Second Edition. Copyright © 2002 by South-Western.
12–18
Mixed Organizing at Various Levels
CEO
Executive
Vice President
Sales and Marketing
Vice President
Sales
Sales
Manager
West
Executive
Vice President
Product Planning and Design
Vice President
Marketing
Manager
Advanced
Plannning
Sales
Manager
South
Sales
Manager
Midwest
Vice President
Product Planning
Sales
Manager
East
Executive
Vice President
Operations
Vice President
Manufacturing
Vice President
Information
Systems
Manager
Special
Projects
Manager
Current
Product
Planning
Manager
Environmental
Regulations
EXHIBIT
12-4A
A. J. DuBrin, Fundamentals of Organizational Behavior, Second Edition. Copyright © 2002 by South-Western.
12–19
Key Modifications to the Bureaucratic
Structure
Matrix Organization
 Is a project structure superimposed on a functional
structure to take advantage of new opportunities and solve
special problems.
 Projects are temporary groups of specialists working under
one manager to accomplish a fixed objective such as
launching a new product.
 Matrix structure creates a dual reporting challenge—the
involved employees may have to report to two bosses.
 A key advantage is to implement projects quickly.
A. J. DuBrin, Fundamentals of Organizational Behavior, Second Edition. Copyright © 2002 by South-Western.
12–20
Electrical
President or
General Manager
Operations
Marketing
Engineer
Laptop
Operations
Marketing
Engineer
Technician
Specialist
Electrical
Operations
Marketing
Engineer
Technician
Specialist
Digital
Electrical
Operations
Marketing
Assistant
Engineer
Technician
Specialist
Project
Cellular
Phone
Project
Personal
Project
EXHIBIT
12-5
Quality
Systems
Electrical
Computer
Information
Information
Systems
Specialist
Information
Systems
Specialist
Information
Systems
Specialist
Quality
Analyst
Quality
Analyst
Quality
Analyst
Horizontal Flow of Project Authority and Responsibility
Matrix Organization
in an Electrics
Company
Vertical Flow of Functional Authority and Responsibility
A. J. DuBrin, Fundamentals of Organizational Behavior, Second Edition. Copyright © 2002 by South-Western.
12–21
Flat Organizational Structures and
Downsizing
Flat Organization
 Has relatively few levels.
 Is less bureaucratic because:


There are few managers available to review decisions.
Short chain-of-command creates less concern about
authority differences among people.
 Are more efficient than tall organizations.
 Requires that managers be conscious of the effects that
downsizing to a flatter structure has on surviving
employees.
A. J. DuBrin, Fundamentals of Organizational Behavior, Second Edition. Copyright © 2002 by South-Western.
12–22
Outsourcing as an Organizational
Arrangement
Outsourcing
 Is having work done by other organizations.
 Is a method of dividing the work between groups on the
outside with groups on the inside.
 Reduces the need for employees and physical assets and
reduces payroll costs.
 Can create ethical dilemmas for companies who have no
control over the actions of their outsourcing suppliers.
A. J. DuBrin, Fundamentals of Organizational Behavior, Second Edition. Copyright © 2002 by South-Western.
12–23
Leading-Edge Organizational Structures
The Horizontal Structure
 Is the arrangement of work by teams that are responsible
for accomplishing a process.
 Is a structure in which employees take collective
responsibility for customers.
Reengineering
 Is the radical redesign of work to achieve substantial
improvements in performance.
 Searches for the most efficient way to perform a task.
 Organizes work horizontally rather than vertically.
A. J. DuBrin, Fundamentals of Organizational Behavior, Second Edition. Copyright © 2002 by South-Western.
12–24
A Horizontal Structure
Customer
Request
Marketing
Specialist
Finance
Specialist
IT
Specialist
Operations
Specialist
Order
Fulfillment
EXHIBIT
12-6
A. J. DuBrin, Fundamentals of Organizational Behavior, Second Edition. Copyright © 2002 by South-Western.
12–25
The Network Structure
A Network Structure (or virtual organization)
 Is a temporary association of otherwise independent firms
that are linked by technology to share resources and
markets.
 Is horizontally oriented.
 Requires that its members
trust one another.
A. J. DuBrin, Fundamentals of Organizational Behavior, Second Edition. Copyright © 2002 by South-Western.
12–26
Organigraphs: Drawing How Companies Really
Work
Organigraphs
 Maps that provides an overview of the company’s functions
and the way people organize themselves at work.
 Help understand organizational functioning.
 Assist in expanding into new markets and opportunities.
 Exhibit 12-7 in the textbook depicts the current
configuration of a bank and strategic options for altering the
structure of the organization.
A. J. DuBrin, Fundamentals of Organizational Behavior, Second Edition. Copyright © 2002 by South-Western.
12–27