Chapter 12
Organizational Structures
Keane Donaldson
Candice Johnson
Matt Rosenthal
Shirley Yin
Organizational Structures
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Today’s companies, more team
orientated.
Organizational Structures,
becoming more important.
Defines how job tasks are
coordinated.
Organizational Structures
Many different physical layouts.
Could be very tall, or very flat.
Organizational Structures
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Could be anywhere in-between
those extremes.
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Flat Structure
Team orientated.
 Open atmosphere.
 Problems solved quickly.
 More interaction between different
hierarchical levels.
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Organizational Structures
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Tall Structure
More levels of organization
 Limited interaction.
 More personal responsibility.
 If you have a problem, you would talk to
your manager, who would talk to their
manager, etc.
 Often, the message that you told to
your manager, is different from the one
they portray to their manager
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Organizational Structures
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When deciding which
organizational structure is best for
their company managers need to
address six key elements:
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Work Specialization
Departmentalization
Chain of command
Span of control
Centralization and decentralization
Formalization
Six Key Questions
Six Key Elements
1. Work Specialization or Division
of Labor:
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The degree to which tasks in the
organization are subdivided into separate
jobs
Ex. Henry Ford, assembly line
Individuals specialize in doing part of an
activity, rather than the whole thing
May lead to boredom, fatigue, stress and
increased absenteeism
Raises employee productivity and
efficiency, but lowers job satisfaction
Six Key Elements
2. Departmentalization:
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The basis on which jobs are grouped
together
Creates competitiveness between
departments
Narrow vision with respect to
organizational goals
5 different kinds of departmentalization:
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Functional
Product
Geographic
Process
Customer
Six Key Elements:
Types of Departmentalization
A) Functional
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Functional Departmentalization groups
activities by functions performed.
More efficient to put together people with
common skills and orientation into a
common unit.
Six Key Elements:
Types of Departmentalization
B) Product:
Grouping your organization
depending on the type of product
created is product
departmentalization.
 Increases accountability for product
performance.
 Also works with services.
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Six Key Elements:
Types of Departmentalization
C) Geographic:
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Departmentalized on the basis of geography,
or territory.
Ex. International companies having different
departments for each country.
D) Process:
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Organizes departments by the processing
that occurs.
Ex. inspecting, packing, shipping…
E) Customer:
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Departmentalize by the type of customer the
organization seeks to reach.
Ex. Corporate or individual customers.
Six Key Elements
3. Chain of Command:
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Unbroken line of authority that extends form
the top of the organization to the bottom.
Designates where you go if you have a
problem.
Becoming less structured than it was in the
past.
4. Span of Control:
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The number of employees a manager can
efficiently and effectively direct.
Generally determines the number of levels
an organization has.
Six Key Elements
5. Centralization and
Decentralization:
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Decentralization:
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The decision discretion is pushed down to
lower-level employees.
Take action quicker.
More people provide input into decisions.
Easier to address customer concerns.
Centralization:
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The degree to which decision making is
concentrated at a single point in the
organization.
Top management makes all the decisions.
Six Key Elements
6. Formalization
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The degree to which jobs within the
organization are standardized.
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Low Formalization:
 Job behaviours are relatively nonprogrammed.
 Lots of employee freedom.
 Less standardization.
High Formalization:
 Explicit job description.
 Lots or organizational rules.
 Clearly defined procedures for work
processes.
Two Models of
Organizations
Mechanistic Model:
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A structure characterized by extensive
departmentalization, high formalization,
a limited information network and
centralization.
Organic Model:
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A structure that is flat, uses cross
hierarchical and cross-functional teams,
has low formalization, possesses a
comprehensive information network,
and relies on group decision making.
Mechanistic vs. Organic Models
Two Models of Organizations
Which model is chosen depends on
the members of the organization’s
experience, personality, the work
task and their cultural background.
Mechanistic:
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People with a high degree of bureaucratic
orientation
Organic:
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People with a low degree of bureaucratic
orientation
Traditional Organizational
Designs
There are three:
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The Simple Structure
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The Bureaucracy
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The Matrix Structure
Traditional Organizational
Designs
The Simple Structure:
A structure with a low degree of
departmentalization. It has wide spans of control, its
power is centralized in a single person and there is
little formalization.
Characteristics:
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Flat, usually only two or three vertical levels.
Widely used in small businesses, where the
manager = owner.
The strength is in its simplicity.
Fast, flexible, inexpensive to maintain, direct
accountability.
Risky: Everything depends on one person.
Traditional Organizational
Designs
The Bureaucracy:
An organization which uses standardization in a
highly efficient manor.
Characteristics:
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Routine operating tasks.
Specialization.
Clearly stated rules and regulations.
Tasks that are grouped into functional
departments.
Centralized authority.
Traditional Organizational
Designs
The Bureaucracy
Advantages:
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Perform standardized activities in a highly
efficient manner.
Can operate with lesser talented staff, which will
have a smaller payroll.
Rules and regulations instead of managerial
discretion.
Centralized decision making.
Traditional Organizational
Designs
The Bureaucracy
Disadvantages:
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Each Functional Department can get a selffocus; they may forget that they are all interdependent.
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Obsessive concern for following the rules.
Traditional Organizational
Designs
The Matrix Structure:
Dual lines of authority, which combine both
functional and product departmentalization.
Characteristics:
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Groups similar specialists – Functional.
Facilitates coordination – Product.
Employees of organization have two managers.
Traditional Organizational
Designs
The Matrix Structure
Advantages:
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Does not become overloaded when complexity
arises.
Improves communication and flexibility.
Eliminates the dreaded “bureau-pathologies”.
Your specialists are grouped together.
Disadvantages:
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Confusion and power struggles.
Stress on employees.
Unclear expectations.
New Design Options
The Team Structure.
The Modular Organization.
The Virtual Organization.
The Boundary-less Organization.
New Design Options
The Team Structure:
The use of teams as a central device to coordinate
all work activities.
Characteristics:
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Breaks down departmentalization.
Teams are given decision making power.
Teams generally consist of 3-20 people.
The teams can be short or long term.
New Design Options
The Modular Organization:
A small core organization that outsourcers major
business functions.
Characteristics:
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Outsourcing employees and/or materials.
Contracting allows job to be done better or
cheaper.
Organization devote their talent to their most
important activities.
There is an increased focus on customers and
materials.
New Design Options
The Virtual Organization:
A continually evolving network of independent
companies linked together to share skills, costs and
access to one another’s markets.
Characteristics:
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Different firms join together to accomplish
common strategic objectives.
Some firms relinquish control, and act interdependently.
Sometimes blurred boundaries between
companies.
Companies create ‘win win’ deals by stimulating
the market.
New Design Options
The Boundary-less Organization:
An organization that seeks to eliminate the chain of
command, have limitless spans of control and
replace departments with empowered teams.
Characteristics:
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Replaces departments with ‘empowered’ teams.
Uses a participative decision-making style.
Heavy reliance on IT.
Can be difficult to manage.
Why Do Structures Differ?
1. Strategy:
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Innovation: a strategy that emphasizes the
introduction of major new products and
services.
Cost minimization: a strategy that
emphasizes tight cost controls, avoidance of
unnecessary innovation or marketing
expenses and price cutting.
Mechanistic imitation: a strategy that seeks
to move into new products or new markets
only after their viability has already been
proven.
Why Do Structures Differ?
2. Organizational Size:
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Size affects structure at a decreasing
rate.
The impact of size is less important as
the organization expanses (after 2000
employees).
3. Technology:
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The way in which an organization
transfers its inputs into outputs.
Degree of routine-ness.
Related to formalization or centralization.
Why Do Structures Differ?
4. Environment:
Those institutions or forces outside
the organization that potentially affect
the organization’s performance.
 Environmental uncertainty.
 Static environment vs. dynamic
environment.
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3 Dimensions to the environment:
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Capacity: the degree to which it can support
growth
Instability: volatility dimension
Complexity: the degree of heterogeneity and
concentration among environmental
elements
Questions?