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ORGANIZATIONAL BEHAVIOR
After studying chapter 15 and listening to class lecture,you should be able to:
1. Identify the six key elements that define an organization’s structure.
2. Explain the characteristics of a bureaucracy.
3. Describe a matrix organization.
4. Explain the characteristics of a virtual organization.
5. Summarize why managers want to create boundaryless organizations.
6. Contrast mechanistic and organic structural models.
7. List the factors that favor different organizational structures.
8. Why do structures differ?
L E
A R
N I
N G
O
B J
E C
T I
V E
S
What Is Organizational Structure?What Is Organizational Structure?
Key Elements:
• Work specialization
• Departmentalization
• Chain of command
• Span of control
• Centralization and decentralization
• Formalization
Key Elements:
• Work specialization
• Departmentalization
• Chain of command
• Span of control
• Centralization and decentralization
• Formalization
What Determines What Determines Organizational Structure?Organizational Structure?
To what degree are tasks subdivided into separate jobs?
On what basis will jobs be grouped together?
To whom do individuals and groups report?
How many individuals can a manager efficiently and effectively direct?
Where does decision-making authority lie?
To what degree will there be rules and regulations to direct employees and managers?
Key Design Questions and Answers for Designing the Proper Organization Structure
Key Design Questions and Answers for Designing the Proper Organization Structure
StrategyStrategy StrategyStrategy
Why DoWhy DoStructuresStructures
Differ?Differ?
Why DoWhy DoStructuresStructures
Differ?Differ?
OrganizationOrganizationSizeSize
OrganizationOrganizationSizeSize
TechnologyTechnology TechnologyTechnology EnvironmentEnvironment EnvironmentEnvironment
Common Organization DesignsCommon Organization Designs
A Simple Structure:Jack Gold’s Men’s Store
A Simple Structure:Jack Gold’s Men’s Store
Organizational Chart of a Manufacturing Firm
BoardmemberBoard
memberBoard
memberBoard
memberBoard
memberBoard
memberBoard
memberBoard
member
ChiefExecutive
Officer
ChiefExecutive
OfficerLegal
counselLegal
counsel
PresidentPresident
IndustrialProductsDirector-Human
Resources
IndustrialProductsDirector-Human
Resources
ConsumerProductsDirector-Human
Resources
ConsumerProductsDirector-Human
Resources
WesternRegion
IndustrialProducts
SalesManager
WesternRegion
IndustrialProducts
SalesManager
EasternRegion
IndustrialProducts
SalesManager
EasternRegion
IndustrialProducts
SalesManager
WesternRegion
ConsumerProducts
SalesManager
WesternRegion
ConsumerProducts
SalesManager
EasternRegion
ConsumerProducts
SalesManager
EasternRegion
ConsumerProducts
SalesManager
etc.etc. etc.etc. etc.etc. etc.etc. etc.etc. etc.etc. etc.etc. etc.etc. etc.etc. etc.etc.
IndustrialProductsDirector-
Production
IndustrialProductsDirector-
Production
ConsumerProductsDirector-
Production
ConsumerProductsDirector-
Production
IndustrialProductsDirector-
R&D
IndustrialProductsDirector-
R&D
ConsumerProductsDirector-
R&D
ConsumerProductsDirector-
R&D
V.P Researchand Development
V.P Researchand Development
V.P Sales/Marketing
V.P Sales/Marketing
V.P HumanResources
V.P HumanResources
V.P Production
V.P Production
IndustrialProductsDirector-
Sales
IndustrialProductsDirector-
Sales
ConsumerProductsDirector-
Sales
ConsumerProductsDirector-
Sales
Tall versus Flat OrganizationsChief
ExecutiveChief
Executive
ChiefExecutive
ChiefExecutive
Tal
l h
iera
rch
yT
all
hie
rarc
hy
Fla
t h
iera
rch
yF
lat
hie
rarc
hy
Relatively widespan of control
Relatively narrowspan of control
Tall Organization
Flat Organization
A Product Organization
Pro-duction
Pro-duction Acctg.Acctg.SalesSales R&DR&D Pro-
duction
Pro-duction Acctg.Acctg.SalesSales R&DR&DPro-
duction
Pro-duction AcctgAcctgSalesSales R&DR&D
ProductGroup 2
ProductGroup 2
ProductGroup 1
ProductGroup 1
ProductGroup 3
ProductGroup 3
PresidentPresident
ChiefExecutive
Officer
ChiefExecutive
Officer
A Horizontal Organization
Team responsible for core process(e.g., generating and fulfilling orders)
Team responsible for core process(e.g., product development)
Team responsible for core process(e.g., flow of materials)
Adviser
Adviser
Adviser
Overall Manager
Objective:Reducedcycle time
Objective:More new products
Objective:Enhancedproductquality
Common Organization Designs Common Organization Designs
The BureaucracyThe Bureaucracy
Strengths– Functional
economies of scale
– Minimum duplication of personnel and equipment
– Enhanced communication
– Centralized decision making
Weaknesses– Subunit conflicts
with organizational goals
– Obsessive concern with rules and regulations
– Lack of employee discretion to deal with problems
Decentralization: Benefits When Low and When High
Low Decentralization(High Centralization)
Eliminates the additional responsibility not desired by people performing routine jobs
Permits crucial decisions to be made by individuals who have the “big picture”
High Decentralization(Low Centralization)
Can eliminate levels of management, making a leaner organization
Promotes greater opportunities for decisions to be made be people closest to problems
Table 12-1
The Matrix StructureThe Matrix Structure
Cross-FunctionalCross-FunctionalCoordinationCoordination
ClearClearAccountabilityAccountability
Allocation Allocation of Specialistsof Specialists
Dual ChainDual Chainof Commandof Command
Matrix Structure (College of Business Administration)Matrix Structure (College of Business Administration)
(Dean)
(Director)
Employee
A Matrix Organization
ProjectGammamanager
ProjectGammamanager
Productionsupportgroup
Productionsupportgroup
Legalsupportgroup
Legalsupportgroup
Accountingsupportgroup
Accountingsupportgroup
Engineeringsupportgroup
Engineeringsupportgroup
ProjectBeta
manager
ProjectBeta
manager
Productionsupportgroup
Productionsupportgroup
Legalsupportgroup
Legalsupportgroup
Accountingsupportgroup
Accountingsupportgroup
Engineeringsupportgroup
Engineeringsupportgroup
ProjectAlpha
manager
ProjectAlpha
manager
Productionsupportgroup
Productionsupportgroup
Legalsupportgroup
Legalsupportgroup
Accountingsupportgroup
Accountingsupportgroup
Engineeringsupportgroup
Engineeringsupportgroup
Productiondepartment
Productiondepartment
Legaldepartment
Legaldepartment
Accountingdepartment
Accountingdepartment
Engineeringdepartment
Engineeringdepartment
Farm MachineryDivision
Farm MachineryDivision
PresidentPresident
Functionalauthority
Projectauthority
Mechanistic vs. Organic Designs
Dimension
Stability
Specialization
Formal rules
Authority
Mechanistic
Change unlikely
Many specialists
Rigid rules
Centralized in a few top people
Organic
Change likely
Many generalists
Considerable flexibility
Decentralized, diffused throughout the organization
Structure
Table 12-2
Mechanistic Versus Organic ModelsMechanistic Versus Organic Models
A Virtual OrganizationA Virtual Organization
Organization Structure: Its Determinants and Outcomes
Organization Structure: Its Determinants and Outcomes
New Design Options New Design Options
Concepts:
Provides maximum flexibility while concentrating on what the organization does best.
Disadvantage is reduced control over key parts of the business.
Concepts:
Provides maximum flexibility while concentrating on what the organization does best.
Disadvantage is reduced control over key parts of the business.
What Is Organizational Structure? (cont’d)What Is Organizational Structure? (cont’d)
Division of labor:
• Makes efficient use of employee skills
• Increases employee skills through repetition
• Less between-job downtime increases productivity
• Specialized training is more efficient
• Allows use of specialized equipment
Division of labor:
• Makes efficient use of employee skills
• Increases employee skills through repetition
• Less between-job downtime increases productivity
• Specialized training is more efficient
• Allows use of specialized equipment
Economies and Diseconomies of Work Specialization
Economies and Diseconomies of Work Specialization
E X H I B I T 15-2
What Is Organizational Structure? (cont’d)What Is Organizational Structure? (cont’d)
Grouping Activities By:
• Function
• Product
• Geography
• Process
• Customer
Grouping Activities By:
• Function
• Product
• Geography
• Process
• Customer
What Is Organizational Structure? (cont’d)What Is Organizational Structure? (cont’d)
Narrow Span Drawbacks:
• Expense of additional layers of management.
• Increased complexity of vertical communication.
• Encouragement of overly tight supervision and discouragement of employee autonomy.
Narrow Span Drawbacks:
• Expense of additional layers of management.
• Increased complexity of vertical communication.
• Encouragement of overly tight supervision and discouragement of employee autonomy.
Concept:Concept:
Wider spans of Wider spans of management increase management increase organizational efficiency.organizational efficiency.
Concept:Concept:
Wider spans of Wider spans of management increase management increase organizational efficiency.organizational efficiency.
Contrasting Spans of ControlContrasting Spans of Control
E X H I B I T 15-3
What Is Organizational Structure? (cont’d)What Is Organizational Structure? (cont’d)
Common Organization Designs (cont’d)Common Organization Designs (cont’d)
Key Elements:
+ Gains advantages of functional and product departmentalization while avoiding their weaknesses.
+ Facilitates coordination of complex and interdependent activities.
– Breaks down unity-of-command concept.
Key Elements:
+ Gains advantages of functional and product departmentalization while avoiding their weaknesses.
+ Facilitates coordination of complex and interdependent activities.
– Breaks down unity-of-command concept.
New Design OptionsNew Design Options
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.”
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.”
New Design Options (cont’d)New Design Options (cont’d)
T-form Concepts:
Eliminate vertical (hierarchical) and horizontal (departmental) internal boundaries.
Breakdown external barriers to customers and suppliers.
T-form Concepts:
Eliminate vertical (hierarchical) and horizontal (departmental) internal boundaries.
Breakdown external barriers to customers and suppliers.
Why Do Structures Differ?Why Do Structures Differ?
Why Do Structures Differ?Why Do Structures Differ?
Why Do Structures Differ? – StrategyWhy Do Structures Differ? – Strategy
The Strategy-Structure RelationshipThe Strategy-Structure Relationship
E X H I B I T 15-9
Why Do Structures Differ? – TechnologyWhy Do Structures Differ? – Technology
Characteristics of routineness (standardized or customized) in activities:
• Routine technologies are associated with tall, departmentalized structures and formalization in organizations.
• Routine technologies lead to centralization when formalization is low.
• Nonroutine technologies are associated with delegated decision authority.
Characteristics of routineness (standardized or customized) in activities:
• Routine technologies are associated with tall, departmentalized structures and formalization in organizations.
• Routine technologies lead to centralization when formalization is low.
• Nonroutine technologies are associated with delegated decision authority.
Why Do Structures Differ? – EnvironmentWhy Do Structures Differ? – Environment
Key Dimensions:
• Capacity: the degree to which an environment can support growth.
• Volatility: the degree of instability in the environment.
• Complexity: the degree of heterogeneity and concentration among environmental elements.
Key Dimensions:
• Capacity: the degree to which an environment can support growth.
• Volatility: the degree of instability in the environment.
• Complexity: the degree of heterogeneity and concentration among environmental elements.
What Is Organizational Structure? (cont’d)What Is Organizational Structure? (cont’d)
The Three Dimensional Model of the Environment
The Three Dimensional Model of the Environment
E X H I B I T 15-10
Complexity
Volatility
Capacity
Organizational Designs and Employee Behavior
Organizational Designs and Employee Behavior
Research Findings:
• Work specialization contributes to higher employee productivity, but it reduces job satisfaction.
• The benefits of specialization have decreased rapidly as employees seek more intrinsically rewarding jobs.
• The effect of span of control on employee performance is contingent upon individual differences and abilities, task structures, and other organizational factors.
• Participative decision making in decentralized organizations is positively related to job satisfaction.
Research Findings:
• Work specialization contributes to higher employee productivity, but it reduces job satisfaction.
• The benefits of specialization have decreased rapidly as employees seek more intrinsically rewarding jobs.
• The effect of span of control on employee performance is contingent upon individual differences and abilities, task structures, and other organizational factors.
• Participative decision making in decentralized organizations is positively related to job satisfaction.