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UNIT -2

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What is Organization Structure?

Common Organization Designs

New Design Options

Why Do Structures Differ?

Organizational Designs and Employee Behavior

Organization Structure: Its Determinants and Outcomes

Six Elements of Organizational

Structure

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1. Work Specialization

The degree to which tasks in the organizations are subdivided into separate jobs.

Also referred to Division of Labor.

Eg. In Ford Company, Every worker was assigned a specific, repetitive task.

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Unbroken Line of Authority Two concepts: Authority and Unity of command

Less relevance today

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The number of subordinates a manger can efficiently and effectively direct.

Wider span of control to reduce cut overhead, speed up decision making, increase flexibility, get closer to customers empower employees.

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Centralization is the degree to which decision making is concentrated at a single point in the organization.

In Decentralization, the lower level personnel provide input the discretion to make decisions

Recent trend is towards Decentralization to take decisions more easily

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Refers to the degree to which jobs within the organization are standardized.

Formalization is high, minimum amount of discretion about job uniform output.

Low formalization non programmed and employees have a great deal of freedom to exercise discretion

Why Do Structures Differ?

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Mechanistic Model:

A structure characterized by:

Extensive departmentalization

High formalization

Centralization

Restricted Information Flow

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Organic Model:

A structure characterized by:

Flat cross-functional teams has low formalization Relies on participative decision making Free Flow of information

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Strategy

Organization Size

Technology

Environment

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Organization goals are achieved by Strategies

Strategy and Structure should be closely linked

Structure must follow Strategy

Change in Organization’s Strategy should be reflected

changes in it’s Structure to support this change

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1- Innovation Strategy:A strategy that emphasizes the introduction of major new products and services. e.g. Apple

3- Imitation Strategy:A strategy that seeks to move into new products or new markets only after their viability has already been proven.

e.g. HP

2- Cost-minimization Strategy:A strategy that emphasizes tight cost controls, avoidance of unnecessary innovation or marketing expenses, and price cutting. e.g. Wal-Mart

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Strategy Structural Option

Innovation Organic: A loose structure; low specialization, low formalization, decentralized

Cost minimization Mechanistic: Tight control; extensive work specialization, high formalization, high centralization

Imitation Mechanistic and organic: Mix of loose with tight properties; tight controls over current activities and looser controls for new undertakings

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Organization’s Size Significantly affects it’s structure

Organizations with 2000 and more employees are Called Large Organizations

Increasing Employees does not affect the larger organizations

But Increasing Employees can affect the shifting of structure for Small Organizations

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“As an organization grows larger, it becomes more mechanistic.”

Characteristics of large organizations:

More specialization More Departmentalization More hierarchal structure More rules and regulations than Smaller

organization

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Technology:

“How an organization transfers its inputs into outputs.”

Every Organization has at-least one technology for

converting Financial, Human and physical resources

into products and services.

Examples: Ford Motors uses “Assembly-line process” for it’s

products Universities normally uses “Formal lecture method”

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Routine technologies are associated with long, departmentalized structures and formalization in organizations.

Routine technologies leads to centralization when formalization is low.

Non-routine technologies are associated with

delegated decision authority.

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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.

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