Designing Organizational Structures 15 Chapter © 2004 by Nelson, a division of Thomson Canada...

Designing Organizational

Structures

15Chapter

© 2004 by Nelson, a division of Thomson Canada Limited.

2 © 2004 by Nelson, a division of Thomson Canada Limited.

Learning Goals

1. What are the five structural building blocks that managers use to design organizations?

2. What are the five types of departmentalization?

3. How can the degree of centralization/ decentralization be altered to make an organization more successful?


Learning Goals (cont’d)

4. How do mechanistic and organic organizations differ?

5. What is the difference between line positions and staff positions?

6. What is the goal of re-engineering?7. How does the informal organization

affect the performance of a company?8. What trends are influencing the way

businesses organize?


Learning Goal 1

What are the five structural building blocks that managers use to design organizations?


Organizing:

the process of coordinating and allocating a firm’s resources so that the firm can carry out its plans and achieve its goals


Structural Building Blocks

1. Division of Labour– specialization of tasks

2. Departmentalization– creating an organization chart

3. Managerial Hierarchy– chain of command– delegation of authority


Structural Building Blocks (cont’d)

4. Span of Control– narrow span– wide span

5. Centralization of Decision Making– degree of centralization vs.

decentralization


Learning Goal 2

What are the five types of departmentalization?


Departmentalization:

the process of grouping jobs together so that similar or associated tasks and activities can be coordinated


Types of Departmentalization

1. Functional

2. Product

3. Process

4. Customer

5. Geographic


Functional


Product or Service Offered


Process


Customer


Geographic


Learning Goal 3

How can the degree of centralization/ decentralization be altered to make an organization more successful?


Centralization:

the degree to which formal authority is concentrated in one area or level of an organization


Decentralization:

the process of pushing decision-making authority down the organizational hierarchy, giving lower-level workers more responsibility


Factors Affecting Decision-Making Authority

• Size of the organization

• Speed of change in its environment

• Managers willing to share power

• Employees willing and able to take more responsibility

• Organization’s geographic dispersion


Learning Goal 4

How do mechanistic and organic organizations differ?


Mechanistic Organization:

an organization characterized by a relatively high degree of work specialization, rigid departmentalization, many layers of management, narrow spans of control, centralized decision- making, and a long chain of command.


Organic organization:

an organization characterized by a relatively now degree of work specialization, loose departmentalization, few levels of management, wide spans of control, decentralized decision-making, and a short chain of command

Mechanistic vs. Organic Structure

Structural Characteristic

Mechanistic Organic

Job specialization High Low

Departmentalization Rigid Loose

Management hierarchy

Tall (many levels)

Short (few levels)

Span of control Narrow Wide

Decision-making authority

Centralized Decentralized

Chain of command Long Short


Learning Goal 5

What is the difference between line positions and staff positions?


Line Positions:

all positions in the organization directly concerned with producing goods and services and which are directly connected from top to bottom

• Typically found in areas such as:– production– marketing – finance


Staff Positions:

positions in an organization held by individuals who provide the administrative and support services that line employees need to achieve the firm’s goals

• Typically found in areas such as:– legal counseling– public relations– human resource management


Common Organizational Structures

• Line organization– clear chain of command

• Line-and-staff organization– both line and staff positions

• Committee structure– group authority and responsibility

• Matrix structure (project management)– combines functional and product

departmentalization


Matrix Structure

• Advantages– teamwork– efficient use of

resources– flexibility– ability to balance

conflicting objectives– higher performance– opportunities for

personal and professional growth

• Disadvantages– power struggles– confusion among

team members– lack of cohesiveness


Learning Goal 6

What is the goal of re-engineering?


Re-engineering:

the complete redesign of business structures and processes in order to improve operations


Goal of Re-engineering

• Redesign business processes to achieve improvements in:

–cost control–product quality–customer service–speed


Learning Goal 7

How does the informal organization affect the performance of a company?


Informal Organization:

the network of connections and channels of communication based on the informal relationships of individuals inside an organization


Informal Organizations

• Give employees more control over their work environment by delivering a continuous stream of company information, helping employees stay informed

• Informal relationships can be:– between people at the same hierarchical

level– between people at different levels and in

different departments


Functions of theInformal Organization

• Friendships and social contact

• Information and sense of control over their work environment

• Source of status and recognition


Learning Goal 8

What trends are influencing the way businesses organize?


Trends in Organizational Structure

• Virtual corporation– technology– opportunism– excellence– trust– no borders

• Structural issues for global mergers

Designing Organizational Structures 15 Chapter © 2004 by Nelson, a division of Thomson Canada...

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