Organization Structure and Design Fundamentals of Organizational Behavior 2e Andrew J. DuBrin...

Organization StructureOrganization Structureand Designand Design

Fundamentals of Fundamentals of Organizational Behavior 2eOrganizational Behavior 2e

Andrew J. DuBrinAndrew J. DuBrin

PowerPoint Presentation by Charlie Cook

PowerPoint Presentation by Charlie Cook

ChapterChapter1212

A. J. DuBrin, Fundamentals of Organizational Behavior, Second Edition. Copyright © 2002 by South-Western. 12–2

Learning ObjectivesLearning Objectives

1.1. Identify and define the foundation concepts of Identify and define the foundation concepts of organization structure, including the informal organization structure, including the informal structure.structure.

2.2. Specify the basic features of the bureaucratic form Specify the basic features of the bureaucratic form of organization, including how it is divided into of organization, including how it is divided into departments.departments.

3.3. Describe key modifications of a bureaucratic Describe key modifications of a bureaucratic structure: matrix, flat, and outsourcing.structure: matrix, flat, and outsourcing.

4.4. Describe the two contemporary organizational Describe the two contemporary organizational designs referred to as horizontal organizations and designs referred to as horizontal organizations and network organizations.network organizations.

5.5. Understand why a new type of organization chart Understand why a new type of organization chart called an called an organigraphorganigraph can contribute to can contribute to understanding organization structure.understanding organization structure.


OrganizationsOrganizations

OrganizationOrganization Is a collection of people working together to achieve a Is a collection of people working together to achieve a

common purpose (or simply a big group).common purpose (or simply a big group).

Organization structureOrganization structure Is the arrangement of people and tasks to accomplish Is the arrangement of people and tasks to accomplish

organizational goals.organizational goals.

Organizational designOrganizational design Is the process of creating a structure that best fits a Is the process of creating a structure that best fits a

purpose, strategy, and environment.purpose, strategy, and environment.


Foundation Concepts of Foundation Concepts of Organizational StructureOrganizational Structure

Mechanistic versus OrganicMechanistic versus Organic Mechanistic organizations are hierarchical bureaucracies Mechanistic organizations are hierarchical bureaucracies

with an emphasis on specialization, control, and vertical with an emphasis on specialization, control, and vertical communications. They rely heavily on rules, policies, and communications. They rely heavily on rules, policies, and procedures. procedures.

Organic structures are laid out as networks and emphasize Organic structures are laid out as networks and emphasize horizontal specialization, personal coordination, and horizontal specialization, personal coordination, and extensive informal communications. They have loose rules, extensive informal communications. They have loose rules, policies, and procedures that allow for rapid responses to policies, and procedures that allow for rapid responses to changes in the environment.changes in the environment.



Formal versus Informal StructureFormal versus Informal Structure Formal organizational structureFormal organizational structure

Is an official statement of the reporting relationships, Is an official statement of the reporting relationships, rules, and regulations that guide and govern the conduct rules, and regulations that guide and govern the conduct of business by the organization.of business by the organization.

Informal organizational structureInformal organizational structure Is a set of unofficial working relationships providing the Is a set of unofficial working relationships providing the

flexibility that take care of events and transactions not flexibility that take care of events and transactions not covered by the formal structure.covered by the formal structure.

Is revealed using social network analysis to trace informal Is revealed using social network analysis to trace informal social relationships and communication channels.social relationships and communication channels.



FormalizationFormalization Is the degree to which expectations regarding the methods Is the degree to which expectations regarding the methods

of work are specified, written down, and enforced.of work are specified, written down, and enforced. Produces an organization with highly specialized labor and Produces an organization with highly specialized labor and

high delegation of authority.high delegation of authority. Is associated with mechanistic (bureaucratic) organizations.Is associated with mechanistic (bureaucratic) organizations.



CentralizationCentralization Is the extent to which executives delegate authority to lower Is the extent to which executives delegate authority to lower

organizational units. Less delegation = more centralization.organizational units. Less delegation = more centralization. Strategic decisions are more likely to be centralized than Strategic decisions are more likely to be centralized than

operational decisions.operational decisions. The use of functional units is a feature of centralization.The use of functional units is a feature of centralization.



ComplexityComplexity Refers to the number of different job titles and Refers to the number of different job titles and

organizational units in an organization.organizational units in an organization. Increases the difficulty of managing an organization.Increases the difficulty of managing an organization. Typically increases with the size of the organization.Typically increases with the size of the organization.

DifferentiationDifferentiation A horizontally differentiated organization has many different A horizontally differentiated organization has many different

job titles.job titles. A vertically differentiated organization has many different A vertically differentiated organization has many different

levels.levels.



Tight versus Loose CouplingTight versus Loose Coupling Coupling is the extent to which organizational parts are Coupling is the extent to which organizational parts are

interdependent.interdependent. Tight coupling between parts is indicated if a minor change Tight coupling between parts is indicated if a minor change

in one part produces a large change in an associated part.in one part produces a large change in an associated part. The degree of coupling in businesses has increased due to The degree of coupling in businesses has increased due to

the increasing interdependence of the parts or subsystems the increasing interdependence of the parts or subsystems of organizations today.of organizations today.

Organizational design is influenced by coupling and the Organizational design is influenced by coupling and the increased necessity for flexibility to meet changing market increased necessity for flexibility to meet changing market conditions.conditions.


Weber’s Ideal Organization: Weber’s Ideal Organization: BureaucracyBureaucracy1.1. Rules and procedures controlling the organizational Rules and procedures controlling the organizational

structure.structure.

2.2. A high degree of differentiation among organizational A high degree of differentiation among organizational functions.functions.

3.3. A high degree of job specialization.A high degree of job specialization.

4.4. An organization of offices determined by hierarchy, with An organization of offices determined by hierarchy, with each unit reporting to a higher unit.each unit reporting to a higher unit.

5.5. A heavy emphasis on rules and norms to regulate behaviorA heavy emphasis on rules and norms to regulate behavior

6.6. Interpersonal relations characterized by impersonality in Interpersonal relations characterized by impersonality in place of favoritism.place of favoritism.

7.7. Selection and promotion based on merit.Selection and promotion based on merit.

8.8. All administrative actions recorded in writing.All administrative actions recorded in writing.


The Bureaucratic Form of The Bureaucratic Form of OrganizationOrganization Machine BureaucracyMachine Bureaucracy Uses standardized work processes and is efficient.Uses standardized work processes and is efficient. Best use is in large organizations.Best use is in large organizations.

Professional BureaucracyProfessional Bureaucracy Standardizes skills for Standardizes skills for

coordination and is coordination and is composed of a core composed of a core of highly trained of highly trained professionals.professionals.


The Bureaucratic FormThe Bureaucratic Formof Organizationof Organization

Power andPower and

AuthorityAuthorityNumber ofNumber of

EmployeesEmployees

HighHigh

LowLow

FewFew

ManyMany

Top-

Level

Managers

Middle-Level

Managers

First-Level

Managers

Operative Employees

EXHIBITEXHIBIT12-112-1


The Bureaucratic Form of The Bureaucratic Form of OrganizationOrganization The Contribution of BureaucracyThe Contribution of Bureaucracy Makes possible large-scale accomplishments and Makes possible large-scale accomplishments and

accountability for results.accountability for results. Bureaucratic layers contain managers with precious skills Bureaucratic layers contain managers with precious skills

and expertise. If eliminated, the organization may suffer.and expertise. If eliminated, the organization may suffer. Restructuring may destroy valuable organizational memory.Restructuring may destroy valuable organizational memory.

Potential Dysfunctions of a BureaucracyPotential Dysfunctions of a Bureaucracy Carrying bureaucratic characteristics to extremes Carrying bureaucratic characteristics to extremes

suppresses innovation and decision making, lowers suppresses innovation and decision making, lowers productivity, and creates inconvenience and inefficiency.productivity, and creates inconvenience and inefficiency.

Workers experience high frustration and low satisfaction.Workers experience high frustration and low satisfaction.


Sources of Individual and Subunit Sources of Individual and Subunit PowerPower DepartmentalizationDepartmentalization Is advantageous in that it gives major attention to enhancing Is advantageous in that it gives major attention to enhancing

product growth or service to customers.product growth or service to customers. Is the process of subdividing work into specialized Is the process of subdividing work into specialized

departments.departments. Functional DepartmentalizationFunctional Departmentalization

Is grouping people according to their expertise.Is grouping people according to their expertise. Territorial DepartmentalizationTerritorial Departmentalization

Is grouping subunits according to the geographic Is grouping subunits according to the geographic areas that they serve.areas that they serve.

Internationalization of business has increased the need Internationalization of business has increased the need for organizing subunits territorially.for organizing subunits territorially.


Sources of Individual and Subunit Sources of Individual and Subunit PowerPower Departmentalization (cont’d)Departmentalization (cont’d) Product/Service DepartmentalizationProduct/Service Departmentalization

Is arranging units by the product or service they provide.Is arranging units by the product or service they provide. Customer DepartmentalizationCustomer Departmentalization

Creates a structure based on customer needs.Creates a structure based on customer needs.

Hybrid (or Mixed) Organization StructureHybrid (or Mixed) Organization Structure Combines the advantages of different organizational types.Combines the advantages of different organizational types.

Line versus StaffLine versus Staff Line groups are responsible for the primary purposes of the Line groups are responsible for the primary purposes of the

firm whereas staff groups are responsible for secondary firm whereas staff groups are responsible for secondary purposes.purposes.


Functional DepartmentalizationFunctional Departmentalization

President

Vice President

Finance and

Chief Financial

Officer

Vice President

Human

Resources

Vice President

Engineering

Vice President

Operations

Vice President

Marketing



Product-ServiceProduct-ServiceDepartmentalizationDepartmentalization CEO

Vice President

Human

Resources

Vice President

Engineering

Vice President

Operations

Vice President

Marketing

Human ResourcesEngineeringOperationsMarketing

Small

Appliance

Division

Large

Appliance

Division

Real Estate

Development

Division

Airplane

Engines

Division



HybridHybridOrganization Organization StructureStructure

CEO

Vice President

Palm-Size

Computers

Vice President

Printers

Vice President

Desktop

Computers

DomesticInternational

OperationsMarketing

and

Sales

Human

Resources

Manufacturing Logistics Compensation Training

and Development



Mixed Organizing at Various Levels Mixed Organizing at Various Levels

CEO

Vice PresidentProduct Planning

Vice PresidentSales

SalesManagerSouth

SalesManagerWest

ExecutiveVice PresidentSales and Marketing

ExecutiveVice PresidentProduct Planning and Design

ExecutiveVice PresidentOperations

Vice PresidentMarketing Vice President

Manufacturing

Vice PresidentInformationSystems

SalesManagerEast

SalesManagerMidwest

ManagerSpecialProjects

ManagerAdvancedPlannning

ManagerEnvironmentalRegulations

ManagerCurrentProductPlanning

EXHIBITEXHIBIT12-4A12-4A


Key Modifications to the Bureaucratic Key Modifications to the Bureaucratic StructureStructure

Matrix OrganizationMatrix Organization Is a project structure superimposed on a functional Is a project structure superimposed on a functional

structure to take advantage of new opportunities and solve structure to take advantage of new opportunities and solve special problems.special problems.

Projects are temporary groups of specialists working under Projects are temporary groups of specialists working under one manager to accomplish a fixed objective such as one manager to accomplish a fixed objective such as launching a new product.launching a new product.

Matrix structure creates a dual reporting challenge—the Matrix structure creates a dual reporting challenge—the involved employees may have to report to two bosses.involved employees may have to report to two bosses.

A key advantage is to implement projects quickly.A key advantage is to implement projects quickly.


Matrix OrganizationMatrix Organizationin an Electrics in an Electrics CompanyCompany

Quality

Analyst

Information

Systems

Specialist

Marketing

Specialist

Operations

Technician

Electrical

Engineer

Laptop

Computer

Project

Quality

Analyst

Information

Systems

Specialist

Marketing

Specialist

Operations

Technician

Electrical

Engineer

Cellular

Phone

Project

Quality

Analyst

Information

Systems

Specialist

Marketing

Specialist

Operations

Technician

Ho

rizo

nta

l F

low

of

Pro

jec

t A

uth

ori

ty a

nd

Re

sp

on

sib

ilit

y

Electrical

Engineer

Personal

Digital

Assistant

Project

QualityInformation

SystemsMarketing

President or

General Manager

OperationsElectrical

Engineer

Vertical Flow of Functional Authority and ResponsibilityEXHIBITEXHIBIT

12-512-5


Flat Organizational Structures and Flat Organizational Structures and DownsizingDownsizing Flat OrganizationFlat Organization Has relatively few levels.Has relatively few levels. Is less bureaucratic because:Is less bureaucratic because:

There are few managers available to review decisions.There are few managers available to review decisions. Short chain-of-command creates less concern about Short chain-of-command creates less concern about

authority differences among people.authority differences among people. Are more efficient than tall organizations.Are more efficient than tall organizations. Requires that managers be conscious of the effects that Requires that managers be conscious of the effects that

downsizing to a flatter structure has on surviving downsizing to a flatter structure has on surviving employees.employees.


Outsourcing as an Organizational Outsourcing as an Organizational ArrangementArrangement

OutsourcingOutsourcing Is having work done by other organizations.Is having work done by other organizations. Is a method of dividing the work between groups on the Is a method of dividing the work between groups on the

outside with groups on the inside.outside with groups on the inside. Reduces the need for employees and physical assets and Reduces the need for employees and physical assets and

reduces payroll costs.reduces payroll costs. Can create ethical dilemmas for companies who have no Can create ethical dilemmas for companies who have no

control over the actions of their outsourcing suppliers.control over the actions of their outsourcing suppliers.


Leading-Edge Organizational Leading-Edge Organizational StructuresStructures The Horizontal StructureThe Horizontal Structure Is the arrangement of work by teams that are responsible Is the arrangement of work by teams that are responsible

for accomplishing a process.for accomplishing a process. Is a structure in which employees take collective Is a structure in which employees take collective

responsibility for customers.responsibility for customers.

ReengineeringReengineering Is the radical redesign of work to achieve substantial Is the radical redesign of work to achieve substantial

improvements in performance.improvements in performance. Searches for the most efficient way to perform a task.Searches for the most efficient way to perform a task. Organizes work horizontally rather than vertically.Organizes work horizontally rather than vertically.


A Horizontal StructureA Horizontal Structure

Customer

Request

Order

FulfillmentOperations

Specialist

IT

Specialist

Finance

Specialist

Marketing

Specialist



The Network StructureThe Network Structure

A Network Structure (or virtual organization)A Network Structure (or virtual organization) Is a temporary association of otherwise independent firms Is a temporary association of otherwise independent firms

that are linked by technology to share resources and that are linked by technology to share resources and markets.markets.

Is horizontally oriented.Is horizontally oriented. Requires that its members Requires that its members

trust one another.trust one another.


Organigraphs: Drawing How Companies Organigraphs: Drawing How Companies Really WorkReally Work

OrganigraphsOrganigraphs Maps that provides an overview of the company’s functions Maps that provides an overview of the company’s functions

and the way people organize themselves at work.and the way people organize themselves at work. Help understand organizational functioning.Help understand organizational functioning. Assist in expanding into new markets and opportunities.Assist in expanding into new markets and opportunities. Exhibit 12-7 in the textbook depicts the current Exhibit 12-7 in the textbook depicts the current

configuration of a bank and strategic options for altering the configuration of a bank and strategic options for altering the structure of the organization.structure of the organization.

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