Organization Structure & Design (2)

8/7/2019 Organization Structure & Design (2)

1/47

Organizational Structureand Design


2/47

Defining Organizational Structurey Organizational Structure

y The formal arrangement of jobs within an organization

y

Organizational Designy A process involving decisions about six key elements:

y Work specialization

y Departmentalization

y Chain of command

y Span of control

y Centralization and decentralization

y Formalization


3/47

Purposes of Organizing

y Divides work to be done into specific jobs anddepartments

y

Assigns tasks and responsibilities associated withindividual jobs

y Coordinates diverse organizational tasks

y Establishes relationships among individuals,groups, and departments

y Establishes formal lines of authority

y Allocates organizational resources


4/47

Designing Organizational Structure

yWork Specialization

y The degree to which tasks in the organization are

divided into separate jobs with each stepcompleted by a different person


5/47

Departmentalization by Type

y Functional

y Grouping jobs by

functions performedy Product

y Grouping jobs byproduct line

yGeographicaly Grouping jobs on the

basis of territory orgeography

y Process

y Grouping jobs on the

basis of product orcustomer flow

y Customer

y Grouping jobs by type

of customer and needs


6/47

Functional Departmentalization

Plant Manager

Manager,

Manufacturing

Manager,

Human Resources

Manager,

Accounting

Manager,

Engineering

Manager,

Purchasing

+ Efficiencies from putting together similar specialties and

people with common skills, knowledge, and orientations

+ Coordination within functional area

+ In-depth specialization

Poor communication across functional areas

Limited view of organizational goals


7/47

Geographical

Departmentalization

Vice President

for Sales

Sales Director,Central Region

Sales Director,Southern Region

Sales Director,Western Region

Sales Director,Eastern Region

+ More effective and efficient handling of specific

regional issues that arise

+ Serve needs of unique geographic markets better

Duplication of functions

Can feel isolated from other organizational areas


8/47

Product Departmentalization

+ Allows specialization in particular products and services

+ Managers can become experts in their industry

+ Closer to customers


Limited view of organizational goals Source: Bombardier Annual Report.

CEO.

Truck

Division

Car

Division

Bus

Division


9/47

Process Departmentalization

+ More efficient flow of work activities

Can only be used with certain types of products

Plant

Manager

Spinning Dyeing Weaving Fininshing


10/47

Customer Departmentalization

+ Customers needs and problems can be met by specialists


Limited view of organizational goals

Director

of Sales

Manager,

Wholesale Accounts

Manager,

Retail Accounts

Manager,

Government Accounts


11/47

Organizational Structure (contd)

yChain of Command

y The continuous line of authority that extendsfrom upper levels of an organization to thelowest levels of the organization and clarifieswho reports to whom


12/47

Organizational Structure (contd)y Authority

y The rights inherent in a managerial position to tell people whatto do and to expect them to do it

y

Responsibilityy The obligation or expectation to perform. Responsibility brings

with it accountability (the need to report and justify work tomanagers superiors)

y Unity of Commandy The concept that a person should have one boss and should

report only to that person

y Delegationy The assignment of authority to another person to carry out

specific duties


13/47


y Line and Staff Authorityy Line managers are responsible for the essential

activities of the organization, includingproduction and sales. Line managers have theauthority to issue orders to those in the chainof commandy

The president, the production manager, and the salesmanager are examples of line managers

y Staff managers have advisory authority, andcannot issue orders to those in the chain ofcommand (except those in their own

department)


14/47


y Span of Controly The number of employees who can be effectively and

efficiently supervised by a managery Width of span is affected by:

y Skills and abilities of the manager and the employeesy Characteristics of the work being doney Similarity of tasksy Complexity of tasks

y Physical proximity of subordinatesy Standardization of tasksy Sophistication of the organizations information systemy Strength of the organizations culturey Preferred style of the manager


15/47


y Centralization

y The degree to which decision making is

concentrated at a single point in the organizationy Organizations in which top managers make all the

decisions and lower-level employees simply carry outthose orders

y Decentralization

y The degree to which lower-level employees provideinput or actually make decisions

y Employee Empowermenty Increasing the decision-making discretion of employees


16/47


y Formalizationy The degree to which jobs within the organization

are standardized and the extent to whichemployee behavior is guided by rules andproceduresy Highly formalized jobs offer little discretion over what is to

be done

y Low formalization means fewer constraints on howemployees do their work


17/47

Organizational Design Decisionsy Mechanistic Organization

y A rigid and tightlycontrolled structurey

High specializationy Rigid departmentalizationy Narrow spans of controly High formalizationy Limited information network

(mostly downwardcommunication)

y Low decision participation bylower-level employees

y Organic Organizationy Highly flexible and

adaptable structurey

Nonstandardized jobsy Fluid team-based structurey Little direct supervisiony Minimal formal rulesy Open communication

networky Empowered employees


18/47

Mechanistic Versus Organic

Organization

Mechanistic

High Specialization

Rigid Departmentalization

Clear Chain of Command

Narrow Spans of Control Centralization

High Formalization

Organic

Cross-Functional Teams

Cross-Hierarchical Teams

Free Flow of Information

Wide Spans of Control Decentralization

Low Formalization


19/47

Structural Contingency Factors (contd)

y Strategy and StructureyAchievement of strategic goals is facilitated by

changes in organizational structure thataccommodate and support change

y Size and Structurey

As an organization grows larger, its structuretends to change from organic to mechanisticwith increased specialization,departmentalization, centralization, and rulesand regulations


20/47


y Technology and Structurey Organizations adapt their structures to their

technologyy Routine technology = mechanistic

organizations

y Nonroutine technology = organic

organizations


21/47


y Environmental Uncertainty and Structure

yM

echanistic organizational structures tend tobe most effective in stable and simpleenvironments

y The flexibility of organic organizational

structures is better suited for dynamic andcomplex environments


22/47

Organizational DesignsOrganizational Designs

Traditional

-Simple Structure

-Functional

-Divisional

Contemporary

-Team

-Matrix-Project

-Boundary less

Learning Organization


23/47

Common Organizational Designs

y Traditional Designsy Simple Structure

y Low departmentalization, wide spans of control, centralized

authority, little formalizationy Functional Structure

y Departmentalization by functiony Operations, finance, human resources, and product research and

development

y

Divisional Structurey Composed of separate business units or divisions with

limited autonomy under the coordination and control of theparent corporation


24/47

Organizational Designs (contd)

yContemporary Organizational Designsy Team Structures

y The entire organization is made up of work groups or

self-managed teams of empowered employeesyMatrix Structures

y Specialists for different functional departments areassigned to work on projects led by project managers

y Matrix participants have two managers

y Project Structuresy Employees work continuously on projects, moving on

to another project as each project is completed


25/47

AMatrix Organization in an

Aerospace Firm

DesignEngineering Manufacturing ContractAdministration Purchasing Accounting HumanResources (HR)

DesignGroup

AlphaProject

ManufacturingGroup

ContractGroup

PurchasingGroup

AccountingGroup

HRGroup

DesignGroup

BetaProject

ManufacturingGroup

ContractGroup

PurchasingGroup

AccountingGroup

HRGroup

Design

Group

Gamma

Project

Manufacturing

Group

Contract

Group

Purchasing

Group

Accounting

Group

HR

Group

DesignGroup

OmegaProject

ManufacturingGroup

ContractGroup

PurchasingGroup

AccountingGroup

HRGroup


26/47

Organizational Designs (contd)yContemporary Organizational Designs

(contd)y

Boundaryless Organizationy A flexible and an unstructured organizational design

that is intended to break down external barriersbetween the organization and its customers andsuppliers

y

Removes internal (horizontal and vertical) boundariesy Eliminates external boundaries


27/47

Organizational Designs (contd)y Learning Organization

y An organization that has developed the capacity tocontinuously learn, adapt, and change through the

practice of knowledge management by employeesy Characteristics of a learning organization:

y An open team-based organization design that empowersemployees

y Extensive and open information sharing

y Leadership that provides a shared vision of the organizationsfuture; support; and encouragement

y A strong culture of shared values, trust, openness, and a senseof community


28/47

Co-ordinationy Linking of two or more organizational members

and/or work units so that they function well together

y

Two main types of co-ordination are:y Vertical coordination

y Horizontal Coordination


29/47

yVertical Coordination:

Linking work units (individual, team, departments)

separated by hierarchical levely Horizontal Coordination:

Linking work units (individual, team, departments) atthe same hierarchical level


30/47

Techniques for effective

coordinationy Coordination by chain of command

y Coordination by leadership

y Coordination by committeesy Staff meetings

y Special Coordinators

y Self- coordination


31/47

Differentiationy Differences in attitudes and working styles, arising

naturally among members of different departments,

that can complicate coordination of an organization'sactivities.


32/47

Integrationy The degree to which members of various departments

work together in a unified manner.


33/47

A Definition ofPower

AB

Power

The ability to exert influence; that is,

the ability to change the attitudes or

behavior of individuals or groups .A

capacity that A has to influence thebehavior of B so that B acts inaccordance with As wishes.

Dependency

Bs relationship to A whenA possesses somethingthat B requires.


34/47

Sources ofPower

Coercive Power

A power base dependent on fear.

Reward PowerCompliance achieved based onthe ability to distribute rewardsthat others view as valuable

Legitimate Power

The power a person receives as a result of his or her

position in the formal hierarchy of an organization.


35/47

Sources ofPowerExpert Power

Influence based on specialskills or knowledge.

Referent Power

Influence based on possessionby an individual of desirableresources or personal traits.


36/47

Dependency: The Key To Powery The General Dependency Postulate

y The greater Bs dependency on A, the greater the power A hasover B.

y Possession/control of scarce organizational resources thatothers need makes a manager powerful.

y Access to optional resources (e.g., multiple suppliers) reducesthe resource holders power.

y What Creates Dependency

y Importance of the resource to the organization

y Scarcityof the resource

y Nonsubstitutabilityof the resource


37/47

Authority (mainly) derives from

roleyAuthority is the right to make an ultimate decision,

and in an organisation it refers to the right to makedecisions which are binding on others (Obholzer,1994).


38/47

Line & StaffAuthority

y Line authority is the relationship in which asuperior exercises direct supervision over a

subordinatey Staff relationship is advisory


39/47

Difference between Authority &

PowerPower Authority

y It is a ability to command &influence behavior of another

y It rests with persons, in their

individual capacitiesy It doesn't follow any hierarchy

y Power, being personalizedattribute, can not be delegated

y Emerges because of personal

factorsy May exist between any 2 persons

y It is institutional right tocommand

y It lies in managerial position

y It is hierarchical in nature

y It can be delegated

y Institutional & originates fromstructural relationship

y Superior-subordinaterelationship


40/47

Delegationy Transfering formal authority from one position to

another is known as delegation


41/47

The Delegation Process

Assign Tasks

Transfer task responsibility

Creation of responsibility

AcceptanceCondition

Accept

Reject


42/47

Blocks to effective delegationy Factors in delegator:

y Love for authority

y Maintenance of tight control

y Fear of subordinates growth

y Fear of exposure

y Attitude towards subordinates

y Personality of superior


43/47

Guides for Overcoming Weak Delegation

1. Define assignments and delegate authority inlight of results expected

2. Select the person in light of the job to be done

3. Maintain open lines of communication

4. Establish proper controls

5. Reward effective delegation and successfulassumption of authority


44/47

Definition of Staffingy Staffing is filling, and keeping filled, positions in the

organization structure


45/47

SITUATIONALFACTORS AFFECTING

STAFFINGy External factors include the level of education, the

prevailing attitudes in society (such as the attitudetoward work), the many laws and regulations thatdirectly affect staffing, the economic conditions, andthe supply of and demand for managers outside theenterprise


46/47

SITUATIONALFACTORS AFFECTING

STAFFING cont.

y Internal factors that affect staffing include, forexample, organizational goals, tasks, technology,organization structure, the kinds of people

employed by the enterprise, the demand for andthe supply of managers within the enterprise, thereward system, and various kinds of policies


47/47

The Human Resources

Management Process

Environment

Environment

Decruitment

RecruitmentHumanResourcePlanning

Selection

Orientation Training

PerformanceManagement

CareerDevelopment

CompensationandBenefits

Identification and Selectionof Competent Employees

Adapted and competentemployees with up-to-dateskills and knowledge

Competent and high-performing employees whoare capable of sustaining high performance overthe long term

Organization Structure & Design (2)

Documents

Transcript of Organization Structure & Design (2)