Organizational Structure and Design
Defining Organizational StructureOrganizational Structure
The formal arrangement of jobs within an organization
Organizational DesignA process involving decisions about six key
elements: Work specialization Departmentalization Chain of command Span of control Centralization and decentralization Formalization
Purposes of OrganizingDivides work to be done into specific jobs
and departmentsAssigns tasks and responsibilities
associated with individual jobsCoordinates diverse organizational tasksEstablishes relationships among
individuals, groups, and departmentsEstablishes formal lines of authorityAllocates organizational resources Cluster jobs in to units
Designing Organizational StructureWork Specialization
The degree to which tasks in the organization are divided into separate jobs with each step completed by a different person
Departmentalization by TypeFunctional
Grouping jobs by functions performed
ProductGrouping jobs by
product lineGeographical
Grouping jobs on the basis of territory or geography
Process Grouping jobs on
the basis of product or customer flow
CustomerGrouping jobs by
type of customer and needs
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
Geographical Departmentalization
Vice Presidentfor 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
Product Departmentalization
+ Allows specialization in particular products and services
+ Managers can become experts in their industry
+ Closer to customers
– Duplication of functions
– Limited view of organizational goals Source: Bombardier Annual Report.
CEO.
Truck Division
Car Division
Bus Division
Process Departmentalization
+ More efficient flow of work activities
– Can only be used with certain types of products
PlantManager
Spinning
Dyeing Weaving Fininshing
Customer Departmentalization
+ Customers’ needs and problems can be met by specialists
– Duplication of functions
– Limited view of organizational goals
Directorof Sales
Manager,Wholesale Accounts
Manager,Retail Accounts
Manager,Government Accounts
Organizational Structure (cont’d)
Chain of CommandThe continuous line of authority that
extends from upper levels of an organization to the lowest levels of the organization and clarifies who reports to whom
Organizational Structure (cont’d)Authority
The rights inherent in a managerial position to tell people what to do and to expect them to do it
ResponsibilityThe obligation or expectation to perform.
Responsibility brings with it accountability (the need to report and justify work to manager’s superiors)
Unity of CommandThe concept that a person should have one boss and
should report only to that personDelegation
The assignment of authority to another person to carry out specific duties
Organizational Structure (cont’d)
Line and Staff AuthorityLine managers are responsible for the
essential activities of the organization, including production and sales. Line managers have the authority to issue orders to those in the chain of command The president, the production manager, and the
sales manager are examples of line managersStaff managers have advisory authority,
and cannot issue orders to those in the chain of command (except those in their own department)
Organizational Structure (cont’d)Span of Control
The number of employees who can be effectively and efficiently supervised by a manager
Width of span is affected by: Skills and abilities of the manager and the employees Characteristics of the work being done Similarity of tasks Complexity of tasks Physical proximity of subordinates Standardization of tasks Sophistication of the organization’s information
system Strength of the organization’s culture Preferred style of the manager
Organizational Structure (cont’d)Centralization
The degree to which decision making is concentrated at a single point in the organization Organizations in which top managers make all the
decisions and lower-level employees simply carry out those orders
DecentralizationThe degree to which lower-level employees
provide input or actually make decisionsEmployee Empowerment
Increasing the decision-making discretion of employees
Organizational Structure (cont’d)Formalization
The degree to which jobs within the organization are standardized and the extent to which employee behavior is guided by rules and procedures Highly formalized jobs offer little discretion over
what is to be done Low formalization means fewer constraints on
how employees do their work
Organizational Design DecisionsMechanistic
OrganizationA rigid and tightly
controlled structure High specialization Rigid
departmentalization Narrow spans of control High formalization Limited information
network (mostly downward communication)
Low decision participation by lower-level employees
Organic OrganizationHighly flexible and
adaptable structure Nonstandardized jobs Fluid team-based
structure Little direct supervision Minimal formal rules Open communication
network Empowered employees
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
Structural Contingency Factors (cont’d)
Strategy and StructureAchievement of strategic goals is
facilitated by changes in organizational structure that accommodate and support change
Size and StructureAs an organization grows larger, its
structure tends to change from organic to mechanistic with increased specialization, departmentalization, centralization, and rules and regulations
Structural Contingency Factors (cont’d)
Technology and StructureOrganizations adapt their structures to
their technologyRoutine technology = mechanistic
organizationsNon–routine technology = organic
organizations
Structural Contingency Factors (cont’d)
Environmental Uncertainty and Structure
Mechanistic organizational structures tend to be most effective in stable and simple environments
The flexibility of organic organizational structures is better suited for dynamic and complex environments
Organizational Designs
Common Organizational Designs
Traditional DesignsSimple Structure
Low departmentalization, wide spans of control, centralized authority, little formalization
Functional Structure Departmentalization by function
Operations, finance, human resources, and product research and development
Divisional Structure Composed of separate business units or divisions
with limited autonomy under the coordination and control of the parent corporation
Organizational Designs (cont’d)Contemporary Organizational Designs
Team Structures The entire organization is made up of work groups
or self-managed teams of empowered employeesMatrix Structures
Specialists for different functional departments are assigned to work on projects led by project managers
Matrix participants have two managersProject Structures
Employees work continuously on projects, moving on to another project as each project is completed
A Matrix 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
DesignGroup
GammaProject
ManufacturingGroup
ContractGroup
PurchasingGroup
AccountingGroup
HRGroup
DesignGroup
OmegaProject
ManufacturingGroup
ContractGroup
PurchasingGroup
AccountingGroup
HRGroup
Organizational Designs (cont’d)Contemporary Organizational
Designs (cont’d)Boundaryless Organization
A flexible and an unstructured organizational design that is intended to break down external barriers between the organization and its customers and suppliers
Removes internal (horizontal and vertical) boundaries
Eliminates external boundaries
Organizational Designs (cont’d)Learning Organization
An organization that has developed the capacity to continuously learn, adapt, and change through the practice of knowledge management by employees
Characteristics of a learning organization: An open team-based organization design that
empowers employees Extensive and open information sharing Leadership that provides a shared vision of the
organization’s future; support; and encouragement A strong culture of shared values, trust, openness,
and a sense of community
Co-ordinationLinking of two or more organizational
members and/or work units so that they function well together
Two main types of co-ordination are:Vertical coordinationHorizontal Coordination
Vertical Coordination: Linking work units (individual, team,
departments) separated by hierarchical levelHorizontal Coordination: Linking work units (individual, team,
departments) at the same hierarchical level
Techniques for effective coordinationCoordination by chain of commandCoordination by leadershipCoordination by committeesStaff meetingsSpecial CoordinatorsSelf- coordination
DifferentiationDifferences in attitudes and working styles,
arising naturally among members of different departments, that can complicate coordination of an organization's activities.
IntegrationThe degree to which members of various
departments work together in a unified manner.
A B
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 the behavior of B so that B acts in accordance with A’s wishes.
Dependency
B’s relationship to A when A possesses something that B requires.
Coercive PowerA power base dependent on fear.Reward PowerCompliance achieved based on the ability to distribute rewards that 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.
Expert Power
Influence based on special skills or knowledge.Referent Power
Influence based on possession by an individual of desirable resources or personal traits.
Dependency: The Key To PowerThe General Dependency Postulate
The greater B’s dependency on A, the greater the power A has over B.
Possession/control of scarce organizational resources that others need makes a manager powerful.
Access to optional resources (e.g., multiple suppliers) reduces the resource holder’s power.
What Creates DependencyImportance of the resource to the organizationScarcity of the resourceNonsubstitutability of the resource
Authority (mainly) derives from roleAuthority is “the right to make an ultimate
decision, and in an organisation it refers to the right to make decisions which are binding on others” (Obholzer, 1994).
Line & Staff AuthorityLine authority is the relationship in
which a superior exercises direct supervision over a subordinate
Staff relationship is advisory
Difference between Authority & PowerPower
Authority It is a ability to command &
influence behavior of another It rests with persons, in their
individual capacities It doesn't follow any hierarchyPower, being personalized
attribute, can not be delegated
Emerges because of personal factors
May exist between any 2 persons
It is institutional right to command
It lies in managerial position
It is hierarchical in nature It can be delegated Institutional & originates
from structural relationshipSuperior-subordinate
relationship
DelegationTransfering formal authority from one
position to another is known as delegation
Assign Tasks
Transfer task responsibility
Creation of responsibility
Acceptance
Condition
Accept
Reject
Blocks to effective delegationFactors in delegator:
Love for authorityMaintenance of tight controlFear of subordinates growthFear of exposureAttitude towards subordinatesPersonality of superior
Guides for Overcoming Weak Delegation
1. Define assignments and delegate authority in light 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
successful assumption of authority
Definition of StaffingStaffing is filling, and keeping filled, positions
in the organization structure
SITUATIONAL FACTORS AFFECTING STAFFING External factors include the level of
education, the prevailing attitudes in society (such as the attitude toward work), the many laws and regulations that directly affect staffing, the economic conditions, and the supply of and demand for managers outside the enterprise
SITUATIONAL FACTORS AFFECTING STAFFING – cont.
Internal factors that affect staffing include, for example, organizational goals, tasks, technology, organization structure, the kinds of people employed by the enterprise, the demand for and the supply of managers within the enterprise, the reward system, and various kinds of policies
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 over
the long term
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