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Lecture 5 6 7_organizational structure
- 2. Formal Reporting Relationships ◦ Number of levels ◦ Span of control Grouping of Individuals ◦ Creation of departments Design of Systems ◦ Communication, coordination, and integration of efforts Horizontal information and coordination reflected in organization chart
- 4. Vertical and horizontal information flow ◦ Traditional organization designed for efficiency? Centralized authority focused on top level decision- making ◦ Learning organization which emphasizes communication and collaboration Decentralized authority focused on shared tasks and decisions
- 5. ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
- 6. ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
- 7. 15-7 The formal configuration between individuals and groups with respect to the allocation of tasks, responsibilities, and authorities within organizations.
- 8. 15-8
- 9. Organizational Structure How job tasks are formally divided, grouped, and coordinated Key Elements: 1. Work specialization 2. Departmentalization 3. Chain of command 4. Span of control 5. Centralization and decentralization 6. Formalization
- 10. The degree to which tasks in the organization are subdivided into separate jobs Division of Labor ◦ Makes efficient use of employee skills ◦ Increases employee skills through repetition ◦ Less between-job downtime increases productivity ◦ Specialized training is more efficient ◦ Allows use of specialized equipment Can create greater economies and efficiencies
- 11. Specialization can reach a point of diminishing returns Then job enlargement gives greater efficiencies than does specialization
- 12. The basis by which jobs are grouped together Grouping Activities by: ◦ Function ◦ Product ◦ Geography ◦ Process ◦ Customer
- 13. 15-13
- 14. 15-14
- 15. 15-15 Chain of Command ◦ The unbroken line of authority that extends from the top of the organization to the lowest echelon and clarifies who reports to whom Authority ◦ The rights inherent in a managerial position to give orders and to expect the orders to be obeyed Unity of Command ◦ A subordinate should have only one superior to whom he or she is directly responsible
- 16. The number of subordinates a manager can efficiently and effectively direct Wider span of management control increases organizational efficiency Drawbacks of narrow span of control: 1. Expense of additional layers of management 2. Increased complexity of vertical communication 3. Encouragement of overly tight supervision and discouragement of employee autonomy
- 18. Centralization ◦ The degree to which decision making is concentrated at a single point in the organization. Decentralization ◦ The degree to which decision making is spread throughout the organization.
- 19. The degree to which jobs within the organization are standardized. ◦ High formalization Minimum worker discretion in how to get the job done Many rules and procedures to follow ◦ Low formalization Job behaviors are nonprogrammed Employees have maximum discretion
- 20. Simple Structure ◦ A structure characterized by a low degree of departmentalization, wide spans of control, authority centralized in a single person, and little formalization
- 21. Bureaucracy A structure of highly routine operating tasks achieved through specialization, very formalized rules and regulations, tasks that are grouped into functional departments, centralized authority, narrow spans of control, and decision making that follows the chain of command
- 22. ◦ Results in economies of scale ◦ Minimum duplication of personnel and equipment ◦ Enhanced communication ◦ Centralized decision making ◦ Subunit conflicts with organizational goals ◦ Obsessive concern with rules and regulations ◦ Lack of employee discretion to deal with problems Strengths Weaknesses
- 24. Activities grouped by common function All specific skills and knowledge are consolidated Promotes economies of scale Slow response to environmental changes Prevalent approach but few companies can respond in today’s environment without horizontal linkages
- 26. Product structure or strategic business units Divisions organized according to products, services, product groups Good for achieving coordination across functional departments Suited for fast change Loses economies of scale Lacks technical specialization
- 29. Organizing to meet needs of users/customers by geography Many multinational corporations are organized by country Focuses managers and employees on specific geographic regions Strengths and weaknesses similar to divisional organization
- 31. Multifocused with strong horizontal linkage Conditions for Matrix: 1. Share resources across the organization 2. Two or more critical outputs required: products and technical knowledge 3. Environment is complex and uncertain Allows organization to meet dual demands Largest weakness is that employees have two bosses and conflicting demands
- 33. Need for shared and flexible use of people across products Two or more critical outputs like new products and technical knowledge The environment is complex and uncertain
- 35. Organization around core processes Processes refers to tasks and activities Shift towards horizontal structure during reengineering Eliminates vertical hierarchy and departmental boundaries
- 37. Structure is created around cross-functional processes Self-directed teams, not individuals, are dominant players Process owners are responsible for entire process People on the team are given authority for decisions Can increase organization’s flexibility Customers drive the organization, measured by customer satisfaction, employee satisfaction, and financial contribution Culture is one of openness, trust, and collaboration; focus on continuous improvement
- 38. ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
- 39. Extend horizontal coordination beyond the boundaries of the organization Most common strategy is outsourcing • Contract out certain tasks/functions Virtual or modular structures subcontract most of its major functions to separate companies The virtual network organization serves as a central hub with contracted experts
- 42. Combination of various structure approaches Tailored to specific needs Often used in rapidly changing environments Greater flexibility
- 43. Each structure meets different needs and is a tool that can help managers be more effective Structural alignment aligns structure with organizational goals Symptoms of Structural Deficiency: ◦ Decision making is delayed or lacking quality ◦ Organization cannot meet changing needs ◦ Employee performance declines, needs are not meet ◦ Too much conflict
- 44. Structure must provide a framework, linking organization into whole Provide vertical and horizontal linkages Variety of alternatives for grouping Virtual network extends horizontal coordination Matrix structure attempts to achieve balance Managers must find right balance The purpose of the organization chart is to encourage and direct activities
- 45. 1. Strategy ◦ Innovation Strategy A strategy that emphasizes the introduction of major new products and services Organic structure is best for the implementation of this strategy ◦ Cost-minimization Strategy A strategy that emphasizes tight cost controls, avoidance of unnecessary innovation or marketing expenses, and price cutting Mechanistic model is best for the implementation of this strategy. ◦ Imitation Strategy A strategy that seeks to move into new products or new markets only after their viability has already been proven Mixture of the organic and mechanistic structure is best for the implementation of this strategy
- 46. 2. Organizational Size As organizations grow, they become more mechanistic, more specialized, with more rules and regulations 3. Technology How an organization transfers its inputs into outputs The more routine the activities, the more mechanistic the structure, and the greater the formalization Custom activities need an organic structure 4. Environment Institutions or forces outside the organization that potentially affect the organization’s performance Three key dimensions: capacity, volatility, and complexity
- 48. Impossible to generalize due to individual differences in the employees 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 People seek and stay at organizations that match their needs.
- 49. Culture and Organizational Structure ◦ Many countries follow the U.S. model ◦ For many Indian managers, individual leadership is the most important reason for the success or failure of an organization Culture and Employee Structure Preferences ◦ Cultures with high-power distance may prefer mechanistic structures Culture and the Boundryless Organization ◦ May be a solution to regional differences in global firms ◦ Breaks down cultural barriers, especially in strategic alliances ◦ Telecommuting also blurs organizational boundaries
- 50. 15- 50 Structure impacts both the attitudes and behaviors of the people within it Impact of Technology Makes it easier to change organizational structure to fit employee and organizational needs Associated with
- 51. Thank you!
Notas do Editor
- Organizational structure depicts how job tasks are formally divided, grouped, and coordinated. The key elements of organizational structure include work specialization, departmentalization, chain of command, span of control, centralization and decentralization, and formalization.
- A key part of organizational structure is understanding the degree to which tasks are divided into separate jobs or work specialization. The division of labor is helpful in creating the most efficient way to utilize employee skills, increase their skills, and maximize their input. When division of labor is utilized an organization can more effectively use specialized training and specialized equipment to accomplish their desired productivity and quality goals.
- Work specialization can cause greater economies, but in some cases it can cause diminishing returns due to repetition which can lead to boredom. Job enlargement can be effective in creating greater efficiencies than specialization does.
- Departmentalization defines how jobs are grouped together. There are a number of options to choose from when grouping jobs – you could organize around function, product, location, process, or customer. When jobs are grouped, departments are formed.
- The chain of command represents the line of authority present in decision making. Embedded in the chain of command is the inherent right of a manager to give orders and expect the orders to be followed. Unity of command is the idea that a subordinate should have only one superior to report to so that directions and the chain of command are clear.
- The fourth element of structure is span of control. This concept looks at how many workers a manager can effectively direct toward organizational goals. Wider span allows for more efficiency because you need fewer managers. However, it can also limit the amount of time and direction a manager can give to their employees. A narrow span can allow for more direction but can add layers of management, increase the complexity of the vertical communication, and encourage overly tight supervision, limiting employee autonomy.
- The graph on this slide depicts different spans of control.
- The fifth aspect of structure deals with centralization and decentralization. Centralization is the degree to which decision making is concentrated at a single point in the organization, typically at the top. Decentralization represents an organization that spreads decision making throughout the organization.
- Formalization is the degree to which jobs within the organization are standardized. When there is high formalization, workers have very little control over how they do their work and they will be required to follow a number of rules and procedures. Lower formalization will tend to allow for different job behaviors to get the job done, giving workers more control over their work.
- There are a number of organizational structures available to companies. We will look at a number of options over the next several slides. The first and most basic structure is the simple structure. This structure has a low degree of departmentalization, wide spans of control, and centralized decision making with little formalization in job design.
- Another type of organizational design is bureaucracy. In a bureaucratic organization, there will be a great deal of structure. The tasks will be completed through specialization and they tend to be formalized through rules and regulations. Departments will be highly defined and authority is centralized. Decision making will follow a strict chain of command and there will be narrow spans of control. The bureaucratic organization will be one that is highly defined and very controlled.
- Bureaucracies have both strengths and weaknesses. They tend to offer economies of scale that are beneficial to the organization. This structure will minimize duplication of personnel and equipment through organization of jobs and departments. Communication will be strong and decision making is centralized. However, this type of structure is not without its weaknesses. In a bureaucratic environment, conflict often arises around organizational goals and unit goals, people can become obsessive about rules and regulations, and employees don’t always know how to deal with problems because employees are not empowered to make decisions.
- Structures differ for a number of reasons. The first is that structure is set up to facilitate the strategy of the organization. If your organization is focusing on innovation as a key value, then they may be best served by an organic structure. Whereas, if they are looking at minimizing costs as their strategy, they will find that a mechanistic structure will work better. Strategy should always dictate structure instead of structure dictating strategy.
- Structures will also differ by organization size – the larger they get, they tend to become more mechanistic. They will differ by how much technology is used – the more routine the activities, the more mechanistic the structure should be. Structures will also differ based on the environment in which they exist. The more dynamic the environment, the more organic the structure will need to be to facilitate quick decisions and fast turnaround.
- The mechanistic model is contrasted with the organic model in the slide above. These are two extreme structures organizations can choose from. The mechanistic model is set up to facilitate high specialization, a clear chain of command, and a large degree of formalization. The organic model, in contrast, is set up to facilitate teams, the free flow of information, decentralized, empowerment, and very little formalization. It is not that one structure is better than the other, rather each organization needs to see what will work best with their workforce and product.
- Organizational designs are not a good predictor of employee behavior. Research has shown that work specialization can lead to increased productivity but lower job satisfaction. Specialization has not been popular as employees are seeking more intrinsically rewarding jobs. Span of control has mixed results depending on individual differences in employees and organizational factors. Participative decision making has been found to be positively related to job satisfaction. Various factors will influence workers in their job satisfaction and their willingness to stay with an organization.
- Most countries follow the U.S. model for organizational structure. However, this may be changing as the U.S. model can be too individualistic. Structural effectiveness will vary in countries based on their cultural preferences. In India, many managers believe individual leadership to be the most important reason for the success or failure of an organization. The boundaryless organization will most likely grow as the economy continues to globalize. This structure tends to break down barriers and increase effectiveness across international boundaries.
- Structure does have an impact on both the attitudes and behaviors of the people within the organization so it is important that managers effectively select and utilize structure within their organizations.