LESSON

1. Organization Theories and Applications
Prepared By: Kc Jilhaney & Chito Aliño
Two Main Classification of Theories
 Traditional Theories
 Modern Theories
Organizational Design
The manner in which a management achieves the right combination of differentiation and integration of
the organization’s operation’s in response to the level of uncertainty in its external environment.
 Traditional Theories- are the usual, old fashioned ways.
 Modern Theories- are contemporary or new design theories.
Traditional Organizational Designs Include:
Simple
This organizational design has few departments, wide spans of control, or a big number of subordinates
directly reporting to a manager; has a centralized authority figure and has very little formalization of work;
usually used by companies that start out as entrepreneurial ventures.
Simple Organizational Design
STRENGTHS WEAKNESSES
 Risk that overdependence with
over-dependence on a single
person.
 No longer appropriate as the
company grows.
 Flexible
 Fast decision- making and
results
 Clear accountability

2. Functional
This organizational design groups together similar or related specialties. Generally, functional
departmentalization is utilized and put into practice in an entire organization.

3. Functional Organizational Design
STRENGTHS WEAKNESSES
Divisional
This organizational design is made up of separate business divisions of units, where the parent
corporation acts as overseer to coordinate and control the different divisions and provide financial and
legal support services.
Divisional Organizational Design
STRENGTHS WEAKNESSES
Modern Organizational Theories Include;
Team Design
In team design, the entire organization is made up of work groups or teams.
Advantages Disadvantages
 Cost-saving advantages
 Management is facilitated
because workers with similar
tasks are grouped together.
 Managers have little
knowledge of other unit’s
functions.
 Focused on results
 Managers are responsible for
what happens to their
products and services.
 Possible duplication of
activities and resources
 Increased cost and reduced
efficiency.
 Empowerment of team
members and reduced
barriers among functional
 A clear chain of command and
great pressure on terms to
perform.

5. Matrix-Project Design
Matrix design refers to an organization design where specialists from different departments work on
projects that are supervised by a project manager.
This design results in a double chain of command wherein workers have two managers—there functional
area manager and their project manager—who share authority over them.
Advantage Disadvantage
Project design refers to an organizational design where employees continuously work on a project.
Boundary-less Design
This is another modern organizational design where the design is not defined or limited by vertical,
horizontal, and external boundaries.
 Specialists are
involved in the
project.
 Task and personality
conflicts.
 Flexible designs and fast
decision –making.
 Complexity of
assigning people to
projects and tasks and
personality conflicts.

6. Good morning to all of you!!!
And our discussion is all about Organization Theories and Applications.
 There are two main classification of theories regarding organizational design according of Robbins
and Coulter (2009).
And that is Traditional Design and Modern design.
But before that what is Organizational Design..
***** Read****
�ORGANIZATIONAL DESIGN�
▶Differentiation refers to the subdivision of functional or departmental units, each concentrating on a
particular aspect of the organization's operations. Integration refers to the linking of differentiated units to
achieve unity of effort in working toward organization's goals. In times of high uncertainty, greater
organizational effectiveness is achieved through high differentiation coupled with high integration. In times
of low uncertainty, low differentiation and low integration are more effective.
USAGE EXAMPLE:
•If our new interim CEO does not agree with the organizational design of the company, he will likely make
some internal changes, and perhaps rearrange the entire hierarchy altogether.
•The organizational design impressed me greatly and it helped in making me choose them as the
company I would work for.
�Simple

7. ➡ for example in a business with few employees the owner tends to be the manager and controls all of
the functions of the business. Often employees work in all parts of the business and don’t just focus on
one job creating little if any departmentalization.
•In this type of design there are usually no standardized policies and procedures. When the company
begins to expand then the structure tends to become more complex and grows out of the simple structure.
�Functional
➡ A functional organizational structure is a structure used to organize workers. They are grouped based
on their specific skills and knowledge. It vertically structures each department with roles from president to
finance and sales departments, to customer service, to employees assigned to one product or service.
Functional organizations contain specialized units that report to a single authority, usually called top
management.
Each functional unit handles one aspect of the product or service provided such as:
• information technology
• marketing
• development
• research, etc.
�Divisional
A divisional structure is made up of separate, semi-autonomous units or divisions. Within one corporation
there may be many different divisions and each division has its own goals to accomplish. A manager
oversees their division and is completely responsible for the success or failure of the division. This gets
managers to focus more on results knowing that they will be held accountable for them.
�Team Design
A simple structure is defined as a design with low departmentalization, wide spans of control, centralized
authority, and little formalization. This type of design is very common in small start up businesses. For
example in a business with few employees the owner tends to be the manager and controls all of the
functions of the business. Often employees work in all parts of the business and don’t just focus on one
job creating little if any departmentalization. In this type of design there are usually no standardized

8. policies and procedures. When the company begins to expand then the structure tends to become more
complex and grows out of the simple structure.
�Matrix-Project Design
1. Matrix Structure
A matrix structure is one that assigns specialists from different functional departments to work on one or
more projects. In an organization there may be different projects going on at once. Each specific project is
assigned a project manager and he has the duty of allocating all the resources needed to accomplish the
project. In a matrix structure those resources include the different functions of the company such as
operations, accounting, sales, marketing, engineering, and human resources. Basically the project
manager has to gather specialists from each function in order to work on a project, and complete it
successfully. In this structure there are two managers, the project manager and the department or
functional manager.
2. Project Structure
A project structure is an organizational structure in which employees continuously work on projects. This is
like the matrix structure; however when the project ends the employees don’t go back their departments.
They continuously work on projects in a team like structure. Each team has the necessary employees to
successfully complete the project. Each employee brings his or her specialized skill to the team. Once the
project is finished then the team moves on to the next project.
�Boundary Less Design
. Boundary less Organization
A boundary less organization is one in which its design is not defined by, or limited to, the horizontal,
vertical, or external boundaries imposed by a predefined structure. In other words it is an unstructured
design. This structure is much more flexible because there is no boundaries to deal with such as chain of
command, departmentalization, and organizational hierarchy. Instead of having departments, companies
have used the team approach. In order to eliminate boundaries managers may use virtual, modular, or
network organizational structures. In a virtual organization work is outsourced when necessary. There are
a small number of permanent employees, however specialists are hired when a situation arises. Examples
of this would be subcontractors or freelancers. A modular organization is one in which manufacturing is
the business. This type of organization has work done outside of the company from different suppliers.

9. Each supplier produces a specific piece of the final product. When all the pieces are done, the
organization then assembles the final product. A network organization is one in which companies
outsource their major business functions in order to focus more on what they are in business to do.