BADM 3740 (Organizational Structure & Culture)

Organizational Structure

Formal arrangement of how roles, power, and responsibilities are assigned, controlled, and coordinated

Organizational Culture

Shared social knowledge within an organization regarding the rules, norms, and values that shape employees' attitudes and behaviors

Different Organizations have different structures

Organizational Structure formally dictates how jobs and tasks are divided and coordinated between individuals and groups within a company.

The larger the company… the more complex organizational structure

Factors that Affect Org. Design

Organizational Design: The process of creating, selecting, or changing the structure of an organization

Business Environment

• Customers, competitors, suppliers, and other external factors

Company Strategy

• Customers, competitors, suppliers, and other external factors

Technology

• The knowledge, machinery, work procedures, and materials used to transform resources into outputs

Company Size

• The total number of employees

The Five Elements of Organizational Structure

1. work specialization

2. chain of command

3. span of control

4. centralization

5. formalization

Work Specialization

the degree to which tasks in an organization are divided into separate jobs

• Trade‐offs among productivity, flexibility, and motivation

• Link back to "variety" in Job Characteristics Theory

Chain of Command

The questions of "Who reports to whom" -> Signifies formal authority relationships

• Attain order, control, and predictable performance

• Some companies adopt more complex chain of command

(e.g., A number of companies, such as Oracle, now have co‐CEOs)

Span of Control

How many employees each manager has responsibility for in the organization

• An organization's span of control affects how "tall" or "flat" its organizational chart becomes.

Span of Control: Narrow (Pros and Cons)

Pros:

• Allows managers to be more hands on with employees, and gives them the opportunity to use directive leadership styles while developing close mentoring relationships with employees

• Especially important if the manager has substantially more skill or expertise than subordinates. ‐

Cons:

• Requires orgs to hire a lot of managers, leading to more labor costs (managers are not cheap)

‐ Too narrow can lead to micro‐managing subordinates ‐ suffocate them

‐ Slower decision making because it involves more layers to approve choices

‐ Communication is more complex

Span of Control: Wide (Pros and Cons)

Pros:

• Provides autonomy for subordinates ‐> subordinates take responsibility and make decisions at their level

‐ Higher motivation and sense of responsibility

‐ Relatively faster decision making (decisions are made from lower levels)

Cons:

• Subordinates may not get the attention necessary…too many people to supervise

‐ Employee development may be slower

Centralization

where decisions are formally made in organizations

Centralized structures rely on one individual to make decisions and provide direction for the company ‐ ‐ usually small businesses

Decentralized organizational structures often have several individuals responsible for making business decisions and running the business.

• Decentralized organizations rely on team environments at different levels in the business.

• Individuals at each level in the business may have some autonomy to make business decisions.

Centralization (Centralized Vertical)

Advantages:

• Can be extremely efficient regarding business decisions.

• Business owners typically develop the company's mission and vision and set objectives for managers and employees to follow when working toward these goals.

Disadvantages:

• Can suffer negative effects due to increased bureaucracy.

• Often have multiple management layers stretching from the owner down to frontline operations. Business owners responsible for making every decision in the company may require more time to gather needed info, which can result in slow business operations.

Centralization (Decentralized Laterals)

Advantages

• Utilize individuals with a variety of expertise and knowledge for running various business operations.

• A broad‐based management team helps to ensure the company has knowledgeable directors or managers to handle various types of business situations.

Disadvantages

• Can struggle with competing individuals/divisions having different opinions on a particular business decision.

• As such, these businesses can face difficulties trying to get everyone on the same page when making decisions.

Formalization

The degree to which rules and procedures are used to standardize behaviors and decisions in an organization

Formalization Advantages and Disadvantages

Advantage

• Provides standardization for service and product delivery (necessary in larger organizations so quality of service do not vary)

• Reduces ambiguity and uncertainty

Disadvantage

• Less autonomy for employees

• Less creativity

• Lower motivation and job satisfaction

• Slower decision making

Common Organizational Forms

Simple structures

Bureaucratic structures

• Functional structures

• Multi-divisional structures

• Product structures

• Geographic structures

• Client-based structures

Matrix structures

Simple Structure

• Most common in small organizations (19 or fewer employees)

• Flat organization with one central decision‐maker

• Low degrees of formalization and work specialization

Functional Structures

Functional structures are the most basic type of organizational structure, dividing the company by the jobs, or functions, to perform.

Benefits: heightened efficiency thanks to centrally‐coordinated work specializations (this saves companies millions), grouped managers of similar expertise