MENT 3101: Organizational Structure and Culture

Organizational Structure

• Formal system defining roles, power, and responsibilities

• Dictates how jobs and tasks are divided and coordinated among individuals and groups

• Larger companies typically have more complex structures

Organizational Culture

• Shared social knowledge about rules, norms, and values within an organization

• Shapes employees’ attitudes and behaviors

Organization Design

• The process of creating, selecting, or changing an organization’s structure

Factors Affecting Organization Design

• Business Environment: Customers, competitors, suppliers; stable or dynamic

• Company Strategy: Goals and approach (e.g., low-cost vs. differentiation)

• Technology: How inputs are transformed into outputs

• Company Size: Total number of employees

Work Specialization (Organizational Structure Element)

• Division of tasks into separate jobs

• Balances productivity, flexibility, and worker motivation

• Involves doing repetitive, specialized tasks

• Example: Assembly-line worker at Ford

Chain of Command (Organizational Structure Element)

• Defines “who reports to whom” and formal authority relationships

• Ensures order, control, and predictable performance

• Can be simple or complex (e.g., co-CEOs at some companies)

• Traditionally follows military-style hierarchy: higher ranks execute, less focus on independent thinking

Span of Control (Organizational Structure Element)

• Number of employees a manager oversees

• Influences whether the org chart is tall (narrow span) or flat (wide span)

• Connects to leadership theories about effective span sizes

• Flat organizations (e.g., startups) often have wide spans of control

Pros & Cons of Narrow Span of Control

Pros:

• Managers can be hands-on and use directive leadership

• Enables close mentoring, especially when managers are more skilled

Cons:

• Requires more managers, increasing labor costs

• Risk of micromanagement, which can suffocate employees

• Slower decision-making due to more layers

• More complex communication channels

Pros & Cons of Wide Span of Control

Pros:

• Greater autonomy for subordinates, boosting motivation and responsibility

• Faster decision-making at lower levels

Cons:

• Managers may struggle to give enough attention to all subordinates

• Employee development and mentoring may be slower

Centralized Decision-Making

• Decisions made by one individual or a small group at the top

• Advantages:
  • Highly efficient for decision-making
  • Clear mission, vision, and objectives set by top leadership

• Disadvantages:
  • Can suffer from bureaucratic delays due to multiple management layers
  • Slower operations as owners/managers handle all decisions

Decentralized Decision-Making

• Multiple individuals at different levels make decisions and run the business

• Relies on teamwork and autonomy throughout the organization

• Advantages:
  • Leverages diverse expertise and knowledge
  • Broad management involvement improves handling of varied business situations

• Disadvantages: 

• Multiple decision-makers can have conflicting opinions

• Difficulty achieving consensus and alignment on decisions

• Can slow down decision-making due to need for coordination

Standardization

• Extent to which rules and procedures govern behaviors and decisions

• Advantages:
  • Ensures consistent, reliable service (important in large organizations)
  • Reduces ambiguity and uncertainty

• Disadvantages:
  • Limits employee autonomy
  • Reduces creativity
  • Can lower motivation and job satisfaction

Functional (Mechanistic) Structure

• Efficient, rigid, predictable, and standardized

• Best suited for stable environments

• Example: Coca-Cola

Divisional (Organic) Structure

• Flexible, adaptive, and outward-focused

• Thrives in dynamic, changing environments

• Examples: SpaceX, Google, Facebook

Simple Structure

• Common in small organizations (under 19 employees)

• Flat hierarchy with one central decision-maker

• Low standardization and low work specialization

Mechanistic Organizational Structure

Designed for efficiency with:
• High work specialization
• High standardization
• Centralized authority
• Narrow spans of control
• Clear, well-defined chains of command

Functional Structure

• Divides company by jobs or functions

• Benefits:
  • High efficiency via coordinated work specialization
  • Groups managers with similar expertise

• Drawbacks:
  • Individuals may lose sight of overall goals
  • Weakened communication across functions

Divisional Structure by Product

• Divisions handle all aspects of a product line (R&D, marketing, sales)

• Benefits: Sales teams focus on core products

• Drawbacks: Poor communication between divisions

Divisional Structure by Geographic Region

• Divisions manage all operations in a region

• Benefits: Tailors to regional customer tastes and market size

• Better serves manufacturing and distribution needs

• Drawbacks: Resource duplication may threaten company identity

Divisional Structure by Client Type

• Divisions focus on specific client groups handling all related functions

• Benefits: Provides managers with more responsibility and flexibility

• Drawbacks: Leads to duplicated resources across divisions

Bureaucratic Structure

• Traditional, formalized organizational structure

• Clear rules, hierarchy, and standardized procedures

Matrix Structure

• Combines functional and divisional structures simultaneously

• Benefits: Flexible teams leveraging diverse skills; dual reporting lines

• Drawbacks: Can cause stress if conflicting demands or power imbalances arise

• Examples: Dow Corning, General Electric

What are the three main components of organizational culture?

• Observable artifacts

• Espoused values

• Basic underlying assumptions

What are observable artifacts in organizational culture?

Manifestations of culture that employees can easily see and discuss (e.g., dress code, symbols, language, office design).

What are espoused values in organizational culture?

The beliefs, philosophies, and norms that a company explicitly states (e.g., mission statements, stated goals).

What are assumptions in organizational culture?

Deeply ingrained, taken-for-granted beliefs that guide employee behavior without being questioned.

Culture strength: High consensus, high intensity (advantages and disadvantages)

Advantages

• differentiates the organizations from others 

• allows employees to identify themselves with the organization 

• facilitates desired behaviors among employees

• creates stability within the organization 

Disadvantages

• makes merging with another organization more difficult 

• attracts and retains similar kinds of employees, thereby limiting diversity of thought 

• can be “too much of a good thing” if it creates extreme behaviors among employees

• Makes adapting to the environment more difficult 

How is organizational culture maintained?

Through the Attraction–Selection–Attrition (ASA) model and socialization.

What does the ASA model stand for?

• Attraction: People are drawn to organizations with cultures similar to their own values and traits.

• Selection: Organizations hire people who fit their culture.

• Attrition: People who don’t fit tend to leave.

How does the ASA model maintain organizational culture?

Over time, the cycle of attraction, selection, and attrition ensures that members share similar values and reinforce the existing culture.

What is socialization in organizational culture?

The process through which employees learn the social knowledge needed to understand and adapt to the organization’s culture.

What are the three stages of socialization?

• Anticipatory stage: Before joining—learning about the organization.

• Encounter stage: Experiencing the organization for the first time (possible reality shock).

• Understanding & adaptation stage: Internalizing norms and adjusting to the culture.

Why is it difficult to change organizational culture?

Because culture is deeply ingrained—like the personality of a person or a nation—and influences every part of the organization

What metaphor describes organizational culture and why?

An iceberg—most of its weight and bulk lie below the surface, representing the unseen assumptions, beliefs, and values that are hard to change.

What makes changing organizational culture a large-scale undertaking?

It requires using all organizational tools to change employees’ mindsets, values, and behaviors, which takes time and coordinated effort.

What are two main ways to change organizational culture?

1. Changing leadership – new leaders model and enforce new values.

2. Mergers and acquisitions (M&A) – combining organizations with different cultures forces adaptation and change.

Define organizational culture.

Shared social knowledge within an organization about the rules, norms, and values that shape employees’ attitudes and behaviors.