Organizational Structure Management 201

Organizational Structure Management 201

Understanding Organizational Structure

• Organizational Structure: Defines how job tasks are formally divided, grouped, and coordinated.
  • Key elements include:
  • Work specialization
  • Departmentalization
  • Chain of command
  • Span of control
  • Centralization and decentralization
  • Formalization
  • Boundary spanning

Key Concepts

Work Specialization

• Definition: Degree to which activities are subdivided into separate jobs (also known as division of labor).
• Benefits:
  • Greater efficiency and lower costs.
• Costs:
  • Potential for human costs if taken to an extreme.
• Solutions: Job enlargement can alleviate overspecialization.

Departmentalization

• Definition: Basis for grouping jobs so that common tasks can be coordinated.
• **Common Bases: **
  • Functional
  • Product or service
  • Geography
  • Process and customer

Chain of Command

• Definition: Unbroken line of authority extending from top to bottom of the organization to clarify accountability relationships.
  • Authority: Positional rights within the organization.
  • Unity of Command: Concept that each employee should report to only one manager.
  • Trend shows this is less relevant in modern organizations.

Span of Control

• Definition: Number of employees a manager is expected to direct effectively and efficiently.
  • Affects the number of levels and managers in an organization.
  • Current trend toward wider spans of control, which improves communication and speeds up decision-making, especially if employees are knowledgeable.

Centralization and Decentralization

• Centralization: Degree to which decision-making is concentrated.
  • Highly centralized means top managers make all decisions.
  • Decentralized means frontline employees and supervisors have decision-making power.
  • The trend is towards increased decentralization.

Formalization

• Definition: Degree to which jobs are standardized within the organization.
  • Formal: Little discretion over job execution.
  • Informal: Allows for more freedom of action.

Boundary Spanning

• Definition: When individuals establish relationships outside their formally assigned groups.
  • Can include:
  • Liaison roles
  • Development activities
  • Job rotations
  • Shared organizational goals and identities.

Common Organizational Frameworks

• Simple Structure:

  • Low degree of departmentalization
  • Wide spans of control
  • Centralized authority
  • Little formalization.
  • Effective primarily in small organizations.

• Bureaucracy:

  • Achieves highly routine tasks via specialization.
  • Characterized by
    overly defined rules and regulations, centralized authority, narrow spans of control, and functional departmental organization.

• Functional Structure: Employees grouped by specialties or roles.

• Divisional Structure: Employees grouped by product, service, customer, or geography.

Matrix Structure

• Definition: Combines functional and product departmentalization.

  • Advantages: Facilitates coordination and efficient specialist allocation.
  • Disadvantages: Potential for confusion, power struggles, and stress among teams.

• Virtual Organization:

  • Features a small core organization that outsources major business functions.
  • Centralized structure, maximum flexibility, less control over outsourced elements.

Determinants of Structure

• Organizational Strategy: Structure should align with organizational strategy.
• Organization Size: Larger organizations tend to adopt mechanistic structures.
• Technology: Routine activities favor mechanistic structures, non-routine activities favor organic structures.
• Environment: Dynamic environments typically necessitate organic structures; additionally consider capacity, volatility, and complexity.
• Institutions: Guidelines for appropriate organizational behavior.