chapter 15: foundations of organizational structure

what is organizational structure?

• how jobs 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

  7. boundry spanning

key design questions and answers for designing the proper organization structure

1. to what degree are activities subdivided into seperate jobs?

   • work specialization

2. on what basis will jobs be grouped together?

   • departmentalization

3. to whom do inviduals and groups report?

   • chain of command

4. how many individuals can a manager efficiently and effectively direct?

   • span of control

5. where does decision-making authority lie?

   • centralization and decentralization

6. to what degree will there be rules and regulations to direct emplopees and managers?

   • formalization

7. do individuals from different areas need to regularly interact?

   • boundry spanning

1. work specialization

• the degree to which tasks in the organization are subdivided into seperate jobs

• division of labor

  • makes efficient use of employee skills

  • increases employee skills through repetition

  • specialized training is more efficient

  • allows use of specialized equipment

2. departmentalization

• the basis by whch jobs are grouped together

• grouping activities by:

  • function

  • product

  • geography

  • process

  • customer

3. chain of command

• authority

  • the rights inherent in a managerial position to give orders and to expect the orders to be obeyed

• 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

• unity of command

  • a subrdinate should have only one superior to whom he or she is directly responsible

4. span of control

• the number of subordinates a manager can efficiently and effectively direct

  • wider spans of management increase organizational efficiency

  • narrow span drawbacks:

    • expense of additional layers of management

    • increased complexity of vertical communication

    • encouragement of overly tight supervision and discouragement of employee autonomy

5. centralization and decentralization

• 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

  • advantages of a decentralized organization:

    • can act more quickly to solve problems

    • more people provide input into decsions

    • employees are less likely to feel alienated from those who make decisions that affect their work lives

6. formalization

• the degree to which jobs within the organization are standarized

  • high fromulation

    • minimum worker discretion in how to get the job done

    • may rules and procedures to follow

  • low formulation

    • job behaviors are nonprogrammed

    • employees have maximum discretion

7. boundry spanning

• occurs when individuals form relationships with peope outside their formally assigned groups

  • positive results are especially strong in organizations that encourage extensive internal communication; in other words, external boundry spanning is most effective when it is followed up with internal boundry spanning

common organization designs: simple structure

• simple structure

  • a structure characterized by a low degree of departmentalization, wide spans of control, authroity centralizaed in a single person, and litle formalization

• simple structure: the manager and the owner are one and the same

  • strengths:

    • simple, fast, and flexible

    • inexpensive to maintain

    • accountability is clear

  • weaknesses:

    • difficult to maintain in anything other than small organizations

    • risky— everything depends on one person

common organization designs

• a bureaucracy is characterized by standardization

  • highly rountine operating tasks

  • very formulized rules and regulations

  • tasks grouped into functional departments

  • centralized authority

  • narrow spans of control

  • decision making that follows the chain of command

the bureaucracy:

• the strengths of bureaucracy:

  • ability to perform standarized activites in a high efficient manner

• weaknesses of bureaucracy:

  • subunit conflicts

• matrix structure

  a structure that creates dual line of authority and combines functional and product departmentalization

• key elements:

  • gains the advantages of functional and product departmentalization while avoiding their weakness

  • facilitates coordination of complex and interdependent activites

  • breaks down unity-of-command concept

alternate design options: virtual organization

• a small, core organization that outsources its major business functions

• highly centralized with little or no departmentalization

  • provides maximum flexibility while concentrating on what the organization does best

  • reduced control over key parts of the business

alternate design options: team structure

• the team structure: elminates the chain of command and replaces departments with empowered teams

  • removes vertical and horizontal boundries

  • breaks down external bnoundries

  • flattens the hierarchy and minmizes status and rank

• when fully operational, the team structure may break down geographic barriers

alternate design options: circular structure

• in the circular structure: in the center are the executives, and radiating outward in rings grouped by function are the managers, then the specialists, then the workers

  • has intuitive appeal for creative entrepreneur

  • however, employees may be unclear about whom they report to and who is running the show

• we are likely to see the popularity of the circular structure spread

effects of downsizing on organizations and employees

• the leaner organization: downsizing

  • the goal of the new organizational forms we’ve described is to improve agility by creating a lean, focused, and flexible organization

  • downsizing is a systematic effort to make an organization leaner by selling off business units, closing locations, or reducing staff. its strategies include:

  investment, communication, participation and assistence

five reasons structures differ

1. strategy

   • innovation strategy

     • a strategy that emphasixes the introduction of major new products and services

     • organic structure best

   • cost-minimization strategy

     • a strategy that emphasizes tight cost controls, avoidance of unnecessary innovation or marketing expensis, and price cutting

   • 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 two types of structure

2. organizational size

   • as organizationas grow, employing 2,000 or more people, they become more mechanistic, more specialized, with rules and regulations

3. technology

   • how an organization transfers its inputs into outputs

     • the more routine the activites, the more mechanistic the structure with greater formalization

     • custom activities need an organic structure

4. environment

   • institutions or forces outside the organization that potentially affect organizations performance

   • three key dimensions: capacity, volatity, and complexity

5. institutions: another factor that shapes organizational structure

   • regulatory pressures

   • simple inertia

   • culture

   • fads or trends

   • insituttional pressures are often difficult to see specifically because we take them for granted, by that doesnt mean they arent powerful

three-dimentional environment model

• capacity

  • the degree to which environment can support growth

• volatility

  • the degree of instability in the environment

• complexity

  • the degree of heterogeneity and concentration among environmental elements

organizational designs and employee behavior

• impossible to generalize dues 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

  • no evidence suppots a relationship between span of control and employee satisfaction or performance

  • participation decision making in decentralized organizations is positively related to job satisfaction

• people seek and stay at organizations that match their needs

global implications

• culture and organizational structure

  • many countries follow the US model

  • US management may be too individualistic

• culture and employee structure prefernces

  • cultures with high-power distance may prefer mechanistic structures

• cultures and the boundaryless organization

  • may be a solution to regional differences in global firms

  • breaks down cultural barriers, especially in strategic alliances

  • telecommuting also blurs oranizational boundaries