Organization Structure

Goals and Strategy

Environment Size

Culture TechnologyStructure

1. Formalization2. Specialization3. Hierarchy of Authority4. Centralization5. Professionalism6. Personnel Ratios

Organization Structure

• Defines how tasks are divided, resources are deployed, and departments are coordinated

• The set of formal tasks assigned to individuals & depts.

• Formal reporting relationships

• The design of systems to ensure effective coordination of employees across departments

• Organizing process leads to the creation of organization structure

• Defines how tasks are divided, resources are deployed, and departments are coordinated

• The set of formal tasks assigned to individuals & depts.

• Formal reporting relationships

• The design of systems to ensure effective coordination of employees across departments

• Organizing process leads to the creation of organization structure

Organizing the Vertical Structure:Work Specialization

• Tasks are subdivided into individual jobs• Division of labor concept• Employees perform only the tasks relevant to their

specialized function• Jobs tend to be small, but they can be performed

efficiently

Organizing the Vertical Structure: Chain of Command

• Unbroken line of authority that links all persons in an organization

• Shows who reports to whom

• Associated with two underlying principles Unity of Command: (each employee is held responsible to only one

supervisor)

Scalar Principle:(clearly defined line of authority)

• Unbroken line of authority that links all persons in an organization

• Shows who reports to whom

• Associated with two underlying principles Unity of Command: (each employee is held responsible to only one

supervisor)

Scalar Principle:(clearly defined line of authority)

Organizing the Vertical Structure: Authority

• Formal and legitimate right of a manager to make decisions and issue orders

• Allocate resources to achieve organizationally desired outcomes

• Authority is distinguished by three characteristicsAuthority is vested in organizational positions, not

peopleAuthority is accepted by subordinates Authority flows down the vertical hierarchy

• Formal and legitimate right of a manager to make decisions and issue orders

• Allocate resources to achieve organizationally desired outcomes

• Authority is distinguished by three characteristicsAuthority is vested in organizational positions, not

peopleAuthority is accepted by subordinates Authority flows down the vertical hierarchy

Organizing the Vertical Structure: Accountability

Mechanism through which authority and responsibility are brought into alignment

People are subject to reporting and justifying task outcomes to those above them in the chain of command

Can be built into the organization structure

Techniques for Delegation

Give thorough instructions

Maintain feedback Evaluate and reward performance

Delegate the whole task Select the right person

Organizing the Vertical Structure: Delegation

Ensure that authority equals responsibility (empowerment)

Organizing the Vertical Structure: Span of Management/Span of Control

• Number of employees who report to a supervisor• Traditional view, about seven subordinates per manager• Many lean organizations today have 30, 40, or even

higher subordinates• When supervisors must be closely involved with

subordinates, the span should be small• Supervisors need little involvement with subordinates, it

can be large

• Number of employees who report to a supervisor• Traditional view, about seven subordinates per manager• Many lean organizations today have 30, 40, or even

higher subordinates• When supervisors must be closely involved with

subordinates, the span should be small• Supervisors need little involvement with subordinates, it

can be large

Tall versus Flat Structure

• Span of Control used in an organization determines whether the structure is tall or flat

• Tall structure has a narrow span and more hierarchical levels

• Flat structure has a wide span, is horizontally dispersed and fewer hierarchical levels

• The trend has been toward wider spans of control

Organizing the Vertical Structure:Formalization

• Written document used to direct & control employees

DepartmentalizationThe basis on which individuals are grouped into departments

• Five structural alternatives Vertical functional approach. People are grouped together in

departments by common skills. Divisional approach. Grouped together based on a common

product, program, or geographical region. Horizontal matrix approach. Functional and divisional chains

of command. Some employees report to two bosses Team-based approach. Created to accomplish specific tasks Network approach. Small, central hub electronically

connected to their other organizations that perform vital functions. Departments are independent, and can be located anywhere.

Advantages ofFunctional Approach

• Efficient use of resources• In-depth skill specialization• Career progress within the department• Top manager has direction and control• Excellent coordination• High-quality problem solving• Simplifies training

• Efficient use of resources• In-depth skill specialization• Career progress within the department• Top manager has direction and control• Excellent coordination• High-quality problem solving• Simplifies training

Disadvantages ofFunctional Approach

• Poor communication among functional departments• Slow response to external changes• Centralized decision making• Responsibility for problems difficult to identify• Employees have limited view• Limited general management training

• Poor communication among functional departments• Slow response to external changes• Centralized decision making• Responsibility for problems difficult to identify• Employees have limited view• Limited general management training

Divisional Approach

• Departments are grouped together based on organizational outputs

• Diverse departments are brought together to produce a single organizational output

• Encourages decentralization

• Departments are grouped together based on organizational outputs

• Diverse departments are brought together to produce a single organizational output

• Encourages decentralization

Advantages ofGeographic Divisions

• Responsive in an unstable environment• Shows concern for customer• Coordinates across functional departments• Identifies responsibility for product • Emphasizes overall product and division goals• Develops general management skills• Minimizes travel costs

• Responsive in an unstable environment• Shows concern for customer• Coordinates across functional departments• Identifies responsibility for product • Emphasizes overall product and division goals• Develops general management skills• Minimizes travel costs

Disadvantages ofGeographic Divisions

• Duplication of resources across divisions• Less specialization in divisions• Poor coordination across divisions• Less top management control• Competition for resources among divisions• More managers needed

Matrix Approach

• Functional and divisional chains of command simultaneously

• Dual lines of authority• Functional hierarchy of authority runs vertically• Divisional hierarchy runs laterally• Violates the unity of command concept

Advantages of Matrix

• More efficient use of resources than single hierarchy• Adaptable to changing environment• Development of both general and specialists

management skills• Expertise available to all divisions• Enlarged tasks for employees

Disadvantages of Matrix

• Dual chain of command• High conflict between two sides of matrix• Many meetings to coordinate activities• Need for human relations training• Power domination by one side of matrix

• Dual chain of command• High conflict between two sides of matrix• Many meetings to coordinate activities• Need for human relations training• Power domination by one side of matrix

Team Approach

• Cross-functional teams consist of employees from various functional departments

• Interdisciplinary approach to management• Permanent team solve ongoing problems• Reengineering radical redesign for improvements

in cost, quality, service and speed

Advantages of Teams

• Same advantages as functional structure• Reduced barriers among departments• Quicker response time• Better morale• Reduced administrative overhead

Disadvantages of Teams

• Dual loyalties and conflict• Time and resources spent on meetings• Unplanned decentralization

Network Approach

• Organization divides major functions into separate companies brokered by a small headquarters organization

• "Where is the organization?"• Especially appropriate for international operations• Held together with phones, faxes, and other

electronic technology

• Organization divides major functions into separate companies brokered by a small headquarters organization

• "Where is the organization?"• Especially appropriate for international operations• Held together with phones, faxes, and other

electronic technology

Advantages of Network Approach

• Global competitiveness• Work force flexibility• Reduced administrative overhead

Disadvantages ofNetwork Approach

• No hands-on control• Loss of part of the organization severely impacts

remainder of organization• Employee loyalty weakened

• No hands-on control• Loss of part of the organization severely impacts

remainder of organization• Employee loyalty weakened

Coordination

Quality of collaboration across departmentsQuality of collaboration across departments

Structural Design

Teams

Project Management

Task Forces

• Task Force...A temporary team or committee formed to solve a specific short-term problem

• Team…Participants from several departments who meet to solve ongoing problems

•Project Manager…A person responsible for coordinating the activities of several departments

Reengineering

• One of the most popular management concepts

• Complete rethinking and transformation of key business processes

• Leads to greater flexibility

• Often involves a shift to horizontal structure based on teams

• Requires identifying customer needs and then designing processes and aligning people to meet those needs

• Can squeeze out the dead space and time lags in work flows

• May lead to redesigning information systems to cut across departmental lines

Traditional Tight, Mechanistic Organization

Dominant Structural Approach

Contemporary Loose, Organic

Organization

Differences in Mechanistic versus Organic Organizations

Horizontal structure is dominant1. Shared tasks 2. Relaxed hierarchy, authority by expertise, few rules 3. Horizontal communication, face-to-face 4. Many teams, task forces, and integrators 5. Informal, decentralized decision making

Vertical Structure is dominant1. Specialized tasks 2. Strict hierarchy authority, many rules 3. Vertical communication and reporting systems 4. Few teams, task forces, or integrators 5. Centralized decision making