WK7- Organizational Structure and Design.PDF

7/27/2019 WK7- Organizational Structure and Design.PDF

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MGT 115 Management andOrganisation

1


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Objectives

By the end of the session students should beable to:

1. A pply organization design concepts

2. Understand span of control

3. Distinguish between tall and flat structures

4. Contrast authority and responsibility

5. Distinguish the Mechanistic and Organic

Structure

6. Understand Contingency Factors that affect2


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Defining Organizational StructureOrganizational Structure

T he for mal ar rangement of jobs within anorganization

Organizational Design A process inv olv ing decisions about six key

elements:

Work specialization

Departmentalization

Chain of commandSpan of control

Centralization and decentralization

Formalization


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Exhibit 9.1 Some Purposes ofOrganizing

Divides work to be done into specific jobs and

departments

Assigns tasks and responsibilities associated withindividual jobs

Coordinates diverse organizational tasks

Clusters jobs into units

Establishes relationships among individuals,

groups, and departments

Establishes formal lines of authority

Allocates and deploys organizational resources


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Organizational StructureWork Specialization

T he degree to which tasks in theorganization are divided into separate

jobs with each step completed by adifferent person

Overspecialization can r es ult in humandiseconomies from boredom, fatigue, stress,poor quality, increased absenteeism, and higherturnover


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Departmentalization by Type

Functional

Grouping jobs by

functions performedProduct

Grouping jobs byproduct line

Geographical

Grouping jobs onthe basis ofterritory orgeography

Process

Grouping jobs on

the basis of productor customer flow

Customer

Grouping jobs bytype of customer

and needs


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Exhibit 9.2a FunctionalDepartmentalization

Plant Manager

Manager,Manufacturing

Manager,Human Resources

Manager,Account ing

Manager,Engineering

Manager,Purchasing

+ Efficiencies from putting together similar specialties and

people with common skills, know ledge, and ori entations

+ Coordination w ithin functional area

+ In-depth specialization Poor communicat ion across functional areas

Limi ted view of organ izat ional goals


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Geographical DepartmentalizationVice President

for Sales

Sales Director,

Central Region

Sales Director,

Prairies Region

Sales Director,

Western Region

Sales Director,

Eastern Region

+ More effective and efficient handl ing of specifi c

regional issues that arise+ Serve needs of unique geographic markets better

Duplication of functions

Can feel isolated from other organizat ional areas


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Exhibit 9.2c Product Departmentalization

+ Allows specialization in particular products and services

+ Managers can become experts in their industry

+ Closer to customers


Limi ted view of organizat ional goals

Source: Bombardier Annual Report.

Bombardier, Ltd.

Industrial

Equipment

Division

Recreational and

Utility Vehicles

Sector

Mass Transit

Sector

Rail Products

Sector

Rail and Diesel

Products Division

BombardierRotax

(Gunskirchen)Recreational

Products Division

Logistic

Equipment

Division

Mass Transit

Division

BombardierRotax

(Vienna)


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Exhibit 9.2d ProcessDepartmentalization

+ More efficient flow of work activities

Can only be used w ith certain types of products

Plant

Superintendent

SawingDepartment

Manager

Planing and

Milling

Department

Manager

Assemblin g

Department

Manager

FinishingDepartment

Manager

Inspection andShipping

Department

Manager

Lacquering

and sanding

Department

Manager


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Customer Departmentalization

+ Customers needs and prob lems can be met by specialists


Limi ted view of organizat ional goals

Director of Sales

Manager,

Wholesale Accounts

Manager,

Retail Accounts

Manager,

Government Accounts


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Organizational Structure (contd)

A uthority

T he rig hts inherent in a manag erial pos ition to tellpeople what to do and to expect them to do it

Responsibility T he oblig ation or ex pectation to perform. Responsibility

brings with it accountability (the need to report andjustify work to manag ers super iors)

Unity of Command

T he concept that a person should hav e one bos s and

should report only to that person Delegation

T he assig nment of author ity to another person to carryout specific duties


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Line and Staff Authority Line managers are respons ible for the

essential activities of the organization,including production and sales. Linemanagers have the authority to issueorders to those in the chain of command

T he pres ident, the production manager, and thesales manager are examples of line managers

Staff managers have advisory authority ,and cannot issue orders to those in thechain of command (except those in theirown department)


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Organizational Structure (contd)Span of Control

T he number of employ ees who can beeffectively and efficiently supervised by amanager

Width of span is af fected by :

Skil ls and abil i t iesof the manager and the employees

Character ist ics of the w orkbeing done

Similarity of tasks

Complex ity of tasks

Standardization of tasks

Physicalpr ox imityof subordinates

Sophistication of inf ormation syst em

Organizations cul ture

Preferred sty le of the manager


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Exhibit 9.3 Contrasting Spans ofControl

Assuming Span of 4

Span of 4:Employees:Managers (level 16)

= 4096= 1365

Span of 8:Employees:Managers (level 14)

Assuming Span of 8

1

2

3

4

5

6

7

(Highest)

(Lowest)

Members at Each Level

1

4

16

64

256

1024

4096

1

8

64

512

4096

OrganizationalLevel

= 4096= 585


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Centralization

T he degree to which decision making is

concentrated at a single point in the organizationOrganizations in which top managers make all the

decisions and lower - level employees s imply carryout those orders

Decentralization

T he degree to which lower- level employ eesprovide input or actually make decisions

Employ ee Empowerment

Increas ing the decision- making discretion ofemployees


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Figure 9.4a Factors that Influencethe Amount of Centralization

More Centralization Env ir onment is stable Low er- level managers are not as capable or

ex perienced at making decisions as upper- levelmanagers

Low er- level managers do not want to hav e asay in decisions

Decis ions ar e sig nificant Or ganization is facing a cr is is or the risk of

company failure Company is large Effectiv e implementation of company strategies

depends on managers retaining say over whathappens


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Figure 9.4b Factors that Influencethe Amount of Decentralization

More Decentralization Env ir onment is complex , uncertain Low er- level managers are capable and

ex perienced at making decisions Low er- level managers want a voice in decisions Decis ions ar e relatively minor Corpor ate culture is open to allow ing managers

to have a say in what happens Company is geog raphically dispersed

Effectiv e implementation of company strategiesdepends on managers having involvement andflexibility to make decisions


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Formalization

T he degree to which jobs within the

organization are standardized and theextent to which employee behaviour isguided by rules and procedures

Highly formalized jobs offer little discretionover what is to be done

Low f ormalization means few er constraints onhow employees do their work


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Organizational Design Decisions Mechanistic

Organization

A rig id and tightlycontrolled structure

High specialization

Rigiddepartmentalization

Narrow spans ofcontrol

High f ormalization

Limited informationnetwork (mostlydownwardcommunication)

Low decisionparticipation bylower- level

Organic Organization

Highly flex ible andadaptable structure

Nonstandardized jobs

Fluid team- basedstructure

Little directsupervision

Minimal formal rules

Open communication

networkEmpowered

employees


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Exhibit 9.5 Mechanistic VersusOrganic Organization

Mechanistic

High Specialization Rigid Departmentalization Clear Chain of Command Narrow Spans of Control Centralization

High Formalization

Organic

Cross-Functional Teams Cross-Hierarchical Teams Free Flow of Information Wide Spans of Control Decentralization

Low Formalization


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Structural Contingency FactorsStructural decisions are influenced by:

Ov erall str ategy of the or ganization

Organizational structure follows strategy

Size of the or ganizationFirms change from organic to mechanistic

organizations as they grow in size

T echnolog y use by the or ganization

Firms adapt their structure to the technology theyuse

Degree of env ironmental uncertainty

Dynamic environments require organic structures;mechanistic structures need stable environments


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Structural Contingency Factors(contd)

Strategy Framework s: Innovation

Pursuing competitiv e advantage throughmeaningful and unique innovations favours anorg anic structuring

Cost minimizationFocusing on tightly controlling cos ts requires a

mechanistic structure for the organization

ImitationMinimizing risks and max imizing profitability by

copying market leaders requires both organicand mechanistic elements in the organizationsstructure


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Structural Contingency Factors(contd)

Strategy and Structure

A chievement of strategic goals is

facilitated by changes in organizationalstructure that accommodate and supportchange

Size and Structure

A s an organization grow s larger, itsstructure tends to change from organicto mechanistic with increasedspecialization, departmentalization,centralization, and rules and regulations


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Structural Contingency Factors (contd)Technology and Structure

Organizations adapt their structures totheir technology

Woodwards classif ication of firms basedon the complexity of the technologyemployed:

Unit production of s ingle units or small batches

Mass production of larg e batches of output

Process production in continuous process of

outputs

Routine technolog y = mechanisticorganizations

Nonroutine technolog y = organicor anizations


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Structural Contingency Factors (contd)

Environmental Uncertainty andStructure

Mechanistic organizational structurestend to be most effective in stable andsimple environments

T he flex ibility of organic organizational

structures is better suited for dynamicand complex environments


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Woodwards Findings on Technology,Structure, and Effectiveness


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Common Organizational Designs

T raditional Designs Simple Str ucture

Low departmentalization, wide spans of control,centralized authority, little formalization

Functional StructureDepartmentalization by function

Operations, finance, human res ources, and productresearch and development

Div is ional Str uctureComposed of separate business units or divisions

with limited autonomy under the coordination andcontrol of the parent corporation


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Strengths and Weaknesses of CommonTraditional Organizational Designs


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Organizational Designs (contd)Contemporary Organizational Designs

T eam StructuresT he entire organization is made up of w ork

gr oups or se lf- managed teams of empoweredemployees

Matrix StructuresSpecialists for different functional departments

are assigned to work on projects led by projectmanagers

Matrix participants hav e two managers

Project StructuresEmployees w ork continuously on projects,

moving on to another project as each project iscompleted


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Contemporary Organizational Designs


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Exhibit 9.9 A Matrix Organizationin an Aerospace Firm

Design

EngineeringManufacturing

Contract

Adminis trationPurchasing Accounting

Human

Resources (HR)

DesignGroup

AlphaProject

ManufacturingGroup

ContractGroup

PurchasingGroup

AccountingGroup

HRGroup

Design

Group

Beta

Project

Manufacturing

Group

Contract

Group

Purchasing

Group

Accounting

Group

HR

Group

Design

Group

Gamma

Project

Manufacturing

Group

Contract

Group

Purchasing

Group

Accounting

Group

HR

Group

Design

Group

Omega

Project

Manufacturing

Group

Contract

Group

Purchasing

Group

Accounting

Group

HR

Group


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Organizational Designs (contd)Contemporary Organizational Designs

(contd) Boundaryless Organization

A flex ible and an unstructured org anizationaldesign that is intended to break down externalbarriers between the organization and itscustomers and suppliers

Removes internal (horizontal) boundaries: Eliminates the chain of command

Has limitless spans of contr ol Us es empow ered teams rather than departments

Eliminates ex ter nal boundaries: Us es vir tual, netw ork, and modular

organizational structures to get closer tostakeholders


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Removing Boundaries

V irtual Org anization A n or ganization that consis ts of a small core of

full- time employees and that temporarily hires

specialists to work on opportunities that ariseNetwork Organization

A small core or ganization that outsources itsmajor business functions (e.g., manufacturing) inorder to concentrate on what it does best

Modular Organization

A manufacturing or ganization that uses outsidesuppliers to provide product components for itsfinal assembly operations


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Outsourcing Issues

Problems in Outsourcing

Choos ing the wrong activ ities to outsour ce

Choos ing the wrong vendor Writing a poor contract

Failing to consider personnel issues

Los ing contr ol ov er the activ ity

Ignoring the hidden cos ts

Failing to develop an ex it strategy (for eithermoving to another vendor, or deciding to bringthe activity back in- house)


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Organizational Designs (contd)Learning Organization

A n or ganization that has developed the capacityto continuously learn, adapt, and change throughthe practice of knowledge management byemployees

Characteris tics of a lear ning or ganization:A n open team- based organization design that

empowers employees

Ex tensive and open information sharing

Leadership that provides a shared vision of theorg anizations future; support; and encourag ement

A strong culture of shared values, trust, openness,and a sense of community


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Characteristics of a Learning Organization

Organizational Design

Boundaryless

Teams

Empowerment

Organizational Culture

Strong Mutual Relationships

Sense of Community

Car ing

Trust

Information Sharing

Open

Timely

Accurate

Leadership

Shared Vision

Collaboration

THE LEARNING

ORGANIZATION

Documents

WK7- Organizational Structure and Design.PDF