6.organization

7/30/2019 6.Organization

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Foundations of

Organizational

Structure


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What Is Organizational Structure?

Key Elements:

Work specialization Departmentalization

Chain of command

Span of control

Centralization and

decentralization

Formalization

Organizational Structure

How job tasks are formallydivided, grouped, andcoordinated.


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Key Design Questions and Answers for Designing the

Proper Organization Structure

E X H I B I T 161

The Key Question The Answer Is Provided By

1. To what degree are articles Work specialization

subdivided into separate jobs?

2. On what basis will jobs be grouped Departmentalizationtogether?

3. To whom do individuals and groups Chain of command

report?

4. How many individuals can a manager Span of control

efficiently and effectively direct?

5. Where does decision-making Centralization

authority lie? and decentralization

6. To what degree will there be rules Formalization

and regulations to direct employees

and managers?


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What Is Organizational Structure? (contd)

Division of labor:

Makes efficient use of employee skills

Increases employee skills through repetition

Less between-job downtime increases productivity

Specialized training is more efficient

Allows use of specialized equipment

Work Specialization

The degree to which tasks in the organization aresubdivided into separate jobs.


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Economies and Diseconomies of Work

Specialization

E X H I B I T 162


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Grouping Activities By:

Function

Product

Geography

Process

Customer

Departmentalization

The basis by which jobs are grouped together.


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Chain of Command

The unbroken line of authority that extends from thetop of the organization to the lowest echelon andclarifies who reports to whom.

AuthorityThe rights inherent in a managerial position to giveorders and to expect the orders to be obeyed.

Unity of Command

A subordinate should have only one superior to whomhe or she is directly responsible.


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Narrow Span Drawbacks:

Expense of additional layers of management.

Increased complexity of vertical communication.

Encouragement of overly tight supervision anddiscouragement of employee autonomy.

Concept:

Wider spans of management increase organizationalefficiency.

Span of ControlThe number of subordinates a manager can efficientlyand effectively direct.


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Contrasting Spans of Control

E X H I B I T 163


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CentralizationThe degree to which decision making isconcentrated at a single point in the organization.

FormalizationThe degree to which jobs withinthe organization are standardized.

DecentralizationThe degree to which decision making isspread throughout the organization.


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E X H I B I T 164Source: S. Adams, Dogberts Big Book of Business, DILBERT

reprinted by permission of United Features Syndicate, Inc.


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Common Organization Designs

A Simple Structure:

Jack Golds Mens Store

Simple Structure

A structure characterized by a low degree ofdepartmentalization, wide spans of control, authoritycentralized in a single person, and little

formalization.

E X H I B I T 165


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Common Organization Designs (contd)

Bureaucracy

A structure of highly operatingroutine tasks achieved throughspecialization, very formalized

rules and regulations, tasks thatare grouped into functionaldepartments, centralizedauthority, narrow spans of

control, and decision makingthat follows the chain ofcommand.


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The Bureaucracy

Strengths

Functionaleconomies of scale

Minimum duplication

of personnel andequipment

Enhancedcommunication

Centralized decisionmaking

Weaknesses

Subunit conflicts withorganizational goals

Obsessive concern

with rules andregulations

Lack of employeediscretion to dealwith problems


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Common Organization Designs (contd)

Key Elements:

+ Gains the advantages of functional and productdepartmentalization while avoiding their weaknesses.

+ Facilitates coordination of complex andinterdependent activities.

Breaks down unity-of-command concept.

Matrix Structure

A structure that creates dual lines of authority andcombines functional and product departmentalization.


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Matrix Structure (College of Business Administration)

(Dean)

(Director)

Employee

E X H I B I T 166


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New Design Options

Characteristics:

Breaks down departmental barriers.

Decentralizes decision making to the team level.

Requires employees to be generalists as well asspecialists.

Creates a flexible bureaucracy.

Team StructureThe use of teams as the central device to coordinatework activities.


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New Design Options (contd)

Concepts:

Advantage: Provides maximum flexibility while

concentrating on what the organization does best.

Disadvantage: Reduced control over key parts of

the business.

Virtual Organization

A small, core organization that outsources its majorbusiness functions.

Highly centralized with little or no departmentalization.


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A Virtual Organization

E X H I B I T 167


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New Design Options (contd)

T-form Concepts:

Eliminate vertical (hierarchical) and horizontal

(departmental) internal boundaries.

Breakdown external barriers to customers and

suppliers.

Boundaryless OrganizationAn organization that seeks to eliminate the chain ofcommand, have limitless spans of control, andreplace departments with empowered teams.


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Why Do Structures Differ?

Mechanistic ModelA structure characterized by extensivedepartmentalization, high formalization,a limited information network, and

centralization.


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Why Do Structures Differ?

Organic Model

A structure that is flat, uses cross-hierarchical andcross-functional teams, has low formalization,possesses a comprehensive information network, and

relies on participative decision making.


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Why Do Structures Differ? Strategy

Innovation StrategyA strategy that emphasizes the introduction of majornew products and services.

Imitation Strategy

A strategy that seeks to move into new products ornew markets only after their viability has alreadybeen proven.

Cost-minimization StrategyA strategy that emphasizes tight cost controls,avoidance of unnecessary innovation or marketingexpenses, and price cutting.


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The Strategy-Structure Relationship

E X H I B I T 169

Strategy Structural Option

Innovation Organic:A loose structure; low

specialization, low formalization,

decentralized

Cost minimization Mechanistic: Tight control; extensive

work specialization, high formalization,

high centralization

Imitation Mechanistic and organic: Mix of

loose with tight properties; tightcontrols over current activities and

looser controls for new undertakings


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Why Do Structures Differ? Technology

Technology

How an organization transfers itsinputs into outputs.

Characteristics of routineness (standardized orcustomized) in activities:

Routine technologies are associated with tall,

departmentalized structures and formalization in

organizations.

Routine technologies lead to centralization whenformalization is low.

Nonroutine technologies are associated with

delegated decision authority.


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Why Do Structures Differ? Environment

Key Dimensions-

Capacity: the degree to which an environment can

support growth.

Volatility: the degree of instability in the environment.

Complexity: the degree of heterogeneity and

concentration among environmental elements.

EnvironmentInstitutions or forces outside the organization thatpotentially affect the organizations performance.


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The Three Dimensional Model of the

Environment

Complexi ty

Volati l i ty

Capacity

E X H I B I T 1610


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Bureaucracy Is Dead

Characteristics of

Bureaucracies

Specialization

Formalization

Departmentalization

Centralization Narrow spans of control

Adherence to a chain ofcommand

Why Bureaucracy

Survives

Large size prevails

Environmentalturbulence can belargely managed

Standardizationachieved through hiringpeople who haveundergone extensiveeducational training

Technology maintainscontrol


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Organizational Designs and Employee

Behavior

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.

The effect of span of control on employee performance is

contingent upon individual differences and abilities, task

structures, and other organizational factors. Participative decision making in decentralized

organizations is positively related to job satisfaction.


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Organization Structure: Its Determinants and

Outcomes

Implicit Models of

Organizational Structure

Perceptions that people holdregarding structural variablesformed by observing things aroundthem in an unscientific fashion.

E X H I B I T 1611

Associated

with


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2007 Prentice Hall Inc. All rights reserved.

What kind of structure might

someone who has a lowtolerance for ambiguity feel most

comfortable in?

Bureaucratic

Organic

Matrix

Virtual

Chapter Check -Up: Struc ture

Discuss with your neighbor why a virtual organization

would not make this same person feel comfortable.


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2007 Prentice Hall Inc. All rights reserved.


If someone has a high need for

affiliation, would a virtual organization be

a good fit for him or her? Why or why

not?

Discuss with a classmate whether or not an organic organizationwould be a good fit for this same person.


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With which type of structure do you

think trust is most necessary? Why?

Are the substitutes for trust that are

potentially built into somestructures? If so, which ones?


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