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Chapter 15: Founda1ons of Organiza1on Structure

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Learning Objectives A;er studying this chapter, you should be able to: Ø Iden1fy the six elements of an organiza1on’s structure. Ø Iden1fy the characteris1cs of a bureaucracy. Ø Describe a matrix organiza1on. Ø Iden1fy the characteris1cs of a virtual organiza1on. Ø Show why managers want to create boundaryless organiza1ons.

Ø Demonstrate how organiza1onal structures differ, and contrast mechanis1c and organic structural models.

Ø Analyze the behavioral implica1ons of different organiza1onal designs. 15-3


Identify the Six Elements of an Organization’s Structure

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Ø Work Specializa1on Ø By the late 1940s, most manufacturing jobs in industrialized countries involved work specializa.on – the division of labor into separate ac1vi1es. Ø Repe11on of work. Ø Training for specializa1on. Ø Increasing efficiency through inven1on. Ø Henry Ford

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Ø Departmentaliza1on Ø Grouping jobs together so common tasks can be coordinated is called departmentaliza.on. Ø By func1ons performed. Ø By type of product or service the organiza1on produces.

Ø By geography or territory. Ø By process differences. Ø By type of customer.

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Ø Chain of Command Ø Chain of command – an unbroken line of authority that extends from the top of the organiza1on to the lowest echelon and clarifies who reports to whom.

Ø Once a basic cornerstone in organiza1on design. Ø Two complementary concepts:

Ø Authority Ø Unity of command

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Ø The chain of command is less relevant today because of technology and the trend of empowering people. Ø Opera1ng employees make decisions once reserved for management.

Ø Increased popularity of self-‐managed and cross-‐func1onal teams.

Ø Many organiza1ons s1ll find that enforcing the chain of command is produc1ve.

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Ø Centraliza1on and Decentraliza1on Ø Centraliza.on refers to the degree to which

decision-‐making is concentrated at a single point in the organiza1on.

Ø Advantages of a decentralized organiza1on: Ø Can act more quickly to solve problems. Ø More people provide input into decisions. Ø Employees are less likely to feel alienated from those who make decisions that affect their work lives.

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Ø Formaliza1on Ø Formaliza.on – the degree to which jobs within the

organiza1on are standardized. Ø A highly formalized job gives the job incumbent a minimum amount of discre1on.

Ø The greater the standardiza1on, the less input the employee has into how the job is done.

Ø Low formaliza1on – job behaviors are rela1vely non-‐programmed, and employees have a great deal of freedom to exercise discre1on in their work.

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Identify the Characteristics of a Bureaucracy

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Ø The simple structure is most widely prac1ced in small businesses in which the manager and the owner are one and the same. Ø Strengths:

Ø Simple, fast, and flexible. Ø Inexpensive to maintain. Ø Accountability is clear.

Ø Weaknesses: Ø Difficult to maintain in anything other than small organiza1ons.

Ø Risky—everything depends on one person.

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Ø A bureaucracy is characterized by standardiza1on. Ø Highly rou1ne opera1ng tasks. Ø Very formalized rules and regula1ons. Ø Tasks grouped into func1onal departments. Ø Centralized authority. Ø Narrow spans of control. Ø Decision making that follows the chain of command.

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Ø Strengths: Ø Ability to perform standardized ac1vi1es in a highly

efficient manner. Ø Weaknesses: Ø Subunit conflicts. Ø Unit goals dominate. Ø Obsessive behavior. Ø Covering weak management.

Ø The bureaucracy is efficient only as long as employees confront familiar problems with programmed decision rules.

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Describe a Matrix Organization

Ø The matrix structure combines two forms of departmentaliza1on—func1onal and product: Ø The strength of func1onal is pubng specialists together.

Ø Product departmentaliza1on facilitates coordina1on. Ø It provides clear responsibility for all ac1vi1es related to a product, but with duplica1on of ac1vi1es and costs.

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Describe a Matrix Organization

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Ø The Virtual Organiza1on Ø The essence of the virtual organiza.on is that it is typically a small, core organiza1on that outsources major business func1ons. Ø Also referred to as a modular or network organiza1on.

Ø It is highly centralized, with liele or no departmentaliza1on.

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Identify the Characteristics of a Virtual Organization


Identify the Characteristics of a Virtual Organization

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Show Why Managers Want to Create Boundaryless Organizations Ø The Boundaryless Organiza1on Ø The boundaryless organiza.on seeks to eliminate the chain of command, has limitless spans of control, and replaces departments with empowered teams. Ø Uses cross-‐hierarchical teams. Ø Uses par1cipa1ve decision making prac1ces. Ø Uses 360-‐degree performance appraisals.

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Ø Func1onal departments create horizontal boundaries. Ø Replace these with cross-‐func1onal teams organized around processes.

Ø Boundaryless organiza1ons break down geographic and cultural barriers. Ø Strategic alliances help blur cultural differences. Ø Telecommu1ng blurs organiza1onal boundaries

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Show Why Managers Want to Create Boundaryless Organizations


Ø The Leaner Organiza1on: Downsizing Ø The goal of the new organiza1onal forms we’ve described is to improve agility by crea1ng a lean, focused, and flexible organiza1on.

Ø Downsizing is a systema1c effort to make an organiza1on leaner by selling off business units, closing loca1ons, or reducing staff.

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Ø Strategies for downsizing include: 1.  Investment 2.  Communica1on 3.  Par1cipa1on 4.  Assistance

Ø Make cuts carefully and help employees through the process.

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Demonstrate How Organizational Structures Differ, and Contrast

Mechanistic and Organic Structural Models


Ø An organiza1on’s structure is a means to help management achieve its objec1ves.

Ø Most current strategy frameworks focus on three strategy dimensions: 1.  Innova1on 2.  Cost Minimiza1on 3.  Imita1on

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Mechanistic and Organic Structural Models Ø Organiza1onal Size Ø Large organiza1ons—employing 2,000 or more people—tend to have more specializa1on, more departmentaliza1on, more ver1cal levels, and more rules and regula1ons than do small organiza1ons. Ø The impact of size becomes less important as an organiza1on expands.

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Mechanistic and Organic Structural Models Ø Technology Ø The way an organiza1on transfers its inputs into outputs is called technology.

Ø Numerous studies have examined the technology-‐structure rela1onship. Ø Organiza1ons engaged in non-‐rou1ne ac1vi1es tend to prefer organic structures, and those performing rou1ne ac1vi1es prefer mechanis1c structures.

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Mechanistic and Organic Structural Models Ø Environment Ø An organiza1on’s environment includes outside

ins1tu1ons or forces that can affect its performance. Ø Dynamic environments create significantly more uncertainty for managers than do sta1c ones.

Ø To minimize uncertainty: Ø Broaden structure to sense and respond to threats.

Ø Form strategic alliances.

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Analyze the Behavioral Implications of Different Organizational Designs

Ø An organiza1on’s structure can have significant effects on its members.

Ø It’s impossible to generalize! Ø Not everyone prefers the freedom and flexibility of

organic structures. Ø Some people are most produc1ve and sa1sfied when

work tasks are standardized and ambiguity minimized.

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Ø Organiza1onal Designs and Employee Behavior Ø Work specializa1on contributes to higher employee

produc1vity. Ø No evidence supports a rela1onship between span of

control and employee sa1sfac1on or performance. Ø Fairly strong evidence links centraliza1on and job

sa1sfac1on, meaning that less centraliza1on is associated with higher sa1sfac1on.

Ø Na1onal culture influences the preference for structure.

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Analyze the Behavioral Implications of Different Organizational Designs


Implications for Managers

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Ø Specializa1on can make opera1ons more efficient, but remember that excessive specializa1on, can create dissa1sfac1on and reduced mo1va1on.

Ø Avoid designing rigid hierarchies that overly limit employees’ empowerment and autonomy.

Ø Balance the advantages of virtual and boundaryless organiza1ons against the poten1al piialls before adding flexible workplace op1ons.

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Ø Downsize your organiza1on to realize major cost savings, and focus the company around core competencies, but only if necessary, because downsizing can have a significant nega1ve impact on employee affect.

Ø Consider the scarcity, dynamism, and complexity of the environment, and balance the organic and mechanis1c elements when designing an organiza1onal structure.

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