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Fundamentals of Organizational StructureMunif Ahmad

1Fandamental of Organizational StructureStudent Name: Group Code: Date:FBM

What Is Organizational Structure?Organizational StructureHow job tasks are formally divided, grouped, and coordinatedKey Elements:Work specializationDepartmentalizationChain of commandSpan of controlCentralization and decentralizationFormalization

What Is Organizational Structure?Organizational StructureHow job tasks are formally divided, grouped, and coordinatedKey Elements:Work specializationDepartmentalizationChain of commandSpan of controlCentralization and decentralizationFormalization

1. Work SpecializationThe degree to which tasks in the organization are subdivided into separate jobsDivision of LaborMakes efficient use of employee skillsIncreases employee skills through repetitionLess between-job downtime increases productivitySpecialized training is more efficientAllows use of specialized equipmentCan create greater economies and efficiencies but not always

2. DepartmentalizationThe basis by which jobs are grouped togetherGrouping Activities by:FunctionProductGeographyProcessCustomer

3. Chain of CommandAuthorityThe rights inherent in a managerial position to give orders and to expect the orders to be obeyedChain of CommandThe unbroken line of authority that extends from the top of the organization to the lowest echelon and clarifies who reports to whomUnity of CommandA subordinate should have only one superior to whom he or she is directly responsible

4. Span of ControlThe number of subordinates a manager can efficiently and effectively directWider spans of management increase organizational efficiencyNarrow span drawbacks:Expense of additional layers of managementIncreased complexity of vertical communicationEncouragement of overly tight supervision and discouragement of employee autonomy

Contrasting Spans of Control

5. Centralization and DecentralizationCentralizationThe degree to which decision making is concentrated at a single point in the organization.DecentralizationThe degree to which decision making is spread throughout the organization.

6. FormalizationThe degree to which jobs within the organization are standardized.High formalizationMinimum worker discretion in how to get the job doneMany rules and procedures to followLow formalizationJob behaviors are nonprogrammedEmployees have maximum discretion

Common Organization Designs: Simple StructureSimple StructureA structure characterized by a low degree of departmentalization, wide spans of control, authority centralized in a single person, and little formalization

Common Organizational Designs: BureaucracyBureaucracyA structure of highly operating routine tasks achieved through specialization, very formalized rules and regulations, tasks that are grouped into functional departments, centralized authority, narrow spans of control, and decision making that follows the chain of command

An Assessment of BureaucraciesStrengthsFunctional economies of scaleMinimum duplication of personnel and equipmentEnhanced communicationCentralized decision making

WeaknessesSubunit conflicts with organizational goalsObsessive concern with rules and regulationsLack of employee discretion to deal with problems

Common Organizational Designs: MatrixMatrix StructureA structure that creates dual lines of authority and combines functional and product departmentalizationKey ElementsGains the advantages of functional and product departmentalization while avoiding their weaknessesFacilitates coordination of complex and interdependent activitiesBreaks down unity-of-command concept

New Design Options: Virtual OrganizationA small, core organization that outsources its major business functionsHighly centralized with little or no departmentalizationProvides maximum flexibility while concentrating on what the organization does bestReduced control over key parts of the business

New Design Options: Boundaryless OrganizationAn organization that seeks to eliminate the chain of command, have limitless spans of control, and replace departments with empowered teamsT-form ConceptsEliminate vertical (hierarchical) and horizontal (departmental) internal boundariesBreakdown external barriers to customers and suppliers

Two Extreme Models of Organizational Design

Four Reasons Structures DifferStrategyInnovation StrategyA strategy that emphasizes the introduction of major new products and servicesOrganic structure bestCost-minimization StrategyA strategy that emphasizes tight cost controls, avoidance of unnecessary innovation or marketing expenses, and price cuttingMechanistic model bestImitation StrategyA strategy that seeks to move into new products or new markets only after their viability has already been provenMixture of the two types of structure

Why Structures DifferOrganizational SizeAs organizations grow, they become more mechanistic, more specialized, with more rules and regulationsTechnologyHow an organization transfers its inputs into outputsThe more routine the activities, the more mechanistic the structure with greater formalizationCustom activities need an organic structureEnvironmentInstitutions or forces outside the organization that potentially affect the organizations performanceThree key dimensions: capacity, volatility, and complexity

Three-Dimensional Environment ModelCapacityThe degree to which an environment can support growthVolatilityThe degree of instability in the environmentComplexityThe degree of heterogeneity and concentration among environmental elements

Complexity VolatilityCapacity

Organizational Designs and Employee BehaviorImpossible to generalize due to individual differences in the employeesResearch findingsWork 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.People seek and stay at organizations that match their needs.

Global ImplicationsCulture and Organizational StructureMany countries follow the U.S. modelU.S. management may be too individualisticCulture and Employee Structure PreferencesCultures with high-power distance may prefer mechanistic structuresCulture and the Boundaryless OrganizationMay be a solution to regional differences in global firmsBreaks down cultural barriers, especially in strategic alliancesTelecommuting also blurs organizational boundaries

Student Name: Group Code: Date:FBMFandamental of Organizational Structure22

Summary and Managerial ImplicationsStructure impacts both the attitudes and behaviors of the people within it

Impact of TechnologyMakes it easier to change structure to fit employee and organizational needs