organizational structure faisal alsager week 8 mgt 101 - principles of management and business
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Organizational StructureFaisal AlSager
Week 8
MGT 101 - Principles of Management and Business
Objectives
✤ Describe six key elements in organizational design
✤ Identify the contingency factors that favor the mechanistic model or the organic model
✤ Compare and contrast traditional and contemporary organizational designs
Organizational Design
Organizing
The function management that creates the organization’s structure
Organizational Design
When managers develop or change the organization’s structure
Elements of the Organizational Structure
✤ The six basic elements of organizational structure are:
1. work specialization,
2. departmentalization,
3. authority and responsibility,
4. span of control,
5. centralization versus decentralization, and
6. formalization
Work Specialization
✤ Definition
dividing work activities into separate job tasks.
✤ Also known as division of labor
Economies and Diseconomies of Work Specialization
Low
Low
High
High
PRODUCTIVITY
WORK SPECIALIZATION
Impact fromeconomies
of specialization
Impact fromhuman
diseconomies
Departmentalization
Departmentalization: how jobs are grouped together
DepartmentalizatioDepartmentalization Typen Type DefinitionDefinition ExamplesExamples
Functional Departmentalizati
on
Grouping activities by functions performed
•Engineering Department•Human Resources Department
Product Departmentalizati
on
Grouping activities by major product area
•Women’s Footwear•Accessories
Customer Departmentalizati
onGrouping activities by customer
•Wholesale Department•Government
Geographic Departmentalizati
on
Grouping activities on the basis of geography
•North•Middle East
Process Departmentalizati
on
Grouping activities on the basis of work or customer flow
•Testing•Payment
Cross-Functional Teams
Definition
Teams made up of individuals from various departments and that cross traditional departmental lines
Authority and Responsibility
Chain of Command
The line of authority extending from upper organizational levels to lower levels, which clarifies who report to whom
Authority
The rights inherent in a managerial position to give orders and respect the orders to be obeyed
Responsibility
An obligation to perform assigned duties
Types of Authority Relationships
1. Line Authority: authority that entitles a manager to direct the work of an employee
2. Staff Authority: positions with some authority that have been created to support, assist, and advise those holding of authority
Power
Power: an individual’s capacity to influence decisions
Coercive Power
Power based on fear
Reward Power Power based on the ability to distribute something that others value
Legitimate Power
Power based on one’s position in the formal hierarchy
Expert Power Power based on one’s expertise, special skill, or knowledge
Reference Power
Power based on identification with a person who has desirable resources or personal traits
Span of Control
✤ Span of Control
The number of employees a manager can efficiently and effectively supervise
✤ Most managerial authors favored a small number; no more than 6
✤ Organizational level is a contingency variable (top managers less than middle managers and so on)
✤ Training and experience of employees is important
Centralization Versus Decentralization
✤ Centralization: the degree to which decision making takes place at upper levels of the organization
✤ Decentralization: the degree to which lower-level managers provide input or actually make decisions
Formalization
✤ Formalization
How standardized an organization’s jobs are and the extent to which employee behavior is guided by rules and procedures
✤ Today’s companies rely less on rules and standards especially if these rules and standards put obstacles in achieving goals and higher profits
Organization Structure Models
✤ There are two generic organization structure models:
1. Mechanistic Organization: a bureaucratic organization; a structure that’s high in specialization, formalization, and centralization
2. Organic Organization: a structure that’s low in specialization, formalization, and centralization
Mechanistic Versus Organic
MECHANISTIC
ORGANIC
•Rigid hierarchical relationships•Fixed duties•Many rules•Formalized communication channels•Centralized decision authority•Taller structures
•Collaboration (both vertical and horizontal)•Adaptable duties•Few rules•Informal communication•Decentralized decision authority•Flatter structures
Contingency Variables Affecting the Organization Structure✤ Strategy
✤ Single-Line Product: high centralization and low formalization
✤ Bigger Organizations: less centralization and higher formalization
✤ Meaningful and Unique Innovations: flexibility and free-flowing information
✤ Size✤ Small-Size Organizations: more organic
✤ Bigger Organization: more mechanistic
✤ Technology✤ Technology used to convert inputs into outputs
✤ Environment✤ Stable Environments: Mechanistic organizations are more effective here
✤ Dynamic and uncertain environment: organic organizations are more effective here
Technology(Woodward’s Findings)
✤ Unit Production: the production of items in units or small batches
✤ Mass Production: large production manufacturing
✤ Process Production: continues flow of products being produced
UNIT PRODUCTIONUNIT PRODUCTION MASS MASS PRODUCTIONPRODUCTION
PROCESS PROCESS PRODUCTIONPRODUCTION
Structural Characteristics
Low vertical differentiation
Moderate vertical differentiation
High vertical differentiation
Low horizontal differentiation
High horizontal differentiation
Low horizontal differentiation
Low formalization High formalization Low formalization
Most Effective Structure
Organic Mechanistic Organic
Common Organizational Designs
✤ Traditional Organizational Designs (more mechanistic):
✤ Simple Structure, Functional Structure, Divisional Structure
✤ More Contemporary Designs (more organic):
✤ Team Structure, Matrix-Project Structure, Boundaryless Structure
Traditional Organizational Designs
✤ Simple Structure: an organizational design with low departmentalization, wide spans of control, authority centralized in a single person and little formalization
✤ Functional Structure: an organizational design that groups similar or related occupational specialities together
✤ Divisional Structure: an organizational structure made up of separate business units or divisions
More Contemporary Designs
✤ Team Structure: a structure in which the entire organization is made up of work teams
✤ Matrix Structure: a structure in which specialities from different functional departments are assigned to work on projects led by a project manager
✤ Project Structure: a structure in which employees continuous work on projects
✤ Boundaryless Structure: an organization whose design is not defined by, or limited to, boundaries imposed by a predefined structure
Boundaryless Organizations
✤ Virtual Organization: an organization that consists of a small core of full-time employees and outside specialists temporarily hired as needed to work on projects
✤ Network Organization: an organization that uses its own employees to do some work activities and networks of outside suppliers to provide other needed product components or work processes
Today’s Organizational Design Challenges
✤ How do we keep employees connected?
✤ How do global differences affect organizational structure?
Learning Outcomes
✤ There are six elements that affect the organizational design
✤ There are two generic organization structure models: mechanistic and organic
✤ The organization structure model choice is affected by strategy, size, technology, and environment
✤ The two common organizational designs are: the traditional and more contemporary