Management 8e. - Robbins and Coulter

1
(No Transcript)
2
Defining Organizational Structure

• Organizational Structure
• The formal (conforming to standards) arrangement
  of jobs within an organization.
• Organizational Design
• Developing or changing an organizations
  structure a process that involves decisions
  about six key elements
• Work specialization
• Departmentalization
• Chain of command
• Span of control
• Centralization and decentralization
• Formalization

3
Some Purposes of Organizing

• Divides work to be done into specific jobs and
  departments.
• Assigns tasks and responsibilities associated
  with individual 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.

Exhibit 91
4
Organizational Structure

• Work Specialization
• The degree to which activities in an organization
  are divided into separate jobs also known as
  division of labor.
• An entire job is broken down into steps that are
  completed by different people with each one
  specializing in doing part of the job.
• Today, managers see work specialization as an
  important mechanism but recognize that it can
  result in boredom, fatigue, stress, poor quality,
  increased absenteeism and higher turnover.
• Some organizations have broadened
  the scope of jobs and reduced
  work specialization.

5
Five Common Forms of Departmentalization

• Functional
• Groups jobs by functions performed.
• Product
• Groups jobs by product line.
• Geographical
• Groups jobs on the basis of territory or
  geography.
• Process
• Groups jobs on the basis of product or customer
  flow.
• Customer
• Groups jobs by type of customers and needs.

6
Functional Departmentalization

• Advantages
• Efficiencies from putting together similar
  specialties and people with common skills,
  knowledge, and orientations
• Coordination within functional area
• In-depth specialization
• Disadvantages
• Poor communication across functional areas
• Limited view of organizational goals

Exhibit 92a
7
Geographical Departmentalization

• Advantages
• More effective and efficient handling of specific
  regional issues that arise
• Serve needs of unique geographic markets better
• Disadvantages
• Duplication of functions
• Can feel isolated from other organizational areas

Exhibit 92b
8
Product Departmentalization
Allows specialization in particular products
and services Managers can become experts in
their industry Closer to customers Duplication
of functions Limited view of organizational
goals
Exhibit 92c
Source Bombardier Annual Report.
9
Process Departmentalization
More efficient flow of work activities Can
only be used with certain types of products
Exhibit 92d
10
Customer Departmentalization
Customers needs and problems can be met by
specialists - Duplication of functions - Limited
view of organizational goals
Exhibit 92e
11
Trends in Departmentalization

• Two popular trends (new styles practices) in
  departmentalization are the increasing use of
  customer departmentalization and the use of
  cross-functional teams. This structure allows
  the company to better understand its customers
  and to respond faster to their needs.
• Cross-functional teams
• Groups of individuals who are experts in various
  specialties and who work together as a team.
• E.g. Employees from finance, purchasing,
  engineering, quality control, representatives
  from outside suppliers, etc, etc

12
Chain of Command

• Chain of Command
• The continuous line of authority that extends
  from upper organizational levels to the lowest
  levels and clarifies who reports to whom.
• It helps employees answer the
  questions Who do I go to
  if I have a problem
  and To whom am
  I responsible?

13
Chain of Command

• Authority
• The rights inherent (existing) in a managerial
  position to tell people what to do and to expect
  them to do it.
• Managers are part of the chain of command and are
  granted (given) authority to facilitate decision
  making and coordination in meeting their
  responsibilities

14
Chain of Command

• Responsibility
• The obligation or expectation to perform any
  assigned duties.
• As managers coordinate and integrate the work of
  employees, those employees assume an obligation
  to act in accordance with instructions.

15
Chain of Command

• Unity of Command
• The management principle that a person should
  report to only one manager.
• The unity of command principle helps preserve the
  concept of a continuous line of authority.
  Without it, conflicting demands and priorities
  from multiple bosses can create problems.

16
Chain of Command

• Traditional and contemporary views
• Today, because of information technology and the
  use of computers, new organizational designs are
  implemented and the concepts of chain of command
  have become less relevant.
• With computers, employees can access information
  that used to be available only to top managers
  and communicate with anyone in the organization
  without going through the formal channels the
  chain of command.

17
Span of Control

• The number of employees a manager can efficiently
  and effectively manage.
• It determines the number of managers in an
  organization.
• Wider spans are more efficient in terms of cost.
• A managers span of control is affected by
• Skills and abilities of the manager and the
  employees.
• Characteristics of the work being done.
• Standardization of tasks or their complexity.
• The organizations culture.
• The managers own style of supervision.

18
Span of Control

• Traditional and contemporary views
• The wider or larger the span of control, the more
  efficient the organization.
• However, when the span becomes too large,
  performance decreases because managers no longer
  have the time to provide the necessary leadership
  and support.
• Today, the trend is toward wider spans while
  investing heavily in employee training.
• Managers recognize that they can handle a wider
  span when employees know their jobs well or can
  turn to co-workers if they have questions.

19
Contrasting Spans of Control
Exhibit 93
20
Organizational Structure

• Centralization
• The degree to which decision-making is
  concentrated at a single point in the
  organizations.
• If top managers make the organizations key
  decisions with little or no input from below,
  then the organization is centralized.
• Decentralization
• The degree to which lower-level employees provide
  input or actually make decisions.
• As organizations become more flexible and
  responsive, there is a trend toward
  decentralizing decision making. The organization
  is decentralized.

21
Factors that Influence the Amount of
Centralization

• More Centralization
• Environment is stable.
• Lower-level managers are not as capable or
  experienced at making decisions as upper-level
  managers.
• Lower-level managers do not want to have a say in
  decisions.
• Decisions are significant.
• Organization is facing a crisis or the risk of
  company failure.
• Company is large.
• Effective implementation of company strategies
  depends on managers retaining say over what
  happens.

Exhibit 94a
22
Factors that Influence the Amount of
Decentralization

• More Decentralization
• Environment is complex, uncertain.
• Lower-level managers are capable and experienced
  at making decisions.
• Lower-level managers want a voice in decisions.
• Decisions are relatively minor.
• Corporate culture is open to allowing managers to
  have a say in what happens.
• Company is geographically dispersed.
• Effective implementation of company strategies
  depends on managers having involvement and
  flexibility to make decisions.

Exhibit 94b
23
Organizational Structure

• Formalization
• The degree to which jobs within the organization
  are standardized and the extent to which employee
  behavior is guided by rules and procedures.
• In organizations with high formalization
• Job descriptions are explicit.
• Organizational rules are numerous.
• Procedures covering work processes are clearly
  defined.
• In organizations with low formalization
• Job behaviors are relatively unstructured (not
  regulated).
• Employees have freedom in how they do their work.

24
Organizational Design Decisions

• Mechanistic Organization
• A rigid and tightly controlled structure
• High specialization.
• Rigid departmentalization.
• Narrow spans of control.
• High formalization.
• Limited information network (downward).
• Little decision participation by lower-level
  employees.

• Organic Organization
• A Highly flexible and adaptive structure
• Non-standardized jobs.
• Fluid team-based structure.
• Little direct supervision.
• Minimal formal rules.
• Open communication network.
• Empowered lower-level employees.

25
Mechanistic versus Organic Organization
Exhibit 95
26
Structural Contingency Factors

• Strategy and Structure
• The organizational structure must support and
  facilitate achievement of strategic goals.
• Because goals are influenced by the
  organizations strategies, structure should
  follow strategy.
• If managers change the organizations strategy,
  they need to modify the structure to accommodate
  and support the change.

27
Structural Contingency Factors

• Size and Structure
• An organizations size significantly affects its
  structure.
• As an organization grows larger, its structure
  tends to change from organic to mechanistic.
• Large organizations have more specialization,
  departmentalization, centralization, and rules
  and regulations than do small organizations.

28
Structural Contingency Factors

• Technology and Structure
• Woodwards studies demonstrate that organizations
  adapt their structures to their technology.
• Technologies differ by their degree of
  routineness (same procedures) or standardization.
• The more routine the technology, the more
  mechanistic the structure can be.
• The more non-routine the technology, the more
  organic the structure can be.

29
Woodwards Findings on Technology, Structure, and
Effectiveness
Exhibit 96
30
Structural Contingency Factors

• Environmental Uncertainty and Structure
• Mechanistic, rigid structures tend to be most
  effective in stable and simple environments.
• Organic, flexible structures tend to be most
  effective in dynamic and uncertain environments.
• Examples of dynamic environmental forces Global
  competition, product innovation by competitors,
  increased demands from customers for high quality
  and faster deliveries.

31
Common Organizational Designs

• Traditional Designs
• Simple structure found in small businesses.
• Low departmentalization, wide spans of control,
  centralized authority, little formalization.
• Functional structure.
• Departmentalization by function.
• Groups similar occupational specialties together.
• Operations, finance, human resources, research
  and development.
• Divisional structure found in large
  corporations.
• Composed of separate business units or divisions
  with limited autonomy under the coordination and
  control of the parent corporation.

32
Strengths and Weaknesses of Common Traditional
Organizational Designs
Exhibit 97
33
Organizational Designs

• Contemporary Organizational Designs
• Team structures
• The entire organization is made up of work groups
  or self-managed teams of empowered employees.
• Matrix structures
• Specialists from different functional departments
  are assigned to work on projects led by a project
  manager.
• Matrix participants have two managers.
• Project structures
• Employees work continuously on projects as one
  project is completed, they move on to the next
  project.

34
A Matrix Organization in an Aerospace Firm
Exhibit 99
35
Organizational Designs

• Contemporary Organizational Designs
• Boundaryless Organization
• A flexible and unstructured organizational design
  that is intended to eliminate boundaries (limits)
  imposed by a predefined structure.
• Removes internal boundaries
• Eliminates the chain of command
• Has limitless spans of control
• Uses empowered teams rather than departments
• Eliminates external boundaries
• Uses virtual, network, and modular (varied and
  flexible) organizational structures to get closer
  to stakeholders.

36
Removing Boundaries

• Virtual Organization
• An organization that consists of a small core of
  full-time employees and that temporarily hires
  specialists to work on opportunities that arise.
• The company enjoys a network of talents
  (expertise) without the overhead (cost) and
  structural complexity.

37
Removing Boundaries

• Network Organization
• A small core (central) organization that
  outsource (obtain services from outside
  suppliers) its major business functions (e.g.,
  manufacturing).
• This approach allows organizations to concentrate
  on what they do best and obtain services from
  outside companies that can do those services
  better (e.g. Nike, Reebok).

38
Removing Boundaries

• Modular Organization
• A manufacturing organization that uses outside
  suppliers to provide product components or
  modules (parts) that are then assembled into
  final products.
• A modular organization can quickly be redesigned
  as needed.
• Automobile manufacturers use outside suppliers to
  provide sections of the cars which are put
  together into finished automobiles by a small
  number of employees (e.g. GM, Ford).

39
Organizational Designs

• The Learning Organization
• An organization that has developed the capacity
  to continuously learn, adapt, and change through
  the practice of knowledge management by
  employees.
• Characteristics of a learning organization
• An open team-based organization design that
  empowers employees.
• Extensive and open information sharing.
• Leadership that provides a shared vision of the
  organizations future, support and encouragement.
• A strong culture of shared values, trust,
  openness, and a sense of community.

40
Characteristics of a Learning Organization
Exhibit 910
41
C H A P T E R R E V I E W 1/3

• Defining Organizational Structure (slides
  4,5,1116,18)
• Discuss the traditional and contemporary view of
  work specialization.
• Describe each of the five forms of
  departmentalization.
• Explain cross-functional teams.
• Differentiate chain of command, authority,
  responsibility, and unity of command.
• Discuss the traditional and contemporary views of
  chain of command.
• Discuss the traditional and contemporary views of
  span of control.

42
C H A P T E R R E V I E W 2/3

• Defining Organizational Structure (Slides 20,23)
• Tell what factors influence the amount of
  centralization and decentralization.
• Explain how formalization is used in
  organizational design.
• Organizational Design Decisions (slides 2428,30)
• Contrast mechanistic and organic organizations.
• Explain the relationship between strategy and
  structure.
• Tell how organizational size affects
  organizational design.
• Discuss Woodwards findings on the relationship
  of technology and structure.
• Explain how environmental uncertainty affects
  organizational design.

43
C H A P T E R R E V I E W 3/3

• Common Organizational Designs (slides
  31,33,3639)
• Contrast the three traditional organizational
  designs.
• Explain team-based, matrix, and project
  structures.
• Discuss the design of virtual, network, and
  modular organizations.
• Describe the characteristics of a learning
  organization.