1. MGT 321: Organizational Behavior
Tasnuva Chaudhury (TcY)
CHAPTER 15: Foundations of organizational structure

2. What Is Organizational Structure?
Defines how job tasks are formally divided, grouped, and coordinated.
There are six key elements that managers need to address when they design their org.’s structure.
Key Elements:
Work specialization
Departmentalization
Chain of command
Span of control
Centralization and decentralization
Formalization

3. Work Specialization
The degree to which tasks in the organization are subdivided into separate jobs.
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.

4. Economies and Diseconomies of Work Specialization
Impact from
economies
of specialization
human
diseconomies
High
Low
Productivity
Work Specialization

5. 2- Departmentalization by Type
The basis by which jobs are grouped together is called….
Functional
Grouping jobs by functions performed
Product
Grouping jobs by product line
Geographical
Grouping jobs on the basis of territory or geography
Process
Grouping jobs on the basis of product or customer flow
Customer
Grouping jobs by type of customer 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

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

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

9. Process Departmentalization
+ More efficient flow of work activities
– Can only be used with certain types of products

10. Customer Departmentalization
+ Customers’ needs and problems can be met by specialists
- Duplication of functions
- Limited view of organizational goals

11. 3 - Chain of Command Chain of Command involves three other concepts:
The continuous line of authority that extends from upper levels of an organization to the lowest levels of the organization and clarifies who reports to whom.
Chain of Command involves three
other concepts:
Authority
Responsibility
Unity of Command

12. 3 - Chain of Command……continued
Authority
Refers to the rights inherent in a managerial position to tell people what to do and to expect them to do it.
Responsibility
The obligation or expectation to perform any assigned duties.
Unity of Command
The concept that a person should have one boss and should report only to that person (Fayol, Weber, Taylor)

13. 4 - Span of Control
The number of subordinates a manager can efficiently and effectively direct.
Concept:
Wider spans of management increase organizational efficiency.
Narrow Span Drawbacks:
Expense of additional layers of management.
Increased complexity of vertical communication.
Encouragement of overly tight supervision and discouragement of employee autonomy.

14. Contrasting Spans of Control

15. 5 - Centralization & Decentralization
The degree to which decision-making is concentrated at a single point in the organizations.
Organizations in which top managers make all the decisions and lower-level employees simply carry out those orders.
Decentralization
Organizations in which decision-making is pushed down to the managers who are closest to the action.
Employee Empowerment
Increasing the decision-making authority (power) of employees.

16. 6 - Formalization
The degree to which jobs within the organization are standardized and the extent to which employee behavior is guided by rules and procedures.
Highly formalized jobs offer little discretion over what is to be done.
Low formalization means fewer constraints on how employees do their work.

17. Common Organizational Designs
Three of the more common org. designs in use: the simple structure, the bureaucracy, and the matrix
Simple Structure
A structure characterized by a low degree of departmentalization, wide spans of control, authority centralized in a single person, and little formalization.
This structure is most widely practiced in small businesses in which the manager & the owner are one & the same.
Strength: simplicity. It is fast, flexible, & inexpensive to maintain, and accountability is clear.
Weakness: it’s difficult to maintain in any other than small orgs. As org. grows due to its low formalization & high centralization creates information overload at the top.

18. Common Organization Designs (cont’d)
Max Weber’s Bureaucracy Model
Standardization is the key concept that underlies all bureaucracies.
highly operating routine tasks achieved through specialization,
formalized rules and regulations,
tasks are grouped into functional departments,
centralized authority
narrow spans of control
decision making that follows the chain of command.

19. The Bureaucracy Strengths Functional economies of scale
Minimum duplication of personnel and equipment
Enhanced communication
Centralized decision making
Weaknesses
Subunit conflicts with organizational goals
Obsessive concern with rules and regulations
Lack of employee discretion to deal with problems

20. Common Organization Designs (cont’d)
Matrix Structure
A structure that creates dual lines of authority and combines functional and product departmentalization.
Key Elements:
Gains the advantages of functional and product departmentalization while avoiding their weaknesses.
Facilitates coordination of complex and interdependent activities.
Breaks down unity-of-command concept.

21. Matrix Structure (College of Business Administration)
(Director)
(Dean)
Employee

22. New Design Options Team Structure
The use of teams as the central device to coordinate work activities.
Characteristics:
Breaks down departmental barriers.
Decentralizes decision making to the team level.
Requires employees to be generalists as well as specialists.
Creates a “flexible bureaucracy.”

23. New Design Options (cont’d)
Virtual Organization
A small, core organization that outsources its major business functions.
Highly centralized with little or no departmentalization.
Concepts:
Advantage: Provides maximum flexibility while concentrating on what the organization does best.
Disadvantage: Reduced control over key parts of the business.

24. New Design Options (cont’d)
Boundaryless Organization
The boundary-less organization seeks to eliminate the chain of command, have limitless spans of control, and replace departments with empowered teams.
Org. rely so heavily on IT, it is also sometimes called the T-form ( or technology based) org.

25. Why Do Structures Differ? – Strategy
• High specialization
• Rigid departmentalization
• Clear chain of command
• Narrow spans of control
• Centralization
• High formalization
• Cross-functional teams
• Cross-hierarchical teams
• Free flow of information
• Wide spans of control
• Decentralization
• Low formalization

26. Why Do Structures Differ? – Strategy
Innovation Strategy A strategy that emphasizes the introduction of major new products and services.
Cost-minimization Strategy A strategy that emphasizes tight cost controls, avoidance of unnecessary innovation or marketing expenses, and price cutting.
Imitation Strategy A strategy that seeks to move into new products or new markets only after their viability has already been proven.

27. Why Do Structures Differ? – Size
How the size of an organization affects its structure. As an organization grows larger, it becomes more mechanistic.
Technology
How an organization transfers its inputs into outputs.
Environment
Institutions or forces outside the organization that potentially affect the organization’s performance.