Presentation on theme: "Chapter 15 Foundations of Organizational Structure"— Presentation transcript:
1Chapter 15 Foundations of Organizational Structure Essentials ofOrganizational Behavior12eStephen P. Robbins & Timothy A. JudgeChapter 15Foundations ofOrganizational Structure
2After studying this chapter, you should be able to: Identify the six elements of an organization’s structure.Describe the common organizational designs.Compare and contrast the virtual and boundary-less organizations.Demonstrate how organizational structures differ.Analyze the behavioral implications of different organizational designs.
3What Is Organization Structure? It defines how job tasks are formally divided, grouped, and coordinatedKey elements to be addressedWork specializationDepartmentalizationChain of commandSpan of controlCentralizationDecentralizationFormalizationOrganizational structure depicts how job tasks are formally divided, grouped and coordinated. The key elements of organizational structure include work specialization, departmentalization, chain of command, span of control, centralization, decentralization and formalization.
4Element 1: Work Specialization Work specialization: Describes the degree to which activities in the organization are subdivided into separate jobsAlso known as division of laborBenefitsGreater efficiency and lower costsCostsHuman costs when carried too farJob enlargement as a solutionA key part of organizational structure is understanding the degree to which tasks are divided into separate jobs or work specialization. The division of labor is helpful in creating the most efficient way to utilize employee skills, increase their skills, and maximize their input.Work specialization can cause greater economies, but in some cases it can cause diminishing returns due to repetition which can lead to boredom. Job enlargement can be more effective at creating greater efficiencies than work specialization.Modern times
5Element 2: Departmentalization Departmentalization: Basis by which jobs are grouped together so that common tasks can be coordinatedCommon bases:FunctionProductGeographyProcessCustomerDepartmentalization defines how jobs are grouped together. There are a number of options to choose from when grouping jobs; you could organize around function, product, location, process or customer. When jobs are grouped, departments are formed.
6Element 3: Chain of Command Chain of command: Unbroken line of authority that extends from the top of the organization to the lowest echelon and clarifies who reports to whomAuthority: positional rightsUnity of command principle: one bossFewer organizations find this is relevantThe chain of command represents the line of authority present in decision making. Embedded in the chain of command is the inherent right of a manager to give orders and expect the orders to be followed. Unity of command is the idea that a subordinate should have only one superior to report to so that directions and the chain of command are clear.As organizations change this concept is becoming less and less important.
7Element 4: Span of Control Span of control: The number of employees a manager is expected to effectively and efficiently directDetermines the number of levels and managers an organization hasTrend is toward wider spans of controlWider span depends on knowledgeable employeesAffects speed of communication and decision makingThe fourth element of structure is span of control. This concept looks at how many workers a manager can effectively direct towards organizational goals. Wider span allows for more efficiency because you need fewer managers. However, it can also limit the amount of time and direction managers can give to their employees. A narrow span can allow for more direction but can add layers of management, increase the complexity of the vertical communication, and encourage overly tight supervision, limiting employee autonomy.
8Contrasting Spans of Control The graph on this slide depicts different spans of control.
9Element 5: Centralization and Decentralization Centralization : Degree to which decision making is concentrated at a single point in the organizationOnly includes formal authority: positional rightsHighly centralized when top managers make all the decisionsDecentralized when front line employees and supervisors make decisionsTrend is toward increased decentralizationThe fifth aspect of structure deals with centralization and decentralization. Centralization is the degree to which decision making is concentrated at a single point in the organization, typically at the top. Decentralization represents an organization that spreads decision making throughout the organization.
10Element 6: Formalization Formalization: Degree to which jobs within the organization are standardizedFormal - minimum discretion over what is to be done, when it is done, and howInformal - freedom to act is necessaryFormalization is the degree to which jobs within the organization are standardized. When there is high formalization workers have very little control over how they do their work and they will be required to follow a number of rules and procedures. Lower formalization will tend to allow for different job behaviors to get the job done, giving workers more control over their work.
11WHAT IS ORGANIZATIONAL STRUCTURE KEY DESIGN QUESTIONS AND ANSWER FOR DESIGNING ORGANIZATION STRUCTURETHE KEY QUESTIONTHE ANSWER IS PROVIDED BY1.To what degree are activities subdivided into separate jobs?2.On what basis will jobs be grouped together?3.To whom do individuals and groups report?4.How many individuals can a manager efficiently and effectively direct?5.Where does decision-making authority lie?6.To what degree will there be rules and regulations to direct employees and managers?Work specializationDepartamentalizationChain of commandSpan of controlCentralization and decentralizationFormalization
12WHAT IS ORGANIZATIONAL STRUCTURE (High)Productivity(Low)Work specialization(High)
13Common Organizational Designs Simple structureBureaucracyMatrix structureThere are a number of organizational structures available to companies. We will look at a number of options over the next several slides.
14Simple Structure Low degree of departmentalization Wide spans of controlAuthority centralized in a single personLittle formalizationDifficult to maintain in anything other than small organizationsThe first and most basic structure is the simple structure. This structure has a low degree of departmentalization, wide spans of control and centralized decision making with little formalization in job design.This structure is difficult to utilize in anything other than small organizations.
15BureaucracyHighly routine operating tasks achieved through specializationFormal rules and regulationsCentralized authorityNarrow spans of controlTasks grouped by functional departmentsDecision making follows the chain of commandAnother type of organizational design is bureaucracy. In a bureaucratic organization there will be a great deal of structure. The tasks will be completed through specialization, and they tend to be formalized through rules and regulations. Departments will be highly defined by function and authority is centralized. Decision making will follow a strict chain of command and there will be narrow spans of control. The bureaucratic organization will be one that is highly defined and very controlled.Hudsucker 1.03,17—1.08
16The matrix structureThe matrix structure combines different structural dimensions simultaneously, for example product divisions and geographical territories or product divisions and functional specialisms.
17Matrix Structure Combines two forms of departmentalization FunctionalProductDual chain of commandAdvantagesFacilitates coordination and efficientallocation of specialistsDisadvantagesPossible confusion, fosters power struggles, stressThe matrix structure is another common organizational design. This structure creates dual lines of authority and combines functional and product departments in a way to effectively meet organizational goals.The key elements of the matrix structure is that it gains the interactions between the functional and product departments by coordinating complex and interdependent activities to help reach the goals set forth in an efficient manner opening up avenues for new ideas to achieve the company’s mission. The matrix structure also breaks down the unity-of-command concept as the lines of authority are blurred.
18Matrix structures (1)Figure Two examples of matrix structures
19Matrix structures (2)Figure Two examples of matrix structures (Continued)
20Matrix structures Advantages Integrated knowledge. Flexible. Allows for dual dimensions.DisadvantagesLength of time to take decisions.Unclear job and task responsibilities.Unclear cost and profit responsibilities.High degrees of conflict.
21Matrix Structure for a College of Business Administration This slide shows an example of a matrix structure within a college.
25Functional structures AdvantagesChief executive in touch with all operations.Reduces/simplifies control mechanisms.Clear definition of responsibilities.Specialists at senior and middle management levels.DisadvantagesSenior managers overburdened with routine matters.Senior managers neglect strategic issues.Difficult to cope with diversity.Coordination between functions is difficult.Failure to adapt.
26The multidivisional structure The multidivisional structure is built up of separate divisions on the basis of products, services or geographical areas.
28Multidivisional structures AdvantagesFlexible (add or divest divisions).Control by performance.Ownership of strategy.Specialisation of competences.Training in strategic view.DisadvantagesDuplication of central and divisional functions.Fragmentation and non-cooperation.Danger of loss of central control.
29New Design Options: Virtual Virtual: A 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 businessVirtual organizations are developing as acceptable organizational structures. This structure offers a small core organization that outsources many of its major functions to competent suppliers. Virtual organizations are highly centralized with virtually no departmentalization to provide maximum flexibility, focusing on what the organization does best. This type of organization reduces control over some of the key parts of the business.
30The Boundaryless Organization Eliminates the chain of commandHas limitless spans of controlReplaces departments with empowered teamsBreaks down geographical barriersBoundaryless organizations are set up to reduce the structure and tight control over work. They organize in a way to try to empower teams. They eliminate vertical and horizontal boundaries, as well as geographic boundaries. Boundaryless organizations also try to breakdown external barriers to customers and suppliers through their structure and style of communication. These organizations also break down geographical barriers.
31The Boundaryless Organization An organization that seeks to eliminate the chain of command, have limitless spans of control, and replace departments with empowered teams.Ex. «Indiana Heart Hospital in Indianapolis, 650 networked computers allow employees to share patient information. The information is entered in the computer when patients check in and digitally recorded on wristbands they wear during their stay. Digital records have eliminated nurses’ stations, chart racks, and the medical-records department. Now, Doctors use wireless laptop computers to check patient records anywhere, working from his home.
32Transnational structures The transnational structure combines local responsiveness with high global coordination.Key Advantages include:Knowledge-sharing.Specialisation.Network management.
33Project-based structures A project-based structure is one where teams are created, undertake the work (e.g. internal or external contracts) and are then dissolved.
34Two Models of Organizational Design This slide shows to extreme models of organizational design – the mechanistic model and the organic model. Several factors discussed next influence which type of structure is best for an organization.The deep dive
35Forces Influencing Structure StrategyInnovation – introduce new offerings - organicCost-minimization – cost control - mechanisticImitation – minimal risk and maximum profit - bothOrganization SizeBigger becomes mechanisticTechnologyRoutine equals mechanistic, non-routine is organicEnvironmentDynamic environments lead to organic structuresStructures differ for a number of reasons. The first is that structure is set up to facilitate the strategy of the organization. If your organization is focusing on innovation as a key value then it may be best served by an organic structure. Whereas, if the strategy emphasizes minimizing costs, a mechanistic structure will work better. Strategy should always dictate structure instead of structure dictating strategy.Structures will also differ by organization size, the larger the organization, the more likely it will be mechanistic. Technology also influences structure. The more routine the activities the more mechanistic the structure should be. Structures will also differ based on the environment in which they exist. The more dynamic the environment the more organic the structure will need to be to facilitate quick decisions and fast turnaround.
36Organizational Designs and Employee Behavior Cannot generalize any link between structure and performanceToo much individual varianceConsider employee preferences forWork specializationSpan of controlCentralizationOrganizational designs are not a good predictor of employee behavior. Research has shown that work specialization can lead to increased productivity but lower job satisfaction. Specialization has not been popular as employees are seeking more intrinsically rewarding jobs. Span of control has mixed results depending on individual differences in employees and organizational factors. Centralization can facilitate different employee responses.Various factors will influence workers in their job satisfaction and their willingness to stay with an organization.
37Global ImplicationsNational culture influences organizational structureHigh power distance cultures accept mechanistic structuresResearch suggests that national culture may influence organizational structure. In particular, organizations with people form high-power distance cultures typically find that employees are more accepting of mechanistic structures than employees from low power-distance countries.
38Implications for Managers Structural relationships impact attitude and behaviorStructure constrains employee behaviorsStructure does have an impact on both the attitudes and behaviors of the people within the organization so it is important that managers effectively select and utilize structure within their organizations.
39The Leaner Organization: Downsizing Downsizing: A systematic effort to make an organization leaner by selling off business units, closing locations or reducing staffControversial because of the negative impact on employeesImpact on organizational performance has been very controversialIn the midst of tough economic times and the need for companies to be leaner downsizing has been on the rise. Downsizing is a systematic effort to make an organization leaner by ridding itself of a business units, excessive locations and staff. It has been very controversial because of the strong negative impact on employees. Because of this negative impact the link to performance enhancement has been questioned.
40Keep in Mind…As tasks become more complex and required skills more diverse, more use of cross-functional teamsSimple structures are easy to create but difficult to growExternal boundaries can be reduced through globalization, strategic alliances, customer-organizational links, and telecommutingAs you think about organizational structure keep in mind that as tasks become more complex and require a greater number of skills cross-functional teams are often more effective to use.Structure plays a critical role but it is dependent upon context, so be sure to select a structure you can grow with.Also as the world becomes more global and business relationships more fluid, external boundaries will be reduced.
41Summary Identified the six elements of an organization’s structure. Described the common organizational designs.Compared and contrasted the virtual and boundaryless organizations.Demonstrated how organizational structures differed.Analyzed the behavioral implications of different organizational designs.
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43PersonalityPersonality - the sum total of ways in which an individual reacts to and interacts with othersMost often described in terms of measurable traits that a person exhibits such as shy, aggressive, submissive, lazy, ambitious, loyal, and timidPersonality is often defined by characteristics such as outgoing or charming. However, psychologists define personality as the growth and development of a person’s whole psychological system.We study personality in Organizational Behavior because it impacts a number of important work outcomes. We can attempt to measure personality through a variety of methods. Often these methods are utilized in the hiring process to assist in hiring the right person for the job and the organization.
44Measuring Personality Self-report surveysMost commonProne to errorEvaluate on a series of factorsSelf-reports are the most common and easiest way to measure personality, but they are prone to error due to the fact that the individual is reporting all the data about themselves.
45Personality Determinants Personality reflects heredity and environmentHeredity is the most dominant factorTwin studies: genetics more influential than parentsEnvironmental factors do have some influenceAging influences levels of abilityBasic personality is constantThere are many determinants of personality including heredity, environmental factors and age.There has been a long standing debate about whether genetics or environment are more important in determining personality. They both play an important role. The heredity approach refers to factors determined at conception such as physical stature and gender. This has been reaffirmed by studies that have looked at twins who were raised apart but still had similar personalities. However, there were differences observed leading to the idea the environmental factors can have some influence.Age does influence the level of ability that an individual has even though it is widely held that the basic personality stays constant throughout the life of the individual.
46Measuring Personality Traits: Myers-Briggs Type Indicator Most widely used personality-assessment instrument in the worldIndividuals are classified as:Extroverted or Introverted (E/I)Sensing or Intuitive (S/N)Thinking or Feeling (T/F)Judging or Perceiving (J/P)Classifications combined into 16 personality types (i.e. INTJ or ESTJ)Unrelated to job performanceThe MBTI is the most widely used personality instrument world-wide. Participants are classified within four scales to determine 1 of 16 possible personality types. These types are broken down into four dichotomies. The first is extroverts who tend to be sociable and assertive verses introverts who tend to be quiet and shy. The second dichotomy is sensing and intuitive. Sensors are practical and orderly where intuits utilize unconscious processes. The third dichotomy is thinking and feeling. Thinking focuses on using reason and logic whereas feeling utilizes values and emotions. The final dichotomy is judging and perceiving. Judgers want order and structure whereas perceivers are more flexible and spontaneous.These categories, while insightful, are not related to job performance.
47Measuring Personality Traits: The Big-Five Model Five Traits:ExtraversionAgreeablenessConscientiousnessEmotional StabilityOpenness to ExperienceStrongly supported relationship to job performance (especially Conscientiousness)The Big Five model of personality sets forth that there are five basic dimensions that underlie all others and encompass most of the significant variations in human personalities. The Big Five factors are: Extroversion, Agreeableness, Conscientiousness, Emotional Stability and Openness to Experiences. There is a lot of research that supports the Big Five model and it has been shown to predict behavior at work.
48Big Five Traits and OBAs shown, the Big Five traits are related to job performance and also have other implications for work and life.
49Other Personality Traits Core Self-EvaluationPeople with positive core self-evaluation like themselves and see themselves as capable and effective in the workplaceMachiavellianismHigh machs tend to be pragmatic, emotionally distant and believe the ends justify the meansNarcissismA person with a grandiose view of self, requires excessive admiration, has a sense of self-entitlement and is arrogantThere are additional personality traits relevant to organizational behavior.Core self-evaluation is the degree to which people like/dislike themselves. Positive self-evaluation leads to higher job performance.Machiavellianism describes a person who tends to be emotionally distant and believes that the ends justify the means. They tend to have a competitive drive and a need to win. They can be very persuasive in situations where there is direct interaction with minimal rules and people are distracted by emotions. Narcissism is a trait that often hinders job effectiveness. It describes a person who requires excessive admiration and has a strong sense of entitlement.