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Chapter 15 Foundations of Organizational Structure

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1 Chapter 15 Foundations of Organizational Structure
Essentials of Organizational Behavior 12e Stephen P. Robbins & Timothy A. Judge Chapter 15 Foundations of Organizational Structure

2 After 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.

3 What Is Organization Structure?
It defines how job tasks are formally divided, grouped, and coordinated Key elements to be addressed Work specialization Departmentalization Chain of command Span of control Centralization Decentralization Formalization Organizational 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.

4 Element 1: Work Specialization
Work specialization: Describes the degree to which activities in the organization are subdivided into separate jobs Also known as division of labor Benefits Greater efficiency and lower costs Costs Human costs when carried too far Job enlargement as a solution A 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

5 Element 2: Departmentalization
Departmentalization: Basis by which jobs are grouped together so that common tasks can be coordinated Common bases: Function Product Geography Process Customer Departmentalization 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.

6 Element 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 whom Authority: positional rights Unity of command principle: one boss Fewer organizations find this is relevant The 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.

7 Element 4: Span of Control
Span of control: The number of employees a manager is expected to effectively and efficiently direct Determines the number of levels and managers an organization has Trend is toward wider spans of control Wider span depends on knowledgeable employees Affects speed of communication and decision making The 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.

8 Contrasting Spans of Control
The graph on this slide depicts different spans of control.

9 Element 5: Centralization and Decentralization
Centralization : Degree to which decision making is concentrated at a single point in the organization Only includes formal authority: positional rights Highly centralized when top managers make all the decisions Decentralized when front line employees and supervisors make decisions Trend is toward increased decentralization The 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.

10 Element 6: Formalization
Formalization: Degree to which jobs within the organization are standardized Formal - minimum discretion over what is to be done, when it is done, and how Informal - freedom to act is necessary Formalization 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.

KEY DESIGN QUESTIONS AND ANSWER FOR DESIGNING ORGANIZATION STRUCTURE THE KEY QUESTION THE ANSWER IS PROVIDED BY 1.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 specialization Departamentalization Chain of command Span of control Centralization and decentralization Formalization

(High) Productivity (Low) Work specialization (High)

13 Common Organizational Designs
Simple structure Bureaucracy Matrix structure There are a number of organizational structures available to companies. We will look at a number of options over the next several slides.

14 Simple Structure Low degree of departmentalization
Wide spans of control Authority centralized in a single person Little formalization Difficult to maintain in anything other than small organizations The 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.

15 Bureaucracy Highly routine operating tasks achieved through specialization Formal rules and regulations Centralized authority Narrow spans of control Tasks grouped by functional departments Decision making follows the chain of command Another 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

16 The matrix structure The matrix structure combines different structural dimensions simultaneously, for example product divisions and geographical territories or product divisions and functional specialisms.

17 Matrix Structure Combines two forms of departmentalization
Functional Product Dual chain of command Advantages Facilitates coordination and efficient allocation of specialists Disadvantages Possible confusion, fosters power struggles, stress The 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.

18 Matrix structures (1) Figure Two examples of matrix structures

19 Matrix structures (2) Figure Two examples of matrix structures (Continued)

20 Matrix structures Advantages Integrated knowledge. Flexible.
Allows for dual dimensions. Disadvantages Length of time to take decisions. Unclear job and task responsibilities. Unclear cost and profit responsibilities. High degrees of conflict.

21 Matrix Structure for a College of Business Administration
This slide shows an example of a matrix structure within a college.

22 Structural types Functional Multidivisional Matrix Multinational/
Transnational Project-based

23 The functional structure
The functional structure divides responsibilities according to the organisation’s primary specialist roles such as production, research and sales.

24 A functional structure

25 Functional structures
Advantages Chief executive in touch with all operations. Reduces/simplifies control mechanisms. Clear definition of responsibilities. Specialists at senior and middle management levels. Disadvantages Senior managers overburdened with routine matters. Senior managers neglect strategic issues. Difficult to cope with diversity. Coordination between functions is difficult. Failure to adapt.

26 The multidivisional structure
The multidivisional structure is built up of separate divisions on the basis of products, services or geographical areas.

27 A multidivisional structure

28 Multidivisional structures
Advantages Flexible (add or divest divisions). Control by performance. Ownership of strategy. Specialisation of competences. Training in strategic view. Disadvantages Duplication of central and divisional functions. Fragmentation and non-cooperation. Danger of loss of central control.

29 New Design Options: Virtual
Virtual: A small core organization that outsources its major business functions Highly centralized with little or no departmentalization Provides maximum flexibility while concentrating on what the organization does best Reduced control over key parts of the business Virtual 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.

30 The Boundaryless Organization
Eliminates the chain of command Has limitless spans of control Replaces departments with empowered teams Breaks down geographical barriers Boundaryless 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.

31 The 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.

32 Transnational structures
The transnational structure combines local responsiveness with high global coordination. Key Advantages include: Knowledge-sharing. Specialisation. Network management.

33 Project-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.

34 Two 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

35 Forces Influencing Structure
Strategy Innovation – introduce new offerings - organic Cost-minimization – cost control - mechanistic Imitation – minimal risk and maximum profit - both Organization Size Bigger becomes mechanistic Technology Routine equals mechanistic, non-routine is organic Environment Dynamic environments lead to organic structures Structures 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.

36 Organizational Designs and Employee Behavior
Cannot generalize any link between structure and performance Too much individual variance Consider employee preferences for Work specialization Span of control Centralization Organizational 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.

37 Global Implications National culture influences organizational structure High power distance cultures accept mechanistic structures Research 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.

38 Implications for Managers
Structural relationships impact attitude and behavior Structure constrains employee behaviors Structure 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.

39 The Leaner Organization: Downsizing
Downsizing: A systematic effort to make an organization leaner by selling off business units, closing locations or reducing staff Controversial because of the negative impact on employees Impact on organizational performance has been very controversial In 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.

40 Keep in Mind… As tasks become more complex and required skills more diverse, more use of cross-functional teams Simple structures are easy to create but difficult to grow External boundaries can be reduced through globalization, strategic alliances, customer-organizational links, and telecommuting As 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.

41 Summary 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.

42 All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of the publisher. Printed in the United States of America.

43 Personality Personality - the sum total of ways in which an individual reacts to and interacts with others Most often described in terms of measurable traits that a person exhibits such as shy, aggressive, submissive, lazy, ambitious, loyal, and timid Personality 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.

44 Measuring Personality
Self-report surveys Most common Prone to error Evaluate on a series of factors Self-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.

45 Personality Determinants
Personality reflects heredity and environment Heredity is the most dominant factor Twin studies: genetics more influential than parents Environmental factors do have some influence Aging influences levels of ability Basic personality is constant There 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.

46 Measuring Personality Traits: Myers-Briggs Type Indicator
Most widely used personality-assessment instrument in the world Individuals 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 performance The 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.

47 Measuring Personality Traits: The Big-Five Model
Five Traits: Extraversion Agreeableness Conscientiousness Emotional Stability Openness to Experience Strongly 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.

48 Big Five Traits and OB As shown, the Big Five traits are related to job performance and also have other implications for work and life.

49 Other Personality Traits
Core Self-Evaluation People with positive core self-evaluation like themselves and see themselves as capable and effective in the workplace Machiavellianism High machs tend to be pragmatic, emotionally distant and believe the ends justify the means Narcissism A person with a grandiose view of self, requires excessive admiration, has a sense of self-entitlement and is arrogant There 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.

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