1. Chapter Thirteen
Organization Design

2. Chapter Objectives
Describe the essential elements of organization design.
Explain three classical view of organization structure.
Discuss the primary contingency approaches to organization design.
Identify the factors and several popular approaches that determine how an organization should be designed.
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3. Essential Elements of Organization Design
A group of people working together to attain common goals.
Organizational Goals
Objectives that management seeks to achieve in pursuing the firm’s purpose.
Strategies
Specific action plans that enable the organization to achieve its goals and thus its purpose.
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4. Organization Structure
Organizational Structure
The system of task, reporting, and authority relationships within the organization.
Structure – the form and function of the organization’s activities and how these parts fit together
Organization Chart
A diagram showing all people, positions, reporting relationships, and lines of formal communication.
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5. Figure 13.1: Examples of Organization Charts
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6. Division of Labor Division of Labor
The way the organization’s work is divided into different jobs to be done by different people.
Large organizations have more division of labor than smaller ones.
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7. Table 13.1: Advantages and Disadvantages of Division of Labor
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8. Coordinating the Divided Tasks
Three basic mechanisms are used to help coordinate the divided tasks:
Departmentalization
Span of control
Administrative hierarchy
These mechanisms focus on:
Grouping tasks in some meaningful manner
Creating work groups of manageable size
Establishing a system of reporting relationship among supervisors and managers
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9. Departmentalization Departmentalization
The manner in which divided tasks are combined and allocated to work groups.
It is a consequence of division of labor.
The five groupings most often used are:
Business function
Process
Product or service
Customer
Geography
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10. Figure 13.2: Departmentalization by Business Function and Process
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11. Figure 13.3: Departmentalization by Customer and Geographic Region
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12. Span of Control Span of Control
The number of people who report to a manager
It defines the size of the organization’s work groups
A manager who has a small span of control can maintain close control over workers and stay in contact with daily operations.
If the span of control is large, close control is not possible.
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13. Figure 13.4: Mixed Departmentalization
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14. Figure 13.5: Span of Control and Levels in the Administrative Hierarchy
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15. Administrative Hierarchy
The system of reporting relationships in the organization, from the lowest to the highest managerial levels.
It results from the need for supervisors and managers to coordinate the activities of employees.
The size of the administrative hierarchy is inversely related to the span of control.
Organizations with a small span of control have many managers in the hierarchy.
Those with a large span of control have a smaller administrative hierarchy.
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16. Authority, Responsibility, and Decision Making
Power that has been legitimized within a specific social context and includes the legitimate right to use resources to accomplish expected outcomes
Responsibility
Obligation to do something with the expectation some act or output will result
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17. Acceptance Theory of Authority
Related Issues
Delegation
The transfer to others of authority to make decisions and use organizational resources.
Acceptance Theory of Authority
The authority of a manager depends on the subordinate’s acceptance of the manager’s right to give directives and expect compliance with them.
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18. Related Issues (continued)
Centralization
Decision-making authority is concentrated at the top of the organizational hierarchy.
At the opposite end of the continuum is decentralization, in which decisions are made throughout the hierarchy.
Formalization
The degree to which rules and procedures shape the jobs and activities of employees
Purpose is to predict and control how employees behave on the job
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19. Classic Views of Structure: The Universal Approach
In the universal approach to organization design (also called the classical organization theory), prescriptions or propositions are designed to work in any circumstance.
It prescribes the “one best way” to structure the jobs, authority, and reporting relationships of the organization, regardless of factors such as the organization’s external environment, the industry, and the type of work to be done.
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20. Contingency Approaches to Organizational Design
Under the contingency approach to organization design, the desired outcomes for the organization can be achieved in several ways.
The contingency factors include the:
Strategy of the organization
Technology
Environment
Organization’s size
Social system within which the organization operates
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21. Structural Imperatives
The structural-imperatives approach to organizational design has been the most discussed and researched contingency perspective in the last 40 years.
It gradually emerged from the vast number of studies that sought to address the question “What are the compelling factors that determine how the organization must be structured to be effective?”
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22. Figure 13.6: The Structural-Imperatives Approach
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23. Contingency Factors Strategy Size
The plans and actions necessary to achieve organizational goals.
Size
Generally, larger organizations have a more complex structure than smaller ones in that large size is associated with greater specialization of labor, a larger span of control, more hierarchical levels, and greater formalization.
Organizational downsizing aims to reduce the size of corporate staff and middle management to reduce costs.
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24. Contingency Factors (continued)
Technology
The mechanical and intellectual processes that transform inputs into outputs.
Although many different ways to evaluate and measure technology are available, there is general agreement that technology is a very important determinant of organization design.
Environment
Everything outside the boundaries of the organization, including people, other organizations, economic factors, objects and events.
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25. Contingency Factors (continued)
General Environment
Includes the broad set of dimensions and factors within which the organization operates, including the:
Political-legal factor
Sociocultural factor
Technological factor
Economic factor
International factor
Task Environment
Includes specific organizations, groups, and individuals who influence the organization.
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26. Aspects of the Environment
Environmental Uncertainty
When managers have little information about environmental events and their impact on the organization
Environmental Complexity
The number of environmental components that impinge on organizational decision making
Environmental Dynamism
The degree to which environmental components that impinge on organizational decision making change
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27. Mechanistic and Organic Designs
Mechanistic Structure
Primarily hierarchical, interactions and communications typically are vertical, instructions come from the boss, knowledge is concentrated at the top, and loyalty and obedience are required to sustain membership
Organic Structure
Set up like a network; interactions and communications are horizontal, knowledge resides wherever it is most useful to the organization, and membership requires a commitment to the organization’s tasks
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28. Mintzberg’s Coordinating Mechanisms
Henry Mintzberg described five methods of coordinating the actions of organizational participants:
Mutual adjustment
Direct supervision, and standardization of
Input skills
Work processes
Outputs
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29. Figure 13.7: Mintzberg’s Five Coordinating Mechanisms
Reference: Henry Mintzberg, The Structuring of Organizations: A Synthesis of the Research. 1979, p.4. Reprinted by permission of Prentice Hall, Inc., Englewood Cliffs, N.J. Used with permission.
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30. Mintzberg’s Structural Forms
Simple Structure
Little specialization or formalization; power and decision making are concentrated in the chief executive
Machine Bureaucracy
Highly specialized and formalized, and decision making is usually concentrated at the top
Professional Bureaucracy
Characterized by horizontal specialization by professional areas of expertise, little formalization, and decentralized decision making
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31. Mintzberg’s Structural Forms (continued)
Divisional Structure
Divided according to the different markets served; horizontal and vertical specialization exists between division and headquarters, decision making is divided between headquarters and divisions, and outputs are standardized
Adhocracy
Decision making is spread throughout the organization, power resides with the experts, horizontal and vertical specialization exists, and there is little formalization
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32. Matrix Organization Design
Matrix Design
Combines two different designs to gain the benefits of each; typically combined are a product or project departmentalization scheme and a functional structure.
This structure has the capacity for flexible and coordinated responses to internal and external pressures because members can be reassigned from one project to another as demands for their skills change.
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33. Figure 13.8: A Matrix Organizational Design
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