1. Chapter 14 Foundations of Organization Structure

2. Organization Structure:
How jobs, tasks and people are formally divided, grouped, and coordinated throughout a company.

3. Elements of Structure Specialization (of work duties)
Standardization (or formalization)
Centralization (of decision making)
Chain of command
Span of control
Departmentalization

4. To what degree are activities subdivided into separate jobs?
Work Specialization
To what degree are activities subdivided into separate jobs?
Also called Division of Labor
Degree to which work and other activities are partitioned into separate, individual tasks, duties and assignments for each employee.

5. Standardization (Formalization)
To what degree will there be rules and regulations to direct employees and managers?
Degree to which jobs are managed using highly specified and rigid rules, policies, procedures, etc. (see: micromanagement !)

6. Centralization (of Decisions)
Where will organizational decision making authority reside?
Centralization: Degree to which decision making is concentrated at a single point in the organization (usually higher up and in the center of the org. chart/hierarchy).
Decentralization: Degree to which lower-level employees provide input and have actual authority or discretion to make decisions for the organization.

7. To whom do individuals and groups report?
Chain of Command
To whom do individuals and groups report?
Refers to the line of authority (or command) from the top of the organization to the lowest “ranks”; clarifies who reports to whom.
Should (ideally) follow the “unity of command” principle.

8. Span of Control Number of levels of managerial hierarchy:
How many direct reports can a manager effectively and efficiently direct?
Number of levels of managerial hierarchy:
Current trend is toward wider/larger spans of control (by using teams, etc.)
Wider spans are consistent with efforts to:
reduce costs
cut overhead
speed up decision making
increase flexibility
get closer to customers
empower employees

9. Contrasting Spans of Control

10. On what basis will organizational entities be grouped?
Departmentalization
On what basis will organizational entities be grouped?
Basis on which units are “grouped” together:
by Function?
by Product?
by Geography?
by Process?
by Customer?
other?

11. Common Organization Structures
1. Simple Structures (are characterized by):
low formalization
centralized authority in a single person
low departmentalization
wider spans of control
A Simple Structure: Gold’s Appliance Store

12. Common Structures (cont.)
2. Bureaucratic (Mechanistic) Structures:
high specialization
highly centralized decision making
highly standardized policies, procedures, rules & regulations
extensive departmentalization, typically by function
narrow spans of control
decision making that follows tight chain of command

13. Why Don’t Bureaucracies Die?
Weaknesses:
Increased subunit conflicts
More rigid and inflexible:
Obsessive concern for enforcing rules and regulations
Lack of employee discretion to deal with problems
Increased time to act
Encourages autocratic leadership styles
Fosters Q1/Q2 cultures
Strengths:
Gives you more control! (especially with bigger size)
Centrally coordinated decision making preferred
Economies of scale
Environmental turbulence can be largely managed
Enhanced management of communication & info.
Technology can mitigate

14. Common Structures (cont.)
3. Matrix: A “hybrid” of departmentalization.
Combines (usually) the following approaches to departmentalization:
Functional
Product

15. Example: A Matrix Structure Approach for a College of Business
M. Stevens

16. Common Structures (cont.)
4. Team Structures: Use of teams as the central device to manage and coordinate work activities (a “simpler” structure for large organizations).
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.”

17. Common Structures (cont.)
Team (Organic, Empowered) Structures:
low specification (formalization)
low specialization (lots of cross-training)
highly decentralized, participative decision-making based on genuinely empowered employees
uses cross-functional and cross-hierarchical teams
flatter hierarchies and reporting structures
comprehensive sharing of information networks

18. The Two Extremes of Structure
E X H I B I T 14 – 6

19. Newer Approaches to Structure
Virtual Organizations
Boundaryless Organizations

20. Which Structure Is Best?
What is the organization’s size?
What technology is being used?
How much environmental uncertainty?
What is the firm’s business strategy:
Creativity and Innovation?
Cost-Minimization?
Imitation?
What is the organization’s culture?