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Basic Organization Designs

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1 Basic Organization Designs
Chapter 5 Basic Organization Designs PowerPoint Presentation by LiZhe Management College C.C.N.U.

2 L E A R N I N G O U T C O M E S After reading this chapter, I will be able to:
Identify and define the six elements of organization structure. Describe the advantages and disadvantages of work specialization. Contrast authority and power. Identify the five different ways by which management can departmentalize. Contrast mechanistic and organic organizations. Summarize the effect of strategy, size, technology, and environment on organization structures.

3 L E A R N I N G O U T C O M E S (cont’d) After reading this chapter, I will be able to:
Contrast the divisional and functional structures. Explain the strengths of the matrix structure. Describe the boundaryless organization and what elements have contributed to its development. Explain what is meant by the term learning organization. Describe what is meant by the term organization culture.

4 Organization Design and Structure
A process in which managers develop or change their organization’s structure Work specialization A component of organization structure that involves having each discrete step of a job done by a different individual rather than having one individual do the whole job

5 Economies and Diseconomies of Work Specialization

6 Organizational Structure: Control
Chain of command The management principle that no person should report to more than one boss Span of control The number of subordinates a manager can direct efficiently and effectively

7 Organizational Structure: Control (cont’d)
Authority The rights inherent in a managerial position to give orders and expect them to be obeyed Power An individual’s capacity to influence decisions Responsibility An obligation to perform assigned activities

8 Types of Organizational Authority
Line authority The position authority (given and defined by the organization) that entitles a manager to direct the work of operative employees Staff authority Positions that have some authority (e.g., organization policy enforcement) but that are created to support, assist, and advise the holders of line authority

9 Chain of Command EXHIBIT 5.2

10 Line Versus Staff Authority

11 Authority Versus Power

12 Authority Versus Power (cont’d)

13 Centralization And Decentralization
A function of how much decision-making authority is pushed down to lower levels in an organization; the more centralized an organization, the higher the level at which decisions are made Decentralization The pushing down of decision-making authority to the lowest levels of an organization

14 Types of Power Coercive power Power based on fear.
Reward power Power based on the ability to distribute something that others value. Legitimate power Power based on one’s position in the formal hierarchy. Expert power Power based on one’s expertise, special skill, or knowledge. Referent power Power based on identification with a person who has desirable resources or personal traits. EXHIBIT 5.5

15 Types of Departmentalization
Functional Product Customer Geographic Process EXHIBIT 5 .6

16 Departmentalization Functional departmentalization
The grouping of activities by functions performed Product departmentalization The grouping of activities by product produced Customer departmentalization The grouping of activities by common customers Geographic departmentalization The grouping of activities by territory Process departmentalization The grouping of activities by work or customer flow

17 Mechanistic and Organic Organizations
Mechanistic organization The bureaucracy; a structure that is high in specialization, formalization, and centralization Organic organization An adhocracy; a structure that is low in specialization, formalization, and centralization Structure follows strategy

18 Mechanistic versus Organic Organizations
Rigid hierarchical relationships Fixed duties Many rules Formalized communication channels Centralized decision authority Taller structures Collaboration (both vertical and horizontal) Adaptable duties Few rules Informal communication Decentralized decision authority Flatter structures EXHIBIT 5.7

19 Technology and Structure
Unit production Production in terms of units or small batches Mass production Production in terms of large batch manufacturing Process production Production in terms of continuous processing

20 Organization Design Applications
Simple structure An organization that is low in specialization and formalization but high in centralization Functional structure An organization in which similar and related occupational specialties are grouped together Divisional structure An organization made up of self-contained units

21 Functional Structure EXHIBIT 5.8

22 Divisional Structure EXHIBIT 5.9

23 Other Organizational Structures
Matrix structure An organization in which specialists from functional departments are assigned to work on one or more projects led by a project manager Team-based structure An organization that consists entirely of work groups or teams Boundaryless organization An organization that is not defined or limited by boundaries or categories imposed by traditional structures

24 Sample Matrix Structure

25 Learning Organization
An organization that has developed the capacity to continuously adapt and change because all members take an active role in identifying and resolving work-related issues. Organization design Information sharing Leadership Organizational culture

26 Characteristics of a Learning Organization
Source: Based on P.M. Senge. The Fifth Discipline: The Art and Practice of Learning Organizations (New York: Doubleday, 1990); and R. M. Hodgetts, F. Luthans and S. M. Lee. “New Paradigm Organizations: From Total Quality to Learning to World Class,” Organizational Dynamics (Winter 1994) pp. 4–19 EXHIBIT 5.11

27 Organization Culture Organization culture
A system of shared meaning within an organization that determines, to a large degree, how employees act Shared values are shown in cultural elements: Stories, rituals, material symbols, and language unique to the organization Results from the interaction between: The founders’ biases and assumptions What the first employees learn subsequently from their own experiences.

28 Ten Characteristics of Organization Culture
Member identity Group emphasis People focus Unit integration Control Risk tolerance Reward criteria Conflict tolerance Means-end orientation Open-systems focus EXHIBIT 5.12

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