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 structureWork specializationA 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 EXHIBIT 5.1
6 Organizational Structure: Control Chain of commandThe management principle that no person should report to more than one bossSpan of controlThe number of subordinates a manager can direct efficiently and effectively
7 Organizational Structure: Control (cont’d) AuthorityThe rights inherent in a managerial position to give orders and expect them to be obeyedPowerAn individual’s capacity to influence decisionsResponsibilityAn obligation to perform assigned activities
8 Types of Organizational Authority Line authorityThe position authority (given and defined by the organization) that entitles a manager to direct the work of operative employeesStaff authorityPositions that have some authority (e.g., organization policy enforcement) but that are created to support, assist, and advise the holders of line authority
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 madeDecentralizationThe 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 FunctionalProductCustomerGeographicProcessEXHIBIT 5 .6
16 Departmentalization Functional departmentalization The grouping of activities by functions performedProduct departmentalizationThe grouping of activities by product producedCustomer departmentalizationThe grouping of activities by common customersGeographic departmentalizationThe grouping of activities by territoryProcess departmentalizationThe grouping of activities by work or customer flow
17 Mechanistic and Organic Organizations Mechanistic organizationThe bureaucracy; a structure that is high in specialization, formalization, and centralizationOrganic organizationAn adhocracy; a structure that is low in specialization, formalization, and centralizationStructure follows strategy
18 Mechanistic versus Organic Organizations Rigid hierarchical relationshipsFixed dutiesMany rulesFormalized communication channelsCentralized decision authorityTaller structuresCollaboration (both vertical and horizontal)Adaptable dutiesFew rulesInformal communicationDecentralized decision authorityFlatter structuresEXHIBIT 5.7
19 Technology and Structure Unit productionProduction in terms of units or small batchesMass productionProduction in terms of large batch manufacturingProcess productionProduction in terms of continuous processing
20 Organization Design Applications Simple structureAn organization that is low in specialization and formalization but high in centralizationFunctional structureAn organization in which similar and related occupational specialties are grouped togetherDivisional structureAn organization made up of self-contained units
23 Other Organizational Structures Matrix structureAn organization in which specialists from functional departments are assigned to work on one or more projects led by a project managerTeam-based structureAn organization that consists entirely of work groups or teamsBoundaryless organizationAn organization that is not defined or limited by boundaries or categories imposed by traditional structures
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 designInformation sharingLeadershipOrganizational 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. 4–19EXHIBIT 5.11
27 Organization Culture Organization culture A system of shared meaning within an organization that determines, to a large degree, how employees actShared values are shown in cultural elements:Stories, rituals, material symbols, and language unique to the organizationResults from the interaction between:The founders’ biases and assumptionsWhat the first employees learn subsequently from their own experiences.
28 Ten Characteristics of Organization Culture Member identityGroup emphasisPeople focusUnit integrationControlRisk toleranceReward criteriaConflict toleranceMeans-end orientationOpen-systems focusEXHIBIT 5.12