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Management Theory: Chapter 10 Organizational Structure and Design.

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1 Management Theory: Chapter 10 Organizational Structure and Design

2 Learning Objectives n Explore the management task of “organizing” n Understand organizational structure and design –Elements of structure –Mechanistic vs. organic designs –Factors that influence organizational design –Common organizational designs –New organizational designs and ideas

3 Organizing n “Organizing” is the process of –creating an organization’s structure, –determining what tasks are to be done, –who is to do them, –how the tasks are to be grouped, –who reports to whom, and –where decisions are to be made

4 Organizational Structure n “The formal framework by which job tasks are divided, grouped, and coordinated.” –To allow employees to effectively and efficiently do their work.

5 Elements of Organizational Structure n Specialization (separating) n Departmentalization (grouping) n Chain of command (authority) n Span of control (coordination) n Centralization/decentralization (decision-making) n Formalization (standardization)

6 Types of Departmentalization n functional n product line n process n geography n customer

7 Centralization vs Decentralization n Stable environment n Experienced upper- level management n Significance of decisions n Large company n Crisis or new direction n Complex, uncertain environment n Capable lower-level managers n Minor decisions n Inclusive culture n Geographically dispersed structure n Involvement/flexibility key to success

8 Organizational Chart n Diagram showing reporting relationships n Shows how pieces of organization fit together (visual “graph” of the structure) n Often doesn’t reflect true authority

9 Factors that Influence Structural Design Choices n Strategy n Culture n Size n Technology/nature of the work n Skills & abilities of employees n Degree of environmental uncertainty

10 Structure Types: Mechanistic Organic n Rigid, stable structure n Standardized jobs & regulations n Rigid departmentalization n Narrow spans of control n High formalization n Centralized decisions n Downward communication n Adaptive, flexible structure n Jobs change frequently & rapidly n Jobs consist of diverse activities n Work often in teams n Minimal formal rules n Empowered employees n Low level of direct supervision

11 Simple Design n Low departmentalization n Wide spans of control n Centralized authority (one person) n Informal n Small or entrepreneurial businesses

12 Functional Design n Functional departmentalization applied to whole organization –R&D, manufacturing, sales & marketing, finance, human resources n Very common

13 Divisional Design n Separate, semi-autonomous business units n “Corporate” supplies some support services and financing n In some conglomerates, these are fully autonomous units

14 Hierarchical Design n Strict departmentalization –function, product, place or customer n Mechanistic/bureaucratic n Centralized authority, strict chain of command n Follows traditional management theories

15 Horizontal Design n Flattens the hierarchy n Teams are primary building blocks n Decentralized authority n Small, strong, well-informed “center”

16 Team-Based Design n Structure based on teams, often self- managed n Employee-empowerment n No clear line of authority/hierarchy n Clear direction, goals are critical

17 Matrix Design n Combines functional and product/process/customer/place departmentalization n Uses cross-functional project teams n Organic design: –emphasis on integration of activities –breaks rule of “unity of command” n Decentralized decision-making n Requires good communication skills

18 Project Design n Work designed completely around projects –“cross-functional” teams without the “functions” n No other hierarchy or structure n Managers serve as coaches, mentors, resource providers

19 Web (or Network) Design n Organization contracts out some or all operating functions n Maintains only core competencies internally n Coordinates activities through a centralized “hub” –Authority is centralized –Implementation is decentralized

20 Shamrock Design n Reflects three different types of employment relationships –the professional “core” of full-time, permanent employees –contract workers/organizations –flexible labor force (part-time and temporary workers)

21 New Ideas in Organizational Design n “Boundarylessness” n Learning organizations

22 Issues n Constant restructuring n Belief that there is a “right” structure

23 Summary n Defined management task of “organizing” n Elements of structure n Mechanistic vs. organic designs n Factors that influence organizational design n Different organizational designs –Basic concepts –Advantages and disadvantages


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