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Lim Sei cK. Organization structure o How job tasks are formally divided, grouped and coordinated o Six key elements to design organization structure.

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Presentation on theme: "Lim Sei cK. Organization structure o How job tasks are formally divided, grouped and coordinated o Six key elements to design organization structure."— Presentation transcript:

1 Lim Sei cK

2 Organization structure o How job tasks are formally divided, grouped and coordinated o Six key elements to design organization structure

3 Key design questions and answers for designing the proper organizational structure The key questionThe answer is provided by 1. To what degree are activities subdivided into separate jobs? Work Specialization 2. On what basis will jobs be grouped together? Departmentalization 3. To whom do individuals and groups report? Chain of Command 4. How many individuals can a manager efficiently and effectively direct? Span of Control 5. Where does decision-making authority lie? Centralization and decentralization 6. To what degree will there be rules and regulations to direct employees and managers? Formalization

4 Work specialization The degree to which activities in the organization are subdivided into separate jobs.  Efficient use of employees skills  Efficient use of organizational resources

5 Departmentalization The basis by which jobs are grouped together.  By functions  Type of product  Basis of geography or territory  By process  Type of customer

6 Chain of command The unbroken line of authority that extends from the top of the organization to the lowest level and clarifies who reports to whom.  Authority – the rights inherent in a managerial position to give orders and to expect the orders to be obeyed  Unity of command – a subordinate should have only one superior to whom he or she is directly responsible

7 Span of control The number of subordinates a manager can efficiently and effectively direct.  Narrow - can maintain close supervision  Expensive, as they add levels to management  Vertical communication more complex  Encourage tight supervision and discourage employee autonomy  Wider – reduce costs, cut overhead, speed up decision making, increase flexibility  Investing heavily on training

8 Centralization and decentralization The degree to which decision making is concentrated at a single point in the organization The degree to which decision making requires multiple parties to make their own independent decisions.

9 Formalization The degree to which jobs within the organization are standardized.  High – minimum amount of discretion over what is to be done, when it is to be done, and how he/she should do it  Low – non-programmed job, employees have a great deal of freedom to exercise discretion in their work.

10 Organizational designs Simple structure Bureaucracy Matrix structure

11 Simple structure A structure characterized by a low degree of departmentalization, wide spans of control, authority decentralized in a single person, and a little formalization. Owner - Manager Salesperson Cashier

12 Simple structure Strength  Fast, flexible and accountability is clear Weakness  As organization grows, it become inadequate

13 Bureaucracy A structure with highly routine operating tasks achieved through specialization, very formalized rules and regulations, tasks that are grouped into functional departments, centralized authority, narrow spans of control and decision making that follows the chain of command.

14 Bureaucracy Strength  Ability to perform standardized activity in a highly efficient manner  Economies of scale, minimum duplication of personnel and equipment Weakness  Specialization creates subunit conflicts  Obsessive concern with following the rules

15 The matrix structure A structure that creates dual lines of authority and combines functional and product departmentalization.

16 The matrix structure Strength  Facilitate the efficient allocation of specialists and sharing of specialized resources across products.  Facilitate coordination when the organization has a multiplicity of complex activities Weakness  Creates confusion

17 New structural options Team structure Virtual organization Boundaryless organization

18 Team structure The use of teams as the central device to coordinate work activities.  Breaks down departmental barriers  Decentralizes decision making  Require employees who are specialists

19 Virtual organization A small, core organization that outsources major business functions.  Highly centralized with little or no departmentalization  Drawback – reduces management’s control over key parts of its business

20 Boundaryless organization An organization that seeks to eliminate the chain of command, have limitless spans of control, and replace departments with empowered teams.  ideal or companies in the growing technology industry.  communicate mainly through , phone and other virtual methods rather than more traditional face-to- face communication

21 Mechanistic versus organic models Mechanistic modelOrganic model High specializationCross-functional teams Rigid departmentalizationCross-hierarchical teams Clear chain of commandFree flow of information Narrow spans of controlWide spans of control CentralizationDecentralization High formalizationLow formalization

22 Why do structures differ? Strategy Size Technology Environment

23 Strategy Innovation strategy – a strategy that emphasizes the introduction of major new products and services. Cost-minimization strategy – a strategy that emphasizes tight cost controls, avoidance of unnecessary innovation or marketing expenses and price cutting. Imitation strategy – a strategy that seeks to move into new products or new markets only after their viability has already been proven

24 Strategy – structure relationship StrategyStructural option InnovationOrganic: a loose structure, low specialization, low formalization, decentralized Cost minimization Mechanistic: tight control, extensive work specialization, high formalization, high centralization ImitationMechanistic and organic: mix of loose and tight properties, tight controls over current activities and loose controls for new undertakings

25 SIZE Large – tend to have more specialization, more departmentalization, more vertical levels and more rules and regulations TECHNOLOGY o How an organization transfers its inputs to outputs. ENVIRONMENT o Institutions or forces outside that potentially affect the organization’s performance.

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