2 Organization structure How job tasks are formally divided, grouped and coordinatedSix key elements to design organization structure
3 Key design questions and answers for designing the proper organizational structure The key questionThe answer is provided by1. To what degree are activities subdivided into separate jobs?Work Specialization2. On what basis will jobs be grouped together?Departmentalization3. To whom do individuals and groups report?Chain of Command4. How many individuals can a manager efficiently and effectively direct?Span of Control5. Where does decision-making authority lie?Centralization and decentralization6. To what degree will there be rules and regulations to direct employees and managers?Formalization
4 Work specializationThe degree to which activities in the organization are subdivided into separate jobs.Efficient use of employees skillsEfficient use of organizational resources
5 Departmentalization The basis by which jobs are grouped together. By functionsType of productBasis of geography or territoryBy processType of customer
6 Chain of commandThe 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 obeyedUnity of command – a subordinate should have only one superior to whom he or she is directly responsible
7 Span of controlThe number of subordinates a manager can efficiently and effectively direct.Narrow - can maintain close supervisionExpensive, as they add levels to managementVertical communication more complexEncourage tight supervision and discourage employee autonomyWider – reduce costs, cut overhead, speed up decision making, increase flexibilityInvesting heavily on training
8 Centralization and decentralization The degree to which decision making is concentrated at a single point in the organizationThe degree to which decision making requires multiple parties to make their own independent decisions.
9 FormalizationThe 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 itLow – non-programmed job, employees have a great deal of freedom to exercise discretion in their work.
11 Simple structureA structure characterized by a low degree of departmentalization, wide spans of control, authority decentralized in a single person, and a little formalization.Owner - ManagerSalespersonCashier
12 Simple structure Strength Weakness Fast, flexible and accountability is clearWeaknessAs organization grows, it become inadequate
13 BureaucracyA 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 Weakness Ability to perform standardized activity in a highly efficient mannerEconomies of scale, minimum duplication of personnel and equipmentWeaknessSpecialization creates subunit conflictsObsessive concern with following the rules
15 The matrix structureA structure that creates dual lines of authority and combines functional and product departmentalization.
16 The matrix structure Strength Weakness Facilitate the efficient allocation of specialists and sharing of specialized resources across products.Facilitate coordination when the organization has a multiplicity of complex activities WeaknessCreates confusion
17 New structural options Team structureVirtual organizationBoundaryless organization
18 Team structureThe use of teams as the central device to coordinate work activities.Breaks down departmental barriersDecentralizes decision makingRequire employees who are specialists
19 Virtual organizationA small, core organization that outsources major business functions.Highly centralized with little or no departmentalizationDrawback – 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 modelHigh specializationCross-functional teamsRigid departmentalizationCross-hierarchical teamsClear chain of commandFree flow of informationNarrow spans of controlWide spans of controlCentralizationDecentralizationHigh formalizationLow formalization
22 Why do structures differ? StrategySizeTechnologyEnvironment
23 StrategyInnovation 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 Structural optionInnovationOrganic: a loose structure, low specialization, low formalization, decentralizedCost minimizationMechanistic: tight control, extensive work specialization, high formalization, high centralizationImitationMechanistic and organic: mix of loose and tight properties, tight controls over current activities and loose controls for new undertakings
25 SIZE TECHNOLOGY ENVIRONMENT Large – tend to have more specialization, more departmentalization, more vertical levels and more rules and regulationsTECHNOLOGYHow an organization transfers its inputs to outputs.ENVIRONMENTInstitutions or forces outside that potentially affect the organization’s performance.