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PowerPoint Presentation by Charlie Cook Copyright © 2005 South-Western. All rights reserved. Chapter 6 Organizational Structure and Design.

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Presentation on theme: "PowerPoint Presentation by Charlie Cook Copyright © 2005 South-Western. All rights reserved. Chapter 6 Organizational Structure and Design."— Presentation transcript:

1 PowerPoint Presentation by Charlie Cook Copyright © 2005 South-Western. All rights reserved. Chapter 6 Organizational Structure and Design

2 Copyright © 2005 South-Western. All rights reserved.6–2 Organizing and Organizational Structure Organizing  The process of structuring both human and physical resources to accomplish organizational objectives. Organizational structure  The framework of jobs and departments that directs the behavior of individuals and groups toward achieving the organization’s objectives.  Management’s responsibility is to develop a structure that enhances the organization’s overall strategy.

3 Copyright © 2005 South-Western. All rights reserved.6–3 Determining Organizational Structure The four major decisions:  Specialization of jobs  Delegation of authority  Departmentalization  Span of control

4 Copyright © 2005 South-Western. All rights reserved.6–4 Determining Organizational Structure (cont’d) Exhibit 6. 1 Specialization of jobs High Low Delegation of authority Centralized Decentralized Departmentalization Homogeneous Heterogeneous Span of control Narrow Wide Designing Organization Structure

5 Copyright © 2005 South-Western. All rights reserved.6–5 Determining Organizational Structure (cont’d) Management Highlight Scientific Management versus Craftsmanship

6 Copyright © 2005 South-Western. All rights reserved.6–6 Determining Organizational Structure (cont’d) Teams and quality circles  Problem-solving team: knowledgeable workers who gather to solve a specific problem and then disband.  Work team: a group of employees who work closely together to pursue common objectives.  Self-managed work teams: workers who become their own managers, which increases reliance on their creative and intellectual capabilities besides their labor.  Quality circle: a group of fewer than ten workers who do similar work and meet weekly to discuss their work, identify problems, and present possible solutions.

7 Copyright © 2005 South-Western. All rights reserved.6–7 Determining Organizational Structure (cont’d) Delegation of authority  Decentralization: the process of distributing authority throughout the organization.  Centralization: the process of retaining authority in the hands of high-level managers, who make all the decisions.  Empowerment: giving employees who are responsible for hands-on production or service activities the authority to make decisions or take action without prior approval.

8 Copyright © 2005 South-Western. All rights reserved.6–8 Determining Organizational Structure (cont’d) Delegation of authority (cont’d)  Chain of command  Delegation of authority creates a formal channel that defines the lines of authority from the top to the bottom of an organization.  Line position: a position in the direct chain of command that contributes directly to achieving the organization’s goals.  Staff position: a position not in the direct chain of command that facilitates or provides advice to line positions.

9 Copyright © 2005 South-Western. All rights reserved.6–9 Determining Organizational Structure (cont’d) Exhibit 6. 2 Chain of Command

10 Copyright © 2005 South-Western. All rights reserved.6–10 Determining Organizational Structure (cont’d) Exhibit 6. 3 Line position ——— Staff position Differentiating between Line and Staff Positions

11 Copyright © 2005 South-Western. All rights reserved.6–11 Determining Organizational Structure (cont’d) Departmentalization  The process of grouping jobs according to some logical arrangement.  As organizations grow in size and job specialization increases, it becomes necessary to determine how to best to arrange and group jobs. Common bases for departmentalization  Functional  Product  Customer  Geographic  Mixed  Matrix organization

12 Copyright © 2005 South-Western. All rights reserved.6–12 Determining Organizational Structure (cont’d) Exhibit 6. 4 Functional Departmentalization

13 Copyright © 2005 South-Western. All rights reserved.6–13 Determining Organizational Structure (cont’d) Exhibit 6. 5 Product Departmentalization

14 Copyright © 2005 South-Western. All rights reserved.6–14 Determining Organizational Structure (cont’d) Exhibit 6. 6 Customer Departmentalization

15 Copyright © 2005 South-Western. All rights reserved.6–15 Determining Organizational Structure (cont’d) Exhibit 6. 7 Geographic Departmentalization

16 Copyright © 2005 South-Western. All rights reserved.6–16 Determining Organizational Structure (cont’d) Exhibit 6. 8 Mixed Departmentalization

17 Copyright © 2005 South-Western. All rights reserved.6–17 Determining Organizational Structure (cont’d) Exhibit 6. 9 Matrix Organization

18 Copyright © 2005 South-Western. All rights reserved.6–18 Determining Organizational Structure (cont’d) Exhibit A. Wide Span of Control B. Narrow Span of Control Wide versus Narrow Span of Control

19 Copyright © 2005 South-Western. All rights reserved.6–19 Determining Organizational Structure (cont’d) Factors to consider in determining span of control  Competence of both the manager and the subordinates.  Degree of interaction required among the units to be supervised.  Extent to which the manager must carry out nonmanagerial tasks.  Relative similarity or dissimilarity of the jobs being supervised.  Extent of standardized procedures.  Degree of physical dispersion of subordinates.

20 Copyright © 2005 South-Western. All rights reserved.6–20 Dimensions of Organizational Structure Formalization  The extent to which organizational communications and procedures are written down and filed. Centralization  How much the authority to make decisions is dispersed throughout the organization. Complexity  The number of different job titles and the number of different departments in an organization.

21 Copyright © 2005 South-Western. All rights reserved.6–21 Organizational Design Organizational design  The process by which managers develop an organizational structure. Issues affecting organizational design  Specialization of jobs  Centralization and delegation of authority  Departmentalization  Span of control Models of organization design  Mechanistic model  Organic model

22 Copyright © 2005 South-Western. All rights reserved.6–22 Organizational Design (cont’d) Mechanistic model  Mechanistic organization: a rigid organization that attempts to achieve production and efficiency through rules, specialized jobs, and centralized authority.  Max Weber’s bureaucracy: an organization based on a formal system of legitimate authority.

23 Copyright © 2005 South-Western. All rights reserved.6–23 Organizational Design (cont’d) Characteristics of a bureaucracy  Tasks are divided into highly specialized jobs.  Each task is performed according to a standardized set of rules that ensures uniformity.  Each member of the organization is accountable to a single manager.  Business is conducted impersonally, and managers maintain a social distance from workers.  Employment and advancement are based on merit and technical qualifications, and workers are protected from arbitrary dismissal.

24 Copyright © 2005 South-Western. All rights reserved.6–24 Organizational Design (cont’d) Organic model  Organic organization: an organization that is decentralized with communication flows throughout the organization rather than through the chain of command.  Seeks to maximize flexibility and adaptability.  Encourages greater utilization of human potential.  Deemphasizes specialization of jobs, status, and rank to encourage horizontal and lateral relationships.  Provides individuals with a supportive work environment and builds a sense of personal worth and importance.

25 Copyright © 2005 South-Western. All rights reserved.6–25 Organizational Design (cont’d) Contingency approach  Designing an organization to effectively function in the face of the unique contingencies or circumstances of its competitive environment.  Contingencies that influence this decision include:  Technology used to produce good or service  Environmental stability or instability  Strategy chosen

26 Copyright © 2005 South-Western. All rights reserved.6–26 Organizational Design (cont’d) Contingencies affecting design  Technology  Routine technologies = mechanistic organization  Nonroutine technologies = organic organization  Environment  Stable environment = mechanistic organization  Unstable environment = organic organization  Strategy  Structure follows strategy  Single product/market = organic structure  Diversification = mechanistic structure

27 Copyright © 2005 South-Western. All rights reserved.6–27 Other Forms of Organizational Design Multidivisional organization  A high-performance organization whose operating units or divisions are partially interdependent.  Each division is different, but all divisions share common technology, skill, and information. Network organization  A flexible, temporary relationship between manufacturers, buyers, suppliers, and customers.  The design is dynamic in that the major components can be assembled or reassembled to meet changing competitive conditions.

28 Copyright © 2005 South-Western. All rights reserved.6–28 Other Forms of Design (cont’d) Network organization (cont’d)  Virtual corporation  A temporary series of partnerships of organizations, linked by information technology, that come together quickly to exploit fast-changing opportunities and terminate once an opportunity is met.  Modular corporation  A hub surrounded by a network of the best suppliers in the world.  The hub is the center of activities, such as research and development; the network is made up of outside specialists.


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