2What Is Organizational Structure? Defines how job tasks are formally divided, grouped, and coordinated.There are six key elements that managers need to address when they design their org.’s structure.Key Elements:Work specializationDepartmentalizationChain of commandSpan of controlCentralization and decentralizationFormalization
3Work SpecializationThe degree to which tasks in the organization are subdivided into separate jobs.Division of labor:Makes efficient use of employee skillsIncreases employee skills through repetitionLess between-job downtime increases productivitySpecialized training is more efficient.Allows use of specialized equipment.
4Economies and Diseconomies of Work Specialization Impact fromeconomiesof specializationhumandiseconomiesHighLowProductivityWork Specialization
52- Departmentalization by Type The basis by which jobs are grouped together is called….FunctionalGrouping jobs by functions performedProductGrouping jobs by product lineGeographicalGrouping jobs on the basis of territory or geographyProcessGrouping jobs on the basis of product or customer flowCustomerGrouping jobs by type of customer and needs
6Functional Departmentalization AdvantagesEfficiencies from putting together similar specialties and people with common skills, knowledge, and orientationsCoordination within functional areaIn-depth specializationDisadvantagesPoor communication across functional areasLimited view of organizational goals
7Geographical Departmentalization AdvantagesMore effective and efficient handling of specific regional issues that ariseServe needs of unique geographic markets betterDisadvantagesDuplication of functionsCan feel isolated from other organizational areas
8Product Departmentalization + Allows specialization in particular products and services+ Managers can become experts in their industry+ Closer to customers– Duplication of functions– Limited view of organizational goals
9Process Departmentalization + More efficient flow of work activities– Can only be used with certain types of products
10Customer Departmentalization + Customers’ needs and problems can be met by specialists- Duplication of functions- Limited view of organizational goals
113 - Chain of Command Chain of Command involves three other concepts: The continuous line of authority that extends from upper levels of an organization to the lowest levels of the organization and clarifies who reports to whom.Chain of Command involves threeother concepts:AuthorityResponsibilityUnity of Command
123 - Chain of Command……continued AuthorityRefers to the rights inherent in a managerial position to tell people what to do and to expect them to do it.ResponsibilityThe obligation or expectation to perform any assigned duties.Unity of CommandThe concept that a person should have one boss and should report only to that person (Fayol, Weber, Taylor)
134 - Span of ControlThe number of subordinates a manager can efficiently and effectively direct.Concept:Wider spans of management increase organizational efficiency.Narrow Span Drawbacks:Expense of additional layers of management.Increased complexity of vertical communication.Encouragement of overly tight supervision and discouragement of employee autonomy.
155 - Centralization & Decentralization The degree to which decision-making is concentrated at a single point in the organizations.Organizations in which top managers make all the decisions and lower-level employees simply carry out those orders.DecentralizationOrganizations in which decision-making is pushed down to the managers who are closest to the action.Employee EmpowermentIncreasing the decision-making authority (power) of employees.
166 - FormalizationThe degree to which jobs within the organization are standardized and the extent to which employee behavior is guided by rules and procedures.Highly formalized jobs offer little discretion over what is to be done.Low formalization means fewer constraints on how employees do their work.
17Common Organizational Designs Three of the more common org. designs in use: the simple structure, the bureaucracy, and the matrixSimple StructureA structure characterized by a low degree of departmentalization, wide spans of control, authority centralized in a single person, and little formalization.This structure is most widely practiced in small businesses in which the manager & the owner are one & the same.Strength: simplicity. It is fast, flexible, & inexpensive to maintain, and accountability is clear.Weakness: it’s difficult to maintain in any other than small orgs. As org. grows due to its low formalization & high centralization creates information overload at the top.
18Common Organization Designs (cont’d) Max Weber’s Bureaucracy ModelStandardization is the key concept that underlies all bureaucracies.highly operating routine tasks achieved through specialization,formalized rules and regulations,tasks are grouped into functional departments,centralized authoritynarrow spans of controldecision making that follows the chain of command.
19The Bureaucracy Strengths Functional economies of scale Minimum duplication of personnel and equipmentEnhanced communicationCentralized decision makingWeaknessesSubunit conflicts with organizational goalsObsessive concern with rules and regulationsLack of employee discretion to deal with problems
20Common Organization Designs (cont’d) Matrix StructureA structure that creates dual lines of authority and combines functional and product departmentalization.Key Elements:Gains the advantages of functional and product departmentalization while avoiding their weaknesses.Facilitates coordination of complex and interdependent activities.Breaks down unity-of-command concept.
21Matrix Structure (College of Business Administration) (Director)(Dean)Employee
22New Design Options Team Structure The use of teams as the central device to coordinate work activities.Characteristics:Breaks down departmental barriers.Decentralizes decision making to the team level.Requires employees to be generalists as well as specialists.Creates a “flexible bureaucracy.”
23New Design Options (cont’d) Virtual OrganizationA small, core organization that outsources its major business functions.Highly centralized with little or no departmentalization.Concepts:Advantage: Provides maximum flexibility while concentrating on what the organization does best.Disadvantage: Reduced control over key parts of the business.
24New Design Options (cont’d) Boundaryless OrganizationThe boundary-less organization seeks to eliminate the chain of command, have limitless spans of control, and replace departments with empowered teams.Org. rely so heavily on IT, it is also sometimes called the T-form ( or technology based) org.
25Why Do Structures Differ? – Strategy • High specialization• Rigid departmentalization• Clear chain of command• Narrow spans of control• Centralization• High formalization• Cross-functional teams• Cross-hierarchical teams• Free flow of information• Wide spans of control• Decentralization• Low formalization
26Why Do Structures Differ? – 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.
27Why Do Structures Differ? – Size How the size of an organization affects its structure. As an organization grows larger, it becomes more mechanistic.TechnologyHow an organization transfers its inputs into outputs.EnvironmentInstitutions or forces outside the organization that potentially affect the organization’s performance.