Chapter 6 Organization Structure and Design Fundamentals of MANAGEMENT Core Concepts & Applications Griffin Eighth Edition Chapter 6 Organization Structure and Design

Chapter Outline The Nature of Organizing Job Specialization Grouping Jobs: Departmentalization The Bureaucratic Model of Organization Design Situational Influences on Organization Core Technology Environment Organization Size and Life Cycle

Chapter Outline (cont’d) Basic Forms of Organization Design Functional (U-Form) Design Conglomerate (H-Form) Design Divisional (M-Form) Design Matrix Design Hybrid Design Emerging Issues in Organization Design The Team Organization The Virtual Organization The Learning Organization

Learning Objectives After studying this chapter, you should be able to: Identify the basic elements of organizations. Describe the bureaucratic perspective on organization design. Identify and explain several situational influences on organization design. Describe the basic forms of organization design that characterize many organizations. Describe emerging issues in organization design.

Components of Organization Structure Barney, Jay B. and Ricky W. Griffin, The Management of Organizations. Copyright © 1992 by Houghton Mifflin Company. Used with permissions.

The Nature of Organizing Organization Design The overall set of structural elements and the relationships among those elements used to manage the total organization. A means to implement strategies and plans to achieve organizational goals. Job Specialization The degree to which the overall task of the organization is broken down and divided into smaller component parts.

Job Specialization Benefits of Specialization Workers can become proficient at a task. Transfer time between tasks is decreased. Specialized equipment can be more easily developed. Employee replacement becomes easier. Limitations of Specialization Employee boredom and dissatisfaction with mundane( routine) tasks. Anticipated benefits of specialization do not always occur.

Alternatives to Specialization Job Rotation Systematically moving employees from one job to another. Most frequent use today is as a training device for skills and flexibility. Job Enlargement An increase in the total number of tasks workers perform. Increases training costs, unions contend that workers deserve more pay for doing more tasks, and the work may still be dull and routine. Job Enrichment Increasing both the number of tasks the worker does and the control the worker has over the job.

Alternatives to Specialization (cont’d) Work Teams An alternative to job specialization that allows the entire group to design the work system it will use to perform an interrelated set of tasks.

Grouping Jobs: Departmentalization The process of grouping jobs according to some logical arrangement. Rationale for Departmentalization Organizational growth exceeds the owner-manager’s capacity to personally supervise all of the organization. Additional managers are employed and assigned specific employees to supervise.

Common Bases of Departmentalization Barney, Jay B. and Ricky W. Griffin, The Management of Organizations. Copyright © 1992 by Houghton Mifflin Company. Used with permission.

Grouping Jobs: Departmentalization (cont’d) Functional Departmentalization The grouping of jobs involving the same or similar activities.

Grouping Jobs: Departmentalization (cont’d) Advantages Each department can be staffed by functional-area experts. Supervision is facilitated in that managers only need be familiar with a narrow set of skills. Coordination inside each department is easier. Disadvantages Decision making becomes slow and bureaucratic. Employees narrow their focus to the department and lose sight of organizational goals/ issues. Accountability and performance are difficult to monitor.

Product Departmentalization Form The grouping of activities around products or product groups.

Product Departmentalization Form (cont’d) Advantages All activities associated with one product can be integrated and coordinated. Speed and effectiveness of decision making are enhanced. Performance of individual products or product groups can be assessed. Disadvantages Managers may focus on their product to the exclusion of the rest of the organization. Administrative costs may increase due to each department having its own functional-area experts.

Customer Departmentalization Grouping activities to respond to and interact with specific customers and customer groups. Advantage Skilled specialists can deal with unique customers or customer groups. Disadvantage A large administrative staff is needed to integrate activities of various departments.

Location Departmentalization The grouping of jobs on the basis of defined geographic sites or areas. Advantage Enables the organization to respond easily to unique customer and environmental characteristics. Disadvantage Large administrative staff may be needed to keep track of units in scattered locations.

Establishing Reporting Relationships Chain of Command A clear and distinct line of authority among the positions in an organization. Unity of Command Each person within an organization must have a clear reporting relationship to one and only one boss. Scalar Principle A clear and unbroken line of authority must extend from the bottom to the top of the organization.

Establishing Reporting Relationships (cont’d) Span of Management (or Span of Control) The number of people who report to a particular manager. There is no ideal or optimal span of management.

Establishing Reporting Relationships: Tall Versus Flat Organizations Tall Organizations Are more expensive because of the number of managers involved. Foster more communication problems because of the number of people through whom information must pass. Flat Organizations Lead to higher levels of employee morale and productivity. Create more administrative responsibility for the relatively few managers. Create more supervisory responsibility for managers due to wider spans of control.

Tall Versus Flat Organizations President Tall Organization Flat Organization

Decentralization and Centralization The process of systematically delegating power and authority throughout the organization to middle- and lower-level managers. Centralization The process of systematically retaining power and authority in the hands of higher-level managers.

Decentralization and Centralization (cont’d) Factors Determining the Choice of Centralization The complexity and uncertainty of the external environment. The history of the organization. The nature (cost and risk) of the decisions to be made.

Functional (U-Form) Design for a Small Manufacturing Company CEO Vice president, operations marketing finance human resources R&D Scientific director Labor relations Plant human resource manager Controller Accounting supervisor Regional sales managers District Plant managers Shift supervisors Lab manager Figure 6.2

Basic Forms of Organization Design (cont’d) Matrix Design An organizational arrangement based on two overlapping bases of departmentalization (e.g., functional departments and product categories). A set of product groups or temporary departments are superimposed across the functional departments.

Basic Forms of Organization Design (cont’d) Matrix Design (cont’d) Employees in the resulting matrix are members of both their departments and a project team under a project manager. The matrix creates a multiple command structure in which an employee reports to both departmental and project managers.

A Matrix Organization Figure 6.5 Employees CEO Project manager B manager C Vice president, engineering production finance marketing manager A Figure 6.5