Learning Goals What is an organization’s structure, and what does it consist of? What are the major elements of an organizational structure? What is organizational design? What factors does the organizational design process depend on? What are some of the more common organizational forms that an organization might adopt for its structure?

Learning Goals, Cont’d When an organization makes changes to its structure, how does that restructuring affect job performance and organizational commitment? What steps can organizations take to reduce the negative effects of restructuring efforts? How do Theory X and Theory Y organizations differ in their structure?

Organizational Structure Organizational structure formally dictates how jobs and tasks are divided and coordinated between individuals and groups within the company. An organizational chart is a drawing that represents every job in the organization and the formal reporting relationships between those jobs.

Two Sample Organizational Structures Figure 15-1

Elements of Organizational Structure Work specialization is the way in which tasks in an organization are divided into separate jobs. Also known as division of labor. Assembly line worker. Chain of command within an organization essentially answers the question “Who reports to whom?” Specific flow of authority down through the levels of an organization’s structure.

Elements of Organizational Structure, Cont’d Span of control represents how many employees the manager is responsible for in the organization. Narrow spans of control allow managers to be much more hands-on with employees. Centralization reflects where decisions are formally made in organizations. OB on Screen Star Wars II: Attack of the Clones

The Relationship between Span of Control and Organizational Performance Figure 15-2

Elements of Organizational Structure, Cont’d A company is high in formalization when there are many specific rules and procedures used to standardize behaviors and decisions. Necessary coordination mechanism that organizations rely on to get a standardized product or deliver a standardized service.

Elements of Organizational Structure Table 15-1

Elements in Combination Mechanistic organizations are efficient, rigid, predictable, and standardized organizations that thrive in stable environments. Rigid and hierarchical chain of command, high degrees of work specialization, centralization of decision making, and narrow spans of control. Organic organizations are flexible, adaptive, outward-focused organizations that thrive in dynamic environments. Low levels of formalization, weak or multiple chains of command, low levels of work specialization, and wide spans of control.

Discussion Questions Is it possible to be a transformational leader in a highly mechanistic organization?

Characteristics of Mechanistic vs. Organic Structures Table 15-2

Organizational Design Organizational design is the process of creating, selecting, or changing the structure of an organization. Business environment consists of its customers, competitors, suppliers, distributors, and other factors external to the firm, all of which have an impact on organizational design. Stable environment Dynamic environment

Organizational Design, Cont’d Organizational Design, continued A company strategy describes an organization’s objectives and goals and how it tries to capitalize on its assets to make money. Low-cost product strategy Differentiation strategy An organization’s technology is the method by which it transforms inputs into outputs. Company size refers to the total number of employees, and structure.

Common Organizational Forms Simple structures are perhaps the most common form of organizational design, primarily because there are more small organizations than large ones. A bureaucratic structure is an organizational form that exhibits many of the facets of the mechanistic organization.

An Organizational Structure for a Small Restaurant Figure 15-3

Bureaucratic Structures Functional structure is an organizational form in which employees are grouped by the functions they perform for the organization. Figure 15-4

Multi-Divisional Structures Multi-divisional structures are bureaucratic organizational forms in which employees are grouped into divisions around products, geographic regions, or clients. Product structures group business units around different products that the company produces. Figure 15-4

Multi-Divisional Structures, Cont’d Geographic structures are generally based around the different locations where the company does business. Figure 15-4

Multi-Divisional Structures, Cont’d Client structure is an organizational form in which employees are organized around serving customers. Figure 15-4

Matrix Structures Matrix structures are a more complex form of organizational design that tries to take advantage of two types of structures at the same time. The matrix represents a combination of a functional structure and a product structure. Figure 15-5

Discussion Questions If you worked in a matrix organization, what would be some of the career development challenges that you might face? Does the idea of working in a matrix structure appeal to you? Why or why not?

Why Do Some Organizations Have Different Structures than Others? Figure 15-6

How Important is Structure? Changes to an organization’s structure can have negative effects on the employees who work for the company, at least in the short term. The process of changing an organization’s structure is called restructuring. Restructuring has a small negative effect on task performance. Restructuring has a more significant negative effect on organizational commitment.

Effects of Organizational Structure on Performance and Commitment Figure 15-7

Restructuring Steps in restructuring Helping restructuring to succeed Recognize the need to change Restructure Helping restructuring to succeed Manage layoff survivors (employees that remain with the company following a layoff) One of the best ways to help layoff survivors adjust is to do things that give them a stronger sense of control.

Three situations where people are most resistant to change: Resistance to Change Three situations where people are most resistant to change: Changes in Compensation—Amount and/or Method (Example: Going from Hourly to Salary) Changes in Skills Needed (Example: Current skill sets obsolete, must re-train staff) Changes in Social Structure (Example: Breaking up groups that socialize together)

Theory X & Y Changes Theory X Situations: Reassure people with information, provide as much stability and security as possible. Unknowns provide dis-satisfaction, stay away from negative Hygiene. Theory Y Situations: Provide information, but mostly provide VISION, tell your people how they can grow with the changes and how their contributions will allow growth. Orient toward satisfaction and the “Big M”

Tactics for Introducing Change Communication and Education Employee Involvement Negotiation Coercion Top-Management Support McGraw-Hill © 2004 The McGraw-Hill Companies, Inc. All rights reserved.

Lewin’s Force Field Analysis Model Increase driving forces that drive change Reduce restraining forces that resist change or do both McGraw-Hill © 2004 The McGraw-Hill Companies, Inc. All rights reserved.

Force-field Model of Change Desired state Restraining forces Status quo Driving forces Time McGraw-Hill © 2004 The McGraw-Hill Companies, Inc. All rights reserved.

Takeaways An organization’s structure formally dictates how jobs and tasks are divided and coordinated between individuals and groups within the organization. This structure, provides the foundation for organizing jobs, controlling employee behavior, shaping communication channels, and providing a lens through which employees view their work environment. There are five major elements to an organization’s structure that can be organized in such a way as to make an organization more mechanistic in nature, which allows it to be highly efficient in stable environments, or more organic in nature, which allows it to be flexible and adaptive in changing environments.

Takeaways, Cont’d Organizational design is the process of creating, selecting, or changing the structure of an organization. Factors to be considered in organizational design include a company’s business environment, its strategy, its technology, and its size. The most common organizational form is the simple structure, which is used by most small companies. Larger companies adopt a more bureaucratic structure. This structure may be functional in nature, such that employees are grouped by job tasks, or multi-divisional, such that employees are grouped by product, geography, or client. Organizations may also adopt a matrix structure.

Takeaways, Cont’d Organizational restructuring efforts have a weak negative effect on job performance. They have a more significant negative effect on organizational commitment, because employees tend to feel less emotional attachment to organizations that are restructuring. To reduce the negative effects of restructuring, organizations should focus on managing the stress levels of the employees who remain after the restructuring. Providing employees with a sense of control can help them learn to navigate their new work environment.