Organization Structures Week Five – Part One Organization Structures

Learning Objectives Understand the basic principles of organization management What is an organization chart, and types of organization structures Understand the relationship between organization structure, culture and the environment Understand the importance of cooperation and coordination

Basic principles of organization management Structuring an organization Setting up teams or departments Assigning responsibility and authority Establishing procedures for accomplishing the organization objectives Allocating resources of the organization

What is an organization chart? Is a visual device that shows relationships among people and divides the organization’s work; it shows who reports to whom.

Example of Organization Chart

Example of Organization Chart

Types of Organization Structures Tall Organization Structure Definition: In which the pyramidal organization chart would be quite tall because of the various levels of management Flat Organization Structure Definition: In which an organization structure that has few layers of management and a broad span of control.

Tall Organization Structure In its simplest form, a tall structure results in one long chain of command similar to the military. As an organization grows, the number of management levels increases and the structure grows taller. In a tall structure, managers form many ranks and each has a small area of control. Tall structures have more management levels than flat structures

Flat Organization Structure Flat organizations focus on empowering employees rather than adhering to the chain of command. By encouraging autonomy and self-direction, flat structures attempt to tap into employees’ creative talents and to solve problems by collaboration.

Example of Tall Organization Structure

Example of Flat Organization Structure

Pros & Cons of Tall Organization The pros of tall structures lie in clarity and managerial control. The narrow span of control allows for close supervision of employees. Tall structures provide a clear, distinct layers with obvious lines of responsibility and control and a clear promotion structure. Challenges begin when a structure gets too tall. Communication begins to take too long to travel through all the levels. These communication problems hamper decision-making and hinder progress.

Pros & Cons of Flat Organization Flat organizations offer more opportunities for employees to excel while promoting the larger business vision. That is, there are more people at the “top” of each level. For flat structures to work, leaders must share research and information instead of hoarding it. If they can manage to be open, tolerant and even vulnerable, leaders excel in this environment. Flatter structures are flexible and better able to adapt to changes. Faster communication makes for quicker decisions, but managers may end up with a heavier workload. Instead of the military style of tall structures, flat organizations lean toward a more democratic style.

Pros & Cons of Flat Organization The heavy managerial workload and large number of employees reporting to each boss sometimes results in confusion over roles. Bosses must be team leaders who generate ideas and help others make decisions. When too many people report to a single manager, his job becomes impossible. Employees often worry that others manipulate the system behind their backs by reporting to the boss; in a flat organization, that means more employees distrusting higher levels of authority.

Departmentalization Definition: The dividing of organizational functions into separate units. The advantages include the following: 1) Employees can develop skills in depth and progress within a department as they master more skills. 2) The company can achieve economies of scale by centralizing all the resources it needs and locate various experts in that area. 3) Employees can coordinate work within the function, and top management can easily direct and control various departments’activities.

Departmentalization The disadvantages may include the following: Departments may not communicate well. Employees may identify with their department’s goals rather than the organization’s. The company’s response to external changes may be slow People may not trained to take different managerial responsibilities; rather, they tend to become narrow specialist Department members may engage to group think(they think alike), it may need input from outside to become more creative

Activity Draw out your own company organization chart each student. (a) Flat organization Structure (b) Tall organization Structure

Major Choices in structuring organizations Centralization versus Decentralization Breath of span of control Tall organization structure versus Flat organization structure Type of departmentalization By Product By Customer Group By Geographic By Process By Hybrid forms

Benchmarking Definition: Comparing an organization’s practices, processes, and products against the world’s best. As we’ve noted, today’s organizations look to other organizations for help in areas where ( any of their departments in an organization) do not generate world- class quality For example, Olympia College is a ISO 9001 private institute in Malaysia.

What are the major concepts an organization involved in interfirm communications? Networking uses communications technology and other means to link organizations and allow them to work together on common objectives. Benchmarking tells firms how their performance measures up to that of their competitors in specific functions. The company may then outsource to companies that perform its weaker functions more effectively and efficiently.

Inverted Organization Definition: An organization that has contact people at the top and the chief executive officer (CEO) at the bottom of the organization chart. It means that Management layers are few, and the manager’s job is to assist and support frontline people, not boss around. It is different from the traditional organizational structure

Organizational Culture Definition: Widely shared values within an organization that provide unity and cooperation to achieve common goals For Example: McDonald’s restaurant has the same feel, look and atmosphere; in short, it is same organizational culture. McDonald’s that the culture emphasizes that quality, service, cleanliness and value

There are two organizational system Formal Organization The structure that details lines of responsibility, authority, and position; that is, the structure shown on organization charts. Informal Organization The system that develops spontaneously as employees meet and form cliques, relationships, and lines of authority outside the formal organization

ATTENTION. Important question as below ATTENTION!!! Important question as below!!! It may come out in your FINAL EXAM!!! Please copy down in your note book, thank you!

Important Questions!!! 1) What are the principles of organization management? 2) What are the four major choices in structuring organizations? 3) The advantages and disadvantages of Departmentalization? (any three of each) 4) (a) What is an organization chart? (b) Types of organization structure and explain it

Important Questions!!! 5) Definition of inverted organization 6) Definition of benchmarking 7) What are the major concepts involved in interfirm communications? 8) (a) What is organizational culture? (b) What is the difference between the formal and informal organization of a firm?