Departmentalization by simple numbers Definition: group people who are to perform same duties under the supervision of a manager

Advantages: useful when it is the number of people that is critical to finish a task Disadvantages: Low specialization Low efficiency

Departmentalization by time Group people based on time

Advantages Extended services Suitable when certain processes can’t be interrupted or certain expensive equipment can be used more than 8 hours a day Disadvantages: Lacks supervision during the night shift Fatigue Affects coordination and communication among different shifts

Organizational Forms Mechanistic Organic Rigid Hierarchy Fixed Duties Many Rules Formal Communication Centralized Decisions Taller Structures Collaboration Adaptable Duties Few Rules Informal Communication Decentralized Decisions Flatter Structures Rigid and tightly controlled, the mechanistic organization is characterized by high specialization, extensive departmentalization, narrow spans of control, high formalization, downward communication, high centralization, and little participation by low-level members in decision making. Jobs are standardized, simple, and routine. There is also strict adherence to the chain of command. In its ideal form, the mechanistic organization is an “efficiency machine,” well lubricated by rules, regulations, and routines. The organic organization is a direct contrast to the mechanistic form. It is characterized by a flat structure, flexibility, use of cross-functional teams, adaptability, comprehensive information networking, and decentralization. Rather than having standardized jobs and regulations, the organic structure’s flexibility allows it to change rapidly as needs require. While there is a division of labor, jobs are not standardized, and employees are well-trained and empowered to make job-related decisions. The net effect is that workers need a minimal degree of formal rules and little direct supervision. With these two models in mind, we are now prepared to address the question: Why are some organizations structured along more mechanistic lines while others lean toward organic characteristics?

Simple structure Characteristics: A low degree of departmentalization Wide span of control Centralized authority Little formalization A flat structure Inexpensive to maintain the structure A clear accountability Popular in small business owned and managed by same person Risky as the organization grows Placing organizations into only two categories--mechanistic and organic--does not capture the nuances and realities of modern organizations. The following slides present a number of practical organization design options. We will start with the simple structure--the form that almost all new organizations begin with and that continues to be used by managers of small businesses. Popular in small businesses owned and managed by same person, the simple structure has several characteristics: a low degree of departmentalization, wide spans of control, centralized authority, little formalization, and a flat structure. This fast, flexible structure is inexpensive to maintain and promotes clear accountability. However, as the organization grows, low formalization and high centralization can cause information over-load at the top. And, this structure is risky because everything depends on one person.

Bureaucracy Characteristics: High specialized operating task Formalized rules and regulations A clearly defined hierarchy Level of managers are created to coordinate activities The paradigm of business structures 30 years ago, a bureaucracy has the following characteristics: highly specialized operating tasks, formalized rules and regulations, tasks grouped into functional departments, centralized authority, narrow spans of control, and chain-of-command decision making. This structure expedites the efficient performance of standardized activities. Furthermore, rules and regulations allow bureaucracies to substitute less-talented (less-costly) managers for creative, experienced decision makers. This structure does have several drawbacks. Specialization can create jurisdictional disputes or “turf-wars” as functional unit goals override the goals of the organization. Plus, bureaucrats resist change and avoid outcome accountability. Given environmental volatility, however, many bureaucracies have become less rigid and more entrepreneurial through decentralizing decision making, designing work around teams, and developing strategic alliances.

Divisional structure An organization is made up of self-contained units Characteristics: Each division is generally autonomous Central headquarters provide financial and legal services to the divisions Central headquarters coordinate and control various divisions Focuses on end results Headquarters concentrate on long-term and strategic issues Duplications of personnel and equipment

Design engineering Manufacturing Accounting Manufacturing group Alpha project Design group Accounting group Manufacturing group Beta project Design group Construction industry, building an apartment Gamma project Design group Manufacturing group Accounting group

Matrix organization Definition: assign people from functional departments to work on one or more projects led by a project manager

Conflict in organization authority exists Advantages Is oriented toward end results Professional identification is maintained Pinpoints product-profit responsibility Cross-functional coordination Disadvantages: Conflict in organization authority exists Possibility of disunity of command exists Requires managers effective in human relations

Team-based structure Definition: the entire organization consists of work groups or team that perform the organization’s work Characteristics: No rigid chain of command Team member has authority to make decisions

Advantages: Is flexible Empower workers Encourages cooperation Oriented toward end results Disadvantages: Lack of responsibility Central control may be difficult Requires managers effective in human relations

The Boundaryless Organization An organization that is not defined or limited by boundaries or categories imposed by traditional structures Characteristics: Minimize the chain of command Replaces departments with empowered team Participative decision-making Coordination among occupational specialties The boundaryless organization is made possible by networked computers that expedite communication across intra-organizational and inter-organizational boundaries. The elimination of boundaries in contemporary organizations is being driven by global markets and competitors, innovative technology, and volatile business environments. This method minimizes the chain of command, limits spans of control, and replaces departments with empowered teams. Cross-hierarchical teams, participative decision making, and 360 degree performance appraisals dismantle vertical boundaries. Cross-functional teams, project-driven activities, lateral transfers, and job rotation minimize horizontal boundaries. Globalization, strategic alliances, customer-organization linkages, and telecommuting overcome external boundaries.

Functional structure An organization in which similar and related occupational specialties are grouped together Characteristics: Work specialization Minimizes duplication of personnel and equipment Follows principle of occupational specializing Simplifies training Furnishes means of tight control at top

Factors that affect structure Organizational factors Strategy (structure should fit organizational strategy) Growth strategy Stability strategy Retrenchment strategy Size and age Larger organizations tended to be more specialized and standardized, and formalized but less centralized than smaller organizations Culture (i.e., a system of shared meaning within an organization that determines, to a large degree, how employees act) Strong culture substitute for the rules and regulations that formally guide employees Nortel networks Corp. cut about 49,500 jobs. 724 solutions Inc. slashed 350 jobs, half its staff. Motorola Inc. dismissed 7000 workers Technology: make decentralization becomes more effectively; change/create individual roles or responsibilities; affects relationship among departments. How technology fits organizational structure?

Environmental factors Technology (i.e., the sequence of physical techniques, knowledge, and equipment used to turn organization inputs into outputs) Define organizational structure Define new roles (e.g., CIOs) Economic situation Strong/weak economy Dynamic/static economy Social/political situation

Building an effective organization design Align with organizational goals Make clear individual roles Make clear sub-goals and policies Be flexible Make staff work effective Make line listen staff Keep staff informed Recognize the importance of informal organization and grapevine

Evaluating effective organizational structure Effective two-way communication Align with organizational goals Clarify authority and responsibility Respond to environmental changes promptly

Why do we need organizational design? Achieve goals Make the best use of people’s experiences, knowledge, skills, and expertise, etc. Provide a smooth communication channel Reduce uncertainty Encourage cooperation