Copyright ©2010 Pearson Education, Inc. Publishing as Prentice Hall 14-1 Chapter 14 Foundations of Organizational Structure

Copyright ©2010 Pearson Education, Inc. Publishing as Prentice Hall 14-2 After studying this chapter, you should be able to: 1.Identify the six elements of an organization’s structure. 2.Describe the common organizational designs. 3.Compare and contrast the virtual and boundaryless organizations. 4.Demonstrate how organizational structures differ. 5.Analyze the behavioral implications of different organizational designs. 6.Show how globalization affects organizational structure.

Copyright ©2010 Pearson Education, Inc. Publishing as Prentice Hall 14-3 What is Organization Structure? It defines how job tasks are formally divided, grouped, and coordinated Key elements to be addressed:  Work specialization  Departmentalization  Chain of command  Span of control  Centralization  Decentralization  Formalization

Copyright ©2010 Pearson Education, Inc. Publishing as Prentice Hall 14-4 Element 1: Work Specialization Also known as division of labor Describes the degree to which activities in the organization are subdivided into separate jobs Benefits:  Greater efficiency and lower costs Costs:  Human costs when carried too far  Job enlargement as a solution

Copyright ©2010 Pearson Education, Inc. Publishing as Prentice Hall Put about 100 bricks in some particular order in a closed room with an open window. Then send 2 or 3 candidates in the room and close the door. Leave them alone and come back after 6 hours and then analyze the situation. If they are counting the bricks. Put them in the accounts department. If they are recounting them.. Put them in auditing. If they have messed up the whole place with the bricks. Put them in engineering. If they are arranging the bricks in some strange order. Put them in planning. If they are throwing the bricks at each other. Put them in operations. If they are sleeping. Put them in security. If they have broken the bricks into pieces. Put them in information Technology. If they are sitting idle. Put them in human resources. If they say they have tried different combinations, yet not a brick has been moved. Put them in sales. If they have already left for the day. Put them in marketing. If they are staring out of the Window. Put them on strategic planning. And then last but not least If they are talking to each other and not a single brick has been moved. Congratulate them and put them in top management.

Copyright ©2010 Pearson Education, Inc. Publishing as Prentice Hall 14-6 Element 2: Departmentalization Basis by which jobs are grouped together so that common tasks can be coordinated Common bases:  Function  Product  Geography  Process  Customer

Copyright ©2010 Pearson Education, Inc. Publishing as Prentice Hall 14-7 Element 3: Chain of Command Unbroken line of authority that extends from the top of the organization to the lowest echelon and clarifies who reports to whom Authority: positional rights Unity of Command principle: one boss Fewer organizations find this is relevant

Copyright ©2010 Pearson Education, Inc. Publishing as Prentice Hall 14-8 Element 4: Span of Control The number of employees a manager is expected to effectively and efficiently direct Determines the number of levels and managers an organization has  Trend is toward wider spans of control  Wider span depends on knowledgeable employees  Affects speed of communication and decision making

Copyright ©2010 Pearson Education, Inc. Publishing as Prentice Hall 14-9 Element 5: Centralization and Decentralization Centralization - degree to which decision making is concentrated at a single point in the organization  Only includes formal authority: positional rights  Highly centralized when top managers make all the decisions  Decentralized when front line employees and supervisors make decisions  Trend is toward increased decentralization

Copyright ©2010 Pearson Education, Inc. Publishing as Prentice Hall Element 6: Formalization Degree to which jobs within the organization are standardized  Formal = minimum discretion over what is to be done, when it is done, and how  Informal = freedom to act is necessary

Copyright ©2010 Pearson Education, Inc. Publishing as Prentice Hall Common Organizational Designs Simple structure Bureaucracy Matrix structure

Copyright ©2010 Pearson Education, Inc. Publishing as Prentice Hall Simple Structure Low degree of departmentalization Wide spans of control Authority centralized in a single person Little formalization Difficult to maintain in anything other than small organizations

Copyright ©2010 Pearson Education, Inc. Publishing as Prentice Hall Bureaucracy Highly routine operating tasks achieved through specialization  Formal rules and regulations  Centralized authority  Narrow spans of control  Tasks grouped by functional departments  Decision making follows the chain of command

Copyright ©2010 Pearson Education, Inc. Publishing as Prentice Hall Matrix Structure Combines two forms of departmentalization  Functional  Product Dual chain of command Advantages:  Facilitates coordination and efficient allocation of specialists Disadvantages:  Possible confusion, fosters power struggles, stress

Copyright ©2010 Pearson Education, Inc. Publishing as Prentice Hall Matrix Structure for a College of Business Administration

Copyright ©2010 Pearson Education, Inc. Publishing as Prentice Hall Exercise Divide in groups of 5 Take any one organization Describe the six key elements of organization structure Analyse whether it is good for that oganization