Thomson South-Western Wagner & Hollenbeck 5e 1 Chapter Twelve Structuring the Organization

2 Chapter Overview  This chapter examines the following topics: – Structural Coordination Basic Coordination Mechanisms Choosing among the Mechanisms – Departmentation – Hierarchy and Centralization – Types of Organization Structure Prebureaucratic Structures Bureaucratic Structures Postbureaucratic Structures

3 Introduction  Organization structure comprises a relatively stable network of interconnections or interdependencies among the different people and tasks that make up an organization  An organization’s structure enables the people within it to work together, thereby accomplishing things beyond the abilities of unorganized individuals

4 Structural Coordination  Achieving structural integration is an important challenge facing all managers  Coordination is a process through which otherwise disorganized actions become integrated so as to produce a desired result – Catching a ball example  The primary means by which organizational activities are integrated, the basic coordination mechanisms of mutual adjustment, direct supervision, and standardization, enable the organization to perform complex activities by bringing together the efforts of many individuals

5 Basic Coordination Mechanisms  Mutual adjustment is coordination accomplished through person-to-person communication processes in which co-workers share job-related information – Factory maintenance mechanics and sales managers examples  It is the simplest of the basic coordination mechanisms  Until fairly recently, virtually all of the mutual adjustment in an organization occurred via face-to- face communication among neighboring co-workers  The advent of local area networks (LANs) and intranets have changed this as has and electronic bulletin boards (EBBs)  Companies can gain significant competitive advantage through these modern basic coordination mechanisms

6 Basic Coordination Mechanisms  Direct supervision, a second type of coordination mechanism, occurs when one person takes responsibility for the work of a group of others – Grocery store owner example

7 Basic Coordination Mechanisms  Standardization, a third type of coordination mechanism, is actually a collection of four different mechanisms that coordinate work by providing employees with standards and procedures that help them determine how to perform their tasks  Coordination via standardization requires that standards be set and procedures designed via the process of formalization, before the work is actually undertaken

8 Basic Coordination Mechanisms  Behavioral standardization involves specification of the precise behaviors or work processes in which employees must engage to accomplish their jobs – Originates in the formalization of job or job analysis where the written documentation is called a job description – Burger King example  Output standardization involves the formal designation of output targets or performance goals – Formalization of work flow – Assembly of notebook computers example  Skill standardization relies on specification of skills, knowledge, and abilities needed to perform tasks competently – Implemented in either of two ways: hiring outside professionals or training current inside employees – School district teachers example  Norm standardization is present when the members of a group or organization share a set of beliefs about the acceptability of particular types of behavior, leading them to behave in ways that are generally approved – Daimler-Chrysler example

9 Choosing among the Mechanisms  Managers charged with managing an organization’s structure continually confront the need to make choices among the basic coordination mechanisms  Most of the time, two or more of these mechanisms are used concurrently to integrate work activities in and among the groups of an organization – Primary mechanism – Secondary mechanism

10 Departmentation  Managers must determine how to cluster the groups or teams produced via group formation – Functional similarities – Work flow similarities  Departmentation occurs from linking the resulting groups together into the larger organization – Functional departmentation – Divisional departmentation

11 Hierarchy and Centralization  A hierarchy reflects the differentiation of rank that occurs as group formation processes and departmentation procedures work together to create clusters of groups and layers of managers having responsibility for the activities of particular clusters  Once formed, a hierarchy can be used to control intergroup relations  Centralization is the concentration of authority and decision- making at the top of a firm – This is favored by many top managers in North America – It affords top managers a high degree of certainty  Decentralization has authority and decision- making dispersed downward and outward in the hierarchy of managers and employees

12 Types of Organization Structure  The choice to emphasize standardization as a primary means of coordination leads to the creation of a bureaucratic organization structure  Between complete bureaucracy and no bureaucracy lies a continuum of structures, each which incorporates specific configurations of departmentation and centralization

13 Prebureaucratic Structures  Prebureaucratic structures lack the standardization that is the defining characteristic of bureaucracies  They can be used successfully only in small and simple organizations where mutual adjustment or direct supervision provides the only coordination needed to maintain interdependence  Types of prebureaucratic structures include: – Simple undifferentiated structure: coordination is accomplished solely by mutual adjustment – Simple differentiated structure: direct supervision is the primary means of coordination

14 Bureaucratic Structures  In the bureaucratic structures that arise as standardization emerges as the primary means of coordination, direct supervision and mutual adjust are retained as secondary mechanisms that take effect when standardization fails to meet all coordination needs

15 Bureaucratic Structures  Functional structure is a form of bureaucratic structure adopted by organizations that are larger than the fifty or so members whose activities can be coordinated via a simple differentiated structure  Such structures are characterized by three key attributes: – Based on coordination by standardization – Organized according to functional departmentation – Usually centralized  Divisional structure is characterized by standardization of any of several types, most often standardization of behaviors, outputs, or skills  The divisional structure’s departmentation scheme and moderate decentralization imbue it with a degree of flexibility not found in the functional structure

16 Bureaucratic Structures  Matrix structures are bureaucratic structures adopted by organizations that must integrate work activities related to a variety of products, locations, or customers  They are also called simultaneous structures  The multiunit structure achieves high flexibility in extremely large organizations by decoupling the divisions of an organization rather than by further integrating divisional elements along functional lines

17 Postbureaucratic Structures  Within the past 25 years, many organizations have found it necessary to be more flexible than allowed by even the most flexible form of bureaucracy  As a result, attention has turned to forming information-rich organization structures grounded in computerized communication networks and coordinated by mutual adjustment that can successfully deal with extreme complexity and identify change before it threatens organizational viability  Managers have begun to experiment with two new kinds of postbureaucratic structures

18 Postbureaucratic Structures  A modular structure consists of a collection of autonomous modules or cells interconnected by a computerized intranet  In such structures, self- managing teams, grouped according to process, assume supervisory duties and use mutual adjustment to coordinate internal work activities  In the virtual structure, several organizations attain the performance capacities of a single, much larger firm while retaining extreme flexibility and significant efficiency  The label virtual structure is patterned after the term, virtual memory