PowerPoint Presentation to Accompany Management Third Canadian Edition John R. Schermerhorn, Jr. Barry Wright Prepared by: Jim LoPresti University of Colorado, Boulder Revised by: Dr. Shavin Malhotra Ryerson University, Toronto, Ontario

2 Management 3e - Chapter 8 2 Chapter 8: Organization Structure and Design

3 Management 3e - Chapter Describe organizing as a management function. 8.2 Understand, describe, and sketch the traditional organization structures. 8.3 Understand the newer types of organization structures. 8.4 Describe organizational designs that are changing the workplace. Chapter 8 Learning Objectives 3

4 Management 3e - Chapter 8  Organizing and organization structure Organizing The process of arranging people and other resources to work together to accomplish a goal. Organization structure The system of tasks, workflows, reporting relationships, and communication channels that link together diverse individuals and groups. Organizing as a Management Function 4

5 Management 3e - Chapter 8 Figure 8.1 Organizing viewed in relationship with the other management functions. 5

6 Management 3e - Chapter 8  Formal structures The structure of the organization in its official state. An organization chart is a diagram describing reporting relationships and the formal arrangement of work positions within an organization. An organization chart identifies the following aspects of formal structure: The division of work. Supervisory relationships. Communication channels. Major subunits. Levels of management. 6 Organizing as a Management Function

7 Management 3e - Chapter 8  Informal structures A “shadow” organization made up of the unofficial, but often critical, working relationships between organization members. Potential advantages of informal structures: Helping people accomplish their work. Overcoming limits of formal structure. Gaining access to interpersonal networks. Informal learning. 7 Organizing as a Management Function

8 Management 3e - Chapter 8  Informal structures (cont.) Potential disadvantages of informal structures: May work against best interests of entire organization. Susceptibility to rumor. May carry inaccurate information. May breed resistance to change. Diversion of work efforts from important objectives. Feeling of alienation by outsiders. 8 Organizing as a Management Function

9 Management 3e - Chapter 8  Functional structures People with similar skills and performing similar tasks are grouped together into formal work units. Members work in their functional areas of expertise. Are not limited to businesses. Work well for small organizations producing few products or services. Traditional Organization Structures 9

10 Management 3e - Chapter 8 Figure 8.3 Functional structures in a business, branch bank, and community hospital. 10

11 Management 3e - Chapter 8  Potential advantages of functional structures: Economies of scale. Task assignments consistent with expertise and training. High-quality technical problem solving, In-depth training and skill development. Clear career paths within functions. 11 Traditional Organization Structures

12 Management 3e - Chapter 8  Potential disadvantages of functional structures: Difficulties in pinpointing responsibilities. Functional chimneys problem. Sense of cooperation and common purpose break down. Narrow view of performance objectives. Excessive upward referral of decisions. 12 Traditional Organization Structures

13 Management 3e - Chapter 8  Divisional structures Group together people who work on the same product or process, serve similar customers, and/or are located in the same area or geographical region. Common in complex organizations. Avoid problems associated with functional structures. 13 Traditional Organization Structures

14 Management 3e - Chapter 8 Figure 8.4 Divisional structures based on product, geography, customer, and process. 14

15 Management 3e - Chapter 8  Types of divisional structures and how they group job and activities: Product structures focus on a single product or service. Geographical structures focus on the same location or geographical region. Customer structures focus on the same customers or clients. Process structures focus on the same processes. 15 Traditional Organization Structures

16 Management 3e - Chapter 8  Potential advantages of divisional structures: More flexibility in responding to environmental changes. Improved coordination. Clear points of responsibility. Expertise focused on specific customers, products, and regions. Greater ease in restructuring. 16 Traditional Organization Structures

17 Management 3e - Chapter 8  Potential disadvantages of divisional structures: Duplication of resources and efforts across divisions. Competition and poor coordination across divisions. Emphasis on divisional goals at expense of organizational goals. 17 Traditional Organization Structures

18 Management 3e - Chapter 8  Matrix structure Combines functional and divisional structures to gain advantages and minimize disadvantages of each. Used in: Manufacturing Service industries Professional fields Non-profit sector Multi-national corporations 18 Traditional Organization Structures

19 Management 3e - Chapter 8 Figure 8.5 Matrix structure in a small multi-project business firm. 19

20 Management 3e - Chapter 8  Potential advantages of matrix structures: Better cooperation across functions. Improved decision making. Increased flexibility in restructuring. Better customer service. Better performance accountability. Improved strategic management. 20 Traditional Organization Structures

21 Management 3e - Chapter 8  Potential disadvantages of matrix structures: Two-boss system is susceptible to power struggles. Two-boss system can create task confusion and conflict in work priorities. Team meetings are time consuming. Team may develop “groupitis.” Increased costs due to adding team leers to structure. 21 Traditional Organization Structures

22 Management 3e - Chapter 8  Team structures Extensively use permanent and temporary teams to solve problems, complete special projects, and accomplish day-to-day tasks. Often use cross-functional teams composed of members from different functional departments. Project teams are convened for a specific task or project and disbanded once completed. 22 Horizontal Organization Structures

23 Management 3e - Chapter 8 Figure 8.6 How a team structure uses cross-functional teams for improved lateral relations. 23

24 Management 3e - Chapter 8  Potential advantages of team structures: Eliminates difficulties with communication and decision making. Eliminates barriers between operating departments. Improved morale. Greater sense of involvement and identification. Increased enthusiasm for work. Improved quality and speed of decision making. 24 Horizontal Organization Structures

25 Management 3e - Chapter 8  Potential disadvantages of team structures: Conflicting loyalties among members. Excessive time spent in meetings. Effective use of time depends on quality of interpersonal relations, group dynamics, and team management. 25 Horizontal Organization Structures

26 Management 3e - Chapter 8  Network structures A central core that is linked through networks of relationships with outside contractors and suppliers of essential services. Own only core components and use strategic alliances or outsourcing to provide other components. 26 Horizontal Organization Structures

27 Management 3e - Chapter 8 Figure 8.7 A network structure for a Web-based retail business. 27

28 Management 3e - Chapter 8  Potential advantages of network structures: Firms can operate with fewer full-time employees and less complex internal systems. Reduced overhead costs and increased operating efficiency. Permits operations across great distances. 28 Horizontal Organization Structures

29 Management 3e - Chapter 8  Potential disadvantages of network structures: Control and coordination problems may arise from network complexity. Potential loss of control over outsourced activities. Potential lack of loyalty among infrequently used contractors. Excessively aggressive outsourcing can be dangerous. 29 Horizontal Organization Structures

30 Management 3e - Chapter 8  Boundaryless organizations Eliminate internal boundaries among subsystems and external boundaries with the external environment. A combination of team and network structures, with the addition of “temporariness.” Key requirements: Absence of hierarchy. Empowerment of team members. Technology utilization. Acceptance of impermanence. 30 Horizontal Organization Structures

31 Management 3e - Chapter 8  Boundaryless organizations (cont.) Encourage creativity, quality, timeliness, flexibility, and efficiency. Knowledge sharing is both a goal and essential component. Virtual organization. A special form of boundaryless organization. Operates in a shifting network of external alliances that are engaged as needed, using IT and the Internet. 31 Horizontal Organization Structures

32 Management 3e - Chapter 8 Figure 8.8 The boundaryless organization eliminates internal and external barriers. 32

33 Management 3e - Chapter 8  Organizational design Choosing and implementing structures that best arrange resources to serve the organization’s mission and objectives. A problem-solving activity that should be approached from a contingency perspective. 33 Organizational Designs

34 Management 3e - Chapter 8  Bureaucracy A form of organization based on logic, order, and the legitimate use of formal authority. Bureaucratic designs feature … Clear-cut division of labour. Strict hierarchy of authority. Formal rules and procedures. Promotion based on competency. 34 Organizational Designs

35 Management 3e - Chapter 8  Contingency perspective on bureaucracy asks the questions: When is a bureaucratic form a good choice for an organization? What alternatives exist when it is not a good choice?  Environment determines the answers to these questions. A mechanistic design works in a stable environment An organic design works in a rapidly changing and uncertain environment. 35 Organizational Designs

36 Management 3e - Chapter 8  Mechanistic Designs Predictable goals Centralized authority Many rules and procedures Narrow spans of control Specialized tasks Few teams and task forces Formal and impersonal means of coordination  Organic Designs Adaptable goals Decentralized authority Few rules and procedures Wide spans of control Shared tasks Many teams and task forces Informal and personal means of coordination 36 Organizational Designs

37 Management 3e - Chapter 8 Figure 8.9 A continuum of organizational design alternatives: from bureaucratic to adaptive organizations. 37

38 Management 3e - Chapter 8  Basics of subsystem design Subsystem A department or work unit headed by a manager. Operates as a smaller part of the larger organization. Ideally, each subsystem supports other subsystems, working toward interests of entire organization. 38 Organizational Designs

39 Management 3e - Chapter 8  Lawrence and Lorsch’s findings on subsystems design … The total system structures of successful firms match the challenges of their environments. The subsystems structures of successful firms match the challenges of their respective sub- environments. Subsystems in successful firms worked well with each other. 39 Organizational Designs

40 Management 3e - Chapter 8  Managing subsystem differentiation : Differentiation is the degree of difference that exists among the internal components of an organization. Common sources of subsystems differentiation: Time orientation Objectives Interpersonal orientation Formal structure 40 Organizational Designs

41 Management 3e - Chapter 8 Figure 8.10: Subsystems differentiation among research and development, manufacturing, and sales 41

42 Management 3e - Chapter 8  Managing subsystem integration: Integration is the level of coordination achieved among an organization’s internal components. Organization design paradox — Increased differentiation creates the need for greater integration. Integration is more difficult to achieve as differentiation increases. 42 Organizational Designs

43 Management 3e - Chapter 8  Mechanisms for achieving subsystem integration: Rules and procedures Hierarchical referral Planning Direct contact Liaison role Task forces Teams Matrix organizations 43 Organizational Designs

44 Management 3e - Chapter 8  Contemporary organizing trends include: Fewer levels of management Shorter chains of command. Less unity of command. Wider spans of control. More delegation and empowerment. Decentralization with centralization. Reduced use of staff. 44 Organizational Designs

45 Management 3e - Chapter 8  Shorter chains of command The line of authority that vertically links all persons with successively higher levels of management. Organizing trend: Organizations are being “streamlined” by cutting unnecessary levels of management. Flatter structures are viewed as a competitive advantage. 45 Organizational Designs

46 Management 3e - Chapter 8  Less unity of command Each person in an organization should report to one and only one supervisor. Organizing trend: Organizations are using more cross- functional teams, task forces, and horizontal structures. Organizations are becoming more customer conscious. Employees often find themselves working for more than one boss. 46 Organizational Designs

47 Management 3e - Chapter 8  Wider spans of control The number of persons directly reporting to a manager. Organizing trend: Many organizations are shifting to wider spans of control as levels of management are eliminated. Managers have responsibility for a larger number of subordinates who operate with less direct supervision. 47 Organizational Designs

48 Management 3e - Chapter 8 Figure 8.11: Organizations with fewer levels of management have wider spans of control 48

49 Management 3e - Chapter 8  More delegation and empowerment Delegation is the process of entrusting work to others by giving them the right to make decisions and take action. The manager assigns responsibility, grants authority to act, and creates accountability. Authority should be commensurate with responsibility. 49 Organizational Designs

50 Management 3e - Chapter 8  Three Steps in Delegation: Assign responsibility – explain task and expectations Grant authority – allow others to make decisions and act Create accountability – require others to report back on results 50 Organizational Designs

51 Management 3e - Chapter 8  More delegation and empowerment A common management failure is unwillingness to delegate. Delegation leads to empowerment. Organizing trend: Managers are delegating more and finding more ways to empower people at all levels. 51 Organizational Designs

52 Management 3e - Chapter 8  Decentralization with centralization Centralization is the concentration of authority for making most decisions at the top levels of the organization. Decentralization is the dispersion of authority to make decisions throughout all levels of the organization. 52 Organizational Designs

53 Management 3e - Chapter 8  Decentralization with centralization Centralization and decentralization not an “either/or” choice. Organizing trend: Delegation, empowerment, and horizontal structures contribute to more decentralization in organizations. Advances in information technology allow for the retention of centralized control. 53 Organizational Designs

54 Management 3e - Chapter 8  Reduced use of staff Specialized staff People who perform a technical service or provide special problem-solving expertise to other parts of the organization. Personal staff People working in “assistant-to” positions that provide special support to higher-level managers. 54 Organizational Designs

55 Management 3e - Chapter 8  Reduced use of staff (cont.) Line and staff managers may disagree over staff authority. Advisory Authority. Functional authority. No one best solution for dividing line-staff responsibilities. Organizing trend: Organizations are reducing staff size. Organizations are seeking increased operating efficiency by employing fewer staff personnel and smaller staff units. 55 Organizational Designs

COPYRIGHT Copyright © 2014 John Wiley & Sons Canada, Ltd. All rights reserved. Reproduction or translation of this work beyond that permitted by Access Copyright (The Canadian Copyright Licensing Agency) is unlawful. Requests for further information should be addressed to the Permissions Department, John Wiley & Sons Canada, Ltd. The purchaser may make back-up copies for his or her own use only and not for distribution or resale. The author and the publisher assume no responsibility for errors, omissions, or damages caused by the use of these programs or from the use of the information contained herein.