1. Designing Organizational Structures

2. Coordinating Through Informal Communication
Sharing information, forming shared mental models
Allows flexibility
Vital in nonroutine and ambiguous situations
Easiest in small firms
Applied in team-based structures
Includes integrator roles

3. Coordinating Through Hierarchy and Standardization
Formal hierarchy
Direct supervision
Assigns formal (legitimate) power to manage others
Coordination strategy for departmentalization
Standardization
Standardized processes (e.g., job descriptions)
Standardized outputs (e.g., sales targets)
Standardized skills (e.g., training)

4. Elements of Organizational Structure
Department-alization
Span of Control
Elements of Organizational
Structure
Formalization
Centralization

5. Span of Control Number of people directly reporting to the next level
Assumes coordination through direct supervision
Wider span of control possible when:
Other coordinating mechanisms present
Routine tasks
Low employee interdependence

6. Centralization and Decentralization
Information Systems
Centralization -- Formal decision making authority is held by a few people, usually at the top
Decentralization increases as companies grow
Varying degrees of centralization in different areas of the company
Example: sales decentralized; info systems centralized
Production
Sales
Upper Mgt
Middle Mgt
Front line
Supervisory
Upper Mgt
Upper Mgt
Middle Mgt
Middle Mgt
Supervisory
Supervisory
Front line
Front line
= locus of decision making authority

7. Formalization
The degree to which organizations standardize behavior through rules, procedures, formal training, and related mechanisms.
Formalization increases as firms get older, larger, and more regulated
Problems with formalization
Reduces organizational flexibility
Discourages organizational learning/creativity
Reduces work efficiency
Increases job dissatisfaction and work stress

8. Mechanistic vs. Organic Structures
Mechanistic Structure
Narrow span of control
High formalization
High centralization
Organic Structure
Wide span of control
Little formalization
Decentralized decisions

9. Evaluating Functional Structures
Benefits
Economy of scale
Supports professional identity and career paths
Easier supervision
Limitations
More emphasis on subunit than organizational goals
Higher dysfunctional conflict
Poorer coordination -- requires more controls

10. Evaluating Divisional Structures
Benefits
Building block structure -- accommodates growth
Focuses on markets/products/clients
Limitations
Duplication, inefficient use of resources
Expertise is dispersed
Reduced ability and motivation to cooperate – creates silos of knowledge
Difficulty determining best divisional form

11. Evaluating Team-Based Structures
Benefits
Responsive, flexible
Lower admin costs
Quicker, more informed decisions
Limitations
Interpersonal training costs
Slower during team development
Role ambiguity increases stress
Problems with supervisor role changes
Duplication of resources

12. Evaluating Matrix Structures
Benefits
Uses resources and expertise effectively
Improves communication, flexibility, innovation
Focuses specialists on clients and products
Supports knowledge sharing within specialty
Solution when two divisions have equal importance
Limitations
Increases conflict and ambiguity
Two bosses dilutes accountability
More conflict, organizational politics, and stress

13. Evaluating Network Structures
Benefits
Highly flexible
Potentially better use of skills and technology
Not saddled with same resources for all products
Limitations
Exposed to market forces
Less control over subcontractors than in-house

14. External Environment & Structure
Dynamic
• High rate of change
• Use team-based, network, or other organic structure
Stable
• Steady conditions, predictable change
• Use mechanistic structure
Complex
• Many elements (such as stakeholders)
• Decentralize
Simple
• Few environmental elements
• Less need to decentralize

15. External Environment & Structure (con’t)
Diverse
• Several products, clients, regions
• Use divisional form aligned with the diversity
Integrated
• Single product, client, place
• Use functional structure, or geographic division if global
Hostile
• Competition and resource scarcity
• Use organic structure for responsiveness
Munificent
• Plenty of resources and product demand
• Less need for organic structure