1. Fundamentals of Organization Design
Chapter 10
Fundamentals of Organization Design
Hellriegel, Jackson, and Slocum MANAGEMENT: A Competency-Based Approach South-Western College Publishing Copyright © 2002

2. 10.1
Learning Objectives
After reading this chapter, you should be able to:
Explain several of the main ingredients of organization design
Outline the features of four basic types of departmentalization
Describe three of the principles for achieving coordination within and between departments
Discuss the fundamental concepts of authority in organization design

3. Basic Elements of Organizing
10.2
Basic Elements of Organizing
Specialization
Standardization
Authority
Coordination
Adapted from Figure 10.1

4. Potential Benefits of Functional Departmentalization
10.3
Potential Benefits of Functional Departmentalization
Supports skill specialization
Reduces duplication of resources and increases coordination within the functional area
Enhances career development and training within the department
Allows superiors and subordinates to share common expertise
Promotes high-quality technical decision making

5. Potential Pitfalls of Functional Departmentalization
10.4
Potential Pitfalls of Functional Departmentalization
Inadequate communication between departments
May create conflict over product priorities
Difficulty with interdepartmental coordination
Focuses on departmental rather than organizational issues and goals
Develops managers who are experts in narrow fields

6. Potential Benefits of Place Departmentalization
10.5
Potential Benefits of Place Departmentalization
Equipment used for products is all in one place, saving time and costs
Develop expertise in solving problems unique to one location
Gaining an understanding of customers’ problems and desires
Getting production closer to raw materials and suppliers

7. Potential Pitfalls of Place Departmentalization
10.6
Potential Pitfalls of Place Departmentalization
Duplication of functions at each regional or individual unit location
May cause conflicts between each location’s goals and organization goals
Adds levels of management and extensive use of rules and regulations to coordinate and ensure uniformity of quality among locations

8. Potential Benefits of Product Departmentalization
10.7
Potential Benefits of Product Departmentalization
Permits fast changes in a product
Allows greater product visibility
Fosters a concern for customer demand
Clearly defines responsibilities
Develops managers who can think across functional lines

9. Potential Pitfalls of Product Departmentalization
10.8
Potential Pitfalls of Product Departmentalization
Poor utilization of skills and resources
Doesn’t foster coordination of activities across product lines
Fosters politics and conflicts in resource allocation across product lines
Limits career mobility for personnel outside their product line

10. Potential Benefits of Customer Departmentalization
10.9
Potential Benefits of Customer Departmentalization
Encourages greater customer focus
Clearly identifies key customers
Enables understanding of customer need
Develops managers and employees who become customer advocates

11. Potential Pitfalls of Customer Departmentalization
10.10
Potential Pitfalls of Customer Departmentalization
Doesn’t foster coordination between divisions organized by customer group
Fosters politics and conflicts in resource allocation between divisions
Employees feel pressure from customer to give them privileges
Restricts problem solving to single type of customer

12. Principles of Coordination
10.11
Principles of Coordination
Unity of command principle
An employee should have only one manager
Scalar principle
A clear, unbroken chain of command should link every employee with someone at a higher level
Span of control principle
Limited number of people reporting to any one manager

13. Effective Delegation Establish goals and standards Ensure clarity
10.12
Effective Delegation
Establish goals and standards
Ensure clarity
Involvement
Expect completed work
Provide training
Timely feedback