2 Learning ObjectivesDiscuss the fundamental characteristics of organizing, including such concepts as work specialization, chain of command, span of management, and centralization versus decentralization.Describe functional and divisional approaches to structure.Explain the matrix approach to structure and its application to both domestic and international organizations.Describe the contemporary team and virtual network structures and why they are being adopted by organizations.
3 Learning Objectives (contd.) Learning Objectives (contd.)Explain why organizations need coordination across departments and hierarchical levels, and describe mechanisms for achieving coordination.Identify how structure can be used to achieve an organization’s strategic goals.Illustrate how organization structure can be designed to fit environmental uncertainty.Define production technology (manufacturing, service, and digital) and explain how it influences organizational structure.
4 OrganizingOrganization is the deployment of resources to achieve strategic goals.It is reflected inDivision of labor into specific departments & jobsFormal lines of authorityMechanisms for coordinating diverse organizational tasks
5 Organization Structure Organization StructureDefines how tasks are divided, resources are deployed, and departments are coordinatedSet of formal tasks assignedFormal reporting relationshipsThe design of systems to ensure effective coordination of employees across departments
6 The Organization Chart The Organization ChartVisual representationSet of formal tasksFramework for vertical controlFormal reporting relationships
7 Division of labor concept Work SpecializationDivision of labor conceptDegree to whichTasks are subdivided into individual jobsEmployees perform only the tasks relevant to their specialized functionJobs tend to be small, but they can be performed efficiently
8 Chain of CommandUnbroken line of authority that links all persons in an organizationShows who reports to whomAssociated with two underlying principlesUnity of CommandScalar Principle
9 AuthorityFormal and legitimate right of a manager to make decisions and issue ordersAllocate resources to achieve organizationally desired outcomesAuthority is distinguished by three characteristicsAuthority is vested in organizational positions, not peopleAuthority is accepted by subordinatesAuthority flows down the vertical hierarchy
10 ResponsibilityFlip side of the authority coinThe duty to perform the task or activity an employee has been assignedManagers are assigned authority commensurate with responsibility
11 AccountabilityMechanism through which authority and responsibility are brought into alignmentPeople are subject to reporting and justifying task outcomes to those above them in the chain of commandCan be built into the organization structure
12 DelegationProcess managers use to transfer authority and responsibilityOrganizations encourage managers to delegate authority to lowest possible level
13 Line and Staff Authority Line and Staff AuthorityLine Authority = individuals in management positions have the formal power to direct and control immediate subordinatesStaff Authority = granted to staff specialists in their area of expertise
14 Span of Management/ Span of Control Span of Management/ Span of ControlNumber of employees who report to a supervisorTraditional view = seven subordinates per managerLean organizations today = 30+ subordinatesSupervisor Involvementmust be closely involved with subordinates, the span should be smallneed little involvement with subordinates, it can be large
15 Factors Associated With Less Supervisor Involvement Factors Associated With Less Supervisor InvolvementWork is stable and routineSubordinates perform similar work tasksSubordinates are concentrated in a single locationSubordinates are highly trainedRules and procedure defining task activities are availableSupport systems and personnel are available for the managerLittle time is required in nonsupervisory activitiesManagers’ preferences and styles favor a large span
16 Tall versus Flat Structure Tall versus Flat StructureSpan of Control used in an organization determines whether the structure is tall or flatTall structure has a narrow span and more hierarchical levelsFlat structure has a wide span, is horizontally dispersed and fewer hierarchical levelsThe trend has been toward wider spans of control
17 Centralization versus Decentralization Centralization versus DecentralizationCentralization means that decision authority is located near the top of the organization.Decentralization means decision authority is pushed downward to lower organizational levels.
18 Departmentalization The basis on which individuals are grouped into departmentsVertical functional structure. People are grouped together in departments by common skills.Divisional structure. Grouped together based on a common product, program, or geographical region.Matrix structure. Functional and divisional chains of command. Some employees report to two bosses.Team-based structure. Created to accomplish specific tasks.
19 Virtual Network Structure Virtual Network StructureAn organizational structure that disaggregates major functions to separate companies that are brokered by a small headquarters organization.
20 Five Approaches to Structural Design Five Approaches to Structural DesignExhibit 10.3
21 Five Approaches to Structural Design Slide 2 Five Approaches to Structural Design Slide 2Exhibit 10.3
22 Vertical Functional Approach Vertical Functional ApproachGrouping of positions into departments based on similar skills, expertise, and resource useInformation flows up and downChain of command converges at the topManagers and employees are compatible because of similar training and expertiseRules and procedures governing duties and responsibilities
23 Divisional Structure Advantages Divisional Structure AdvantagesEfficient use of resourcesSkill specialization developmentTop management controlExcellent coordinationQuality technical problem solving
24 Divisional Structure Disadvantages Divisional Structure DisadvantagesPoor communicationsSlow response to external changesDecisions concentrated at topPin pointing responsibility is difficultLimited view of organizational goals by employees
25 Matrix AdvantagesMore efficient use of resources than single hierarchyAdaptable to changing environmentDevelopment of both general and specialists management skillsExpertise available to all divisionsEnlarged tasks for employees32
26 Dual Authority Structure in a Matrix Organization Dual Authority Structure in a Matrix OrganizationExhibit 10.6
27 Matrix Disadvantages Dual chain of command Matrix DisadvantagesDual chain of commandHigh conflict between two sides of matrixMany meetings to coordinate activitiesNeed for human relations trainingPower domination by one side of matrix33
28 Team Advantages Same advantages as functional structure Team AdvantagesSame advantages as functional structureReduced barriers among departmentsQuicker response timeBetter moraleReduced administrative overhead35
29 Team Disadvantages Dual loyalties and conflict Team DisadvantagesDual loyalties and conflictTime and resources spent on meetingsUnplanned decentralization36
30 Virtual Network Approach Advantages Virtual Network Approach AdvantagesCan draw on expertise worldwideWork force flexibilityReduced administrative overhead38
31 Network Approach Disadvantages Network Approach DisadvantagesLack of control, weak boundariesGreater demands on managersEmployee loyalty weakened39
32 Task Forces, Teams, Project Management Task Forces, Teams, Project ManagementTask Force = temporary team/committee designed to solve a short-term problem involving several departmentsProject Manager = responsible for coordinating activities of several departments on a full-time basis for the completion of a specific project
33 ReengineeringRadical redesign of business processes to achieve dramatic improvements in cost, quality, service, and speedProcess = organized group of related tasks and activities that work together to transform inputs into outputs and create value