1. 1 Ch 8 Outline Organizational Structure & Design 1.Defining Organizational Structure 2.Organizational Design Decisions 3.Common Organizational Designs A.Traditional Designs B.Contemporary Designs 4.The Learning Organization

2. 2 Defining Organizational Structure Organizing – the process of creating an organization’s structure Organizational structure – the formal framework by which job tasks are divided, grouped and coordinated (often represented by an organizational chart) Organizational design – the process of developing or changing an organization’s structure – It involves six key elements

3. 3 Organizational Design Involves decisions about six key elements: 1.Work specialization 2.Departmentalization 3.Chain of command 4.Span of control 5.Centralization/decentralization 6.Formalization

4. 4 Departmentalization The way jobs are grouped together: 1. Functional – groups jobs by functions performed 2. Product – groups jobs by the product line 3. Geographical – groups jobs on the basis of territory or geography 4. Process – groups jobs on the basis of product or customer flow 5. Customer – groups jobs on the basis of common customers

5. 5 Span of Control Refers to the number of subordinates who report directly to an executive or supervisor The differences in the span of control have direct implications on the shape of the organization –Tall organizations – span of control remains constant, or narrow –Flat organizations – span of control is wide with fewer reporting levels

6. 6 Span of Control Organizations must find the optimal span of control to be effective –Narrow enough to permit manages to maintain control over subordinates –Wide enough so that the possibility of micromanaging is minimized The optimal span of control is dependant on the following factors –Is the work clearly defined –Are subordinates highly trained and do they have access to information –Is the manager highly capable and supportive –Are jobs similar and performance measures comparable –Do subordinates prefer autonomy to close supervisory control

7. 7 Decentralization Organizations in which high-level executives make most decisions and pass them down to lower levels for implementation are known as C entralized organizations Decentralized organizations allow lower-level managers to make important decisions Decentralization: –Can speed the decision making process –Allows the people who are most affected by the decision to make the decision –Allows individuals with the most relevant information, and who can best foresee the consequences of the decision, to make the decision

8. 8 Formalization The degree to which jobs within the organization are standardized. –Standardization – removes the need for employees to consider alternatives The extent to which employee behavior is guided by rules and procedures. –Explicit job descriptions –Clearly defined procedures

9. 9 Common Organizational Designs Traditional Designs - Simple Structure – low departmentalization, wide spand of control, authority centralized in a single person, and little formalization - Functional Structure – groups similar or related occupational specialties together (e.g. engineering, accounting, etc.)

10. 10 Common Organizational Designs Divisional Structure – composed of separate divisions –Each division has limited autonomy –Parent corporation acts as an external overseer to coordinate and control the divisions Parent corp. also provides support services

11. 11 The Divisional Organization In a divisional organization, departmentalization will group units around products, customers, or geographic regions

12. 12 Common Organizational Designs Team-Bases Structures – entire organization is made up of work teams –Employee empowerment is crucial (teams may be self- directed/managed—no straight-line authority from top down) –Teams are responsible for all work activity and performance –Complements functional or divisional structures in large orgs. –Allows efficiency of a bureaucracy –Provides flexibility of teams

13. 13 The Matrix Organization A matrix organization is a hybrid form of organization in which functional and divisional forms overlap; managers and staff personnel report to two bosses – a functional manager and a divisional manager

14. 14 The Matrix Organization Advantages of the Matrix organization include –Decision making is decentralized –Communication networks process large amounts of information –Decentralization keeps higher management from becoming overloaded –Employees learn to collaborate –More career options for employees Disadvantages of the matrix organization include –Subordinates may become confused regarding their primary responsibility –Power struggle between managers –Thinking that matrix management is the same thing as group decision making –Too much democracy can lead to not enough action