The Basic Elements of Organizing Copyright © Houghton Mifflin Company. All rights reserved.

The Elements Organizing Deciding how to best group organizational activities and resources. Here are the main elements we will cover: Job Design Departmentalization Chain of Command Span of Management Authority Centralization vs. Decentralization Tall vs. Flat Organizations Copyright © Houghton Mifflin Company. All rights reserved.

Job Specialization (Division of Labor) Job Design-- Job Specialization (Division of Labor) The degree to which the overall task of the organization is broken down and divided into smaller component parts. Benefits of Specialization Workers can become proficient at a task. Transfer time between tasks is decreased. Specialized equipment can be more easily developed. Employee replacement becomes easier. Limitations of Specialization boredom and dissatisfaction with mundane tasks. Anticipated benefits do not always occur. Copyright © Houghton Mifflin Company. All rights reserved.

Adam Smith’s Example of Job Specialization Making a pin (nail) requires 18 tasks 1 worker doing all 18 tasks might make 20 pins (nails) a day. 20 workers = (20 x 20) = 400 pins ______________________________ With specialization: 20 workers make 100,000 pins a day. 1 worker = 5,000 pins 20 pins vs. 5,000 pins per worker Copyright © Houghton Mifflin Company. All rights reserved. 10

Alternatives to Specialization Job Rotation Systematically moving employees from one job to another in an attempt to reduce employee boredom. Job Enlargement An increase in the total number of tasks workers perform. Job Enrichment Increasing both the number of tasks the worker does and the control the worker has over the job. Copyright © Houghton Mifflin Company. All rights reserved.

Alternatives to Specialization Job Characteristics Approach: suggests jobs should be diagnosed and improved along 5 core dimensions. Core Dimensions Skill variety—the number of tasks a person does in a job. Task identity—the extent to which the worker does a complete or identifiable portion of the total job. Task significance—the perceived importance of the task. Autonomy—the degree of control the worker has over how the work is performed. Feedback— the extent to which the worker knows how well the job is being performed. Copyright © Houghton Mifflin Company. All rights reserved.

Alternatives to Specialization Work Teams An alternative to job specialization that allows the entire group to design the work system it will use to perform an interrelated set of tasks. Copyright © Houghton Mifflin Company. All rights reserved.

Grouping Jobs: Departmentalization The process of grouping jobs according to some logical arrangement. Rationale for Departmentalization Organizational growth exceeds the owner-manager’s capacity to personally supervise all of the organization. Additional managers are employed and assigned specific employees to supervise. Copyright © Houghton Mifflin Company. All rights reserved.

Departmentalization (cont’d) Functional Departmentalization Grouping jobs involving the same or similar activities. Product Departmentalization Grouping activities around products or product groups. Customer Departmentalization Grouping activities to respond to and interact with specific customers and customer groups. Location Departmentalization The grouping of jobs on the basis of defined geographic sites or areas. Copyright © Houghton Mifflin Company. All rights reserved.

Bases for Departmentalization Copyright © Houghton Mifflin Company. All rights reserved.

Reporting Relationships Chain of Command A clear and distinct line of authority among the positions in an organization. Span of Management (Span of Control) The number of people who report to a particular manager. Determined by many factors: Competence of manager and subordinate Extent of Standardized Procedures Degree of required interaction Amount of non-supervisory work in manager’s job Copyright © Houghton Mifflin Company. All rights reserved.

Tall Versus Flat Organizations Wide spans of management result in flat organizations which can improve communication and flexibility. Copyright © Houghton Mifflin Company. All rights reserved.

Distributing Authority Power that has been legitimized by the organization. Delegation The process by which managers assign a portion of their total workload to others. Reasons for Delegation To enable the manager to get more work done by utilizing the skills and talents of subordinates. To foster development of subordinates by having them participate in decision making and problem. Copyright © Houghton Mifflin Company. All rights reserved.

Decentralization and Centralization Systematically delegating power and authority throughout the organization to middle- and lower-level managers. Centralization Systematically retaining power and authority in the hands of higher-level managers. Factors Determining Choice of Centralization External environment’s complexity and uncertainty History of the organization Nature (cost and risk) of the decisions to be made. Copyright © Houghton Mifflin Company. All rights reserved.

The Nature of Organization Design The overall set of structural elements and the relationships among those elements used to manage the total organization. A means to implement strategies and plans to achieve organizational goals. Organization Design Concepts Organizations are not designed and then left intact. Organizations are in a continuous state of change. Designs for larger organizations are extremely complex and have many nuances and variations. Copyright © Houghton Mifflin Company. All rights reserved.

The Bureaucratic Model of Organization Design Bureaucratic Model (Max Weber) A logical, rational, and efficient organization design based on a legitimate and formal system of authority. Characteristics A division of labor with each position filled by an expert. A consistent set of rules that ensure uniformity in task performance. A hierarchy of positions which creates a chain of command. Impersonal management; with the appropriate social distance between superiors and subordinates. Employment and advancement is based on technical expertise, and employees are protected from arbitrary dismissal. Copyright © Houghton Mifflin Company. All rights reserved.

Situational View of Organization Design Assumes that the optimal design depends on a set of relevant situational factors. Four Basic Factors: Technology Unit or Small Batch Large-Batch or Mass Production Continuous-Process Technology Environment Stable environments that remain constant over time. Mechanistic – similar to bureaucratic, most frequently found in stable environments Unstable environments subject to uncertainty and rapid change Organic – flexible and informal; usually found in unstable and unpredictable environments Size Organizational Life Cycle Copyright © Houghton Mifflin Company. All rights reserved.

Basic Forms of Organization Design Functional or U-form (Unitary) Design Organizational members and units are grouped into functional departments such as marketing and production. Coordination is required across all departments. Design approach resembles functional departmentalization in its advantages and disadvantages. Copyright © Houghton Mifflin Company. All rights reserved.

Functional or U-form Design for a Small Manufacturing Company Copyright © Houghton Mifflin Company. All rights reserved.

Basic Forms of Organization Design (cont’d) Conglomerate or H-form (Holding) Design Organization consists of a set of unrelated businesses with a general manager for each business. Holding-company design is similar to product departmentalization. Coordination is based on the allocation of resources across companies in the portfolio. Design has produced only average to weak financial performance; has been abandoned for other approaches. Copyright © Houghton Mifflin Company. All rights reserved.

Conglomerate (H-form) Design at Samsung Copyright © Houghton Mifflin Company. All rights reserved.

Basic Forms of Organization Design (cont’d) Divisional or M-form (Multidivisional) Design Multiple businesses in related areas operating within a larger organizational framework. Results from a strategy of related diversification. Some activities are decentralized down to the divisional level; others are centralized at the corporate level. M-form design advantages are the opportunities for coordination and sharing of resources. Successful M-form organizations can out perform U-form and H-form organizations. Copyright © Houghton Mifflin Company. All rights reserved.

Multidivisional (M-form) Design at Limited Brands Copyright © Houghton Mifflin Company. All rights reserved.

Basic Forms of Organization Design (cont’d) Matrix Design Two overlapping bases of departmentalization: A set of product groups or temporary departments are superimposed across the functional departments. Employees in the matrix belong to their departments and the project team: A multiple command structure in which an employee reports to both departmental and project managers. A matrix design is useful when: There is strong environmental pressure. There are large amounts of information to be processed. There is pressure for shared resources. Copyright © Houghton Mifflin Company. All rights reserved.

A Matrix Organization Copyright © Houghton Mifflin Company. All rights reserved.

Basic Forms of Organization Design (cont’d) Hybrid Designs Based on two or more common forms of organization design—may have a mixture of related divisions and a single unrelated division. Most organizations use a modified form of organization design that permits them to have sufficient flexibility to make adjustments for strategic purposes. Copyright © Houghton Mifflin Company. All rights reserved.

Emerging Issues in Organization Design The Team Organization Relies almost exclusively on project-type teams, with little or no underlying functional hierarchy. The Virtual Organization Has little or no format structure with few permanent employees, leased facilities, and outsourced basic support services. May conduct its business entirely on-line and exists only to meet for a specific and present need. The Learning Organization Works to facilitate the lifelong learning and development of its employees while transforming itself to respond to changing demands and needs. Copyright © Houghton Mifflin Company. All rights reserved.