Prepared by Charlie Cook The University of West Alabama © 2012 South-Western, a part of Cengage Learning All rights reserved. Structure in Organizations Chapter th Edition Managing Organizational Behavior Moorhead & Griffin

16–2 © 2012 South-Western, a part of Cengage Learning After studying this chapter you should be able to: Define organization structure and discuss its purpose. Describe the classic views of organization structure. Describe structural configuration and summarize its four basic dimensions. Discuss two structural policies that affect operations. Explain the dual concepts of authority and responsibility. Chapter Learning Objectives

16–3 © 2012 South-Western, a part of Cengage Learning The Nature of Organization Structure Organization –A goal-directed social entity with deliberate processes and systems Organizational Goals –Objectives that management seeks to achieve in pursuing the firm’s purpose Strategies –Specific action plans that enable the organization to achieve its goals and thus its purpose

16–4 © 2012 South-Western, a part of Cengage Learning The Nature of Organization Structure (cont’d) Organization Structure –The system of task, reporting, and authority relationships within which an organization does its work –Purpose of structure is to order and coordinate the actions of employees to achieve organizational goals –“Structure follows strategy”

16–5 © 2012 South-Western, a part of Cengage Learning The Nature of Organization Structure (cont’d) Organized Effort Premise –People can accomplish more by working together than they can separately –Proper coordination is needed to realize the potential gains from collective efforts Analysis of Organizational Structures –Configuration (organization chart) –Operational characteristics –Responsibility and authority

16–6 © 2012 South-Western, a part of Cengage Learning Structural Configuration Organization Chart –Describes the structure of an organization Shows all people, positions, reporting relationships, and lines of formal communication Depicts reporting relationships and work group memberships Shows how positions and small work groups are combined into departments which make up the shape (configuration) of the organization Basic Requirements of Structure –Division of labor –Coordination of divided tasks

16–7 © 2012 South-Western, a part of Cengage Learning 16.1 Examples of Organization Charts

16–8 © 2012 South-Western, a part of Cengage Learning Structural Configuration (cont’d) Division of Labor (Specialization) –The way the organization’s work is divided into different jobs to be done by different people –Organizations, in order to be successful, must have highly trained specialists who know their specific jobs very well Coordinating the Divided Tasks –Mechanisms to help coordinate the divided tasks Departmentalization Span of control Administrative hierarchy

16–9 © 2012 South-Western, a part of Cengage Learning Structural Configuration (cont’d) Departmentalization –The manner in which divided tasks are combined and allocated to work groups –A consequence of the division of labor –Ways to departmentalize tasks: Business function Process Product or service Customer Geography

16–10 © 2012 South-Western, a part of Cengage Learning 16.1 Advantages and Disadvantages of Division of Labor AdvantagesDisadvantages Efficient use of labor Reduced training costs Increased standardization and uniformity of output Increased expertise from repetition of tasks Routine, repetitive jobs Reduced job satisfaction Decreased worker involvement and commitment Increased worker alienation Possible incompatibility with computerized manufacturing technologies

16–11 © 2012 South-Western, a part of Cengage Learning Structural Configuration (cont’d) Departmentalization (cont’d) –Span of control (also span of management) The number of people who report to a manager The smaller the span of control the more a manager can maintain close control over workers and stay in contact with daily operations Size is inversely related to the span of control

16–12 © 2012 South-Western, a part of Cengage Learning 16.2 Departmentalization by Business Function and by Process

16–13 © 2012 South-Western, a part of Cengage Learning 16.3 Departmentalization by Customer

16–14 © 2012 South-Western, a part of Cengage Learning 16.4 Departmentalization by Customer and by Geographic Region

16–15 © 2012 South-Western, a part of Cengage Learning 16.5 Mixed Departmentalization

16–16 © 2012 South-Western, a part of Cengage Learning Conditions Affecting Span of Control Optimal unit size (span of control) depends on: 1.The coordination requirements within the unit, including factors such as the degree of job specialization 2.The similarity of the tasks in the unit 3.The type of information available or needed by unit members 4.Differences in the members’ need for autonomy 5.The extent to which members need direct access to the supervisor

16–17 © 2012 South-Western, a part of Cengage Learning Structural Configuration (cont’d) Departmentalization (cont’d) –Administrative hierarchy System of reporting relationships in the organization from the first level up through the president or CEO Organizational downsizing results in lower overhead costs, less bureaucracy, faster decision making, smoother communications, and increases in productivity

16–18 © 2012 South-Western, a part of Cengage Learning 16.6 Span of Control and Levels in the Administrative Hierarchy

16–19 © 2012 South-Western, a part of Cengage Learning Structure and Operations Structural Policies –Affect operations and prescribe or restrict how employees behave in their organizational activities Centralization –Decision-making authority is concentrated at the top of the organizational hierarchy Decentralization –Decisions are made throughout the hierarchy. Participative Management –A total management system in which people throughout the organization are involved in the daily decision making and management of the organization

16–20 © 2012 South-Western, a part of Cengage Learning Structure and Operations (cont’d) Formalization –The degree to which rules and procedures shape the jobs and activities of employees –Good managers use appropriate judgment in making exceptions to rules in recognizing that: Individuals are unique with meaningful differences There are commonalities among employees

16–21 © 2012 South-Western, a part of Cengage Learning Responsibility and Authority Responsibility –An obligation to do something with the expectation of achieving some act or output Authority –Power that has been legitimized within a particular social context Originates in the ownership of the organization The relationship between responsibility and authority must be one of parity Can be delegated down to others Delegation is the transfer to others of authority to make decisions and use organizational resources

16–22 © 2012 South-Western, a part of Cengage Learning Responsibility and Authority (cont’d) An Alternative View of Authority –Acceptance Theory of Authority The authority of a manager depends on their subordinates’ acceptance of the manager’s right to give directives and to expect compliance with them By either accepting or rejecting the directives of a supervisor, workers can limit supervisory authority

16–23 © 2012 South-Western, a part of Cengage Learning Classic Views of Structure Ideal Bureaucracy (Max Weber) –Is an organizational system characterized by a hierarchy of authority and a system of rules and procedures that create a maximally effective system for large organizations. –Weber claimed that the bureaucratic form of administration is superior to other forms of management with respect to: Stability Control Predictability of outcomes

16–24 © 2012 South-Western, a part of Cengage Learning 16.2 Elements of Weber’s Ideal Bureaucracy ElementsComments 1.RULES AND PROCEDURESA consistent set of abstract rules and procedures should exist to ensure uniform performance. 2.DISTINCT DIVISION OF LABOREach position should be filled by an expert. 3.HIERARCHY OF AUTHORITYThe chain of command should be clearly established. 4.TECHNICAL COMPETENCEEmployment and advancement should be based on merit. 5.SEGREGATION OF OWNERSHIPProfessional managers rather than owners should run the organization. 6.RIGHTS AND PROPERTIES OF THE POSITION These should be associated with the organization, not with the person who holds the office. 7.DOCUMENTATIONA record of actions should be kept regarding administrative decisions, rules, and procedures.

16–25 © 2012 South-Western, a part of Cengage Learning Classic Views of Structure (cont’d) The Classic Principles of Organizing –Management functions (Henri Fayol) Planning Organizing Command Coordination Control –Principles of organizing provide the framework for the organization chart and the coordination of work

16–26 © 2012 South-Western, a part of Cengage Learning 16.3 Fayol’s Classic Principles of Organizing From General and Industrial Management, by Henri Fayol. Copyright © Lake Publishing 1984, Belmont, CA Used with permission. PrincipleFayol’s Comments 1.DIVISION OF WORKIndividuals and managers work on the same part or task. 2.AUTHORITY AND RESPONSIBILITY Authority—right to give orders; power to exact obedience; goes with responsibility for reward and punishment. 3.DISCIPLINEObedience, application, energy, behavior. Agreement between firm and individual. 4.UNITY OF COMMANDEmployee receives orders from one superior. 5.UNITY OF DIRECTIONOne head and one plan for activities with the same objective. 6.SUBORDINATION OF INDIVIDUAL INTEREST TO GENERAL INTEREST Objectives of the organization come before objectives of the individual. 7.REMUNERATION OF PERSONNEL Pay should be fair to the organization and the individual; discussed various forms.

16–27 © 2012 South-Western, a part of Cengage Learning 16.3 Fayol’s Classic Principles of Organizing (cont’d) From General and Industrial Management, by Henri Fayol. Copyright © Lake Publishing 1984, Belmont, CA Used with permission. PrincipleFayol’s Comments 8.CENTRALIZATIONProportion of discretion held by the manager compared to that allowed to subordinates. 9.SCALAR CHAINLine of authority from lowest to top. 10.ORDERA place for everyone and everyone in his or her place. 11.EQUITYCombination of kindness and justice; equality of treatment. 12.STABILITY OF TENURE OF PERSONNEL Stability of managerial personnel; time to get used to work. 13.INITIATIVEPower of thinking out and executing a plan. 14.ESPRIT DE CORPSHarmony and union among personnel is strength.

16–28 © 2012 South-Western, a part of Cengage Learning Classic Views of Structure (cont’d) Human Organization (Rensis Likert) –Based on supportive relationships, participation, and overlapping work groups The principle of “overlapping work groups” means that work groups are linked, with managers serving as the “linking pins” –Assumption is that people work best in highly cohesive groups oriented toward organizational goals –Approach consists of four systems of organizing (management systems) and eight organizational variables

16–29 © 2012 South-Western, a part of Cengage Learning 16.4 Characteristics of Likert’s Four Management Systems Reference: Adapted from Rensis Likert, New Patterns of Management (New York: McGraw-Hill, 1961), pp. 223–233; and Rensis Likert, The Human Organization (New York: McGraw-Hill, 1967), pp. 197, 198, 201, 203, 210, and 211.

16–30 © 2012 South-Western, a part of Cengage Learning 16.4 Characteristics of Likert’s Four Management Systems Reference: Adapted from Rensis Likert, New Patterns of Management (New York: McGraw-Hill, 1961), pp. 223–233; and Rensis Likert, The Human Organization (New York: McGraw-Hill, 1967), pp. 197, 198, 201, 203, 210, and 211.

16–31 © 2012 South-Western, a part of Cengage Learning Organizational Behavior in Action After reading the chapter: –In the chapter opening case, why did Intel shift from a product-centered to a customer-centered business model? –Which elements of Weber’s ideal bureaucracy were present in the structure of an organization for which you have worked? Which are not?