Structure and Design of Organizations Peter Drucker: While a poor structure makes a high performance impossible, the best structure in the world will not ensure good performance http://www.sbmt.bsu.by/usr/mamonova%5CLectureNotes%5COrg.Structure&Design.ppt.

Organization structure The way component parts and activities are grouped, controlled and coordinated to achieve specific aims and outcomes. How jobs tasks are formally divided, grouped and coordinated Structure is a means for attaining the objectives and goals of an organization

The Organization Chart The chart is an illustration in box and-lines informing about the formal lines of authority and the division of labor. The Vertical Hierarchy of Authority: A glance up and a glance down shows the chain of command The Horizontal Specialization: A glance to the left and right on the line of an organization chart shows the different jobs or work specialization

Chart—Example for a Hospital Board of Directors Strategic Planning Advisor Chief Executive Officer Legal Counsel President Cost Containment Staff Executive Administrative Director Executive Medical Director Director of X-Ray & Laboratory Services Director of Pharmacy Chief Physician Director of Personnel Director of Admissions Director of Nutrition & Food Services Director of Patient & Public Relations Director of Accounting Director of Surgery Director of Outpatient Services

Organization’s Major Elements Authority refers to the rights inherent in a managerial position to make decisions, give orders, and utilize resources. Delegation is the process of assigning managerial authority and responsibility to managers and employees lower in the hierarchy Responsibility is the obligation you have to perform the tasks assigned to you Accountability managers must report and justify work results to managers above them

Key elements in org.structure Work specialization: To what degree are tasks subdivided into separate jobs? Departmentalization: On what basis will jobs be grouped together? By function, product, customer, By territory… Chain of command: To whom individuals and groups report? Span of control: How many individuals can a manager direct? Important factors: Required Contact. Degree of Specialization. Ability to Communicate… Centralization and decentralization: Where does decision-making authority lie? Centralized Authority: important decisions are made by higher-level managers. Decentralized Authority: important decisions are made by middle-level and supervisory-level managers Formalization: To what degree will there be rules to direct employees and managers. Refers to the extent to which expectations regarding the means and ends of work are specified and written

Spans of Control: Narrow versus Wide CEO Narrow Key: T = Top manager M = Middle manager F = First-line (supervisory) manager T M Wide

Contingency Design Mechanistic vs. Organic Is the process of fitting the organization to the environment. Factors Affecting contingency Design are: Mechanistic vs. Organic Differentiation vs. Integration Size Technology Life Cycle

Characteristics of Mechanistic & Organic Organizations Centralized hierarchy of authority Decentralized hierarchy of authority Many rules and procedures Few rules and procedures Specialized tasks Shared tasks Formalized communication Informal communication Few teams or task forces Many teams or task forces Narrow span of control, taller structure Wider span of control, flatter structure

Types of Organizational Structures Simple Structure Functional Structure Divisional Structure Conglomerate Structure Hybrid Structure Matrix Structure Team-Based Structure Network Structure

Simple Structure Owner Administrative Assistant There is only one hierarchical level of management beneath the owner

Functional Structure Structure for a business Structure for a hospital President Vice President, Marketing Finance Production Human Resources Structure for a hospital Chief Administrator Chief of Medical Services Director of Administrative Outpatient Nutrition & Food Services

Divisional Structure FunctionProduct Divisions group activities are arranged around similar products or services Customer Divisions group activities around common customers or clients Geographic Divisions group activities around defined regional locations

Divisional Structure Product Divisional Structure President Motion Pictures & TV Division Music Magazine & Book Internet Products Product Divisional Structure Consumer Loans Mortgage Business Agriculture Customer Divisional Structure Western Region Northern Southern Eastern Geographic Divisional Structure

Conglomerate Structures This resembles the structure of General Electric President Lighting Products Appliances Aircraft Engines Plastics Financial Services Broad- casting

Hybrid Structures A Hypothetical example of what GM might use Vice- President, Production Marketing Finance Human Resources Functional divisional structure President Cadillac Buick Pontiac Chevrolet Product Divisional Structure Manager Region I Region II Region III Region IV Geographical divisional structure A Hypothetical example of what GM might use

Matrix Structure Example of Ford Motor Company Functional Structure President Vice President, Engineering Finance Production President. Marketing Project Manager, Taurus Manager, Mustang Manager, Explorer Manager, Expedition Functional Structure Subordinate reports to both Vice President of marketing & to project Manager for Mustang Project structure Example of Ford Motor Company

Advantages of Matrix Organization Efficient use or resources Flexibility in conditions of change and uncertainty Technical excellence Freeing top management for long-run planning Improving motivation and commitment Providing opportunities for personal development

Team-Based Structures President Vice President, Research & Development Design Engineering Marketing Product Team Manager, Manufacturing Light Trucks Sedans Sport Cars Project team members Functional structure Project teams

Network Structure Core of personal computer company USA Design Studio Sweden Components Assembly Mexico, Asia Core of personal computer company USA Engineering Company Japan Distribution Company Canada Accounting & Finance USA

Organizational Life Cycle Birth Stage the nonbureaucratic stage in which the organization is created Youth Stage the organization is in a prebureaucratic stage, a stage of growth and expansion Midlife Stage the organization becomes bureaucratic, a period of growth evolving into stability Maturity Stage the organization becomes very bureaucratic, large and mechanistic Consequences of Structural Deficiencies: Motivation and morale can be affected Decision making can be slow and of poor quality Conflict and lack of coordination can occur Failure to respond to changing circumstances Rising costs