Chapter 15 Organizational Structure By: Jennifer Aguirre & Ashley Mettille

What is Organizational Structure? Organizational structure is the division of labor and the patterns of coordination, communication, work flow, and formal power that direct organizational activities. Two fundamental processes in organizational structure are Division of labor and Coordination Division of Labor refers to the subdivision of work into separate jobs assigned to different people. *Subdivided work leads to job specialization because each job now includes a narrow subset of. the tasks necessary to complete the product or service Coordinating: As soon as people divide work among themselves, coordinating mechanisms are needed to ensure that everyone works in concert. Every organization uses one or more of the following coordinating mechanisms: 1)informal communication 2)formal hierarchy 3) standardization

Coordinating Mechanisms in Organization 1) Informal communication: This coordinating mechanism is used in all organizations! It is the sharing of information about mutual tasks as well as forming common mental models to synchronize work activities. For large companies this type of communication is important, since employees can exchange a large volume of information through face-to-face and other media-rich channels. Large organizations are encouraged to create an integrator roles. These people are responsible for coordinating a work process by encouraging employees in each work unit to share information and informally coordinate work activities.

Continued Coordination through Formal Hierarchy: Informal communication is the most flexible form of coordination, but it can be time-consuming. As an organization grows Formal Hierarchy must be used. This type of coordination is when Hierarchy assigns legitimate power to individuals, who then use this power to direct work processes and allocate resources. In other words, work is coordinate through direct supervision.

Coordination through Standardization It involves creating routine patterns of behavior or output. This mechanism takes three distinct forms: 1)Standardized processes: Quality and consistency of a product or service can often be improved by standardizing work activities through job descriptions and procedures. 2)Standardized outputs: This form involves ensuring that individuals and work units have clearly defined goals and output measures. 3)Standardized skills: When work activities are too complex to standardize through processes or goals, companies often coordinate work efforts by extensively training employees or hiring people who have learned precise role behaviors from educational programs.

Elements of Organizational Structure Every company is configured in terms of four basic elements of organizational structure. Three are introduced in this chapter and the fourth is in the next section. Span of control: The number of people directly reporting to the next level in the organizational hierarchy. Some of the best performing manufacturing plants currently have an average of 38 employees per supervisor. The best span of control depends on the nature of the task. A wider span of control is possible when employees perform routine tasks, whereas a narrower span of control is required when employees perform novel or complex tasks. A third influence is the degree of interdependence among employees within the department of team.

Tall and Flat Structures

Mechanisms vs. Organic Structures We have discussed span of control, centralization, and formalization together because they usually cluster into two forms: mechanism and organic structures. Mechanism structure: is characterized by a narrow span of control an high degree of formalization and centralization. Organic structure have the opposite characteristics. It has a wide span of control, with little formalization, and decentralized decision making.

Continued Centralization: The degree to which formal decision authority is held by a small group of people, typically those at the top of the organizational hierarchy. Most organizations begin with centralized structures because the founder makes most decisions and tries to direct the business toward his or her vision. Decentralized disperse decision authority and power throughout the organization. Formalization: The degree to which organizations standardize behavior though rules, procedures and relate mechanism.

Departmentalization Establishes the chain of command-the system of common supervision among positions and units with the organization. Focuses people around common mental models or ways particular skill set. Encourages coordination through informal communication around people and subunits

5 Pure Types of Departmentalization Simple Structure Functional Structure Divisional Structure Matrix Structure Team-Based Structure

Organizes employees around specific knowledge or other resources. Simple Structure Employs only a few people and typically offer only one distinct product for service. Minimal hierarchy-usually just employees reporting to the owners. Highly flexible and minimizes the walls that form between employees in other structures. Functional Structure Organizes employees around specific knowledge or other resources. Improves direct supervision, but increasing conflict in serving clients or developing products.

Divisional Structure Groups employees around geographic areas, clients, or outputs. Accommodates growth and focuses employee attention on products or customers rather than on tasks. Three variations Strategic business-Creates minibusinesses that may operate as subsidiaries rather than departments Geographic structure-Organizes employees around distinct regions of the country Product/service structure-organizes work between distinct outputs

Evaluating the Matrix Structure Having employees belong to departments by adding to specific teams based on needs. Combines two structures to leverage the benefits of both types of structure. Evaluating the Matrix Structure Optimizes the use of resources and expertise, making it ideal fro project-based organizations with fluctuating workloads. Improves communication efficient, project flexibility, and innovation. Increases goal conflict and ambiguity.

Team-Based Structure Features Flat with low formalization and organize self-directed teams around work process rather than functional specialties. Features Built around self-directed work teams rather than traditional teams or departments. Typically organized around work processes, such as making a specific product or serving a specific group. Has a very flat hierarchy, usually with no more than two or three management levels.

Continued Evaluating The Team-based Structure More responsive and flexible than traditional functional or divisionalized structures. Reduces costs because teams have less reliance on formal hierarchy. Quicker more informed decision making. Employees may experience stress due to increased ambiguity and conflict.

Network Structure Evaluating the Network Structure An alliance of several organizations for the purpose of creating a product or serving a client. One of the main forces pushing toward a network structure is the recognition that an organization has only a few core competencies. Virtual corporations are network structures that can quickly reorganize themselves to suit the clients requirements. They exist temporarily and reshape themselves quickly to fit immediate needs. Evaluating the Network Structure Offer flexibility to realign their structures with changing environmental requirements. A disadvantage is that they expose the core firm to market forces.

Contingencies of Organizational Design External Environment Dynamic versus stable environments- have a high rate of change, leading to novel situations and a lack of identifiable patterns. Complex versus simple environments- have many elements whereas simple environments have few things to monitor. Diverse versus integrated environments-organizations located in diverse environments have a greater variety of products or services, clients, and regions Hostile versus munificent environments-Firms located in hostile environments face resource scarcity and more competition in the marketplace. Reduce the predictability of access to resources and demand for outputs

Organizational Strategy. Organizational Size As organizations increase in size, they become more decentralized and more formalized, with greater job specialization and more elaborate coordinating mechanisms. Technology Variability- The number of expectations to standard procedure that tend to occur. Analyzability-the predictability or difficulty of the required work. The work units technology-including variety of work and analyzability of problems influences whether to adopt an organic or mechanistic structure. Organizational Strategy. Represents the decisions and actions applied to achieve the organizations goals. ‘Structure follows strategy” has become the dominant perspective of business policy and strategic management.

Questions/Answers 1)List the three coordinating Mechanisms in an organization: Informal communication, formal hierarchy, and standardization. 2) List three mechanisms involved in coordination through standardization: Standardized process, standardized outputs, and standardized skills. 3)True or False: Tall structures use narrow span of control and Flat structures use wide span of control. TRUE 4)What are the two of the 5 forms of departmentalization? Simple Structure, Functional Structure, Divisional Structure, Matrix Structure, and Team based Structure. 5)True or False: The best organization structure depends on the firms external environment, size, technology and strategy. TRUE