Organization Structure

The Organization Goals and Strategy Environment Size Culture Technology Structure Formalization Specialization Hierarchy of Authority Centralization Professionalism Personnel Ratios

Organization Structure Defines how tasks are divided, resources are deployed, and departments are coordinated The set of formal tasks assigned to individuals & depts. Formal reporting relationships The design of systems to ensure effective coordination of employees across departments Organizing process leads to the creation of organization structure

Organizing the Vertical Structure:Work Specialization Tasks are subdivided into individual jobs Division of labor concept Employees perform only the tasks relevant to their specialized function Jobs tend to be small, but they can be performed efficiently

Organizing the Vertical Structure: Chain of Command Unbroken line of authority that links all persons in an organization Shows who reports to whom Associated with two underlying principles Unity of Command: (each employee is held responsible to only one supervisor) Scalar Principle:(clearly defined line of authority)

Organizing the Vertical Structure: Authority Formal and legitimate right of a manager to make decisions and issue orders Allocate resources to achieve organizationally desired outcomes Authority is distinguished by three characteristics Authority is vested in organizational positions, not people Authority is accepted by subordinates Authority flows down the vertical hierarchy

Organizing the Vertical Structure: Accountability Mechanism through which authority and responsibility are brought into alignment People are subject to reporting and justifying task outcomes to those above them in the chain of command Can be built into the organization structure

Organizing the Vertical Structure: Delegation Give thorough instructions Maintain feedback Evaluate and reward performance Techniques for Delegation Delegate the whole task Ensure that authority equals responsibility (empowerment) Select the right person

Organizing the Vertical Structure: Span of Management/Span of Control Number of employees who report to a supervisor Traditional view, about seven subordinates per manager Many lean organizations today have 30, 40, or even higher subordinates When supervisors must be closely involved with subordinates, the span should be small Supervisors need little involvement with subordinates, it can be large

Tall versus Flat Structure Span of Control used in an organization determines whether the structure is tall or flat Tall structure has a narrow span and more hierarchical levels Flat structure has a wide span, is horizontally dispersed and fewer hierarchical levels The trend has been toward wider spans of control

Organizing the Vertical Structure:Formalization Written document used to direct & control employees

Departmentalization The basis on which individuals are grouped into departments Five structural alternatives Vertical functional approach. People are grouped together in departments by common skills. Divisional approach. Grouped together based on a common product, program, or geographical region. Horizontal matrix approach. Functional and divisional chains of command. Some employees report to two bosses Team-based approach. Created to accomplish specific tasks Network approach. Small, central hub electronically connected to their other organizations that perform vital functions. Departments are independent, and can be located anywhere.

Advantages of Functional Approach Efficient use of resources In-depth skill specialization Career progress within the department Top manager has direction and control Excellent coordination High-quality problem solving Simplifies training 24

Disadvantages of Functional Approach Poor communication among functional departments Slow response to external changes Centralized decision making Responsibility for problems difficult to identify Employees have limited view Limited general management training 25

Divisional Approach Departments are grouped together based on organizational outputs Diverse departments are brought together to produce a single organizational output Encourages decentralization 26

Advantages of Geographic Divisions Responsive in an unstable environment Shows concern for customer Coordinates across functional departments Identifies responsibility for product Emphasizes overall product and division goals Develops general management skills Minimizes travel costs 28

Disadvantages of Geographic Divisions Duplication of resources across divisions Less specialization in divisions Poor coordination across divisions Less top management control Competition for resources among divisions More managers needed 29

Matrix Approach Functional and divisional chains of command simultaneously Dual lines of authority Functional hierarchy of authority runs vertically Divisional hierarchy runs laterally Violates the unity of command concept 31

Advantages of Matrix More efficient use of resources than single hierarchy Adaptable to changing environment Development of both general and specialists management skills Expertise available to all divisions Enlarged tasks for employees 32

Disadvantages of Matrix Dual chain of command High conflict between two sides of matrix Many meetings to coordinate activities Need for human relations training Power domination by one side of matrix 33

Team Approach Cross-functional teams consist of employees from various functional departments Interdisciplinary approach to management Permanent team solve ongoing problems Reengineering radical redesign for improvements in cost, quality, service and speed 34

Advantages of Teams Same advantages as functional structure Reduced barriers among departments Quicker response time Better morale Reduced administrative overhead 35

Disadvantages of Teams Dual loyalties and conflict Time and resources spent on meetings Unplanned decentralization 36

Network Approach Organization divides major functions into separate companies brokered by a small headquarters organization "Where is the organization?" Especially appropriate for international operations Held together with phones, faxes, and other electronic technology 37

Advantages of Network Approach Global competitiveness Work force flexibility Reduced administrative overhead 38

Disadvantages of Network Approach No hands-on control Loss of part of the organization severely impacts remainder of organization Employee loyalty weakened 39

Quality of collaboration across departments Coordination Quality of collaboration across departments

Structural Design Project Management Task Forces Teams Task Force...A temporary team or committee formed to solve a specific short-term problem Team…Participants from several departments who meet to solve ongoing problems Project Manager…A person responsible for coordinating the activities of several departments

Reengineering One of the most popular management concepts Complete rethinking and transformation of key business processes Leads to greater flexibility Often involves a shift to horizontal structure based on teams Requires identifying customer needs and then designing processes and aligning people to meet those needs Can squeeze out the dead space and time lags in work flows May lead to redesigning information systems to cut across departmental lines

Differences in Mechanistic versus Organic Organizations Contemporary Loose, Organic Organization Traditional Tight, Mechanistic Organization Horizontal structure is dominant 1. Shared tasks 2. Relaxed hierarchy, authority by expertise, few rules 3. Horizontal communication, face-to-face 4. Many teams, task forces, and integrators 5. Informal, decentralized decision making Dominant Structural Approach Vertical Structure is dominant 1. Specialized tasks 2. Strict hierarchy authority, many rules 3. Vertical communication and reporting systems 4. Few teams, task forces, or integrators 5. Centralized decision making