© 2005 Prentice-Hall, Inc Chapter 12 Organizational Structure

© 2005 Prentice-Hall, Inc Learning Objectives Define organizational structure and understand the elements that compose it Know how bureaucracies and other types of organizations are structured Appreciate the structure and role of family businesses in international business Know how national culture affects various types of organization structure Have an awareness of emerging types of organizational structures in the global economy

© 2005 Prentice-Hall, Inc Organizational Structure The arrangement of positions in an organization

© 2005 Prentice-Hall, Inc The Systems Perspective of Organizations Inputs Raw materials Human resources Finance Ideas Transformation Processes Outputs Products Services Knowledge

© 2005 Prentice-Hall, Inc Elements of Structure Complexity Extent to which an organization has subparts Horizontal Differentiation Way tasks performed by the organization are subdivided Vertical/Hierarchical Differentiation Number of levels in an organization Spatial Dispersion Geographical spread of an organization’s sub-units

© 2005 Prentice-Hall, Inc Elements of Structure Centralization Focuses on decision-making authority of members of an organization Centralized Decisions made by few people, usually at the top Decentralized More broad-based decision making

© 2005 Prentice-Hall, Inc Elements of Structure Formalization Extent to which rules, policies, and procedures govern organization members' behavior Patterns Mechanistic/Bureaucratic Centralized, high formalization, specialization based on a micro division of labor Organic Decentralized, low formalization, specialization based on depth of knowledge

© 2005 Prentice-Hall, Inc Explaining Structure Determinist Theories One variable explains more of the structural aspects of organizations than others Contingency Theories Multiple causes that produce different types of structures

© 2005 Prentice-Hall, Inc Culture and Organization Structure Ways of structuring work strong enough to persist in value system of another society Differences in cultural values contribute to variation in organizational structure

© 2005 Prentice-Hall, Inc Organization Structure, Culture, and Organizational Behavior Cultural values affect organization structure, which then influences organizational behavior Structuralism Organization structure influences— even determines—values Organizational behavior a product of the interaction of structure and values

© 2005 Prentice-Hall, Inc Types of Organizational Structure Bureaucracy Rational administration Simple Structure Typical of entrepreneurial activity in early stages and of small family businesses

© 2005 Prentice-Hall, Inc Types of Organizational Structure Organic Structure Flexible, change oriented, fosters creativity Multiple Structures Contain both bureaucratic and organic elements Often experience conflict as a result of coexistence of different structures

© 2005 Prentice-Hall, Inc Structural Variations Family Business Take various forms Some small and local, others dispersed multinational conglomerates Chinese Family Business Centers on patrimonialism Autocratic leadership and a personalistic style of management

© 2005 Prentice-Hall, Inc National Structural Variations Japanese Keiretsu Complex interfirm networks that combine market exchange and noneconomic social relations Korean Chaebol Business group consisting of large companies, owned and managed by family members or relatives in many diversified business areas

© 2005 Prentice-Hall, Inc Emerging Structures in the Global Economy Boundaryless Organizations Features include widespread use of project teams, interfunctional teams, networks, and similar structural mechanisms Multinational Structure Focus on a strategy that is primarily country oriented and locally responsive Global Structure Centralized, follows a strategy built on global-scale cost advantages

© 2005 Prentice-Hall, Inc Emerging Structures in the Global Economy International Structure Develops products and innovations in domestic market, then transports them to foreign affiliates where products and technologies are adapted to local needs Transnational Structure Attempts to achieve solutions tailored to specific situations Differentiated structures replace systemwide structures

© 2005 Prentice-Hall, Inc Emerging Structures in the Global Economy Heterarchy Type of multinational organization that utilizes aspects of markets and hierarchies to interweave a multiplicity of organizing principles Network Organizations Flexible and adaptive to continuously changing environments

© 2005 Prentice-Hall, Inc Convergence or Divergence? Bureaucracy and patrimony exist in most societies Pressures to replace or supplement traditional organizational structures with networks that permit flexibility and foster innovation Level of economic development, variations in relationships between political and industrial sectors, and cultural values create differences Distinct organizational structure can be a competitive advantage

© 2005 Prentice-Hall, Inc Implications for Managers Organizational structure a competitive tool in international business Global managers must be able to understand and manage unfamiliar structures in unfamiliar cultures Managers must learn how to operate in network organizations