Welcome to AB140 Introduction to Management Unit 4 Seminar – Organizing Robin Watkins

Unit 4 Objectives Identify characteristics of vertical and horizontal organizational structures Identify levels of authority in an organization Discuss delegation

Key Concepts CEO V.P. Finance/ Acctg. Mgr.- Mrktg and Cust. Service Manager Production Manager Research Assist. Manager Supply Chain Accountant

4 What Is Organizational Structure? Key Elements: Work specialization Departmentalization Chain of command Span of control Centralization and decentralization Formalization Key Elements: Work specialization Departmentalization Chain of command Span of control Centralization and decentralization Formalization Organizational Structure How job tasks divided, grouped, and coordinated

5 Key Design Q&A Organization Structure Question Answer 1. Articles subdivided in separate jobsWork specialization 2. Basis jobs grouped togetherDepartmentalization 3. Individual & Group Reporting structure Chain of command 4. Managers efficiently & effectively directSpan of control 5. Decision-making authorityCentralization or decentralization 6. Employee rules and regulations Formalization

6 What Is Organizational Structure? (cont’d) Division of labor Efficient use of employee skills Increases employee skills through repetition Less between-job downtime increases productivity Specialized training more efficient Allows use of specialized equipment Division of labor Efficient use of employee skills Increases employee skills through repetition Less between-job downtime increases productivity Specialized training more efficient Allows use of specialized equipment Work Specialization Tasks subdivided into separate jobs

7 What Is Organizational Structure? (cont’d) Chain of Command Line of authority from top to bottom clarifying who reports to whom Authority The right to give orders and expect to be obeyed Unity of Command Subordinate has only one person to report to

8 What Is Organizational Structure? (cont’d) Grouping activities by: Function Product Geography Process Customer Grouping activities by: Function Product Geography Process Customer Departmentalization Grouping jobs together

9 What Is Organizational Structure? (cont’d) Narrow Span Drawbacks: Additional layers of management Increased vertical communication complexity Encourages overly tight supervision and discourages employee autonomy Narrow Span Drawbacks: Additional layers of management Increased vertical communication complexity Encourages overly tight supervision and discourages employee autonomy Concept Wider management spans increase efficiency Concept Span of Control N umber a manager can efficiently and effectively direct

10 What Is Organizational Structure? (cont’d) Centralization Decision making concentrated at a single point Formalization Standardized organizational jobs Decentralization Decision making spread throughout organization

11 Common Organization Designs A Simple Structure: Jack Gold’s Men’s Store Simple Structure Low degree of departmentalization, wide spans of control, authority centralized in a single person, and little formalization

Organizational Chart Illustrated (Sandwich Blitz, Inc.)

13 Common Organization Designs (cont’d) Bureaucracy Highly specialized routine tasks, very formalized rules and regulations, tasks grouped into functional departments, centralized authority, narrow spans of control, and decision making that follows the chain of command

14 The Bureaucracy Strengths -Functional economies of scale -Minimum duplication of personnel and equipment -Enhanced communication -Centralized decision making Weaknesses -Subunit conflicts with organizational goals -Obsessive concern with rules and regulations -Lack of employee discretion to deal with problems

15 “Bureaucracy Is Dead” Bureaucracy Characteristics -Specialization -Formalization -Departmentalization -Centralization -Narrow spans of control -Adherence to a chain of command Why Bureaucracy Survives -Large size prevails -Environmental turbulence can be largely managed -Standardization achieved by hiring people with extensive educational training -Technology maintains control

16 Why Do Structures Differ? Mechanistic Model Extensive departmentalization, high formalization, limited information network, and centralization

17 Why Do Structures Differ? Organic Model Is flat, uses cross-hierarchical and cross-functional teams, has low formalization, possesses a comprehensive information network, and relies on participative decision making

18 Mechanistic Versus Organic Models

Vertical Organizational Structures Vertical Structure Hierarchical lines of authority: -Board of Directors -Chief Executive Officer -Upper Management Team -Middle Management -First Line Management

Vertical Organizational Structures (Continued) Characteristics Delegation -Responsibility: Person assigned task to complete -Accountability: Manager’s right to expect specific performance and to take corrective action if failure occurs Decentralization

Horizontal Organizational Structures Departmentalization: Subdividing larger organizations into smaller subunits Line Departments: Responsibility for primary activities of the firm Staff Departments: Provide specialized or professional skills to support line department s

Horizontal Organizational Structures (Continued) Firm subdivided by: -Functions: Production, human resources, accounting, etc. -Divisions: Reflect diverse firm needs. Each division having its own functional subunits. -Matrix: Hybrid combination functional and divisional Involves multiple reporting relationships -Network: Collection of mostly single-function firms that collaborate

Common Organization Designs (cont’d) Key Elements + Gains functional advantages and product departmentalization while avoiding weaknesses + Facilitates complex and interdependent activities coordination – Breaks down unity-of-command concept Key Elements + Gains functional advantages and product departmentalization while avoiding weaknesses + Facilitates complex and interdependent activities coordination – Breaks down unity-of-command concept Matrix Structure Creates dual lines of authority combining functional and product departmentalization

New Design Options Characteristics: Breaks down departmental barriers. Decentralizes decision making to the team level. Requires generalist as well as specialists employees Creates “flexible bureaucracy” Characteristics: Breaks down departmental barriers. Decentralizes decision making to the team level. Requires generalist as well as specialists employees Creates “flexible bureaucracy” Team Structure Teams central to work activities

New Design Options (cont’d) Concepts Advantage: Maximum flexibility organization does what it does best. Disadvantage: Reduced control over key business parts Concepts Advantage: Maximum flexibility organization does what it does best. Disadvantage: Reduced control over key business parts Virtual Organization Outsource major business functions Highly centralized with little or no departmentalization

New Design Options (cont’d) T-form Concepts: Eliminate vertical (hierarchical) and horizontal (departmental) internal boundaries. Breakdown external barriers to customers and suppliers. T-form Concepts: Eliminate vertical (hierarchical) and horizontal (departmental) internal boundaries. Breakdown external barriers to customers and suppliers. Boundaryless Organization Seeks to eliminate chain of command, have limitless spans of control, and replaces departments with empowered teams

Why Do Structures Differ? – Strategy Innovation Strategy E mphasizes major new products and services introduction Imitation Strategy M oves into new products or new markets only after viability has been proven Cost-minimization Strategy Emphasizes tight cost controls, avoidance of unnecessary innovation or marketing expenses, and price cutting

The Strategy-Structure Relationship Strategy Structural Option Innovation Organic: Loose structure; low specialization, low formalization, decentralized Cost minimization Mechanistic: Tight control; extensive work specialization, high formalization, high centralization Imitation Mechanistic and organic: Mix of loose with tight properties; tight controls over current activities and looser controls for new undertakings

Why Do Structures Differ? – Size Characteristics of large organizations: More specialization More vertical levels More rules and regulations Characteristics of large organizations: More specialization More vertical levels More rules and regulations Size affects structure (larger = more mechanistic)

Why Do Structures Differ? – Technology Technology Organizations transfer inputs to outputs Routine activities characteristics (standardized or customized): Routine technologies associated with tall, departmentalized structures and formalization Routine technologies lead to centralization if formalization low Non-routine technologies associated with delegated decision authority Routine activities characteristics (standardized or customized): Routine technologies associated with tall, departmentalized structures and formalization Routine technologies lead to centralization if formalization low Non-routine technologies associated with delegated decision authority

Why Do Structures Differ? – Environment Key Dimensions Capacity: Environment can support growth. Volatility: Environmental instability Complexity: Environmental heterogeneity and concentration among elements Key Dimensions Capacity: Environment can support growth. Volatility: Environmental instability Complexity: Environmental heterogeneity and concentration among elements Environment Outside institutions or forces affect performance

Organizational Design & Employee Behavior Research Findings Work specialization contributes to higher employee productivity, reduces job satisfaction Specialization decreased rapidly when employees seek more intrinsically rewarding jobs Span of control’s effect on employee performance based on differences, abilities, task structures, and other factors Decentralized organizations’ participative decision making positively related to job satisfaction Research Findings Work specialization contributes to higher employee productivity, reduces job satisfaction Specialization decreased rapidly when employees seek more intrinsically rewarding jobs Span of control’s effect on employee performance based on differences, abilities, task structures, and other factors Decentralized organizations’ participative decision making positively related to job satisfaction

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