1. “It’s all
about
working
together”

2. Organizational Structure and Design

4. Defining Organizational Structure
The formal arrangement (system of task and reporting relationships showing how workers use resources) of jobs within an organization.
Structure as an influence on behavior
Structure as recurring activities

5. Organization structure – the pattern of jobs and groups of jobs in an organization.
It is an important cause of individual and group behavior.

6. How do we organize jobs into departments
How do we organize jobs into departments? How do we answer the questions “who does what” and “who reports to whom” in the chain of command? How do we coordinate all of these people and duties? Organizational Structure is the framework for answering these questions and more.

7. Purposes of Organizing
Divides work to be done into specific jobs and departments.
Assigns tasks and responsibilities associated with individual jobs.
Coordinates diverse organizational tasks.
Clusters jobs into units.
Establishes relationships among individuals, groups, and departments.
Establishes formal lines of authority.
Allocates and deploys organizational resources.

8. Organization Structure: Its Determinants and Outcomes

9. Why Do Structures Differ
Why Do Structures Differ? – Strategy Organizations have different strategies in order to cope with competition, growth, and environment.
Innovation Strategy:
emphasizes the introduction of major new products and services.
Cost-minimization Strategy:
emphasizes tight cost controls, avoidance of unnecessary innovation or marketing expenses, and price cutting.
Imitation Strategy:
seeks to move into new products or new markets only after their viability has already been proven.

10. Why Do Structures Differ? – Size
How the size of an organization affects its structure. As an organization grows larger, it becomes more mechanistic.
Characteristics of large organizations:
More specialization
More vertical levels
More rules and regulations

11. Why Do Structures Differ? – Technology
How an organization transfers its inputs into outputs.
Characteristics of routineness (standardized or customized) in activities:
Routine technologies are associated with tall, departmentalized structures and formalization in organizations.
Routine technologies lead to centralization when formalization is low.
Nonroutine technologies are associated with delegated decision authority.

12. Why Do Structures Differ? – Environment
Institutions or forces outside the organization that potentially affect the organization’s performance.
Key Dimensions-
Capacity: the degree to which an environment can support growth.
Volatility: the degree of instability in the environment.
Complexity: the degree of heterogeneity and concentration among environmental elements.
Volatility
Capacity
Complexity

13. Common Organizational Designs
Tall structure
Long chain of command
As an organization grows, the number of management levels increases and the structure grows taller.
In a tall structure, managers form many ranks and each has a small area of control.
Tall structure
Long chain of command
As an organization grows,
the number of management
levels increases and the
structure grows taller.
In a tall structure,
managers form many ranks
and each has a small area
of control

14. Flat structure
focus on empowering employees rather than adhering to the chain of command.
fewer management levels, with each level controlling a broad area or group.

15. Disadvantage is reduced control over key parts of the business.
Virtual structure
an organization uses information and communication technologies to replace or augment some aspect of the organization.
Concepts:
Provides maximum flexibility while concentrating on what the organization does best.
Disadvantage is reduced control over key parts of the business.

16. Boundary-less organization structure
A contemporary approach in Organizational design.
It is an organization that is not defined by, or limited to the horizontal, vertical or external boundaries imposed by a pre-defined structure.
It behaves more like an organism encouraging better integration among employees and closer partnership with stakeholders.

17. Matrix structure
An organization in which specialists from functional departments are assigned to work on one or more projects led by a project manager

18. Breaks down departmental barriers.
Characteristics:
Breaks down departmental barriers.
Decentralizes decision making to the team level.
Requires employees to be generalists as well as specialists.
Creates a “flexible bureaucracy.”

19. Two extreme models of organizational design

22. Mechanistic Structure
Process
Mechanistic Structure
Organic Structure
1. Leadership
No perceived confidence and trust between superiors and subordinates.
Perceived confidence and trust between superiors and subordinates.
2. Motivation
Taps physical, security, and economic motives, through fear and sanctions.
Taps a full range of motives through participatory methods.
3. Communication
Information flows downward and tends to be distorted, inaccurate, and viewed with suspicion by subordinates.
Information flows freely: upward, downward, and laterally and is accurate and undistorted.
4. Interaction
Closed and restricted. Subordinates have little effect on departmental goals, methods, and activities.
Open and extensive. Both superiors and subordinates are able to affect departmental goals, methods, and activities.
5. Decision
Relatively centralized. Occurs only at the top of the organization.
Relatively decentralized. Occurs at all levels through group processes.
6. Goal setting
Located at the top of the organization, discouraging group participation.
Encourages group participation in setting high, realistic objectives.
7. Control
Centralized. Emphasizes fixing blame for mistakes.
Dispersed throughout the organization. Emphasizes self-control /problem solving.
8.Performance goals
Low and passively sought by managers, who make no commitment to developing the organization’s HR.
High and actively sought by superiors, who recognize the need for full commitment to developing, through training, the organization’s HR.

24. Organizational Design Centralization and decentralization
A process involving decisions about six key elements:
Work specialization
Departmentalization
Chain of command
Span of control
Centralization and decentralization
Formalization
To create a specific type of organizational structure and culture so that a company can operate in the most efficient and effective way

26. Key Design Questions and Answers for Designing the Proper Organization Structure

27. Makes efficient use of employee skills
Division of labor:
Makes efficient use of employee skills
Increases employee skills through repetition
Less between-job downtime increases productivity
Specialized training is more efficient
Allows use of specialized equipment

28. Departmentalization
The process through which an organization’s activities are grouped together and assigned to managers; the organization wide division of work.
Process
Grouping jobs on the basis of product or customer flow
Customer
Grouping jobs by type of customer and needs
Functional
Grouping jobs by functions performed
Product
Grouping jobs by product line
Geographical
Grouping jobs on the basis of territory or geography

29. Functional Departmentalization
Advantages
Efficiencies from putting together similar specialties and people with common skills, knowledge, and orientations
Coordination within functional area
In-depth specialization
Disadvantages
Poor communication across functional areas
Limited view of organizational goals

30. Geographical Departmentalization
Advantages
More effective and efficient handling of specific regional issues that arise
Serve needs of unique geographic markets better
Disadvantages
Duplication of functions
Can feel isolated from other organizational areas

31. Product Departmentalization
Advantages
Allows specialization in particular products and services
Managers can become experts in their industry
Closer to customers
Disadvantages
Duplication of functions
Limited view of organizational goals

32. Process Departmentalization
Advantages
More efficient flow of work activities
Disadvantages
Can only be used with certain types of products

33. Customer Departmentalization
Advantages
Customers’ needs and problems can be met by specialists
Disadvantages
Duplication of functions
Limited view of organizational goals

34. Narrow Span Drawbacks:
Expense of additional layers of management.
Increased complexity of vertical communication.
Encouragement of overly tight supervision and discouragement of employee autonomy.
Concept:
Wider spans of management increase organizational efficiency.

35. Span of Control Width of span is affected by:
Skills and abilities of the manager
Employee characteristics
Characteristics of the work being done
Similarity of tasks
Complexity of tasks
Physical proximity of subordinates
Standardization of tasks

36. Centralization: The degree to which decision making is concentrated at a single point in the organization.
DEGREE OF CENTRALIZATION
DEGREE OF DECENTRALIZATION
Decentralization: The degree to which decision making is spread throughout the organization.

37. More Decentralization
More Centralization
Environment is stable.
Lower-level managers are not as capable or experienced at making decisions as upper-level managers.
Lower-level managers do not want to have a say in decisions.
Decisions are relatively minor.
Organization is facing a crisis or the risk of company failure.
Company is large.
Effective implementation of company strategies depends on managers retaining say over what happens
More Decentralization
Environment is complex/uncertain.
Lower-level managers are capable and experienced at making decisions.
Lower-level managers want a voice in decisions.
Decisions are significant.
Corporate culture is open to allowing managers to have a say in what happens.
Company is geographically dispersed.
Effective implementation of company strategies depends on managers having involvement and flexibility to make decisions

38. Delegation Decision Guidelines
How routine and straightforward are the job’s or unit’s required decisions?
Are individuals competent to make the decision?
Are individuals motivated to make the decision?
Do the benefits of decentralization outweigh its costs?

39. To whom I am responsible? To whom I go with my problems?
Chain of Command
The unbroken line of authority that extends from the top of the organization to the lowest echelon and clarifies who reports to whom.
To whom I am responsible?
To whom I go with my problems?
Authority: The rights inherent in a managerial position to give orders and to expect the orders to be obeyed.
Unity of Command: A subordinate should have only one superior to whom he or she is directly responsible.

40. Formalization
The degree to which jobs within the organization are standardized and the extent to which employee behavior is guided by rules and procedures.
Highly formalized jobs offer little discretion over what is to be done.
Low formalization means fewer constraints on how employees do their work.
HIGH LEVELS
minimum amount of discretion over what, when, and how
consistent output
explicit job descriptions
organizational rules
clearly defined procedures
LOW LEVELS
unprogrammed behaviors
exercise discretion
great deal of freedom
less standardization
consider alternatives

41. Organizational design and employee behavior
Structure and design have significant
effects on employees.
It shapes the work environment.
This relationship tell us something
about job performance, job satisfaction
and motivation of employees.
Work specialization: contributes higher employee productivity,
but at the price of reduced job satisfaction.
Repetitive and narrow work has a negative effect.
Span of control: large spans might lead to higher employee performance
by more distant supervision and more opportunity for personal initiative.
On the other hand, some people like to be left alone.
Centralization: some value dependency and freedom, some not.
Participative decision making in decentralized organizations is
positively related to job satisfaction.

42. Today we manage & shape our organizations differently than past
In order to fit in the environment better!.
© 2007 Prentice Hall, Inc. All rights reserved.