1. Foundations of Organization Structure
Chapter 16
Foundations of Organization Structure

2. Chapter Learning Objectives
After studying this chapter you should be able to:
Define organization structure and discuss its purpose.
Describe the classic views of organization structure.
Describe structural configuration and summarize its four basic dimensions.
Discuss two structural policies that affect operations.
Explain the dual concepts of authority and responsibility.
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3. The Nature of Organization Structure
A goal-directed social entity with deliberate processes and systems
Organizational Goals
Objectives that management seeks to achieve in pursuing the firm’s purpose
Strategies
Specific action plans that enable the organization to achieve its goals and thus its purpose
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4. The Nature of Organization Structure (cont’d)
The system of task, reporting, and authority relationships within which an organization does its work
Purpose of structure is to order and coordinate the actions of employees to achieve organizational goals
“Structure follows strategy”
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5. The Nature of Organization Structure (cont’d)
Organized Effort Premise
People can accomplish more by working together than they can separately
Proper coordination is needed to realize the potential gains from collective efforts
Analysis of Organizational Structures
Configuration (organization chart)
Operational characteristics
Responsibility and authority
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6. Structural Configuration
Organization Chart
Describes the structure of an organization
Shows all people, positions, reporting relationships, and lines of formal communication
Depicts reporting relationships and work group memberships
Shows how positions and small work groups are combined into departments which make up the shape (configuration) of the organization
Basic Requirements of Structure
Division of labor
Coordination of divided tasks
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7. 16.1 Examples of Organization Charts
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8. Structural Configuration (cont’d)
Division of Labor (Specialization)
The way the organization’s work is divided into different jobs to be done by different people
Organizations, in order to be successful, must have highly trained specialists who know their specific jobs very well
Coordinating the Divided Tasks
Mechanisms to help coordinate the divided tasks
Departmentalization
Span of control
Administrative hierarchy
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9. Structural Configuration (cont’d)
Departmentalization
The manner in which divided tasks are combined and allocated to work groups
A consequence of the division of labor
Ways to departmentalize tasks:
Business function
Process
Product or service
Customer
Geography
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10. 16.1 Advantages and Disadvantages of Division of Labor
Efficient use of labor
Reduced training costs
Increased standardization and uniformity of output
Increased expertise from repetition of tasks
Routine, repetitive jobs
Reduced job satisfaction
Decreased worker involvement and commitment
Increased worker alienation
Possible incompatibility with computerized manufacturing technologies
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11. Structural Configuration (cont’d)
Departmentalization (cont’d)
Span of control (also span of management)
The number of people who report to a manager
The smaller the span of control the more a manager can maintain close control over workers and stay in contact with daily operations
Size is inversely related to the span of control
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12. 16.2 Departmentalization by Business Function and by Process
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13. 16.3 Departmentalization by Customer
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14. 16.4 Departmentalization by Customer and by Geographic Region
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15. 16.5 Mixed Departmentalization
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16. Conditions Affecting Span of Control
Optimal unit size (span of control) depends on:
The coordination requirements within the unit, including factors such as the degree of job specialization
The similarity of the tasks in the unit
The type of information available or needed by unit members
Differences in the members’ need for autonomy
The extent to which members need direct access to the supervisor
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17. Structural Configuration (cont’d)
Departmentalization (cont’d)
Administrative hierarchy
System of reporting relationships in the organization from the first level up through the president or CEO
Organizational downsizing results in lower overhead costs, less bureaucracy, faster decision making, smoother communications, and increases in productivity
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18. 16.6 Span of Control and Levels in the Administrative Hierarchy
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19. Structure and Operations
Structural Policies
Affect operations and prescribe or restrict how employees behave in their organizational activities
Centralization
Decision-making authority is concentrated at the top of the organizational hierarchy
Decentralization
Decisions are made throughout the hierarchy.
Participative Management
A total management system in which people throughout the organization are involved in the daily decision making and management of the organization
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20. Structure and Operations (cont’d)
Formalization
The degree to which rules and procedures shape the jobs and activities of employees
Good managers use appropriate judgment in making exceptions to rules in recognizing that:
Individuals are unique with meaningful differences
There are commonalities among employees
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21. Responsibility and Authority
An obligation to do something with the expectation of achieving some act or output
Authority
Power that has been legitimized within a particular social context
Originates in the ownership of the organization
The relationship between responsibility and authority must be one of parity
Can be delegated down to others
Delegation is the transfer to others of authority to make decisions and use organizational resources
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22. Responsibility and Authority (cont’d)
An Alternative View of Authority
Acceptance Theory of Authority
The authority of a manager depends on their subordinates’ acceptance of the manager’s right to give directives and to expect compliance with them
By either accepting or rejecting the directives of a supervisor, workers can limit supervisory authority
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23. Classic Views of Structure
Ideal Bureaucracy (Max Weber)
Is an organizational system characterized by a hierarchy of authority and a system of rules and procedures that create a maximally effective system for large organizations.
Weber claimed that the bureaucratic form of administration is superior to other forms of management with respect to:
Stability
Control
Predictability of outcomes
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24. 16.2 Elements of Weber’s Ideal Bureaucracy
Comments
1. RULES AND PROCEDURES
A consistent set of abstract rules and procedures should exist to ensure uniform performance.
2. DISTINCT DIVISION OF LABOR
Each position should be filled by an expert.
3. HIERARCHY OF AUTHORITY
The chain of command should be clearly established.
4. TECHNICAL COMPETENCE
Employment and advancement should be based on merit.
5. SEGREGATION OF OWNERSHIP
Professional managers rather than owners should run the organization.
6. RIGHTS AND PROPERTIES OF THE POSITION
These should be associated with the organization, not with the person who holds the office.
7. DOCUMENTATION
A record of actions should be kept regarding administrative decisions, rules, and procedures.
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25. Classic Views of Structure (cont’d)
The Classic Principles of Organizing
Management functions (Henri Fayol)
Planning
Organizing
Command
Coordination
Control
Principles of organizing provide the framework for the organization chart and the coordination of work
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26. 16.3 Fayol’s Classic Principles of Organizing
Fayol’s Comments
1. DIVISION OF WORK
Individuals and managers work on the same part or task.
2. AUTHORITY AND RESPONSIBILITY
Authority—right to give orders; power to exact obedience; goes with responsibility for reward and punishment.
3. DISCIPLINE
Obedience, application, energy, behavior. Agreement between firm and individual.
4. UNITY OF COMMAND
Employee receives orders from one superior.
5. UNITY OF DIRECTION
One head and one plan for activities with the same objective.
6. SUBORDINATION OF INDIVIDUAL INTEREST TO GENERAL INTEREST
Objectives of the organization come before objectives of the individual.
7. REMUNERATION OF PERSONNEL
Pay should be fair to the organization and the individual; discussed various forms.
From General and Industrial Management, by Henri Fayol. Copyright © Lake Publishing 1984, Belmont, CA Used with permission.
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27. 16.3 Fayol’s Classic Principles of Organizing (cont’d)
Fayol’s Comments
8. CENTRALIZATION
Proportion of discretion held by the manager compared to that allowed to subordinates.
9. SCALAR CHAIN
Line of authority from lowest to top.
10. ORDER
A place for everyone and everyone in his or her place.
11. EQUITY
Combination of kindness and justice; equality of treatment.
12. STABILITY OF TENURE OF PERSONNEL
Stability of managerial personnel; time to get used to work.
13. INITIATIVE
Power of thinking out and executing a plan.
14. ESPRIT DE CORPS
Harmony and union among personnel is strength.
From General and Industrial Management, by Henri Fayol. Copyright © Lake Publishing 1984, Belmont, CA Used with permission.
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28. Classic Views of Structure (cont’d)
Human Organization (Rensis Likert)
Based on supportive relationships, participation, and overlapping work groups
The principle of “overlapping work groups” means that work groups are linked, with managers serving as the “linking pins”
Assumption is that people work best in highly cohesive groups oriented toward organizational goals
Approach consists of four systems of organizing (management systems) and eight organizational variables
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29. 16.4 Characteristics of Likert’s Four Management Systems
Reference: Adapted from Rensis Likert, New Patterns of Management (New York: McGraw-Hill, 1961), pp. 223–233; and Rensis Likert, The Human Organization (New York: McGraw-Hill, 1967), pp. 197, 198, 201, 203, 210, and 211.
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30. 16.4 Characteristics of Likert’s Four Management Systems
Reference: Adapted from Rensis Likert, New Patterns of Management (New York: McGraw-Hill, 1961), pp. 223–233; and Rensis Likert, The Human Organization (New York: McGraw-Hill, 1967), pp. 197, 198, 201, 203, 210, and 211.
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31. Organizational Behavior in Action
After reading the chapter:
In the chapter opening case, why did Intel shift from a product-centered to a customer-centered business model?
Which elements of Weber’s ideal bureaucracy were present in the structure of an organization for which you have worked? Which are not?
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