1. HND – 12. Organization Structure
Lim Sei cK

2. Organization structure
How job tasks are formally divided, grouped and coordinated
Six key elements to design organization structure

3. Key design questions and answers for designing the proper organizational structure
The key question
The answer is provided by
1. To what degree are activities subdivided into separate jobs?
Work Specialization
2. On what basis will jobs be grouped together?
Departmentalization
3. To whom do individuals and groups report?
Chain of Command
4. How many individuals can a manager efficiently and effectively direct?
Span of Control
5. Where does decision-making authority lie?
Centralization and decentralization
6. To what degree will there be rules and regulations to direct employees and managers?
Formalization

4. Work specialization
The degree to which activities in the organization are subdivided into separate jobs.
Efficient use of employees skills
Efficient use of organizational resources

5. Departmentalization The basis by which jobs are grouped together.
By functions
Type of product
Basis of geography or territory
By process
Type of customer

6. Chain of command
The unbroken line of authority that extends from the top of the organization to the lowest level and clarifies who reports to whom.
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

7. Span of control
The number of subordinates a manager can efficiently and effectively direct.
Narrow - can maintain close supervision
Expensive, as they add levels to management
Vertical communication more complex
Encourage tight supervision and discourage employee autonomy
Wider – reduce costs, cut overhead, speed up decision making, increase flexibility
Investing heavily on training

8. Centralization and decentralization
The degree to which decision making is concentrated at a single point in the organization
The degree to which decision making requires multiple parties to make their own independent decisions.

9. Formalization
The degree to which jobs within the organization are standardized.
High – minimum amount of discretion over what is to be done, when it is to be done, and how he/she should do it
Low – non-programmed job, employees have a great deal of freedom to exercise discretion in their work.

10. Organizational designs
Simple structure
Bureaucracy
Matrix structure

11. Simple structure
A structure characterized by a low degree of departmentalization, wide spans of control, authority decentralized in a single person, and a little formalization.
Owner - Manager
Salesperson
Cashier

12. Simple structure Strength Weakness
Fast, flexible and accountability is clear
Weakness
As organization grows, it become inadequate

13. Bureaucracy
A structure with highly routine operating tasks achieved through specialization, very formalized rules and regulations, tasks that are grouped into functional departments, centralized authority, narrow spans of control and decision making that follows the chain of command.

14. Bureaucracy Strength Weakness
Ability to perform standardized activity in a highly efficient manner
Economies of scale, minimum duplication of personnel and equipment
Weakness
Specialization creates subunit conflicts
Obsessive concern with following the rules

15. The matrix structure
A structure that creates dual lines of authority and combines functional and product departmentalization.

16. The matrix structure Strength Weakness
Facilitate the efficient allocation of specialists and sharing of specialized resources across products.
Facilitate coordination when the organization has a multiplicity of complex activities                    
Weakness
Creates confusion

17. Q
1. All things being equal, which is more efficient, a wide or narrow span of control? Why?
2. In what ways can management departmentalize? Provide examples.

18. New structural options
Team structure
Virtual organization
Boundaryless organization

19. Team structure
The use of teams as the central device to coordinate work activities.
Breaks down departmental barriers
Decentralizes decision making
Require employees who are specialists

20. Virtual organization
A small, core organization that outsources major business functions.
Highly centralized with little or no departmentalization
Drawback – reduces management’s control over key parts of its business

21. Boundaryless organization
An organization that seeks to eliminate the chain of command, have limitless spans of control, and replace departments with empowered teams.
ideal or companies in the growing technology industry.
communicate mainly through , phone and other virtual methods rather than more traditional face-to- face communication

22. Mechanistic versus organic models
Mechanistic model
Organic model
High specialization
Cross-functional teams
Rigid departmentalization
Cross-hierarchical teams
Clear chain of command
Free flow of information
Narrow spans of control
Wide spans of control
Centralization
Decentralization
High formalization
Low formalization

23. Why do structures differ?
Strategy
Size
Technology
Environment

24. Strategy
Innovation strategy – a strategy that emphasizes the introduction of major new products and services.
Cost-minimization strategy – a strategy that emphasizes tight cost controls, avoidance of unnecessary innovation or marketing expenses and price cutting.
Imitation strategy – a strategy that seeks to move into new products or new markets only after their viability has already been proven

25. Strategy – structure relationship
Structural option
Innovation
Organic: a 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 and tight properties, tight controls over current activities and loose controls for new undertakings

26. SIZE TECHNOLOGY ENVIRONMENT
Large – tend to have more specialization, more departmentalization, more vertical levels and more rules and regulations
TECHNOLOGY
How an organization transfers its inputs to outputs.
ENVIRONMENT
Institutions or forces outside that potentially affect the organization’s performance.