1. Basic Organization Designs
Chapter 5
Basic Organization Designs
PowerPoint Presentation by Charlie Cook
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2. L E A R N I N G O U T C O M E S After reading this chapter, I will be able to:
Identify and define the six elements of organization structure.
Describe the advantages and disadvantages of work specialization.
Contrast authority and power.
Identify the five different ways by which management can departmentalize.
Contrast mechanistic and organic organizations.
Summarize the effect of strategy, size, technology, and environment on organization structures.
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3. L E A R N I N G O U T C O M E S (cont’d) After reading this chapter, I will be able to:
Contrast the divisional and functional structures.
Explain the strengths of the matrix structure.
Describe the boundaryless organization and what elements have contributed to its development.
Explain what is meant by the term learning organization.
Describe what is meant by the term organization culture.
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4. Organization Design and Structure
A process in which managers develop or change their organization’s structure
Work specialization
A component of organization structure that involves having each discrete step of a job done by a different individual rather than having one individual do the whole job
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5. Economies and Diseconomies of Work Specialization
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EXHIBIT 5.1

6. Organizational Structure: Control
Chain of command
The management principle that no person should report to more than one boss
Span of control
The number of subordinates a manager can direct efficiently and effectively
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7. Organizational Structure: Control (cont’d)
Authority
The rights inherent in a managerial position to give orders and expect them to be obeyed
Power
An individual’s capacity to influence decisions
Responsibility
An obligation to perform assigned activities
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8. Types of Organizational Authority
Line authority
The position authority (given and defined by the organization) that entitles a manager to direct the work of operative employees
Staff authority
Positions that have some authority (e.g., organization policy enforcement) but that are created to support, assist, and advise the holders of line authority
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9. Chain of Command EXHIBIT 5.2
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EXHIBIT 5.2

10. Line Versus Staff Authority
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EXHIBIT 5.3

11. Authority Versus Power
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EXHIBIT 5.4a

12. Authority Versus Power (cont’d)
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EXHIBIT 5.4b

13. Centralization And Decentralization
A function of how much decision-making authority is pushed down to lower levels in an organization; the more centralized an organization, the higher the level at which decisions are made
Decentralization
The pushing down of decision-making authority to the lowest levels of an organization
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14. Types of Power Coercive power Power based on fear.
Reward power Power based on the ability to distribute something that others value.
Legitimate power Power based on one’s position in the formal hierarchy.
Expert power Power based on one’s expertise, special skill, or knowledge.
Referent power Power based on identification with a person who has desirable resources or personal traits.
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EXHIBIT 5.5

15. Types of Departmentalization
Functional
Product
Customer
Geographic
Process
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EXHIBIT 5 .6

16. Departmentalization Functional departmentalization
The grouping of activities by functions performed
Product departmentalization
The grouping of activities by product produced
Customer departmentalization
The grouping of activities by common customers
Geographic departmentalization
The grouping of activities by territory
Process departmentalization
The grouping of activities by work or customer flow
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17. Mechanistic and Organic Organizations
Mechanistic organization
The bureaucracy; a structure that is high in specialization, formalization, and centralization
Organic organization
An adhocracy; a structure that is low in specialization, formalization, and centralization
Structure follows strategy
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18. Mechanistic versus Organic Organizations
Rigid hierarchical relationships
Fixed duties
Many rules
Formalized communication channels
Centralized decision authority
Taller structures
Collaboration (both vertical and horizontal)
Adaptable duties
Few rules
Informal communication
Decentralized decision authority
Flatter structures
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EXHIBIT 5.7

19. Technology and Structure
Unit production
Production in terms of units or small batches
Mass production
Production in terms of large batch manufacturing
Process production
Production in terms of continuous processing
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20. Organization Design Applications
Simple structure
An organization that is low in specialization and formalization but high in centralization
Functional structure
An organization in which similar and related occupational specialties are grouped together
Divisional structure
An organization made up of self-contained units
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21. Functional Structure EXHIBIT 5.8
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EXHIBIT 5.8

22. Divisional Structure EXHIBIT 5.9
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EXHIBIT 5.9

23. Other Organizational Structures
Matrix structure
An organization in which specialists from functional departments are assigned to work on one or more projects led by a project manager
Team-based structure
An organization that consists entirely of work groups or teams
Boundaryless organization
An organization that is not defined or limited by boundaries or categories imposed by traditional structures
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24. Sample Matrix Structure
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EXHIBIT 5.10

25. Learning Organization
An organization that has developed the capacity to continuously adapt and change because all members take an active role in identifying and resolving work-related issues.
Organization design
Information sharing
Leadership
Organizational culture
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26. Characteristics of a Learning Organization
Source: Based on P.M. Senge. The Fifth Discipline: The Art and Practice of Learning Organizations (New York: Doubleday, 1990); and R. M. Hodgetts, F. Luthans and S. M. Lee. “New Paradigm Organizations: From Total Quality to Learning to World Class,” Organizational Dynamics (Winter 1994) pp. 4–19
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EXHIBIT 5.11

27. Organization Culture Organization culture
A system of shared meaning within an organization that determines, to a large degree, how employees act
Shared values are shown in cultural elements:
Stories, rituals, material symbols, and language unique to the organization
Results from the interaction between:
The founders’ biases and assumptions
What the first employees learn subsequently from their own experiences.
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28. Ten Characteristics of Organization Culture
Member identity
Group emphasis
People focus
Unit integration
Control
Risk tolerance
Reward criteria
Conflict tolerance
Means-end orientation
Open-systems focus
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EXHIBIT 5.12