1. Managing Organizational Structure9
Chapter
Managing Organizational Structure
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2. Learning Objectives After studying the chapter, you should be able to:
Identify the factors that influence managers’ choice of an organizational structure.
Explain how managers group tasks into jobs that are motivating and satisfying for employees.
Describe the types of organizational structures managers can design, and explain why they choose one structure over another.
Explain why there is a need to both centralize and decentralized authority.
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3. Learning Objectives (cont’d)
Explain why managers must coordinate and integrate between jobs, functions, and divisions as an organization grows.
Explain why managers who seek new ways to increase efficiency and effectiveness are using strategic alliances and network structures.
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4. Chapter Outline Designing Organizational Structure
The Organizational Environment
Strategy
Technology
Human Resources
Grouping Tasks into Jobs: Job Design
Job Enlargement and Job Enrichment
The Job Characteristics Model
Grouping Jobs into Functions and Divisions
Functional Structure
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5. Chapter Outline (cont’d)
Grouping Jobs into Functions and Divisions (cont’d)
Functional Structure
Divisional Structure: Product, Market, Geographic
Matrix and Product Team Designs
Hybrid Structure
Coordinating Functions and Divisions
Allocating Authority
Types of Integrating Mechanisms
Strategic Alliances, B2B Network Structures, and IT
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6. Organizational Structure
Organizational Architecture
The organizational structure, control systems, culture, and human resource management systems that together determine how efficiently and effectively organizational resources are used.
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7. Designing Organizational Structure
Organizing
The process by which managers establish working relationships among employees to achieve goals.
Organizational Structure
Formal system of task and reporting relationships showing how workers use resources.
Organizational design
The process by which managers make specific choices that result in a particular kind of organizational structure.
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8. Factors Affecting Organizational Structure
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Figure 9.1

9. Determinants of Structure
The Organizational Environment
The quicker the environment changes, the more problems face managers.
Structure must be more flexible (i.e., decentralized authority) when environmental change is rapid.
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10. Determinants of Structure
Strategy
Different strategies require the use of different structures.
A differentiation strategy needs a flexible structure, low cost may need a more formal structure.
Increased vertical integration or diversification also requires a more flexible structure.
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11. Determinants of Structure
Technology
The combination of skills, knowledge, tools, equipment, computers and machines used in the organization.
More complex technology makes it harder for managers to regulate the organization.
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12. Determinants of Structure
Technology (cont’d)
Technology can be measured by:
Task variety: the number of new problems a manager encounters.
Task analyzability: the availability of programmed solutions to a manager to solve problems.
High task variety and low analyzability present many unique problems to managers.
Flexible structure works best in these conditions.
Low task variety and high analyzability allow managers to rely on established procedures.
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13. Types of Technology Small Batch Technology Mass Production Technology
Small quantities of one-of-a-kind products are produced by the skills of the workers who work together in small groups.
Appropriate structure is decentralized and flexible.
Mass Production Technology
Automated machines that are programmed to make high volumes of standard products.
Formal structure is the best choice for workers who must perform repetitive tasks.
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14. Types of Technology Continuous Process Technology
Totally mechanized systems of automatic machines.
A flexible structure is necessary to allow workers to react quickly to unexpected problems.
Information Technology (IT)
Knowledge management
The sharing and integrating of expertise within and between functions and divisions through realtime, interconnected IT that allows for new kinds of tasks and job reporting relationships.
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15. Determinants of Structure
Human Resources
Highly skilled workers whose jobs require working in teams usually need a more flexible structure.
Higher skilled workers (e.g., CPA’s and doctors) often have internalized professional norms.
Managers must take into account all four factors (environment, strategy, technology and human resources) when designing the structure of the organization.
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16. Job Design Job Design Job Simplification
The process by which managers decide how to divide tasks into specific jobs.
The appropriate division of labor results in an effective and efficient workforce.
Job Simplification
The process of reducing the tasks each worker performs.
Too much simplification and boredom results.
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17. Job Design Job Enlargement Job Enrichment
Increasing the number of tasks for a given job to reduce boredom.
Job Enrichment
Increasing the degree of responsibility a worker has over a job.
can lead to increased worker involvement.
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18. The Job Characteristics Model
Source: Adapted from J. R. Hackman and G. R. Oldham, Work Redesign (Reading, MA: Addison-Wesley, 1980).
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Figure 9.2

19. Job Characteristics Model
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20. Grouping Jobs into Functions
Functional Structure
An organizational structure composed of all the departments that an organization requires to produce its goods or services.
Advantages
Encourages learning from others doing similar jobs.
Easy for managers to monitor and evaluate workers.
Disadvantages
Difficult for departments to communicate with others.
Preoccupation with own department and losing sight of organizational goals.
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21. The Functional Structure of Pier 1 Imports
Figure 9.3
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22. Divisional Structures
An organizational structure composed of separate business units within which are the functions that work together to produce a specific product for a specific customer
Divisions create smaller, manageable parts of a firm.
Divisions develop a business-level strategy to compete.
Divisions have marketing, finance, and other functions.
Functional managers report to divisional managers who then report to corporate management.
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23. Types of Divisional Structures
Product Structure
Customers are served by self-contained divisions that handle a specific type of product or service.
Allows functional managers to specialize in one product area
Division managers become experts in their area
Removes need for direct supervision of division by corporate managers
Divisional management improves the use of resources
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24. Product, Market, and Geographic Structures
Figure 9.4
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25. Viacom’s 2001 Product Structure
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Figure 9.5

26. Types of Divisional Structures (cont’d)
Geographic Structure
Each regional or a country or area with customers with differing needs is served by a local self-contained division producing products that best meet those needs.
Global geographic structure
Different divisions serve each world region when managers find different problems or demands across the globe.
Generally, occurs when managers are pursuing a multidomestic strategy
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27. Types of Divisional Structures (cont’d)
Market (Customer) Structure
Each kind of customer is served by a self-contained division
Global market (customer) structure
Customers in different regions buy similar products so firms can locate manufacturing facilities and product distribution networks where they decide is best.
Firms pursuing a global strategy will use this type of structure.
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28. Global Geographic and Global Product Structures
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Figure 9.6

29. Matrix Design Structure
Matrix Structure
An organizational structure that simultaneously groups people and resources by function and product.
Results in a complex network of superior-subordinate reporting relationships.
The structure is very flexible and can respond rapidly to the need for change.
Each employee has two bosses (functional manager and product manager) and possibly cannot satisfy both.
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30. Matrix Structure Figure 9.7
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Figure 9.7

31. Product Team Design Structure
Product Team Structure
The members are permanently assigned to the team and empowered to bring a product to market.
Avoids problems of two-way communication and the conflicting demands of functional and product team bosses.
Cross-functional team is composed of a group of managers from different departments working together to perform organizational tasks.
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32. Product Team Structure
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Figure 9.7

33. Hybrid Structures Hybrid Structure
The structure of a large organization that has many divisions an simultaneously uses many different organizational structures
Managers can select the best structure for a particular division—one division may use a functional structure, another division may have a geographic structure.
The ability to break a large organization into smaller units makes it easier to manage.
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34. Target’s Hybrid Structure
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Figure 9.8

35. Coordinating Functions: Allocating Authority
The power to hold people accountable for their actions and to make decisions concerning the use of organizational resources.
Hierarchy of Authority
An organization’s chain of command, specifying the relative authority of each manager.
Span of Control: refers to the number of workers a manager manages.
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36. Allocating Authority (cont’d)
Span of Control
The number of subordinates that report directly to a manager
Line Manager
Managers in the direct chain of command who have authority over people and resources lower down.
Primarily responsible for the production of goods or services.
Staff Manager
Managers who are functional-area specialists that give advice to line managers.
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37. The Hierarchy of Authority and Span of Control at McDonald’s Corporation
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Source:
Figure 9.9

38. Tall and Flat Organizations
Tall structures have many levels of authority and narrow spans of control.
As hierarchy levels increase, communication gets difficult creating delays in the time being taken to implement decisions.
Communications can also become garbled as it is repeated through the firm.
Flat structures have fewer levels and wide spans of control.
Structure results in quick communications but can lead to overworked managers.
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39. Flat Organizations Figure 9.10a
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Figure 9.10a

40. Tall Organizations Figure 9.10b
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Figure 9.10b

41. Organizational Structure
Managers should carefully evaluate:
Do the organization have the right number of middle managers?
Can the structure be altered to reduce levels?
Centralized and Decentralized of Authority
Decentralization puts more authority at lower levels and leads to flatter organizations.
Works best in dynamic, highly competitive environment.
Stable environment favor centralization of authority.
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42. Integrating Mechanisms
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Figure 9.11

43. Forms of Integrating Mechanisms
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Source:
Figure 9.12

44. Strategic Alliances Strategic Alliance Network Structure:
An agreement in which managers pool or share firm’s resources and know-how with a foreign company and the two firms share in the rewards and risks of starting a new venture.
Network Structure:
A series of strategic alliances that an organization creates with suppliers, manufacturers, and distributors to produce and market a product.
Network structures allow firms to bring resources together in a boundary-less organization.
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45. B2B Network Structures and IT
Boundaryless Organization
An organization whose members are linked by computers, faxes, computer-aided design systems, and video-conferencing and who, rarely, if ever, see one another face-to-face.
Knowledge Management System
A company-specific virtual information system that allows workers to share their knowledge and expertise and find others to help solve problems.
Source:
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46. B2B Network Structures and IT (cont’d)
Business to Business (B2B ) network
A group of organizations that join together and use IT to link themselves to potential global suppliers to increase efficiency and effectiveness.
Source:
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