1. Organizational Structure
Chapter Twelve
Ed Kaiser/Edmonton Journal

2. Organizational Structure
Division of labor and patterns of coordination, communication, workflow, and formal power that direct organizational activities.
Division of labor
Subdivision of work into separate jobs assigned to different people
Potentially increases work efficiency
Necessary as company grows and work becomes more complex
Ed Kaiser/Edmonton Journal

3. Forms of Work Coordination
Informal communication
Sharing information
High media-richness
Important in teams
Formal hierarchy
Direct supervision
Assigns formal (legitimate) power to manage others
Coordination strategy for departmentalization
Standardization
Processes -- formal instructions
Outputs -- clear goals/output measures
Skills -- training, learn precise role behaviors

4. Elements of Organizational Structure
Department-alization
Span of Control
Organizational
Structure Elements
Formalization
Centralization

5. Span of Control, Centralization, and Formalization
Organizational Structure

6. Span of Control Number of people directly reporting to the next level
Assumes coordination through direct supervision
Wider span of control possible with other coordinating mechanisms present

7. Tall vs Flat Structures
As companies grow, they:
Build taller hierarchy
Widen span, or both
Problems with tall hierarchies
Overhead costs
Poorer upward information
Focus power around managers, so staff less empowered

8. Trend Toward Flatter Structures
Firms moving toward flatter structures (delayering)
Cuts costs
Puts decision makers closer to front-line information
Supports empowerment
Problem: risk of cutting too much middle management

9. Centralization and Decentralization
Formal decision making authority is held by a few people, usually at the top
Centralization
Decision making authority is dispersed throughout the organization
Decentralization

10. Formalization
The degree to which organizations standardize behavior through rules, procedures, formal training, and related mechanisms.
Formalization increases as firms get older, larger, and more regulated
Problems
Reduces organizational flexibility
May undermine work efficiency
Job dissatisfaction and work stress

11. Mechanistic vs. Organic Structures
Narrow span of control
High formalization
High centralization
Organic
Wide span of control
Little formalization
Decentralized decisions

12. Organizational Departmentalization
Organizational Structure

13. Effects of Departmentalization
Establishes chain of command (supervision structure)
Creates common mental models, measures of performance, etc
Encourages staff to coordinate through informal communication

14. Functional Organizational Structure
Organizes employees around specific
knowledge or other resources
(marketing, production)
CEO
Finance
Production
Marketing

15. Evaluating Functional Structures
Benefits
Supports professional identity and career paths
Permits greater specialization
Easier supervision --similar issues
Creates an economy of scale --common pool of talent
Limitations
More emphasis on subunit than organizational goals
Higher dysfunctional conflict
Poorer coordination -- requires more controls

16. Divisional Structure
Organizes employees around outputs, clients, or geographic areas
CEO
Consumer
Products
Lighting
Products
Medical
Systems

17. Divisional Structures Dynamics
Different forms of divisional structure
Geographic structure
Product structure
Client structure
Best form depends on environment
Movement away from geographic form
Less need for local representation
Reduced geographic variation
More global clients

18. Evaluating Divisional Structures
Benefits
Building block structure -- accommodates growth
Better coordination in diverse markets
Limitations
Duplication, inefficient use of resources
Specializations are dispersed, creating silos of knowledge

19. W. L. Gore’s Team-Based Structure
W. L. Gore & Associates Inc. has an extreme team-based organizational structure that eliminates the traditional hierarchy. Associates are organized around self-directed teams at dozens of manufacturing and sales offices around the world.
© Bill Kramer/ Bill Kramer Photography Inc.

20. Team-Based Structure Features
Self-directed work teams
Teams organized around work processes
Very flat hierarchy, few management levels
Very little formalization
Usually found within divisionalized structure
© Bill Kramer/ Bill Kramer Photography Inc.

21. Evaluating Team-Based Structures
Benefits
Responsive, flexible
Lower admin costs
More informed decisions
Limitations
Interpersonal training costs
Slower during team development
Stress due to ambiguous roles
Problems with supervisor role changes
Duplication of resources
© Bill Kramer/ Bill Kramer Photography Inc.

22. Bioware’s Matrix Structure
Ray Muzyka (left) and Greg Zeschuk (right) adopted a matrix organizational structure for their electronic games company, Bioware, because it balances the need for teamwork and information sharing.
Ed Kaiser/Edmonton Journal

23. Matrix Structure (Project-based)
Employees ( ) are temporarily assigned to a specific project team and have a permanent functional unit
CEO
Engineering
Marketing
Design
Project A
Manager
Project B
Manager
Project C
Manager

24. Evaluating Matrix Structures
Benefits
Uses resources and expertise effectively
Improves communication,flexibility, innovation
Focuses specialists on clients and products
Supports knowledge sharing within specialty across groups
Solution when two divisions have equal importance
Limitations
Increases goal conflict and ambiguity
Two bosses dilutes accountability
More conflict, organizational politics, and stress

25. Contingencies of Organizational Structure

26. External Environment & Structure
Dynamic
• High rate of change
• Use team-based, network, or other organic structure
Stable
• Steady conditions, predictable change
• Use mechanistic structure
Complex
• Many elements (such as stakeholders)
• Decentralize
Simple
• Few environmental elements
• Less need to decentralize

27. External Environment & Structure (con’t)
Diverse
• Several products, clients, regions
• Use divisional form aligned with the diversity
Integrated
• Single product, client, place
• Use functional structure, or geographic division if global
Hostile
• Competition and resource scarcity
• Use organic structure for responsiveness
Munificent
• Plenty of resources and product demand
• Less need for organic structure

28. Effects of Organizational Size
As organizations grow, they have:
More division of labor (job specialization)
Greater use of standardization
More hierarchy and formalization
More decentralization

29. Technology and Structure
Technology refers to mechanisms or processes by which an organization turns out its product or service
Two contingencies:
Variability -- the number of exceptions to standard procedure that tend to occur.
Analyzability -- the predictability or difficulty of the required work

30. Organizational Strategy
Structure follows strategy
Strategy points to the environments in which the organization will operate
Leaders decide which structure to apply
Differentiation strategy
Providing unique products or attracting clients who want customization
Cost leadership strategy
Maximize productivity in order to offer competitive pricing

31. Organizational Structure
Chapter Twelve
Ed Kaiser/Edmonton Journal