1. Managing Behavior In Organizations
Sixth Edition
Jerald Greenberg
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2. Designing Effective Organizations
Chapter Thirteen
Designing Effective Organizations

3. Learning Objectives
DEFINE organizational structure and DISTINGUISH among aspects of organizational structure that are typically represented in an organization chart
DISTINGUISH among the three types of departmentalization: functional organizations, product organizations, and matrix organizations
DEFINE organizational design and DISTINGUISH between classical and neoclassical approaches to organizational design
DESCRIBE the contingency approach to organizational design
IDENTIFY emerging approaches to organizational design
DISTINGUISH between conglomerates and strategic alliances as two types of interorganizational designs
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4. Three Good Reasons Why You Should Care About . . . Organizational Design
To understand how organizations function, you must know about their structural elements - their basic building blocks.
The design of organizations has profound effects on how they function.
The way organizations are designed has been changing in recent years and promises to continue changing in the years ahead.
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5. Organizational Structure
Organizational structure - the formal configuration between individuals and groups with respect to the allocation of tasks, responsibilities, and authority within organizations.
Organization charts show the connections between various clusters of functions of which an organization is composed.
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6. Hierarchy of Authority
Hierarchy of authority describes who reports to whom in an organization
Downsizing – eliminating entire levels of organizational structure
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7. Span of Control
Span of control ― number of people formally required to report to each individual manager
Tall ― organizations that have many levels
Flat ― organizations with few levels
Wide span of control ― responsibility for many individual reports; organization has a flat hierarchy
Narrow span of control ― responsibility for few individual reports; organization has a tall hierarchy
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8. Division of Labor
Division of labor ― tasks to be performed within an organization are divided into specialized jobs
The more specialized are jobs, the narrower the range incumbents are required to perform
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9. Line versus Staff Positions
Line vs. staff positions:
People in line positions have decision-making power.
People in staff positions cannot make decisions, but provide advice and recommendations to be used by the line managers.
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10. Decentralization Centralization vs. decentralization
Decentralization is the process of delegating power from higher to lower levels within organizations
Centralization is the tendency for just a few powerful individuals or groups to hold most of the decision-making power
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11. Decentralization
Various benefits are associated with low decentralization (high centralization) and high decentralization (low centralization) within organizations.
Low Decentralization (High Centralization)
Eliminates the additional responsibility not desired by people performing routine jobs
Permits crucial decisions to be made by individuals who have the “big picture”
High Decentralization (Low Centralization)
Can eliminate levels of management, making a leaner organization-one that is better quipped to make changes required to adapt to market demands and opportunities (see Chapter 14).
Promotes greater opportunities for decision to be made by people closest to problems
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12. Departmentalization
Departmentalization - the way in which an organization is broken up into coherent units.
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13. Functional Organizations
A departmentalizes functional organization individuals according to the functions they perform.
Most basic approach to departmentalization
As organizations grow in complexity, more departments are added or deleted as the need arises
Avoids duplication of effort and takes advantage of economies of scale
Could cause narrow-mindedness and discourage innovation
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14. Product Organizations
A product organization departmentalizes individuals by creating self-contained divisions, each of which is responsible for everything to do with a certain product or group of products.
Drawbacks - loss of economies of scale from the duplication of various departments within operating units
Problems of coordination across product lines may arise
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15. Matrix Organization
A matrix organization combines the function and product forms of departmentalization
Used in complex and uncertain environments and when there is a need for economies of scale in the use of internal resources.
Employee is required to report to both a functional manager and a product manager (dual authority).
Three kinds of bosses:
Top leader
Matrix bosses
Two-boss managers
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16. Matrix Organization Degree of permanence
Permanent overlay – project teams are kept going after a project is completed
Mature matrix both functional and product lines are permanent and equally strong in the organization
Temporary overlay - projects are crossed with functions on a short-term basis
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17. Matrix Organization Advantages and disadvantages:
permit flexible use of human resources
offer an efficient means of responding quickly to a changing, unstable environment
enhance communication among managers
create frustration and stress as a result of the dual reporting system
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18. Organizational Design
Organizational design refers to the process of coordinating the structural elements of organizations in the most appropriate manner
Classical organizational theory - effective organizations have a formal hierarchy, a clear set of rules, specialization of labor, highly routine tasks, and a highly impersonal working environment
Neoclassical organizational theory - effective organizations are designed with flat hierarchical structures and a high degree of decentralization
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19. The Contingency Approach
The contingency approach - the best design for an organization depends on the nature of the environment in which the organization is operating
The external environment – the sum of all the forces impinging on an organization with which it must deal effectively if it is to survive
How stable the environment is (unchanging)
How unstable (turbulent) the environment is
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20. Mechanistic versus Organic
Organizational designs for stable versus turbulent conditions
Mechanistic organization ― people perform specialized jobs, many rigid rules, authority vested in a few top ranking officials
Effective when environment is stable
Organic organization ― jobs tend to be very general, few rules, decisions made by low-level employees
Effective when the environment is turbulent
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21. Mintzberg’s Framework
Organizations are composed of five basic elements:
Operating core – employees who perform the basic work related to the product or service
Strategic apex – top-level executives responsible for running the entire organization
Middle line – managers who transfer information between the strategic apex and the operating core
Technostructure – specialists responsible for standardizing various aspects of the organization’s activities
Support staff – provide indirect support services to the organization
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22. Mintzberg’s Framework
Five specific organizational designs:
Simple structure – power resides at the strategic apex
Machine bureaucracy – power resides with the technostructure
Professional bureaucracy – power is at the operating core
Divisional structure – division managers have control
Adhocracy – all members have authority to make decisions that fall within their areas of specialization
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23. Mintzberg’s Framework
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24. Copyright © 2013 Pearson Education, Inc., publishing as Prentice Hall
GM Reorganization
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25. Vertically Integrated Organization
Vertically integrated organizations - companies that own their own suppliers and/or their own customers who purchase their products
Difficult to balance their resources in the most effective manner
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26. Interorganizational Designs
Intraorganizational designs – the arrangements of units within one organization
Interorganizational designs – plans by which two or more organizations come together
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27. Team-Based Organizations
Team-based organizations – autonomous work teams are organized in parallel fashion such that each performs many different steps in the work process
Design the organization around processes instead of tasks
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28. Interorganizational Designs
Boundaryless organizations - chains of command are eliminated, spans of control are unlimited, and rigid departments give way to empowered teams
Modular or networked organizations - non-core functions are outsourced to other companies while full strategic control over the core business is retained
Virtual organization - composed of a continually evolving network of companies (e.g., suppliers and customers) that are linked together to share skills, costs, and access to markets
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29. Interorganizational Designs
Conglomerates are formed when organizations diversify by adding an entirely unrelated business or product to their organizational design
A strategic alliance - a type of organizational design in which two or more separate firms join their competitive capabilities to operate a specific business
Mutual service consortia
Joint ventures
Value-chain partnerships
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30. Alliances in the Global Economy
Strategic alliances in the global economy are
popular between companies from developed
countries and companies from transforming
economies
Market access
Exchange technology and manufacturing services
Financial incentives
Marketing benefits
Managerial benefits
Economic development
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