1. Designing Organizational Structures15
Chapter
Designing Organizational Structures
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Learning Goals
What are the five structural building blocks that managers use to design organizations?
What are the five types of departmentalization?
How can the degree of centralization/ decentralization be altered to make an organization more successful?
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3. Learning Goals (cont’d)
4. How do mechanistic and organic organizations differ?
5. What is the difference between line positions and staff positions?
6. What is the goal of re-engineering?
7. How does the informal organization affect the performance of a company?
8. What trends are influencing the way businesses organize?
© 2004 by Nelson, a division of Thomson Canada Limited.

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Learning Goal 1
What are the five structural building blocks that managers use to design organizations?
© 2004 by Nelson, a division of Thomson Canada Limited.

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Organizing:
the process of coordinating and allocating a firm’s resources so that the firm can carry out its plans and achieve its goals
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6. Structural Building Blocks
Division of Labour
specialization of tasks
Departmentalization
creating an organization chart
Managerial Hierarchy
chain of command
delegation of authority
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7. Structural Building Blocks (cont’d)
Span of Control
narrow span
wide span
Centralization of Decision Making
degree of centralization vs. decentralization
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Learning Goal 2
What are the five types of departmentalization?
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9. Departmentalization:
the process of grouping jobs together so that similar or associated tasks and activities can be coordinated
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10. Types of Departmentalization
Functional
Product
Process
Customer
Geographic
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Functional
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12. Product or Service Offered
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Process
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Customer
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Geographic
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Learning Goal 3
How can the degree of centralization/ decentralization be altered to make an organization more successful?
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Centralization:
the degree to which formal authority is concentrated in one area or level of an organization
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Decentralization:
the process of pushing decision-making authority down the organizational hierarchy, giving lower-level workers more responsibility
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19. Factors Affecting Decision-Making Authority
Size of the organization
Speed of change in its environment
Managers willing to share power
Employees willing and able to take more responsibility
Organization’s geographic dispersion
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Learning Goal 4
How do mechanistic and organic organizations differ?
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21. Mechanistic Organization:
an organization characterized by a relatively high degree of work specialization, rigid departmentalization, many layers of management, narrow spans of control, centralized decision- making, and a long chain of command.
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22. Organic organization:
an organization characterized by a relatively now degree of work specialization, loose departmentalization, few levels of management, wide spans of control, decentralized decision-making, and a short chain of command
© 2004 by Nelson, a division of Thomson Canada Limited.

23. Mechanistic vs. Organic Structure
Structural Characteristic
Mechanistic
Organic
Job specialization
High
Low
Departmentalization
Rigid
Loose
Management hierarchy
Tall (many levels)
Short (few levels)
Span of control
Narrow
Wide
Decision-making authority
Centralized
Decentralized
Chain of command
Long
Short

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Learning Goal 5
What is the difference between line positions and staff positions?
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Line Positions:
all positions in the organization directly concerned with producing goods and services and which are directly connected from top to bottom
Typically found in areas such as:
production
marketing
finance
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Staff Positions:
positions in an organization held by individuals who provide the administrative and support services that line employees need to achieve the firm’s goals
Typically found in areas such as:
legal counseling
public relations
human resource management
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27. Common Organizational Structures
Line organization
clear chain of command
Line-and-staff organization
both line and staff positions
Committee structure
group authority and responsibility
Matrix structure (project management)
combines functional and product departmentalization
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Matrix Structure
Advantages
teamwork
efficient use of resources
flexibility
ability to balance conflicting objectives
higher performance
opportunities for personal and professional growth
Disadvantages
power struggles
confusion among team members
lack of cohesiveness
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Learning Goal 6
What is the goal of re-engineering?
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Re-engineering:
the complete redesign of business structures and processes in order to improve operations
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31. Goal of Re-engineering
Redesign business processes to achieve improvements in:
cost control
product quality
customer service
speed
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Learning Goal 7
How does the informal organization affect the performance of a company?
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33. Informal Organization:
the network of connections and channels of communication based on the informal relationships of individuals inside an organization
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34. Informal Organizations
Give employees more control over their work environment by delivering a continuous stream of company information, helping employees stay informed
Informal relationships can be:
between people at the same hierarchical level
between people at different levels and in different departments
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35. Functions of the Informal Organization
Friendships and social contact
Information and sense of control over their work environment
Source of status and recognition
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Learning Goal 8
What trends are influencing the way businesses organize?
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37. Trends in Organizational Structure
Virtual corporation
technology
opportunism
excellence
trust
no borders
Structural issues for global mergers
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