1. © McGraw-Hill Companies, Inc., 1999 1 Chapter 15 Organizational Structure and Design John M. Ivancevich Michael T. Matteson Slides Prepared by Bruce R. Barringer University of Central Florida

2. © McGraw-Hill Companies, Inc., 1999 2 Learning Objectives Slide 1 of 3 Identify the choices which must be made in designing an organization structure. Define what is meant by the term division of labor. Discuss the role of delegation of authority in design decisions. Describe several forms of departmentalization.

3. © McGraw-Hill Companies, Inc., 1999 3 Learning Objectives Slide 2 of 3 Explain the importance of span of control. Define three important dimensions of structure. Compare mechanistic and organic organizational design. Identify the major advantages of matrix organizational design.

4. © McGraw-Hill Companies, Inc., 1999 4 Learning Objectives Slide 3 of 3 Discuss multinational organizational structure and design issues. Explain the meaning of the term virtual organization.

5. © McGraw-Hill Companies, Inc., 1999 5 Organizational Structure and Design Organizational Structure –The formal pattern of how people and jobs are grouped in an organization. Organizational Design –The decisions and actions that result in organizational structure.

6. © McGraw-Hill Companies, Inc., 1999 6 Designing an Organization Structure Slide 1 of 2 Basic Steps 1. 3. 2. Managers must decide how to divide the overall tasks of the organization into successively smaller jobs. Managers must decide the basis by which to group the individual jobs. Managers must decide the appropriate size of the group reporting to each supervisor 4.Managers must distribute authority among the jobs.

7. © McGraw-Hill Companies, Inc., 1999 7 Designing an Organization Structure Slide 2 of 2 Components of the Four Design Decisions Specialization HighLow Delegation HighLow Basis HomogenousHeterogeneous Number FewMany Division of Labor Span of Control Departmentalization Authority

8. © McGraw-Hill Companies, Inc., 1999 8 Division of Labor Slide 1 of 2 Division of Labor Defined –Refers to the extent to which jobs are specialized in an organization. Ways that Division of Labor can Occur –Work can be divided into different personal specialties. –Work can be divided into different activities necessitated by the natural sequence of the work the organization does.

9. © McGraw-Hill Companies, Inc., 1999 9 Division of Labor Slide 2 of 2 Ways that Division of Labor can Occur (continued) –Finally, work can be divided along the vertical plane of an organization.

10. © McGraw-Hill Companies, Inc., 1999 10 Delegation of Authority The process by which authority is distributed downward in an organization.

11. © McGraw-Hill Companies, Inc., 1999 11 Exhibit 15.1: Functional Departmentalization Structure OMB Company OMB Company Personnel Finance Marketing Manufacturing Engineering

12. © McGraw-Hill Companies, Inc., 1999 12 Exhibit 15.2: Territorial Departmentalization Structure OMB Company OMB Company Pacific Rocky Mountain Rocky Mountain Southern Midwestern Eastern

13. © McGraw-Hill Companies, Inc., 1999 13 Exhibit 15.3: Product Departmentalization Structure OMB Company OMB Company Commercial Appliances Commercial Appliances Large Household Appliances Large Household Appliances Small Household Appliances Small Household Appliances

14. © McGraw-Hill Companies, Inc., 1999 14 Exhibit 15.4: Customer Departmentalization Structure OMB Company OMB Company Institutional Sales Institutional Sales Mail Order Mail Order Retail Stores Retail Stores Government Contracts Government Contracts

15. © McGraw-Hill Companies, Inc., 1999 15 Span of Control Span of Control Defined –The number of subordinates reporting to a superior. The span is a factor that affects the shape and height of an organizational structure. Critical Considerations in Determining a Manager’s Span of Control –Required contact –Degree of specialization –Ability to communicate

16. © McGraw-Hill Companies, Inc., 1999 16 Dimensions of Structure Slide 1 of 2 FormalizationCentralization Refers to the extent to which expectations regarding the means and ends of work are specified, written, and enforced. Refers to the location of decision-making authority in the hierarchy of the organization.,

17. © McGraw-Hill Companies, Inc., 1999 17 Dimensions of Structure Slide 2 of 2 Complexity Refers to the number of distinctly different job titles, or occupational groupings, and the number of distinctly different units, or departments.

18. © McGraw-Hill Companies, Inc., 1999 18 Exhibit 15.5: Organization Dimensions and Organizational Decisions Slide 1 of 2 Dimensions Decisions High formalization1. High specialization 2. Delegated authority 3. Functional departments 4. Wide spans of control High Centralization1. High specialization 2. Centralized authority 3. Functional departments 4. Wide spans of control

19. © McGraw-Hill Companies, Inc., 1999 19 Exhibit 15.5: Organization Dimensions and Organizational Decisions Slide 2 of 2 Dimensions Decisions High complexity1. High specialization 2. Delegated authority 3. Territorial, customer, and product departments 4. Narrow spans of control

20. © McGraw-Hill Companies, Inc., 1999 20 Organizational Design Models The Mechanistic Model The Matrix Model The Organic Model

21. © McGraw-Hill Companies, Inc., 1999 21 The Mechanistic Model The type of organizational design that emphasizes the importance of production and efficiency. It is highly formalized, centralized, and complex.

22. © McGraw-Hill Companies, Inc., 1999 22 The Organic Model The organizational design that emphasizes the importance of adaptability and development. It is relatively informed, decentralized, and simple.

23. © McGraw-Hill Companies, Inc., 1999 23 The Matrix Model An organizational design that superimposes a product- or project-based design on an existing function-based design.

24. © McGraw-Hill Companies, Inc., 1999 24 Exhibit 15.6: Matrix Organization Project, ProductsManufacturingMarketingEngineeringFinance Functions Project or product A Project or product E Project or product D Project or product C Project or product B

25. © McGraw-Hill Companies, Inc., 1999 25 A Look to the Future: Virtual Organizations One of the fastest developing practices in business throughout the world involves firms in cooperative relationships with their suppliers, distributors, and even competitors.