1 Chapter 14 Foundations of Organization Structure.

1

Chapter 14

Foundations of Organization

Structure

2

Organization Structure:How jobs, tasks and people are formally divided, grouped, and coordinated throughout a company.

3

Elements of Structure

• Specialization (of work duties)• Standardization (or formalization)• Centralization (of decision making)-----------------------------------------------------• Chain of command• Span of control• Departmentalization

4

Work Specialization

• Also called Division of Labor

• Degree to which work and other activities are partitioned into separate, individual tasks, duties and assignments for each employee.

To what degree are activities subdivided into separate jobs?

5

Standardization (Formalization)

• Degree to which jobs are managed using highly specified and rigid rules, policies, procedures, etc. (see: micromanagement !)

To what degree will there be rules and regulations to direct employees and managers?

6

• Centralization: Degree to which decision making is concentrated at a single point in the organization (usually higher up and in the center of the org. chart/hierarchy).

• Decentralization: Degree to which lower-level employees provide input and have actual authority or discretion to make decisions for the organization.

Centralization (of Decisions)Where will organizational decision making authority reside?

7

Chain of Command

• Refers to the line of authority (or command) from the top of the organization to the lowest “ranks”; clarifies who reports to whom.

• Should (ideally) follow the “unity of command” principle.

To whom do individuals and groups report?

8

• Number of levels of managerial hierarchy:- Current trend is toward wider/larger spans of control

(by using teams, etc.)

- Wider spans are consistent with efforts to:o reduce costso cut overheado speed up decision makingo increase flexibilityo get closer to customerso empower employees

Span of ControlHow many direct reports can a manager effectively

and efficiently direct?

9

Contrasting Spans of Control

10

Departmentalization

Basis on which units are “grouped” together:• by Function?• by Product?• by Geography?• by Process?• by Customer?• other?

On what basis will organizational entities be grouped?

11

Common Organization Structures

A Simple Structure:Gold’s Appliance Store

A Simple Structure:Gold’s Appliance Store

1. Simple Structures (are characterized by):

• low formalization• centralized authority in a single person• low departmentalization• wider spans of control

12

Common Structures (cont.)

• high specialization

• highly centralized decision making

• highly standardized policies, procedures, rules & regulations

• extensive departmentalization, typically by function

• narrow spans of control

• decision making that follows tight chain of command

2. Bureaucratic (Mechanistic) Structures:

13

Why Don’t Bureaucracies Die?

Strengths:• Gives you more control!

(especially with bigger size)

• Centrally coordinated decision making preferred

• Economies of scale

• Environmental turbulence can be largely managed

• Enhanced management of communication & info.

• Technology can mitigate

Weaknesses:• Increased subunit conflicts

• More rigid and inflexible:-Obsessive concern for enforcing

rules and regulations

-Lack of employee discretion to deal with problems

- Increased time to act

• Encourages autocratic leadership styles

• Fosters Q1/Q2 cultures

14

Common Structures (cont.)

3. Matrix: A “hybrid” of departmentalization.

Combines (usually) the following approaches to departmentalization:

• Functional• Product

15

Example: A Matrix StructureApproach for a College of Business

M. Stevens

16

Common Structures (cont.)

Characteristics:• Breaks down departmental barriers.

• Decentralizes decision making to the team level.

• Requires employees to be generalists as well as specialists.

• Creates a “flexible bureaucracy.”

Characteristics:• Breaks down departmental barriers.

• Decentralizes decision making to the team level.

• Requires employees to be generalists as well as specialists.

• Creates a “flexible bureaucracy.”

4. Team Structures: Use of teams as the central device to manage and coordinate work activities (a “simpler” structure for large organizations).

17

Common Structures (cont.)

Team (Organic, Empowered) Structures:• low specification (formalization)

• low specialization (lots of cross-training)

• highly decentralized, participative decision-making based on genuinely empowered employees

• uses cross-functional and cross-hierarchical teams

• flatter hierarchies and reporting structures

• comprehensive sharing of information networks

18

The Two Extremes of Structure

E X H I B I T 14 – 6E X H I B I T 14 – 6

19

Newer Approaches to Structure

• Virtual Organizations• Boundaryless Organizations

20

Which Structure Is Best?

• What is the organization’s size?• What technology is being used?• How much environmental uncertainty?• What is the firm’s business strategy:

– Creativity and Innovation?– Cost-Minimization?– Imitation?

• What is the organization’s culture?