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Copyright ©2005 Pearson Education Canada Inc.Chapter 14 / Slide 1

Part 4

• Organizational Structure

• Environment, Strategy, and Technology

• Organizational Change, Development, and Innovation

Copyright ©2005 Pearson Education Canada Inc.

The Total Organization


Learning Objectives

1. Define organizational structure and explain how it corresponds to division of labour.

2. Discuss the relative merits of various forms of departmentation.

3. Review the more basic and more elaborate means of achieving organizational coordination.

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Learning Objectives

4. Discuss the nature and consequences of traditional structural characteristics.

5. Explain the distinction between organic and mechanistic structures.

6. Discuss the emergence of network, virtual, modular, and boundaryless organizations.

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Learning Objectives

7. Review important considerations concerning downsizing.

8. Identify symptoms of structural problems in organizations.

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What is Organizational Structure?

• The manner in which an organization divides its labour into specific tasks and achieves coordination among these tasks.

• Structure affects how effectively and efficiently group effort is coordinated.


The Division and Coordination of Labour

• To achieve its goals, an organization has to divide labour among its members and then coordinate what has been divided.

• There are two basic dimensions to the division of labour:

– A vertical dimension– A horizontal dimension


Vertical Division of Labour

• The vertical division of labour is concerned primarily with apportioning authority for planning and decision making.

• Key themes or issues that underlie the vertical division of labour:

– Autonomy and control– Communication


Horizontal Division of Labour

• The horizontal division of labour groups the basic tasks that must be performed into jobs and then into departments.

• Required workflow is the main basis for this division.


Horizontal Division of Labour (continued)

• Key themes or issues that underlie the horizontal division of labour:

– Job design– Differentiation is the tendency for

managers in separate departments to differ in terms of goals, time spans, and interpersonal styles.


Departmentation

• The assignment of jobs to departments is called departmentation, and it represents one of the core aspects of the horizontal division of labour.

• Methods of departmentation include: Functional, product, matrix, geographic, customer, and hybrid.


Functional Departmentation

• Employees with closely related skills and responsibilities are assigned to the same department.

• Advantages:

– Efficiency.– Enhanced communication.– Enhanced career ladders and training

opportunities.– Easier to measure and evaluate

performance.


Functional Departmentation (continued)

• Disadvantages:

– A high degree of differentiation.– Poor communication and slow

response to organizational problems.– Conflicts between departments.– Department empires build at expense

of organizational goals.


Product Departmentation

• Departments are formed on the basis of a particular product, product line, or service.

• Advantages:

– Better coordination and communication among functional specialists who work on a particular product line.

– Flexibility.– Departments can be evaluated as profit

centres.– Timely response to customers.


Product Departmentation (continued)

• Disadvantages:

– Professional development might suffer.– Economies of scale might suffer.– Inefficiency.– Departments might work at cross

purposes.


Matrix Departmentation

• Employees remain members of a functional department while also reporting to a product or project manager.

• Advantages:

– Balance.– Flexibility.– Better communication.


Matrix Departmentation (continued)

• Disadvantages:

– Conflict between product or project managers and functional managers.

– Role conflict and stress because employees must report to two managers.


Geographic Departmentation

• Relatively self-contained units deliver an organization’s products or services in a specific geographic territory.

• Advantages:

– Shortens communication channels.– Caters to regional tastes.– Some local control to clients and

customers.


Customer Departmentation

• Relatively self-contained units deliver an organization’s products or services to specific customer groups.

• Advantages:

– Better service to customers.• The disadvantages of geographic and

customer departmentation parallel those for production departmentation.


Hybrid Departmentation

• A structure based on some mixture of functional, product, geographic, or customer departmentation.

• Hybrids attempt to capitalize on the strengths of various structures while avoiding the weaknesses of others.


Basic Methods of Coordinating Divided Labour

• Coordination is a process of facilitating timing, communication, and feedback among work tasks.

• There are five basic methods of coordination.

• The methods can be ordered in terms of the degree of discretion they permit in terms of task performance.


Basic Methods of Coordinating Divided Labour (continued)

• From least to most work discretion, the five methods are:

– Direct supervision– Standardization of work processes– Standardization of work outputs– Standardization of skills– Mutual adjustment


Basic Methods of Coordinating Divided Labour (continued)• The method of coordination affects the

design of jobs.

• The use of the various methods of coordination tends to vary across different parts of the organization.

• Methods of coordination may change as task demands change.


Other Methods of Coordination

• Lateral coordination across highly differentiated departments often requires more elaborate forms of coordination.

• Integration is the process of attaining coordination across differentiated departments.


Other Methods of Coordination (continued)

• In ascending order of elaboration, three methods of achieving integration include the use of:

– Liaison roles– Task forces– Full-time integrators


Liaison Role

• A person is assigned to help achieve coordination between his or her department and another department.

• One person serves as a part-time link between two departments.


Task Forces

• Temporary groups set up to solve coordination problems across several departments.

• Self-managed and cross-functional teams are also an effective means of achieving coordination.


Integrators

• Organizational members permanently assigned to facilitate coordination between departments.

• They are especially useful for dealing with conflict between highly interdependent departments with diverse goals in an ambiguous environment.


Traditional Structural Characteristics

• There are a number of characteristics that summarize the structure of organizations:

– Span of control– Flat organization– Tall organization– Formalization– Centralization– Complexity


Span of Control

• The number of subordinates supervised by a manager.

• The larger the span, the less potential there is for coordination by direct supervision.

• Spans at the upper levels of an organization tend to be smaller.


Flat and Tall Organization

• A flat organization has relatively few levels in its hierarchy of authority.

• A tall organization has relatively many levels in its hierarchy of authority.

• Flatness versus tallness is an index of the vertical division of labour.

• Flatness and tallness are associated with the average span of control.


Formalization

• The extent to which work roles are highly defined by an organization.

• A very formalized organization tolerates little variability in the way members perform their tasks.

• Very complex tasks dictate high formalization.


Centralization

• The extent to which decision-making power is localized in a particular part of an organization.

• In most centralized organizations, the power for all key decisions rests in a single individual, such as the president.


Centralization (continued)

• In a decentralized organization, decision-making power is dispersed down through the hierarchy and across departments.

• The proper degree of centralization should put decision-making power where the best knowledge is located.


Complexity

• The extent to which an organization divides labour vertically, horizontally, and geographically.

• A very complex organization will be tall, will have have a large number of job titles and departments, and might be spread around the world.

• The essential characteristic of complexity is variety.


Organic versus Mechanistic Structures

• Mechanistic structures are characterized by tallness, specialization, centralization, and formalization.

• Organic structures are characterized by flatness, low specialization, low formalization, and decentralization.


Organic versus Mechanistic Structures (continued)

• More mechanistic structures are called for when an organization’s environment is more stable and its technology is more routine.

• Organic structures tend to work better when the environment is less stable and the technology is less routine.


Contemporary Organic Structures

• The removal of unnecessary bureaucracy and the decentralization of decision-making have led to some new organic organizational structures:

– Network and virtual organizations– Modular organization– Boundaryless organization


Network Organization

• Various functions are coordinated as much by market mechanisms as by managers and formal lines of authority.

• In stable networks, core firms contract out some functions to favoured partners so that they can concentrate on the things that they do best.


Virtual Organization

• A network of continually evolving independent organizations that share skills, costs, and access to one another’s markets.

• Each partner contributes only in its area of core competencies.

• A key advantage is its flexibility and adaptability.

• Network and virtual organizations face some unique problems.


Modular Organization

• An organization that performs a few core functions and outsources noncore activities to specialists and suppliers.

• The modular organization maintains complete strategic control.

• By outsourcing noncore activities, modular organizations can keep unit costs low and develop new products more rapidly.


Modular Organization (continued)

• Requires good suppliers who are reliable, loyal, and can be trusted with trade secrets.

• They must be careful not to outsource critical technologies.

• Operational control is reduced due to the dependence on outsiders.

• A lean and streamlined organizational structure with great flexibility.


Boundaryless Organization

• An organization structure that removes vertical, horizontal, and external barriers.

• It is made up of self-managing and cross-functional teams that are organized around core business processes.

• The teams include employees from different functional areas as well as customers and suppliers.


Boundaryless Organization (continued)

• Boundaryless organizations are able to achieve greater integration and coordination.

• They are able to adapt to environmental changes.

• However, it can be difficult to overcome political and authority boundaries.

• It can be time consuming to manage the democratic process to coordinate the efforts of many stakeholders.


The Impact of Size

• Large organizations are more complex than small organizations.

• Larger organizations are less centralized and more formal than smaller organizations.

• Size is only one determinant of organizational structure.


The Relationship Between Size and Structure


Downsizing

• The intentional reduction in workforce size with the goal of improving organizational efficiency or effectiveness.

• Downsizing is often accompanied by reducing horizontal or vertical complexity.

• Self-managed teams can act as substitutes for a level of management.

• Horizontally, functions can be combined or removed by contracting them out.


Problems with Downsizing

• Increased formalization and centralization that can have a negative effect on customers or clients.

• Removal of departments and positions without first thinking about the work that needs to be done and who should do it.

• The removal of management levels without considering the implications for job design and workload.


Problems with Downsizing (continued)

• Traditional guards against unethical activities might be removed.

• Low morale, reduced productivity, and distrust of management.

• Downsizing does not result in cost reductions in the long run or improvements in productivity.

• Its impact on structure and morale must be anticipated and managed to have positive consequences.


Symptoms of Structural Problems

• Bad job design.

• The right hand does not know what the left is doing.

• Persistent conflict between departments.

• Slow response times.

• Decisions made with incomplete information.

• A proliferation of committees.

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