MGMT 371 --- Principles of Management
ManagementChapter 11 & 12: Organizational Structure and
Design Test Three: Notes
Design Organizational Structure Organizing: Arranging and
structuring work to accomplish an organizations goals. Organization
Structure: The formal arrangement of jobs within an organization.
Organizational Design Departmentalization Jobs that are grouped
together Work specialization How to divide task into separate jobs
Chain of command The reporting structure Span of control How many
employees report to managers Centralization and decentralization
How much power should lower level employees have Formalization Do
people have the
Functional Departmentalization- Group Jobs According to Function
Plant Manager Manager, Engineering Manager, Accounting Manager,
Manufacturing Manager, Human Resources Manager, Purchasing+
Efficiencies from putting together similar specialties and people
with common skills, knowledge, and orientations+ Coordination
within functional area+ In-depth specialization-- Poor
communication across functional areas-- Limited view of
organizational goals
Geographical Departmentalization Vice President for Sales Sales
Director, Western Region Sales Director, Southern Region Sales
Director, Midwestern Region Sales Director, Eastern Region+ More
effective and efficient handling of specific regional issues that
arise+ Serve needs of unique geographic markets better --
Duplication of function-- Can feel isolated from other
organizational areas
Product Departmentalization Bombardier, Ltd. Mass Transit Sector
Mass Transit Division Bombardier-Rotax (Vienna) Recreational and
Utility Vehicles Sector Recreational Products Division Logistical
Equipment Division Industrial Equipment Division Bombardier-Rotax
(Gunskirchen) Rail Product Sector Rail and Diesel Products
Division+ Allows specialization in particular products and
services+ Managers can become experts in their industry+ Closer to
customers-- Duplication of functions-- Limited view of
organizational goals Plant superintendent Sewing Department Manager
Planning and Milling Department Manager Assembling Department
Manager Lacquering and Sanding Department Manager Finishing
Department Manager Inspection and Shipping Department Manager+ More
efficient flow of work activities-- Can only be used with certain
types of products
Customer Departmentalization Director of Sales Manager, Retail
Accounts Manager, Wholesale Accounts Manager, Government Accounts+
Specialists can meet Customers needs and problems-- Duplication of
functions-- Limited view of organizational goalsIncreasingly
popular
Organizational Structure Work Specialization Dividing work
activities into separate job tasks Consider McDonalds
Overspecialization can result in boredom, fatigue, stress, poor
quality, increased absenteeism, and higher turnover Job
characteristics model
Designing Jobs Job Characteristics Model (JCM) Five primary job
characteristics:1. Skill Variety: How many skills and talents are
needed?2. Task Identity: Does the job produce a complete work?3.
Task Significance: How important is the job?4. Autonomy: How much
independence does the jobholder have?5. Feedback: Do workers know
how well they are doing?More on this later
Organizational Structure (cont.) Chain of Command: The
continuous line of authority that extends from upper levels of an
organization to the lowest levels of the organization and clarifies
that reports to whom. Authority: The rights inherent in a
managerial position to tell people what to do and to expect them to
do it. Barnard acceptance of authority Line vs. staff authority
Responsibility: The obligation or expectation to perform. Unity of
Command: The concept that a person should have one boss and should
report only to that person. Span of Control: The number of
employees who can be effectively and efficiently supervised by a
manager.
Contrasting Spans of Control
Organizational Structure (cont.) Centralization: The degree to
which decision-making is concentrated at upper levels in the
organization. Decentralization: Organizations in which
decision-making is pushed down to the managers who are closest to
the action. Employee Empowerment When is more centralization or
decentralization better? Formalization: The degree to which jobs
within the organization are standardized and the extent to which
employee behavior is guided by rules and procedures. Highly
formalized jobs little discretion Low formalization fewer
constraints
Mechanistic Versus Organic Organizations Mechanistic Rigid
Departmentalization High specialization Clear chain of command
Narrow spans of control Centralization High formalization Organic
Cross-functional teams Cross-hierarchical teams Free flow of
information Wide spans of control Decentralization Low
formalization
Recall Webers Bureaucracy A bureaucracy should have: Career
Orientation: Managers are career professionals, not owners of units
they manage Division of Labor: Jobs broken down into simple,
routine, and well-defined tasks. Authority Hierarchy: Positions
organized in a hierarchy with a clear chain of command. Formal
Selection: People selected for job based on technical
qualifications Formal Rules and Regulations: System of written
rules and standard operating procedures. Impersonality: Uniform
application of rules and controls, not according to
personalities.
Contingency Factors Overall strategy of the organization
Structure follows strategy. Innovation organic Cost control
mechanistic Size of the organization Firms change from organic to
mechanistic organizations as they grow. Degree of environmental
uncertainty Dynamic organic Stable mechanistic Technology and
Structure Organizations adapt their structures to their technology.
Unit production of single units or small batches Mass production of
large batches of output Process production in continuous process of
outputs Routine technology = mechanistic organizations Non-routine
technology = organic organizations
Core Technology and Organization Design Woodwards Basic Forms of
Technology Unit or Small-batch (Organic)
Large-batch/mass-production (Mechanists) Continuous-process
(Organic)
Traditional Organizational Designs Simple Structure
Owner-Manager Workers Functional Structure Top Management
Manufacturing Sales Finance Personnel Divisional Structure Product
Division A Manufacturing Finance Sales Personnel Product Division B
Manufacturing Sales Finance Personnel* Strategic Business Units and
the conglomerate structure are variants of the divisional
structure.
Conglomerate (H-form) Design at Samsung CEO Semiconductors
Telecommunication Appliances Media
Multidivisional (M-form) Design at Hilton Hotels CEO Conrad
Hotels & Resorts Doubletree Hotels Embassy Suites Hotels
Hampton Inn & Suites Hilton Garden Inn Hilton Grand Vacations
Club Homewood Suites by Hilton
Strengths and Weaknesses of Traditional Organizational Designs
Simple Structure Strengths: Fast, flexible; Inexpensive to maintain
Cleat Accountability Weaknesses: Not appropriate as organization
grows Reliance on one person is risky. Functional Structure
Strengths: Cost-saving advantages from specialization (economies of
scale, minimal duplication of people and equipment) Employees are
grouped with others who have similar tasks. Weaknesses: Pursuit of
functional goals can cause managers to lose sight of whats best for
overall organization; Functional specialists become insulated and
have little understanding of what other units are doing. Divisional
Structure Strengths: Focus on results division managers are
responsible for what happens to their products and services.
Weaknesses: Duplication of activities and resources increases costs
and reduces efficiency.
Contemporary Organizational Designs Team Structure What it is: A
structure in which the entire organization is made up of work
teams. Advantages: Employees are more involved and empowered.
Reduced barriers among functional areas. Disadvantages: No clear
chain of command Pressure on teams to perform. Matrix-Project
Structure What it is: Matrix structure assigns specialists from
different functional areas to work on projects but who return to
their areas when the project is completed. Project structure has
employees continuously work on projects. Advantages: Fluid and
flexible design that can respond to environmental changes. Faster
decision making Disadvantages: Complexity of assigning people to
projects. Task and Personality conflicts. Boundaryless Structure
What it is: A structure not defined by or limited to artificial
horizontal, vertical, or external boundaries; includes virtual and
network types of government. Advantages: Highly flexible and
responsive. Draws on talent wherever its found. Disadvantages: Lack
of Control Communication difficulties Learning Structure What it
is: A structure in which employees continually acquire and share
new knowledge and apply that knowledge. Advantages: Sharing of
knowledge throughout organization. Sustainable source of
competitive advantage. Disadvantages: Reluctance on part of
employees to share knowledge for fear of losing their power. Large
numbers of experienced employees in the verge of retiring.
Removing External Boundaries Virtual Organization: Consists of a
small core of full-time employees, and temporarily hires
specialists to work on opportunities that arise. Network
Organization: Outsources its major business functions (e.g.,
manufacturing) in order to concentrate on what it does best.
Matrix and Network (Virtual) Structures
Common Organization Designs for International OrganizationsA.
Separate International Division CEO Production Marketing Finance
International DivisionB. Location Departmentalization CEO North
American Operations European Operations Asian OperationsC. Product
Departmentalization CEO Product Manager A Product Manager B North
America Europe Asia Product Manager CD. Multidivisional Structure
CEO Subsidiary A (Germany) Subsidiary B (U.S.) Subsidiary C
(France) Subsidiary D (Japan) Subsidiary E (China)
Learning Organizations An organization that has developed the
capacity to continuously learn, adapt, and change through the
practice of knowledge management by employees. An open team-based
organization design that empowers employees Extensive and open
information sharing
Collaboration Cross-functional teams Task forces / ad hoc
committees Communities of practice Open innovation Strategic
partnerships
Flexible Work Arrangements Telecommuting Flextime, compressed
workweeks, job sharing Contingent workers More on these in HR
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