Organizational Behavior

Organizational StructureMcGraw-Hill/IrwinMcShane/Von Glinow OB 5eCopyright 2010 by The McGraw-Hill Companies, Inc. All rights reserved.

13-*

Choosing an Organizational Structure at BioWareRay Muzyka (left) and Greg Zeschuk (right) designed an organizational structure for their electronic games company, Bioware, that balances the need for teamwork and information sharing.

13-*

Organizational Structure DefinedDivision of labor and patterns of coordination, communication, workflow, and formal power that direct organizational activities.Relates to many OB topicse.g. job design, teams, power, org culture, org change

13-*

Division of LaborSubdividing work into separate jobs assigned to different peopleDivision of labor is limited by ability to coordinate workPotentially increases work efficiencyNecessary as company grows and work becomes more complex

13-*

Coordinating Work ActivitiesInformal communicationSharing information, forming common mental modelsAllows flexibilityVital in nonroutine and ambiguous situationsEasiest in small firmsApplied in team-based structuresIncludes integrator roles

13-*

Coordinating Work ActivitiesFormal hierarchyDirect supervisionAssigns formal (legitimate) power to manage others Coordination strategy for departmentalizationStandardizationStandardized processes (e.g., job descriptions)Standardized outputs (e.g., sales targets)Standardized skills (e.g., training)

13-*

Elements of Organizational StructureSpan of ControlCentralizationDepartment-alizationFormalizationElements of Organizational Structure

13-*

Span of ControlNumber of people directly reporting to the next levelAssumes coordination through direct supervisionWider span of control possible when:Other coordinating mechanisms presentRoutine tasksLow employee interdependence

13-*

Tall vs Flat StructuresAs companies grow, they:Build taller hierarchyWiden span, or bothProblems with tall hierarchiesOverhead costsWorse upward informationFocus power around managers, so staff less empowered

13-*

Issues with Tall vs Flatter StructuresFirms moving toward flatter structures (delayering) because taller hierarchies have:Higher mgt overhead costsLess information flowLess staff empowermentBut also problems with flatter hierarchiesUndermines management functionsIncreases workload and stressRestricts management career development

13-*

Centralization and Decentralization

13-*

FormalizationThe degree to which organizations standardize behavior through rules, procedures, formal training, and related mechanisms.Formalization increases as firms get older, larger, and more regulatedProblems with formalizationReduces organizational flexibilityDiscourages organizational learning/creativityReduces work efficiencyIncreases job dissatisfaction and work stress

13-*

Growing an Organic TaxiAward-winning TAXI relies on an organic structure to maintain its creative advantage. TAXI cofounder Paul Lavoie (bottom right in this New York City office photo) says that most firms are so layered that a great idea was easily crushedWe needed a flexible infrastructure, able to move with the pace of change. TAXI started lean and nimble, and remains so today.

13-*

Mechanistic vs. Organic StructuresOrganic StructureWide span of controlLittle formalizationDecentralized decisionsMechanistic StructureNarrow span of controlHigh formalizationHigh centralization

13-*

DepartmentalizationSpecifies how employees and their activities are grouped togetherThree functions of departmentalizationEstablishes chain of commandCreates common mental models, measures of performance, etc Encourages coordination through informal communication

13-*

Organizes employees around specific knowledge or other resources (e.g., marketing, production) CEOFinanceProductionMarketingFunctional Organizational Structure

13-*

Evaluating Functional StructuresBenefitsEconomy of scaleSupports professional identity and career pathsEasier supervisionLimitationsMore emphasis on subunit than organizational goals Higher dysfunctional conflictPoorer coordination -- requires more controls

13-*

Organizes employees around outputs, clients, or geographic areasDivisional StructureCEOHealthcareLightingProductsConsumer Lifestyle

13-*

Divisional StructureDifferent forms of divisional structureGeographic structureProduct structureClient structureBest form depends on environmental diversity or uncertaintyMovement away from geographic formLess need for local representationReduced geographic variationMore global clients

13-*

Evaluating Divisional StructuresBenefitsBuilding block structure -- accommodates growthFocuses on markets/products/clients LimitationsDuplication, inefficient use of resourcesSpecializations are dispersed--silos of knowledgePolitics/conflict when two forms of equal value

13-*

Team-Based StructureSelf-directed work teamsTeams organized around work processesTypically organic structureWide span of control many employees work without close supervisionDecentralized with moderate/little formalizationUsually found within divisionalized structure

13-*

Evaluating Team-Based StructuresBenefitsResponsive, flexibleLower admin costsQuicker, more informed decisionsLimitationsInterpersonal training costsSlower during team developmentRole ambiguity increases stressProblems with supervisor role changesDuplication of resources

13-*

Biowares Matrix StructureRay Muzyka (left) and Greg Zeschuk (right) adopted a matrix organizational structure for their electronic games company, Bioware, because it balances the need for teamwork and information sharing.

13-*

Audio DeptLeaderSoftware Dept LeaderArt Dept LeaderMatrix Structure (Project-based)CEO

13-*

Evaluating Matrix StructuresBenefitsUses resources and expertise effectivelyImproves communication, flexibility, innovation Focuses specialists on clients and productsSupports knowledge sharing within specialtySolution when two divisions have equal importanceLimitationsIncreases goal conflict and ambiguityTwo bosses dilutes accountabilityMore conflict, organizational politics, and stress

13-*

Core FirmProduct development partner (U.S.A.)Callcenter partner (Philippines)Accounting partner(U.S.A.)Package design partner (UK)Assembly partner (Mexico)Network Organizational StructureAlliance of firms creating a product or serviceSupporting firms beehived around a hub or core firm

13-*

Evaluating Network StructuresBenefitsHighly flexiblePotentially better use of skills and technologyNot saddled with same resources for all productsLimitationsExposed to market forcesLess control over subcontractors than in-house

13-*

External Environment & Structure

13-*

External Environment & Structure (cont)

13-*

Effects of Organizational SizeAs organizations grow, they have:More division of labor (job specialization)Greater use of standardizationMore hierarchy and formalizationMore decentralization

13-*

Technology and StructureTechnology refers to mechanisms or processes by which an organization turns out its product or serviceTwo contingencies:Variability -- the number of exceptions to standard procedure that tend to occur. Analyzability -- the predictability or difficulty of the required work

13-*

Organizational StrategyStructure follows strategyStrategy points to the environments in which the organization will operateLeaders decide which structure to applyDifferentiation strategyProviding unique products or attracting clients who want customizationCost leadership strategyMaximize productivity in order to offer competitive pricing

Organizational Structure13-*McGraw-Hill/IrwinMcShane/Von Glinow OB 5eCopyright 2010 by The McGraw-Hill Companies, Inc. All rights reserved.

******************************