Session 3 Dimension of Org Structure

8/19/2019 Session 3 Dimension of Org Structure

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Dimensions Of OrganizationStructure

Lecture 3



Session ObjectivesDescribe three components comprising

complexity

Compare functional with social specialization

Ientify bene!ts that accrue fromformalization

Describe the relationship betweencomplexity" formalization" an centralization

Ientify why organization might practiceecentralization



Dimensions of OrganizationStructure

#$ Complexity

%$ &ormalization

3$ Centralization



Complexity 'he egree of i(erentiation that exists

within an organization)orizontal Di(erentiation*

Consiers the egree of horizontalseparation between units

+ertical Di(erentiation*

,efers to the egree of epthSpatial Di(erentiation*

'he egree to which the location of anorganization-s facilities an personnel areisperse geographically



)orizontal Di(erentiation

,efers to the egree of i(erentiation

between units base on the orientation ofmembers" the nature of tas. they perform"their eucation an training

'he larger number of i(erent occupations

with an organization that re/uirespecialize .nowlege an s.ills" the morecomplex the organization

0hy1



)orizontal Di(erentiationDiverse orientations ma.e it more i2cult

for organizational members tocommunicate an more i2cult formanagement to coorinate their activities

Diversity increases the li.elihoo that they

will have i(erent goal emphasis" timeorientations" i(erent wor. vocabulary

'he most visible evience in organizationsof horizontal i(erentiation is

specialization an epartmentation



otential con4icting objectives an priorities

resient

5ar.eting

&inance anaccounting

5anufacturing

,esponsibilities

DistributionChannelsCustomer

ServiceInventoryobsolescence

Communications anata processingCarrying inventory

rouction ansupplyalternatives

0are housing

Objectives

5oreinventory

Lessinventory&re/uent short

runs

Lower prouction

runs&ast orerprocessing

Cheaporerprocessing

&astDelivery

Lowest costrouting

&iel

warehousin

Less

warehousinlantwarehousing



)orizontal Di(erentiation Specialization*

articular grouping of activities performe byan iniviual

It can be achieve through*

#$ &unctional Specialization or ivision of labor

6ob is bro.en own into simple repetitive tas.

%$ Social specialization*

Iniviual is specialize rather than their wor.

7professionals8



)orizontal Di(erentiation ,easons for ivision of labor*

#$ hysical limitationsIn highly sophisticate an complex jobs" noone can perform all the tas.

%$ 9nowlege an s.ill limitations

3$ ,epresent proper usage resources an s.illslevel

:$ ;2ciency

a$ 'ime saving

b$ 'raining



)orizontal Di(erentiation Departmentation*

'he way the specialists are groupe togetherDepartmentation is the way in whichorganizations typically coorinate activities thathave been horizontally i(erentiate

Departments coul be create on the basis of*

a$ Simple numbers

b$ &unctions

c$ rouct or service

$ Client

e$ <eography

f$ processes



&unctionalDepartmentalization

Manager,

Engineering

Manager,

Manufacturing

Manager,

Human Resources

Manager,

Purchasing

Plant Manager

Manager,

Accounting

© Prentice Hall,2002

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rouct Departmentalization

Mass TransitDivision

Bombarier!Rota"#$ienna%

Manager,Retail Accounts

Recreational ProuctsDivision

&ogistic E'ui(mentDivision

)nustrial E'ui(mentDivision

Bombaier!Rota"#*uns+irchen%

Recreational an tilit-$ehicles .ector

Rail Proucts.ector

Bombarier, &t/


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<eographicalDepartmentalization

.ales Director,estern Region

.ales Director,.outhern Region

.ales Director,Eastern Region

$ice Presientfor .ales

.ales Director,Mi1estern Region


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rocess Departmentalization

.a1ing

De(artmentManager

Planing an

MillingDe(artmentManager

Assembling

De(artmentManager

&ac'uering a

.aningDe(artmentManager

inishingDe(artmentManager

Plant .u(erintenent


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)ns(ection

an.hi((ingDe(artment

Manager



CustomerDepartmentalization

Manager,Retail Accounts

Directorof .ales

Manager,*overnment Accounts

Manager,holesale Accounts


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Discussion =uestionIs it possible for an organization to use all

the six methos of epartmentation$



+ertical Di(erentiation,efers to the epth in structure

)ow oes vertical i(erentiation increasescomplexity1

'he more levels that exist between topmanagement an operatives" the greater the

potential of communication istortion" the morei2cult it is to coorinate the ecisions ofmanagerial personnel" the more i2cult for topmanagement to oversee the actions of

operatives



+ertical Di(erentiationCan horizontal i(erentiation an vertical

i(erentiation be construe as inepenent of each

other1+ertical i(erentiation shoul be unerstoo as a

response to horizontal i(erentiation

,eason*

>s specialization expans" it becomes increasinglynecessary to coorinate tas.s$ Since" highi(erentiation that members will have a iversetraining an bac.groun" it may be i2cult for

iniviual units to see how their tas. !ts intogreater whole$ 'he result is a nee for increasecoorination" which shows itself in evelopment ofvertical integration



+ertical i(erentiation Do organizations with same number of employees nee

to have same egree of vertical i(erentiation1

'he etermining factor is span of control Span of control*

De!nes the number of suborinates that a manager canirect e(ectively

a$ 0ie span*managers woul have large number of suborinatesreporting to them

b$ ?arrow span*

managers woul have less number of suborinatesreporting to them

0ier span of control leas to 4at organization structurewhereas narrow span woul lea to taller organization



Contrasting Spans Of Control

#

%

3

:

@

A

B

O r g a n i z a

t i o n a l L e v e l

Members at Each &evel

.(an of 34(eratives 5 3,067Managers #levels 8!7% 5 8,97:

.(an of ;4(eratives 5 3,067Managers #levels 8!3% 5 :

#

:

#A

A:

%@A

#"%:

:"A

#

E

A:

@#%

:"A


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+ertical Di(erentiation >vantages of tall organizations*

#$ 'ighter controls%$ Fetter psychological career paths" better

promotion opportunities

Disavantages*

#$ Coorination an communications becomecomplicate

>vantages of &lat Organizations

#$ Shorter an simpler communication chain

Disavantages

#$ Loose controls

%$ ,euce promotion chances



Spatial Di(erentiation 'he egree to which the location of an

organization-s o2ces" plants" an personnel areisperse geographically

Spatial i(erentiation can be thought as asextene imensions to horizontal an vertical

i(erentiationSpatial i(erentiation tells that even if

horizontal an vertical i(erentiation were toremain the across spatially separate units" the

physical separation itself woul increasecomplexity



Discussion =uestion

>re three complexity measures interGcorrelate1



0hy is complexity Important 'he more complex an organization" the greater the

nee for e(ective communication" coorination an

control evices 'he higher the complexity" the greater amount of

attention they must pay to ealing with problems ofcommunication" coorination" an control

Parao" )n the anal-sis of 4rgani<ation anal-sis5anagement-s ecision to increase i(erentiation ismae in the interest of economy an e2ciency$ 'heseecisions create cross pressure to a managerial

personnel to facilitate control" coorination" ancon4ict reuction$ So the economies that complexitycreates may be counterbalance by the increaseburen of .eeping the organization together



Discussion =uestion

)ow might a manager-s job i(er in anorganization in low complexity comparewith his or her counterpart managing ahighly complex organization1

& li ti



&ormalization 'he egree to which jobs within the organization are stanarize

In highly formalize jobs" the job incumbent has minimum amountof iscretion over what is to be one" an how he shoul o it$;mployees can be expecte always hanle the same input inexactly the same way" resulting in consistent an uniform output

In jobs with low formalization" employees behavior woul berelatively nonGprogramme by the organization$ Such jobs woul

o(er employees a great eal of freeom to exercise iscretion intheir wor.

Since employees behavior is inversely relate to the behavior thatis preprogramme by the organization" the greater thestanarization" the less input the employee has into how hisH her

wor. is to one$ Stanarization not only eliminates employees engaging in

alternative behaviors but also removes the nee for employees to

consier alternatives



,ange of &ormalization

ns.ille jobs versus professional jobs

9in of wor. being performe 7 prouctionversus sales8

Level in the hierarchy of organization



0hy is formalizationImportantStanarize behavior reuces variabilityStanarization promotes coorination

Stanarization o(er economiesH coste(ective



'he J5a.e or FuyK Decision &ormalization can ta.e place on the job or o( the job

#$ On the job " the term externalize behavior is use$ It means

that formalization is external to the employee that is" the rules"proceures" an regulations governing the iniviual-s wor.activity are speci!cally e!ne" coi!e an enforce throughirect management supervision$ 'his characterize uns.illewor.ers$ It is also what is typically meant by formalization

%$ O( the job" creation of internalize behavior through socialspecialization$ Iniviual learn the values" norms" an expectebehavior patterns for the job an the organization of which they

will be a part$ 'his true in hiring professions

5anagement has two ecisions to ma.e

a$0hat egree of stanarization of behavior is esire

b$ 0ill the stanarization be mae J in houseK or JboughtK outsie



'he J 5a.e or FuyK DecisionIn house variety is emphasize with uns.ille

wor.ers&or professionals !ne tuning will be re/uire

Direct on the job formalization anprofessionalization are basically substitutes for

each other 'he organization can either control employee

behavior either irectly or it can achieve inirectcontrol by hiring uly traine professionals

>s the level of professionalization increases inan organization" the level of formalizationecreases



&ormalization 'echni/ues

Selection,ole ,e/uirements

,ules" proceures an policies

'raining,ituals

'he ,elationship Fet een



'he ,elationship Fetween&ormalization an Complexity

)igh horizontal i(erentiation when achieve

through ivision of labor" typically means hiringuns.ille personnel to perform routine anrepetitive tas. tens to be associate with highegree of formalization to facilitate coorination

an control$ 0here high horizontali(erentiation is achieve by hiringprofessionals" formalization tens to be low

'he .ey to unerstaning the complexity M

formalization relationship is to focus on theegree of horizontal i(erentiation an the wayit is achieve



Discussion =uestion

#$ ;mployee woul prefer high formalizationo you agree or isagree

%$ >n organization that is high in complexitywill be high in formalization$ Do you

agree or isagree



Centralization 'he egree to which ecision ma.ing is

concentrate at a single point in theorganization

> high concentration implies highcentralization where as a low concentration

inicates low centralization orecentralization

Centralization is concerne with ispersionof authority to ma.e ecisions within the

organization" not geographic ispersion



Centralization

Issues in Centralization*

#$ Do we loo. only at formal authority

%$ Can policies overrie ecentralization

3$ 0hat oes J concentration at a single point

mean1:$ Does information processing system that

closely monitors ecentralize ecisionsmaintain centralize control

@$ Does the control of information by lowerlevel members result in ecentralization ofwhat appears to be centralize



Centralization Centralization can be escribe as the egree

to which the formal authority to ma.e

iscretionary choices is concentrate in aniniviual" unit" or level 7usually high inorganization8" thus permitting employees7 usually8 low in the organization minimuminput into their wor.

#$ Centralization is concerne only with formalstructure" not the informal structure

%$ Loo.s at ecision iscretion$ 0here ecisionsare elegate ownwar but extensive

policies exist to constrain the iscretion oflower members" there is increasecentralization



Centralization3$ Concentration at a single point can refer to

an iniviual" unit" or level" but the singlepoint implies at high level

:$ >n information processing system thatclosely monitors ecentralize ecisions

oes not maintain centralize ecisions@$ 'he control of information input is a form of

e facto ecentralization



Situation

Informationinput

What can be

done

Interpretationand advice

What should

be done

choice

What is

intended

to be

done

Authorization

What is

authorized

to be done

Action

Execution

What is

actually

done

Organizational Decision Maing !rocess



0hy is centralization Important,easons for Decentralization

>voiance of information overloa&ast response to changing conitions

Detaile input into ecision ma.ing process

;mployee motivation

'raining opportunity

,easons for Centralization

Choosing action consistent with the best interest

of the organizationSome activities are one more e(ectively



,elationship of centralization"complexity an formalizationCentralization an complexity*

Inverse relationship with centralization ancomplexity

Increase in number of occupational specialties

means an increase in the expertise an abilityto ma.e ecisions$ 'he more employees haveunergone professional training the more li.elythey woul participate in ecision ma.ing

'he greater the centralization of ecisionma.ing" the less professional training is li.elyto be exhibite by employees



Centralization an&ormalization,elationship is ambiguous

)igh formalization can be foun couple witheither centralize or ecentralize structure

If employees are preominantly uns.ille onecan expect high formalization an centralizeauthority

0ith professional employees one might preictlow formalization an ecentralization



Discussion =uestion

Nou are evaluating an organization-sstructure$ Nou !n prouction activitiesare highly formalize" whereas level offormalization of researchGesign is low$Similarly" legal ecisions are highlycentralize" but mar.eting ecisions areecentralize$ )ow o you arrive at

organization wie measures oforganization structure if units within theorganization are not homogenous1

Session 3 Dimension of Org Structure

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