Management

Stephen P. Robbins CHAPTER Mary Coulter

11
ORGANIZATION
AL STRUCTURE
AND DESIGN
 ORGANIZING

• ARRANGING AND STRUCTURING

WORK TO ACCOMPLISH
ORGANIZATIONAL GOALS
• THE CONCERN OF ORGANIZING IS TO
PUT TOGETHER ALL THE NECESSARY
RESOURCES AND DEVISE A DESIGN
SO THAT INDIVIDUALS MAY
ACCOMPLISH THEIR ACTIVITIES
• PROCESS DURING WHICH MANAGERS
DESIGN ORGANIZATION’S
STRUCTURE
 ORGANIZATIONAL STRUCTURE
• An organizational structure determines how the roles, power and
responsibilities are assigned, controlled and coordinated and how the
information flows in different levels of management.
• Any structure would actually depend on the organization’s objectives
and strategy.
• It defines how activities flow in an organization such as: task allocation,
coordination and supervision which are then directed toward the
achievement of organizational aims.
• It also allows proper allocation of responsibilities to different
BRANCHES, DEPARTMENTS, WORKGROUPS AND
INDIVIDUALS.
 EXHIBIT 9–1 PURPOSES OF ORGANIZING

• Divides work to be done into specific jobs and departments.

• Assigns tasks and responsibilities associated with individual
jobs.
• Coordinates diverse organizational tasks.
• Clusters jobs into units.
• Establishes relationships among individuals, groups, and
departments.
• Establishes formal lines of authority.
• Allocates and deploys organizational resources.
 DESIGNING ORGANIZATIONAL
STRUCTURE
ORGANIZATIONAL DESIGN
• A process involving decisions about six key elements:

I. Work specialization
II. Departmentalization
[Link] of command
IV. Span of control
V. Centralization and decentralization
[Link]
 ORGANIZATIONAL STRUCTURE
I. WORK SPECIALIZATION
• The degree to which tasks in the organization are divided into separate
jobs with each step completed by a different person.

• Dividing work activities in to separate job tasks

• Overspecialization can result in human diseconomies from boredom,

fatigue, stress, poor quality, increased absenteeism, and higher turnover.
II. DEPARTMENTALIZATION BY
TYPE
• FUNCTIONAL • PROCESS
• Grouping jobs by functions • Grouping jobs on the basis
performed
of product or customer flow
• PRODUCT
• CUSTOMER
• Grouping jobs by product line
• Grouping jobs by type of
• GEOGRAPHICAL customer and needs
• Grouping jobs on the basis of
territory or geography
 ORGANIZATIONAL STRUCTURE
(CONT’D)
III. 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 who
reports to whom.
 CHAIN OF COMMAND (CONT’D)
• AUTHORITY
• The rights inherent in a managerial position to tell people what to do and
to expect them to do it.
• Line authority– authority that entitles a manager to direct the work of an
employee.
• Staff authority – positions with some authority that have been created to
support, assist, and advise those holding line 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.
 EXHIBIT 9–3 CONTRASTING SPANS OF
CONTROL
[Link] OF CONTROL
The number of employees who can be effectively and
efficiently supervised by a manager.
 ORGANIZATIONAL STRUCTURE
(CONT’D)
V. CENTRALIZATION
• The degree to which decision making is concentrated at upper levels in the
organization.
• Organizations in which top managers make all the decisions and
lower-level employees simply carry out those orders.

•DECENTRALIZATION
• Organizations in which decision making is pushed down to the managers
who are closest to the action.

Employee empowerment
• Increasing the decision-making authority (power) of employees.

VI. FORMALIZATION
 DECENTRALIZATION VS
CENTRALIZATION
• JOHNSON & JOHNSON is a • THE MILITARY Is an
company that's known for its organization famous for its
decentralized structure. highly centralized structure
• As a large company with over 200 • With a long and specific
business units and brands that function hierarchy of superiors and
in sometimes very different industries, subordinates.
each operates autonomously.
• In a centralized organizational
• However, make their own decisions
system, there are very clear
and come to the best conclusion
responsibilities for each role,
without getting "approval" from up
top.
 EXHIBIT 9–4 FACTORS THAT INFLUENCE
THE AMOUNT OF
CENTRALIZATION AND
DECENTRALIZATION
• More Centralization
 Environment is stable.
 Lower-level managers are not as capable or experienced at
making decisions as upper-level managers.
 Lower-level managers do not want to have a say in decisions.
 Decisions are relatively minor.
 Organization is facing a crisis or the risk of company failure.
 Company is large.
 Effective implementation of company strategies depends on
managers retaining say over what happens.
 EXHIBIT 9–4 (CONT’D) FACTORS THAT INFLUENCE THE
AMOUNT
OF CENTRALIZATION AND
DECENTRALIZATION
• More Decentralization
 Environment is complex, uncertain.
 Lower-level managers are capable and experienced at making
decisions.
 Lower-level managers want a voice in decisions.
 Decisions are significant.
 Corporate culture is open to allowing managers to have a say
in what happens.
 Company is geographically dispersed.
 Effective implementation of company strategies depends on
managers having involvement and flexibility to make
decisions.
 EXHIBIT 9–5 MECHANISTIC VERSUS
ORGANIC ORGANIZATION

• High specialization • Cross-functional teams

• Rigid departmentalization • Cross-hierarchical teams
• Clear chain of command • Free flow of information
• Narrow spans of control • Wide spans of control
• Centralization • Decentralization
• High formalization • Low formalization
 MECHANISTIC-ORGANIZATIONS
• General motors is a good example of an organization using the
mechanistic model.
 For one, they’re very large, and when that many people and functions are
involved, order is needed. But they’re also in a stable, if not somewhat simple,
environment. The car market fluctuates with the economy, yes, but the
company builds cars and trucks. Across all their divisions, that function is
basically the same.
• Another example of a mechanistic model is the department of motor
vehicles (DMV).
 When you get your new driver’s license, you go from one department to
another, taking a written test, taking an eye exam, taking an actual driving test,
filling out the paperwork, and then finally, getting your driver’s license. The
structure for this is very mechanistic—every person looking to get a driver’s
license has to be treated exactly the same. It’s simple and stable.
 ORGANIC-ORGANIZATION
• A good example of an organization that uses an organic structure might
be a Consulting firm.
 A consulting firm responds to customer issues as they come up, and those
issues change with the business environment. Consulting firms want to
respond to change quickly, so by choosing an organic structure they’re
able to be nimble and address their customers’ needs.

• Google has an organic structure.

 Since google is a company that must be on the cutting edge of product
development, they need the best and the brightest people, along with the
company culture that nurtures creativity. Google has a culture of openness,
innovativeness, smart with an emphasis on excellence
 CONTINGENCY FACTORS FOR
STRUCTURAL CHOICE
1. STRATEGY AND STRUCTURE
The organic structure works well for organizations pursuing
meaningful and unique innovations.
The mechanistic organization works best for companies wanting to
tightly control costs.

2. SIZE AND STRUCTURE

An organization grows larger, its structure tends to change from organic to mechanistic
with increased specialization, departmentalization, centralization, and rules/regulations.

[Link] UNCERTAINTY AND STRUCTURE

Mechanistic organizational structures tend to be most effective in stable and simple
environment.
The flexibility of organic organizational structures is better suited for dynamic and
complex environments.
4. TECHNOLOGY AND STRUCTURE
ORGANIZATIONS ADAPT STRUCTURE TO THEIR TECHNOLOGY

 The first category, unit production, described the production of items in

units or small batches.
 The second category, mass production, described large batch
manufacturing.
 Finally, the third and most technically complex group, process production,
included continuous-process production.

•The more complicated the technology, the need for flexible structure and
progressive culture
•The more routine the technology, the more structured environment is
needed
 COMMON ORGANIZATIONAL
DESIGNS
TRADITIONAL DESIGNS
I. SIMPLE STRUCTURE
• Low departmentalization, wide spans of control, centralized authority, little
formalization
II. FUNCTIONAL STRUCTURE
• Departmentalization by function
• Operations, finance, marketing, human resources, and product research and
development
III. DIVISIONAL STRUCTURE
• Composed of separate business units or divisions with limited autonomy under
the coordination and control the parent corporation.
• Each division is a collection of functions which produce product.
• Employees who are assigned for certain market services or types of products are
placed in divisional structure for them to increase their flexibility.
EXHIBIT 9–7 STRENGTHS AND WEAKNESSES OF
TRADITIONAL
ORGANIZATIONAL DESIGNS
 CONTEMPORARY ORG DESIGNS
• TEAM-BASED
 The entire organization is made up of work groups or self-managed teams
of empowered employees.
 Similar to divisional or functional structures, team-based organizations
segregate into close-knit teams of employees

• MATRIX STRUCTURE
 Firms can also have a matrix structure. It is also the most confusing and the
least used.
 This structure matrixes employees across different superiors, divisions, or
departments.
 An employee working for a matrixed company, for example, may have
duties in both sales and customer service.
PROJECT MANAGEMENT STRUCTURE
•Refers to how a business is organized to complete the work of a project.
•In project structures, employees work continuously on projects; moving on
to another project as each project is completed.
•Employees have no formal department to return

BOUNDARYLESS ORGANIZATION
•A structure that is not defined by or limited to artificial horizontal, vertical,
or external boundaries; includes virtual and network types of organizations.
 ORGANIZATIONAL DESIGNS
(CONT’D)
• CONTEMPORARY ORGANIZATIONAL DESIGNS (CONT’D)
• BOUNDARYLESS ORGANIZATION
• An flexible and unstructured organizational design that is intended to break
down external barriers between the organization and its customers and
suppliers.
• REMOVES INTERNAL (HORIZONTAL) BOUNDARIES:
• Eliminates the chain of command
• Has limitless spans of control
• Uses empowered teams rather than departments
• ELIMINATES EXTERNAL BOUNDARIES:
• Uses virtual, network, and modular organizational structures to get
closer to stakeholders.
 REMOVING EXTERNAL
BOUNDARIES
• VIRTUAL ORGANIZATION
• An organization that consists of a small core of full-time employees and that
temporarily hires specialists to work on opportunities that arise.
• A virtual organization takes advantage of telecommuting to perform its work.
Members use the internet, email and phones instead of meeting face to face.
• EXAMPLE
i. EMMA Inc., an email marketing firm with 100 employees who work from
home or offices in Austin, New York.
[Link] LIFE is a free 3D virtual world and online multimedia platform
that allows people to create an avatar for themselves and then interact with
other users and user-created content within a multi-user online virtual world.
Developed and owned by the San Francisco–based firm linden lab and launched on june 23, 2003,
 TASK FORCE

A TEMPORARY COMMITTEE OR TEAM

FORMED TO TACKLE A SPECIFIC SHORT
TERM PROBLEM AFFECTING SEVERAL
DEPARTMENTS

EXAMPLE

PEPSI CO INC. A TASK FORCE THAT HAS

MEMBERS OF THE COMPANY HISPANIC
EMPLOYEES’ RESOURCE GROUP HELPED
IN DEV OF 2 PRODUCTS

LAY’S COOL GUACAMOLE POTATO

CHIPS

&

TORTILLA GUACAMOLE TORTILLA

CHIPS
 OPEN INNOVATION
• THE OPEN INNOVATION PARADIGM:
– Attacks the cost side of the problem by leveraging external
sources of innovation to reduce time and money in the company’s
innovation process
– Attacks the revenue side by increasing “market” chances
• “WE ENGAGE IN TWO KINDS OF OPEN INNOVATION.”
• – Through “inside-out” innovation, we make our skills and resources
available to the outside world. For example, we regularly undertake
contract research for external parties, provide technical facilities and
support, and assist with IP licensing.
• – Through “outside-in” innovation, we draw on the capacities of
individuals, organizations, and even small start-ups from around the globe.
By providing a broader window on the world of health and well- being,
these strategic partners help us gain new insights and access to new
technologies.
TODAY’S ORGANIZATIONAL DESIGN
CHALLENGES

• Keeping employees connected

• Widely dispersed and mobile employees
• Building a learning organization
• Managing global structural issues
• Cultural implications of design elements
 TELECOMMUTING
• Refers to working from an employee’s
own home, but also includes remote
work from suitable and secure
workspaces, such as libraries or other
private premises. Some employees
telecommute full time, while others
have the chance to telecommute
certain days per week or on special
occasions (e.g. health issues, etc.).
 ORGANIZATIONAL DESIGNS
(CONT’D)
• THE LEARNING ORGANIZATION
An organization that has developed the capacity to continuously
learn, adapt, and change through the practice of knowledge
management by employees.
Characteristics of a learning organization:
• An open team-based organization design that empowers
employees
• Extensive and open information sharing
• Leadership that provides a shared vision of the organization’s
future.
• A strong culture of shared values, trust, openness, and a sense
of community.