Robbins & Judge

Chapter
Organizational Behavior
15
14th Edition

Foundations of Organization
Structure
Kelli J. Schutte
William Jewell College
 Chapter Learning Objectives
• After studying this chapter, you should be able to:
1. Identify the six elements of an organization’s structure.
2. Identify the characteristics of the functional structure, the
divisional structure, and the matrix structure.
3. Identify the characteristics of the virtual structure, the team
structure, and the circular structure.
4. Describe the effects of downsizing on organizational structures
and employees
5. Contrast the reasons for mechanistic and organic structural
models
6. Analyze the behavioral implications of different organizational
designs.
 What Is Organizational Structure?
• Organizational Structure
– How job tasks are formally divided, grouped, and
coordinated
– Key Elements:
1. Work specialization
2. Departmentalization
3. Chain of command
4. Span of control
5. Centralization and decentralization
6. Formalization
 1. Work Specialization
• The degree to which tasks in the organization are
subdivided into separate jobs
• Division of Labor
– Makes efficient use of employee skills
– Increases employee skills through repetition
– Less between-job downtime increases productivity
– Specialized training is more efficient
– Allows use of specialized equipment
• Can create greater economies and efficiencies – but
not always…
 Work Specialization Economies and
Diseconomies

• Specialization can reach a point of diminishing

returns
• Then job enlargement gives greater efficiencies
than does specialization
 2. Departmentalization
• The basis by which jobs are grouped together
• Grouping Activities by:
– Function
– Product
– Geography
– Process
– Customer
 3. Chain of Command
• Authority
– The rights inherent in a managerial position to give
orders and to expect the orders to be obeyed
• Chain of Command
– The unbroken line of authority that extends from the
top of the organization to the lowest echelon and
clarifies who reports to whom
• Unity of Command
– A subordinate should have only one superior to whom
he or she is directly responsible
 4. Span of Control

The number of subordinates a manager can efficiently and effectively direct

– Wider spans of management
increase organizational
efficiency
– Narrow span drawbacks:
• Expense of additional layers of
management
• Increased complexity of vertical
communication
• Encouragement of overly tight
supervision and
discouragement of employee
autonomy
Contrasting Spans of Control
 5. Centralization and Decentralization

• Centralization
– The degree to which decision making is
concentrated at a single point in the organization.
• Decentralization
– The degree to which decision making is spread
throughout the organization.
 6. Formalization
• The degree to which jobs within the
organization are standardized.
– High formalization
• Minimum worker discretion in how to get the job done
• Many rules and procedures to follow
– Low formalization
• Job behaviors are nonprogrammed
• Employees have maximum discretion
 Common Organization Designs: Simple
Structure
• Simple Structure
– A structure characterized by a low degree of
departmentalization, wide spans of control,
authority centralized in a single person, and
little formalization
Common Organizational Designs:
Bureaucracy
• Bureaucracy
– A structure of highly operating
routine tasks achieved
through specialization, very
formalized rules and
regulations, tasks that are
grouped into functional
departments, centralized
authority, narrow spans of
control, and decision making
that follows the chain of
command
 An Assessment of Bureaucracies

Strengths Weaknesses
– Functional economies of – Subunit conflicts with
scale organizational goals
– Minimum duplication of – Obsessive concern with
personnel and equipment rules and regulations
– Enhanced communication – Lack of employee
– Centralized decision discretion to deal with
making problems
Common Organizational Designs: Matrix
• Matrix Structure
– A structure that creates dual lines of authority and
combines functional and product departmentalization
• Key Elements
– Gains the advantages of functional and product
departmentalization while avoiding their weaknesses
– Facilitates coordination of complex and
interdependent activities
– Breaks down unity-of-command concept
New Design Options: Virtual Organization
– A small, core organization
that outsources its major
business functions
– Highly centralized with
little or no
departmentalization
• Provides maximum
flexibility while
concentrating on what
the organization does
best
• Reduced control over
key parts of the
business
 New Design Options: Boundaryless
Organization
– An organization that seeks to eliminate the chain
of command, have limitless spans of control, and
replace departments with empowered teams
– T-form Concepts
• Eliminate vertical (hierarchical) and horizontal
(departmental) internal boundaries
• Breakdown external barriers to customers and suppliers
Two Extreme Models of Organizational
Design
 Four Reasons Structures Differ
1. Strategy
– Innovation Strategy
• A strategy that emphasizes the introduction of major new
products and services
• Organic structure best
– Cost-minimization Strategy
• A strategy that emphasizes tight cost controls, avoidance of
unnecessary innovation or marketing expenses, and price
cutting
• Mechanistic model best
– Imitation Strategy
• A strategy that seeks to move into new products or new
markets only after their viability has already been proven
• Mixture of the two types of structure

15-20
 Why Structures Differ
2. Organizational Size
– As organizations grow, they become more mechanistic, more
specialized, with more rules and regulations
3. Technology
– How an organization transfers its inputs into outputs
• The more routine the activities, the more mechanistic the structure with
greater formalization
• Custom activities need an organic structure
4. Environment
– Institutions or forces outside the organization that potentially
affect the organization’s performance
– Three key dimensions: capacity, volatility, and complexity
Three-Dimensional Environment Model
Volatility

Complexity Capacity

• Capacity
– The degree to which an environment can support growth
• Volatility
– The degree of instability in the environment
• Complexity
– The degree of heterogeneity and concentration among
environmental elements
 Organizational Designs and Employee
Behavior
• Impossible to generalize due to individual differences in the
employees
• Research findings
– Work specialization contributes to higher employee productivity,
but it reduces job satisfaction.
– The benefits of specialization have decreased rapidly as employees
seek more intrinsically rewarding jobs.
– The effect of span of control on employee performance is
contingent upon individual differences and abilities, task structures,
and other organizational factors.
– Participative decision making in decentralized organizations is
positively related to job satisfaction.
• People seek and stay at organizations that match their needs.
 Global Implications
• Culture and Organizational Structure
– Many countries follow the U.S. model
– U.S. management may be too individualistic
• Culture and Employee Structure Preferences
– Cultures with high-power distance may prefer
mechanistic structures
• Culture and the Boundaryless Organization
– May be a solution to regional differences in global firms
– Breaks down cultural barriers, especially in strategic
alliances
– Telecommuting also blurs organizational boundaries
 Summary and Managerial Implications
• Structure impacts both the attitudes and behaviors of the
people within it
Associated
with

• Impact of Technology
– Makes it easier to change structure to fit employee and
organizational needs