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Organizational Structure

Chapter. 13. Organizational Structure. Organization structure – the pattern of jobs and groups of jobs in an organization. It is an important cause of individual and group behavior. The Concept of Organization Structure. Structure as purposeful and goal-directed behavior.

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Organizational Structure

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  1. Chapter 13 Organizational Structure

  2. Organization structure –the pattern of jobs and groups of jobs in an organization. It is an important cause of individual and group behavior.

  3. The Concept of Organization Structure Structure as purposeful and goal-directed behavior Structure as an influence on behavior Structure as recurring activities

  4. The effects of structure on individual behavior • The job provides powerful stimuli for individual behavior • The demands on, and expectation of, individuals can result in high levels of personal satisfaction or stress, anxiety • The relationships can result in feelings of friendship, competition, cooperativeness, satisfaction and stress.

  5. Structure and group behavior • Group containing people doing the same job will be less cohesive, less open to new ideas, and less communicative than the group doing different jobs

  6. Organizational Design Decisions • Managers decide how to divide the overall task into successively smaller jobs • Managers decide the bases by which to group the jobs • Managers decide the appropriate size of the group reporting to each superior • Managers distribute authority among the jobs

  7. The Four Key Design Decisions Specialization Division of Labor: Low High Basis Departmentalization: Homogeneous Heterogeneous Number Span of Control: Many Few Delegation Authority: High Low

  8. Division of Labor • Division of labor – concerns the extent to which jobs are specialized • It is the process of dividing work into relatively specialized jobs to achieve advantages of specialization

  9. Division of Labor Occurs in Three Different Ways: 1. Personal specialties • e.g., accountants, software engineers, graphic designers, scientists, etc. 2. Natural sequence of work • e.g., dividing work in a manufacturing plant into fabricating and assembly (horizontal specialization) 3. Vertical plane • e.g., hierarchy of authority from lowest-level manager to highest-level manager

  10. Delegation of Authority • Managers decide how much authority should be delegated to each job and to each jobholder • Delegation of authority– process of distributing authority downward in an organization

  11. Reasons to Decentralize Authority • Relatively high delegation of authority encourages the development of professional managers • High delegation of authority can lead to a competitive climate within the organization • Managers who have relatively high authority can exercise more autonomy, and thus satisfy their desires to participate in problem solving

  12. Reasons to Centralize Authority (1 of 2) • Managers must be trained to make the decisions that go with delegated authority • Many managers are accustomed to making decisions and resist delegating authority to their subordinates

  13. Reasons to Centralize Authority (2 of 2) • Administrative costs are incurred because new control systems must be developed to provide top management with information about the effects of subordinates’ decisions • Decentralization means duplication of functions

  14. Departmentalization –process in which an organization is structurally divided by combining jobs in departments according to some shared characteristic or basis.

  15. Departmentalization Bases Geographic Functional Customer Product

  16. Departmental Bases:Functional Departmentalization • Jobs are combined according to the functions of the organization • The principal advantage is efficiency • By having departments of specialists, management creates efficient units • A major disadvantage is that organizational goals may be sacrificed in favor of departmental goals

  17. Functional Departmentalization Structure OBM Company Engineering Finance Public Relations Reliability Manufacturing Distribution Human Resources Purchasing

  18. Departmental Bases:Geographic Departmentalization • Establish groups according to geographic area • The logic is that all activities in a given region should be assigned to a manager • Advantageous in large organizations because physical separation of activities makes centralized coordination difficult • Provides a training ground for managerial personnel

  19. Geographic Departmentalization Structure OBM Company Northeast Midwest Southeast Southwest Pacific

  20. Departmental Bases:Product Departmentalization • All jobs associated with producing and selling a product or product line will be placed under the direction of one manager • Product becomes the preferred basis as a firm grows by increasing the number of products it markets • Concentrating authority, responsibility, and accountability in a specific product department allows top management to coordinate actions

  21. Product Departmentalization Structure OBM Company Small Household Appliances Large Household Appliances Commercial Appliances Building Materials and Products Lawn and Garden Products Automotive Products

  22. Departmental Bases:Customer Departmentalization • The importance of customer satisfaction has stimulated firms to search for creative ways to serve people better • Organizations with customer-based departments are better able to satisfy customer-identified needs than organizations that base departments on non-customer factors

  23. Customer Departmentalization Structure OBM Company Retail Stores Mail Order On-Line Sales Institutional Sales Government Contracts

  24. Span of Control (1 of 2) • Number of individuals who report to a specific manager • Narrow span • Wide span • The frequency and intensity of actual relationships is the critical consideration in determining the manager’s span of control

  25. Span of Control (2 of 2) • If we shift our attention from potential to actual relationships as the bases for determining optimum span of control, three factors appear to be important: Key Factors Required Contact Degree of Specialization Ability to Communicate

  26. Dimensions of Structure • Formalization – the extent to which expectations regarding the means and ends of work are specified, written, and enforced • Centralization – the location of decision-making authority in the hierarchy • Complexity – the direct outgrowth of dividing work and creating departments

  27. The Mechanistic Model Emphasizes importance of achieving high levels of production and efficiency through: Extensive use of rules and procedures Centralized authority High specialization of labor The Organic Model Emphasizes importance of achieving high levels of production and efficiency through: Limited use of rules and procedures Decentralized authority Relatively low degrees of specialization Organization Design Models

  28. Comparison of Mechanistic and Organic Structures (1 of 3)

  29. Comparison of Mechanistic and Organic Structures (2 of 3)

  30. Comparison of Mechanistic and Organic Structures (3 of 3)

  31. Organization Design Models:The Matrix Model • Matrix organization – attempts to maximize the strengths and minimize the weaknesses of both the functional and product bases • Superimpose a horizontal structure of authority, influence, and communication on the vertical structure • Facilitates the utilization of highly specialized staff and equipment

  32. Example of the Matrix Organization Model Functions Project or product A Project or product B Project or product C Project or product D Project or product E Projects, products ManufacturingMarketingEngineeringFinance

  33. Advantages of Matrix Organization • Efficient use of resources • Flexibility in conditions of change and uncertainty • Technical excellence • Freeing top management for long-range planning • Improving motivation and commitment • Providing opportunities for personaldevelopment

  34. Evolutionary Steps to the Matrix Model Task Force (1) Teams (2) Product Managers (3) Product Management Depts. (4)

  35. Virtual Organizations • Virtual organization – a collection of geographically distributed, functionally and/or culturally diverse aggregations of individuals that is linked by electronic forms of communication • Assembled and disassembled according to needs

  36. Virtual Organizations:Factors in Design Considerations • Personnel distributed geographically • Electronically connected • Differences in expertise and function • Culturally diverse • Work schedule differences • Horizontally arranged with little emphasis on command and control authority

  37. Virtual Organizations:Design Implications • Contractual relationships • Constant change and reconfiguration • No rigid boundaries • Flexible • Little or personal and social contact

  38. Boundaryless Organizations • Organizations in which: • the hierarchy and chain of command are minimized • rigidly structured departments are eliminated • Implemented to reduce barriers between people and constituencies

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