Understanding Organizational Structure and Design

1. Organizational Structure 15

2. Learning Goals • What is an organization’s structure, and what does it consist of? • What are the major elements of an organizational structure? • What is organizational design, and what factors does the design process depend on? • What are some of the more common organizational forms that an organization might adopt for its structure?

3. Learning Goals, cont’d • When an organization makes changes to its structure, how does that restructuring affect job performance and organizational commitment? • What steps can organizations take to reduce the negative effects of restructuring efforts?

4. Organizational Structure • Organizational structure • Formally dictates how jobs and tasks are divided and coordinated between individuals and groups • Organizational chart • A drawing that represents every job in the organization and the formal reporting relationships between jobs

5. Figure 15-1 Two Sample Organizational Structures

6. Elements of Organizational Structure • Work specialization • The degree to which tasks in an organization are divided into separate jobs • Also known as division of labor • Chain of command • Answers the question “Who reports to whom?” and signifies formal authority relationships • Specific flow of authority down through the levels of an organization’s structure

7. Elements of Organizational Structure, cont’d • Span of control • How many employees the manager is responsible for in the organization • Narrow spans of control allow managers to be much more hands-on with employees • Centralization • Reflects where decisions are formally made in the organization

8. Figure 15-2 The Relationship Between Span of Control and Organizational Performance

9. Elements of Organizational Structure, cont’d • Formalization • Many specific rules and procedures used to standardize behaviors and decisions • Necessary coordination mechanism that organizations rely on to deliver a standardized product or service

10. Elements in Combination Mechanistic organizationsare efficient, rigid, predictable, and standardized organizations that thrive in stable environments • Rigid and hierarchical chain of command • High degrees of work specialization • Centralization of decision making • Narrow spans of control

11. Elements in Combination Organic organizationsare flexible, adaptive, outward-focused organizations that thrive in dynamic environments • Low levels of formalization • Weak or multiple chains of command • Low levels of work specialization • Wide spans of control

12. Table 15-2 Characteristics of Mechanistic vs. Organic Structures

13. Discussion Questions • Is it possible to be a great leader in a highly mechanistic organization? What special talents or abilities might be required? • Why do the elements of structure—such as work specialization, formalization, span of control, chain of command, and centralization have a tendency to change together? Which do you believe is the most important? • Which is more important—for an organization to be efficient, or to be able to adapt to its environment?

14. Organization Design Organization design – the process of creating, selecting, or changing the structure of an organization • Business environmentconsists of its customers, competitors, suppliers, distributors, and other factors external to the firm • All have an impact on organizational design • Stable environment • Dynamic environment

15. Organizational Design, cont’d • Company strategydescribes an organization’s objectives and goals and how it tries to capitalize on its assets to make money • Low-cost product strategy • Differentiation strategy • An organization’s technologyis the method by which it transforms inputs into outputs • Company sizerefers to thetotal number of employees

16. Common Organizational Forms • Simple structure • The most common form of organizational design, primarily because there are more small organizations than large ones • 80 percent of employing organizations have fewer than 19 employees • Bureaucratic structure • An organizational form that exhibits many of the facets of the mechanistic organization

17. Figure 15-3 An Organizational Structure for a Small Restaurant

18. Figure 15-4 Bureaucratic Structure Functional structure • Employees are grouped by the functions they perform for the organization

19. Figure 15-4 Multidivisional Structure Multi-divisional structures • Bureaucratic organizational forms in which employees are grouped into divisions around products, geographic regions, or clients • Product structuresgroup business units around different products that the company produces

20. Figure 15-4 Multidivisional Structure Geographic structures • Based around the different locations where the company does business

21. Figure 15-4 Multidivisional Structures, cont’d Client structure • Employees are organized around serving customers

22. Discussion Question • Which of the organizational forms just described do you think leads to the highest levels of motivation? Why?

23. Figure 15-5 Matrix Structures • More complex form of organizational design • Tries to take advantage of two types of structures at the same time • This matrix represents a combination of a functional structure and a product structure

24. Discussion Question • If you worked in a matrix organization, what would be some of the career development challenges that you might face? • Does the idea of working in a matrix structure appeal to you? Why or why not?

25. Figure 15-6 Why Do Organizations Have Different Structures?

26. How Important is Structure? • Changes to an organization’s structure can have negative effects on the employees who work for the company, at least in the short term. • The process of changing an organization’s structure is called restructuring. • Restructuring has a small negative effect on task performance • Restructuring has a more significant negative effect on organizational commitment

27. Application: Restructuring • Steps in restructuring • Recognize the need to change • Restructure • Helping restructuring to succeed • Manage layoff survivors – employees that remain with the company following a layoff • One of the best ways to help layoff survivors adjust is to do things that give them a stronger sense of control