Organizational Structure

1. Organizational Structure A Critical Factor for Organizational Effectiveness & Employee Satisfaction

2. Organizational Structure • Important as organization grows • Answers the questions.. • How are jobs organized into departments? • Who does what? • Who reports to whom? • How is work coordinated between departments?

3. Organizational Structure • How organization arranges human resources • Based on Goals & Objectives

4. Staff vs. Line Positions Staff Positions Line Positions Make decisions about how a business uses its resources Generate Revenue • Provide information & give advice to people in line positions • Consume Revenue

5. Organizational Chart“Org Chart” • HR Planning Tool • Visualrepresentation of organization’s structure • Levels of Hierarchy • Span of Control • Chain of Command (reporting structure)

6. Levels of Hierarchy • Defines who is in charge of which business elements & who reports to whom • Division of tasks • Reporting Structure

8. Dimensions of Organizational Structure Vertical & Horizontal Dimensions Tall vs. Flat Wide vs. Narrow

9. Appropriate Structure • Businesses organize themselves differently • Strategic Objectives • Customer Base • Sense of Products & Services • Large Organizations Use Multiple Structures • Different structures may benefit different portions of an organization

10. Dimensions of Organizational Structure Vertical (tall vs. flat) Horizontal (wide vs. narrow)

11. Vertical vs. Horizontal Dimensions Vertical Horizontal How tasks are divided & distributed across the organization Departments & Divisions • Who is in charge of whom & where are decisions made • Levels of Hierarchy • # of layers • Distance that decisions travel • Span of Control • # people reporting to a single manager • Wide = oversee a large # of people • Narrow = oversee a small # of people

12. Span of ControlTall vs. Flat Organizations • Tall • More levels of hierarchy (12+) • Managers have NARROW span of control (5 or 6 people) • Staff => little freedom, operational direction from above • Flat • Fewer levels of hierarchy (less than 6) • Managers have WIDE span of control (10-12 people) • Staff => lots of freedom, operational direction from within Flatten Organization = Widen Spans of Control

13. Delegation SMARTER Keys to Effective Delegation • Managers giving tasks to staff • Empower & entrust staff • Hold staff accountable • Manager maintains responsibility • Specific – clearly defined tasks • Measurable – quantifiable results • Agreement between manager & staff • Realistic – achievable tasks • Time-bound – deadlines • Ethical – consider needs & abilities of staff • Recorded – provide staff with credit & feedback

14. Types of Organizational Structures Functional Divisional

15. Functional Structure • Aligns with Vertical Dimension • Most popular (65-75% of businesses use it) • Basic & makes sense • Organization arranged by departments • People grouped by skill • Managed by people with those skills • Centralized Decision Making

16. Functional Structure Advantages Disadvantages Poor communication & conflict between departments Silo effect= departments becoming isolated Lack of company-wide teamwork Customer Frustration Lack of responsiveness Problems/issues passed between departments Employees Identify w/ Departments Not with organization • Upper management control • Employee Motivation • Well-defined career paths • Fosters stability & efficiency • Everyone knows their job • Groups use similar processes • Economies of scale

17. Divisional Structure • Placing people where they are needed across the organization • People with similar skills found in different divisions of the same company • Organization arranged by divisions • Product Lines • Markets • Segments • Geographic regions

19. Divisional Structure Advantages Disadvantages Redundant effort & resources Multiple departments performing same functions Inefficiency Lack of economies of scale Reduction in specialization & skills In-house competition between divisions • Coordination of functions within a division • 1 person in charge of all functions • More responsive to customer issues • More accountability • Develops managerial & executive skills • Managers exposed to more functions

20. Group WorkStarbucks Organization • Read “General” information about business • What does the company’s size tell us about their organizational structure? • What might the company’s objective reveal about their organizational structure? • Read “Business Segments” • Identify (highlight/underline) information that reveals how the organization is structured. • How is the business structured; functional or divisional? • Use “Business Segment” and “Senior Officer” information to create an organizational chart for Starbucks. • Highlight areas of business that are organized by function & those by division.

21. 2.2Organizational Structure HL Topics

22. Centralized vs. Decentralized Decision Making Centralized Decentralized Decisions made at lower levels of the organization • Decisions made at the top of the organization; • Directed down

23. Formalization • Degree to which an organization documents its procedures & processes • Amount of rules & regulations

24. Matrix Structure • Elements of functional & divisional structures • Operates like neither • “Projects” pass-through functional departments • Projects = Clients / Customers • “Project” Managers do not have staff • Staffs assembled as needed (“borrowed” from departments) • Functional support teams allocated from functional departments • “Projects” compete for staff

25. Matrix Structure Division Production Legal Engineering Accounting Production Team Legal Team Engineering Team Accounting Team Alpha Project Mgr. Beta Project Mgr. Production Team Legal Team Engineering Team Accounting Team Gamma Project Mgr. Production Team Legal Team Engineering Team Accounting Team

26. Matrix Structure Advantages Disadvantages Frustrated & confused employees Changing chain of command (who’s the boss?) Conflictsbetween department & project managers Different deadlines & priorities Competition between project managers Time spent in meetings coordinating staff & activities • Extremely efficient • Resources focused on where the need is greatest • Expensive staff kept busy • Projects started quickly • Staff is available & acquainted with structure • Employee development • Dealing with different types of projects • More employee involvement • Skills/knowledge that project managers don’t have

27. Theories of Optimal Organizational Structure Classical vs. Neoclassical

28. Theories of Organizational Structure Classical (Traditional) Neoclassical (Progressive) Employee satisfaction & efficiency are ultimate goals Managers do not tightly control subordinates Flat hierarchies Wide Span of Control Managers rely on employees to make decisions Informal (fewer rules, regulations & processes) • Single best way to design organizations • Managers have tight control over subordinates • Tall hierarchies • Narrow Span of Control • Formal (lots of documentation, rules & procedures) • Functional Organization

29. Classical Design Neoclassical Design