Chapter 15

Foundations of Organization Structure

ORGANIZATIONAL BEHAVIOR
By Iba Almajzoub

What What Is Is Organizational Organizational Structure? Structure?

Organizational Structure
How job tasks are formally divided, grouped, and coordinated. Key KeyElements: Elements:
Work Workspecialization specialization Departmentalization Departmentalization Chain Chainof ofcommand command Span Spanof ofcontrol control Centralization Centralizationand and decentralization decentralization Formalization Formalization
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What What Is Is Organizational Organizational Structure? Structure? (cont.) (cont.)

Work Specialization
The degree to which tasks in the organization are subdivided into separate jobs. Division Divisionof oflabor: labor:
Makes Makesefficient efficientuse useof ofemployee employeeskills skills Increases Increasesemployee employeeskills skillsthrough throughrepetition repetition Less Lessbetween-job between-jobdowntime downtimeincreases increasesproductivity productivity Specialized Specializedtraining trainingis ismore moreefficient. efficient. Allows Allowsuse useof ofspecialized specializedequipment. equipment.
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What What Is Is Organizational Organizational Structure? Structure? (cont.) (cont.)

Departmentalization
The basis by which jobs are grouped together. Grouping GroupingActivities ActivitiesBy: By:
Function Function Product Product Geography Geography Process Process Customer Customer
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What What Is Is Organizational Organizational Structure? Structure? (cont.) (cont.)

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.
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What What Is Is Organizational Organizational Structure? Structure? (cont.) (cont.)

Span of Control
The number of subordinates a manager can efficiently and effectively direct.
Concept: Concept: Wider Widerspans spansof ofmanagement managementincrease increase organizational efficiency. organizational efficiency. Narrow NarrowSpan SpanDrawbacks: Drawbacks: Expense Expenseof ofadditional additionallayers layersof ofmanagement. management. Increased Increasedcomplexity complexityof ofvertical verticalcommunication. communication. Encouragement Encouragementof ofoverly overlytight tightsupervision supervisionand and discouragement of employee autonomy. discouragement of employee autonomy.
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What What Is Is Organizational Organizational Structure? Structure? (cont.) (cont.)

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.

Formalization
The degree to which jobs within the organization are standardized.
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Common Common Organization Organization Designs Designs

Simple Structure
A structure characterized by a low degree of departmentalization, wide spans of control, authority centralized in a single person, and little formalization.

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Common Common Organization Organization Designs Designs (cont.) (cont.)

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.

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The The Bureaucracy Bureaucracy

Strengths Weaknesses
Functional Subunit conflicts economies of scale with organizational goals Minimum duplication of Obsessive concern personnel and with rules and equipment regulations Enhanced Lack of employee communication discretion to deal with problems Centralized decision making Iba Almajzoub
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Common Common Organization Organization Designs Designs (cont.) (cont.)

Matrix Structure
A structure that creates dual lines of authority and combines functional and product departmentalization. Key KeyElements: Elements:

+ +Gains Gainsthe theadvantages advantagesof offunctional functionaland andproduct product

departmentalization departmentalizationwhile whileavoiding avoidingtheir their weaknesses. weaknesses. + +Facilitates Facilitatescoordination coordinationof ofcomplex complexand and interdependent interdependentactivities. activities.
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Breaks Breaksdown downunity-of-command unity-of-commandconcept. concept.

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New New Design Design Options Options

Team Structure
The use of teams as the central device to coordinate work activities. Characteristics: Characteristics:
Breaks Breaksdown downdepartmental departmentalbarriers. barriers. Decentralizes Decentralizesdecision decisionmaking makingto tothe theteam team level. level. Requires Requiresemployees employeesto tobe begeneralists generalistsas aswell well as specialists. as specialists. Creates flexible Createsa a flexiblebureaucracy. bureaucracy.
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New New Design Design Options Options (cont.) (cont.)

Virtual Organization
A small, core organization that outsources its major business functions. Highly centralized with little or no departmentalization. Concepts: Concepts:
Advantage: Advantage:Provides Providesmaximum maximumflexibility flexibilitywhile while concentrating on what the organization does concentrating on what the organization doesbest. best. Disadvantage: Disadvantage:Reduced Reducedcontrol controlover overkey keyparts partsof of the business. the business.
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New New Design Design Options Options (cont.) (cont.)

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 T-formConcepts: Concepts:
Eliminate Eliminatevertical vertical(hierarchical) (hierarchical)and andhorizontal horizontal (departmental) (departmental)internal internalboundaries. boundaries. Breakdown Breakdownexternal externalbarriers barriersto tocustomers customersand and suppliers. suppliers.
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Why Why Do Do Structures Structures Differ? Differ?

Mechanistic Model
A structure characterized by extensive departmentalization, high formalization, a limited information network, and centralization.

Organic Model
A structure that is flat, uses cross-hierarchical and cross-functional teams, has low formalization, possesses a comprehensive information network, and relies on participative decision making.
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Why Why Do Do Structures Structures Differ? Differ? Strategy Strategy

Innovation Strategy
A strategy that emphasizes the introduction of major new products and services.

Cost-minimization Strategy
A strategy that emphasizes tight cost controls, avoidance of unnecessary innovation or marketing expenses, and price cutting.

Imitation Strategy
A strategy that seeks to move into new products or new markets only after their viability has already been proven. Iba Almajzoub

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Why Why Do Do Structures Structures Differ? Differ? Size Size

Size
How the size of an organization affects its structure. As an organization grows larger, it becomes more mechanistic. Characteristics Characteristicsof oflarge large organizations: organizations:
More Morespecialization specialization More Morevertical verticallevels levels More Morerules rulesand andregulations regulations
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Why Why Do Do Structures Structures Differ? Differ? Technology Technology

Technology
How an organization transfers its inputs into outputs.
Characteristics Characteristicsof ofroutineness routineness(standardized (standardizedor or customized) in activities: customized) in activities: Routine Routinetechnologies technologiesare areassociated associatedwith withtall, tall, departmentalized structures and formalization departmentalized structures and formalizationin in organizations. organizations. Routine Routinetechnologies technologieslead leadto tocentralization centralizationwhen when formalization is low. formalization is low. Nonroutine Nonroutinetechnologies technologiesare areassociated associatedwith with delegated decision authority. delegated decision authority.
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Why Why Do Do Structures Structures Differ? Differ? Environment Environment

Environment
Institutions or forces outside the organization that potentially affect the organization s performance. Key KeyDimensionsDimensions Capacity: Capacity:the thedegree degreeto towhich whichan anenvironment environmentcan can support supportgrowth. growth. Volatility: Volatility:the thedegree degreeof ofinstability instabilityin inthe theenvironment. environment. Complexity: Complexity:the thedegree degreeof ofheterogeneity heterogeneityand and concentration among environmental elements. concentration among environmental elements.
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Bureaucracy Bureaucracy Is Is Dead Dead

Characteristics of Bureaucracies
Specialization Formalization Departmentalization Centralization Narrow spans of control Adherence to a chain of command.

Why Bureaucracy Survives

Large size prevails. Environmental turbulence can be largely managed. Standardization achieved through hiring people who have undergone extensive educational training. Technology maintains control.
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