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Principles of Management

Dr. Karim Kobeissi


Islamic University of Lebanon
- 2013

Chapte
r

Organizat
ion
Design
and
Structure

Organization DesignDefinition
Organizing is the management function
that
creates
the
organizations
structure. When managers develop or
change the organizations structure,
theyre engaging in organizational
design, which is the process of making
decisions about how specialized jobs
should be, the rules to guide
employees behaviors, and the level at
which decisions will be made.

Elements in Organizational
Design
The Six basic elements of
organizational structure are:
1. Work specialization
2. Departmentalization
3. Chain of command
4. Span of control
5. Centralization and decentralization
6. Formalization

1. Work Specialization
Work specialization is defined as the degree to
which tasks in the organization are subdivided
into separate jobs.
At the Wilson Sporting
Goods factory, workers making footballs
specialize in job taskssuch as shaping,
stitching and lacing to increase work output.
When first introduced, work specialization
almost always generated higher productivity. But
at some point, the human diseconomies
fatigue, stress, low productivity, poor quality,
increased absenteeism, and high turnover
exceed the economic advantages.

Work Specialization

2. Departmentalization
Early management writers argued that
common work activities needed to be
grouped together to get them done in a
coordinated and integrated way. How
jobs are grouped together is called
departmentalization. There are five
common forms of departmentalization,
although an organization may use its
own unique method.

3. Chain of Command

Chain of Command

Authority

When organizing work, managers need to clarify who reports


to whom, which is know as the chain of commandthat
is, the line of authority extending from upper to lower
organizational levels.
Authority refers to the rights inherent in a managerial
position to give orders and expect the orders to be
obeyed. Each management position has specific inherent
rights associated with the positions rank or title. When
employees are given rights they also assume a corresponding
obligation to perform and be held responsible for their
performance.

Unity of Command

A subordinate should have only one superior to whom he or


she is directly responsible

Authority and Power


Authority A right; legitimacy is based
on authority figures position in the
organization.
Power An individuals capacity to
influence decisions. Power is made up
of BOTH ones vertical managerial
position and ones distance from the
organizations power core or center.

Authority and Power:


Differences

Authority and Power:


Differences (con)
The cone analogy acknowledges two facts:
1. The higher one moves in an organization (an
increase in authority), the closer one moves to
the power core.
2. Its not necessary to have authority to wield
power because one can move horizontally (---)
inward toward the power core without moving up.
For instance, as gatekeepers for their bosses,
assistants often are powerful in a company even
though they have little authority.

Sources of Power

4. Span of Control
The number of subordinates a manager can efficiently and effectively
direct

Wider spans of control increase


organizational efficiency
Narrow span of control 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
organization are standardized.

within

the

High formalization
Employees have minimum freedom of choice in how to
get the job done
Employees are required to follow many rules and
procedures

Low formalization
Employees have maximum freedom of choice in how to
get the job done
Job behaviors are nonprogrammed

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/Functional
Bureaucracy /Functional
A structure of highly
operating routine tasks
achieved
through
specialization,
very
formalized rules and
regulations, tasks are
grouped into functional
departments,
centralized
authority,
narrow spans of control,
and decision making
that follows the chain of
command.

Functional Structure

Common Organizational Designs:


Divisional
With a divisional structure, functional
activities are performed both centrally
and in each separate division.
The divisional structure can be organized
in one of four ways: by geographic area,
by product , by customer, or by process.

Divisional Structure By
Geographic Area

Divisional Structure By Product

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
1- The mechanistic organization naturally results
from combining the six elements of structure. The
chain-of-command principle ensures a formal
hierarchy of authority, with each person
controlled and supervised by one superior.
Keeping the span of control small at increasingly
higher levels in the organization creates tall,
impersonal structures. Because top managers
cant control lower-level activities, they substitute
rules and regulations. A high degree of work
specialization creates jobs that are simple,
routine, and standardized. Further specialization
through departmentalization increases the need
for multiple layers of management to coordinate
the specialized departments.

Two Extreme Models of Organizational


Design
2- The organic organization is highly
adaptive, loose, and flexible, which allows
it to change rapidly as required. Although
it has division of labor, the jobs are not
standardized because the employees
tend
to
be
technically
proficient
professionals who are trained to handle
diverse problems and whose behavior is
guided by professional standards. The
organic
organization
is
low
in
centralization so that the professional can
respond quickly to problems.

Why Structure Differ?


How

an

depends
strategy,

organization
on

variables

size,

environment.

is

structured
such

technology,

as
and

Strategy and Structure


An

organizations

structure

should

facilitate

goal

achievement. Research shows that certain structural


designs

work

best

with

different

organizational

strategies. For instance, the flexibility and free-flowing


information of the organic structure works well when
an organization is pursuing meaningful and unique
innovations. In contrast, the mechanistic organization,
with its efficiency, stability, and tight controls, works
best for companies that want to tightly control costs.

Size and Structure


Theres considerable evidence that an
organizations size affects its structure. Large
organizations
tend
to
have
more
specialization,
departmentalization,
centralization, and regulations than smaller
organizations do.

Technology and Structure

The Environment and


Structure
The organizations environment has a major effect on its
structure: Mechanistic organizations are most effective
in stable environments and organic organizations are
best matched with dynamic and uncertain environments.
Thats why so many managers have restructured their
organizations to be lean, fast, and flexible in response to
such dynamic environmental forces as global competition,
accelerated product innovation by competitors, knowledge
management, and increased demands from customers for
higher quality and faster deliveries.
In contrast, mechanistic organizations tend to be illequipped to respond to rapid environmental change .

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.

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

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