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Organizational Structure

and Design
Defining Organizational Structure
Organizational Structure
The formal arrangement of jobs within an organization
Organizational Design
A process involving decisions about six key elements:
Work specialization
Departmentalization
Chain of command
Span of control
Centralization and decentralization
Formalization

Purposes of Organizing
Divides work to be done into specific jobs and
departments
Assigns tasks and responsibilities associated with
individual jobs
Coordinates diverse organizational tasks
Establishes relationships among individuals,
groups, and departments
Establishes formal lines of authority
Allocates organizational resources
Cluster jobs in to units

Designing Organizational Structure
Work Specialization
The degree to which tasks in the organization are
divided into separate jobs with each step
completed by a different person


Departmentalization by Type
Functional
Grouping jobs by
functions performed
Product
Grouping jobs by
product line
Geographical
Grouping jobs on the
basis of territory or
geography

Process
Grouping jobs on the
basis of product or
customer flow
Customer
Grouping jobs by type
of customer and needs


Functional Departmentalization
Plant Manager
Manager,
Manufacturing
Manager,
Human Resources
Manager,
Accounting
Manager,
Engineering
Manager,
Purchasing
+ Efficiencies from putting together similar specialties and
people with common skills, knowledge, and orientations
+ Coordination within functional area
+ In-depth specialization
Poor communication across functional areas
Limited view of organizational goals
Geographical
Departmentalization
Vice President
for Sales
Sales Director,
Central Region
Sales Director,
Southern Region
Sales Director,
Western Region
Sales Director,
Eastern Region
+ More effective and efficient handling of specific
regional issues that arise
+ Serve needs of unique geographic markets better
Duplication of functions
Can feel isolated from other organizational areas
Product Departmentalization
+ Allows specialization in particular products and services
+ Managers can become experts in their industry
+ Closer to customers
Duplication of functions
Limited view of organizational goals
Source: Bombardier Annual Report.
CEO.
Truck
Division
Car
Division
Bus
Division
Process Departmentalization
+ More efficient flow of work activities
Can only be used with certain types of products
Plant
Manager
Spinning
Dyeing
Weaving
Fininshing

Customer Departmentalization
+ Customers needs and problems can be met by specialists
Duplication of functions
Limited view of organizational goals
Director
of Sales
Manager,
Wholesale Accounts
Manager,
Retail Accounts
Manager,
Government Accounts
Organizational Structure (contd)
Chain of Command
The continuous line of authority that extends
from upper levels of an organization to the
lowest levels of the organization and clarifies
who reports to whom

Organizational Structure (contd)
Authority
The rights inherent in a managerial position to tell people what
to do and to expect them to do it
Responsibility
The obligation or expectation to perform. Responsibility brings
with it accountability (the need to report and justify work to
managers superiors)
Unity of Command
The concept that a person should have one boss and should
report only to that person
Delegation
The assignment of authority to another person to carry out
specific duties

Organizational Structure (contd)
Line and Staff Authority
Line managers are responsible for the essential
activities of the organization, including
production and sales. Line managers have the
authority to issue orders to those in the chain
of command
The president, the production manager, and the sales
manager are examples of line managers
Staff managers have advisory authority, and
cannot issue orders to those in the chain of
command (except those in their own
department)

Organizational Structure (contd)
Span of Control
The number of employees who can be effectively and
efficiently supervised by a manager
Width of span is affected by:
Skills and abilities of the manager and the employees
Characteristics of the work being done
Similarity of tasks
Complexity of tasks
Physical proximity of subordinates
Standardization of tasks
Sophistication of the organizations information system
Strength of the organizations culture
Preferred style of the manager


Organizational Structure (contd)
Centralization
The degree to which decision making is
concentrated at a single point in the organization
Organizations in which top managers make all the
decisions and lower-level employees simply carry out
those orders
Decentralization
The degree to which lower-level employees provide
input or actually make decisions
Employee Empowerment
Increasing the decision-making discretion of
employees

Organizational Structure (contd)
Formalization
The degree to which jobs within the organization
are standardized and the extent to which
employee behavior is guided by rules and
procedures
Highly formalized jobs offer little discretion over what is to
be done
Low formalization means fewer constraints on how
employees do their work
Organizational Design Decisions
Mechanistic Organization
A rigid and tightly
controlled structure
High specialization
Rigid departmentalization
Narrow spans of control
High formalization
Limited information network
(mostly downward
communication)
Low decision participation by
lower-level employees
Organic Organization
Highly flexible and
adaptable structure
Nonstandardized jobs
Fluid team-based structure
Little direct supervision
Minimal formal rules
Open communication
network
Empowered employees

Mechanistic Versus Organic
Organization
Mechanistic
High Specialization
Rigid Departmentalization
Clear Chain of Command
Narrow Spans of Control
Centralization
High Formalization
Organic
Cross-Functional Teams
Cross-Hierarchical Teams
Free Flow of Information
Wide Spans of Control
Decentralization
Low Formalization
Structural Contingency Factors (contd)
Strategy and Structure
Achievement of strategic goals is facilitated by
changes in organizational structure that
accommodate and support change
Size and Structure
As an organization grows larger, its structure
tends to change from organic to mechanistic
with increased specialization,
departmentalization, centralization, and rules
and regulations

Structural Contingency Factors (contd)
Technology and Structure
Organizations adapt their structures to their
technology
Routine technology = mechanistic
organizations
Nonroutine technology = organic
organizations
Structural Contingency Factors (contd)
Environmental Uncertainty and Structure
Mechanistic organizational structures tend to
be most effective in stable and simple
environments
The flexibility of organic organizational
structures is better suited for dynamic and
complex environments

Organizational Designs
Organizational Designs
Traditional
-Simple Structure
-Functional
-Divisional
Contemporary
-Team
-Matrix-Project
-Boundary less
Learning Organization
Common Organizational Designs
Traditional Designs
Simple Structure
Low departmentalization, wide spans of control, centralized
authority, little formalization
Functional Structure
Departmentalization by function
Operations, finance, human resources, and product research and
development
Divisional Structure
Composed of separate business units or divisions with
limited autonomy under the coordination and control of the
parent corporation

Organizational Designs (contd)
Contemporary Organizational Designs
Team Structures
The entire organization is made up of work groups or
self-managed teams of empowered employees
Matrix Structures
Specialists for different functional departments are
assigned to work on projects led by project managers
Matrix participants have two managers
Project Structures
Employees work continuously on projects, moving on
to another project as each project is completed

A Matrix Organization in an
Aerospace Firm
Design
Engineering
Manufacturing
Contract
Administration
Purchasing Accounting
Human
Resources (HR)
Design
Group
Alpha
Project
Manufacturing
Group
Contract
Group
Purchasing
Group
Accounting
Group
HR
Group
Design
Group
Beta
Project
Manufacturing
Group
Contract
Group
Purchasing
Group
Accounting
Group
HR
Group
Design
Group
Gamma
Project
Manufacturing
Group
Contract
Group
Purchasing
Group
Accounting
Group
HR
Group
Design
Group
Omega
Project
Manufacturing
Group
Contract
Group
Purchasing
Group
Accounting
Group
HR
Group
Organizational Designs (contd)
Contemporary Organizational Designs
(contd)
Boundaryless Organization
A flexible and an unstructured organizational design
that is intended to break down external barriers
between the organization and its customers and
suppliers
Removes internal (horizontal and vertical) boundaries
Eliminates external boundaries

Organizational Designs (contd)
Learning Organization
An organization that has developed the capacity to
continuously learn, adapt, and change through the
practice of knowledge management by employees
Characteristics of a learning organization:
An open team-based organization design that empowers
employees
Extensive and open information sharing
Leadership that provides a shared vision of the organizations
future; support; and encouragement
A strong culture of shared values, trust, openness, and a sense
of community

Co-ordination
Linking of two or more organizational members
and/or work units so that they function well together
Two main types of co-ordination are:
Vertical coordination
Horizontal Coordination
Vertical Coordination:
Linking work units (individual, team, departments)
separated by hierarchical level
Horizontal Coordination:
Linking work units (individual, team, departments) at
the same hierarchical level
Techniques for effective
coordination
Coordination by chain of command
Coordination by leadership
Coordination by committees
Staff meetings
Special Coordinators
Self- coordination

Differentiation
Differences in attitudes and working styles, arising
naturally among members of different departments,
that can complicate coordination of an organization's
activities.
Integration
The degree to which members of various departments
work together in a unified manner.

A Definition of Power
A
B
Power
The ability to exert influence; that is,
the ability to change the attitudes or
behavior of individuals or groups . A
capacity that A has to influence the
behavior of B so that B acts in
accordance with As wishes.
Dependency
Bs relationship to A when
A possesses something
that B requires.
Sources of Power
Coercive Power
A power base dependent on fear.
Reward Power
Compliance achieved based on
the ability to distribute rewards
that others view as valuable
Legitimate Power
The power a person receives as a result of his or her
position in the formal hierarchy of an organization.

Sources of Power
Expert Power
Influence based on special
skills or knowledge.
Referent Power
Influence based on possession
by an individual of desirable
resources or personal traits.
Dependency: The Key To Power
The General Dependency Postulate
The greater Bs dependency on A, the greater the power A has
over B.
Possession/control of scarce organizational resources that
others need makes a manager powerful.
Access to optional resources (e.g., multiple suppliers) reduces
the resource holders power.
What Creates Dependency
Importance of the resource to the organization
Scarcity of the resource
Nonsubstitutability of the resource
Authority (mainly) derives from
role
Authority is the right to make an ultimate decision,
and in an organisation it refers to the right to make
decisions which are binding on others (Obholzer,
1994).
Line & Staff Authority
Line authority is the relationship in which a
superior exercises direct supervision over a
subordinate
Staff relationship is advisory

Difference between Authority &
Power
Power

Authority
It is a ability to command &
influence behavior of another
It rests with persons, in their
individual capacities
It doesn't follow any hierarchy
Power, being personalized
attribute, can not be delegated
Emerges because of personal
factors
May exist between any 2 persons

It is institutional right to
command
It lies in managerial position

It is hierarchical in nature
It can be delegated
Institutional & originates from
structural relationship
Superior-subordinate
relationship
Delegation
Transfering formal authority from one position to
another is known as delegation
The Delegation Process
Assign Tasks
Transfer task responsibility
Creation of responsibility
Acceptance
Condition
Accept
Reject
Blocks to effective delegation
Factors in delegator:
Love for authority
Maintenance of tight control
Fear of subordinates growth
Fear of exposure
Attitude towards subordinates
Personality of superior
Guides for Overcoming Weak Delegation
1. Define assignments and delegate authority in
light of results expected
2. Select the person in light of the job to be done
3. Maintain open lines of communication
4. Establish proper controls
5. Reward effective delegation and successful
assumption of authority

Definition of Staffing
Staffing is filling, and keeping filled, positions in the
organization structure

SITUATIONAL FACTORS AFFECTING
STAFFING
External factors include the level of education, the
prevailing attitudes in society (such as the attitude
toward work), the many laws and regulations that
directly affect staffing, the economic conditions, and
the supply of and demand for managers outside the
enterprise
SITUATIONAL FACTORS AFFECTING
STAFFING cont.
Internal factors that affect staffing include, for
example, organizational goals, tasks, technology,
organization structure, the kinds of people
employed by the enterprise, the demand for and
the supply of managers within the enterprise, the
reward system, and various kinds of policies
The Human Resources
Management Process
Environment
Environment
Decruitment
Recruitment
Human
Resource
Planning
Selection
Orientation Training
Performance
Management
Career
Development
Compensation
and
Benefits
Identification and Selection
of Competent Employees
Adapted and competent
employees with up-to-date
skills and knowledge
Competent and high-performing employees who
are capable of sustaining high performance over
the long term

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