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Chapter 15

Foundations of
Organization Structure
ORGANIZATIONAL BEHAVIOR
S T E P H E N P. R O B B I N S
E L E V E N T H
2005 Prentice Hall Inc.
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E D I T I O N

W W W . P R E N H AL L . C O M / R O B B I N S

PowerPoint Presentation
by Charlie Cook

What
What Is
Is Organizational
Organizational Structure?
Structure?
Organizational Structure
Defines how job tasks
are formally divided,
grouped, and
coordinated.

Key
KeyElements:
Elements:
1.1. Work
Workspecialization
specialization

There are six key


elements that managers
need to address when
they design their org.s
structure.

2.2.
3.3.

Departmentalization
Departmentalization
Chain
Chainof
ofcommand
command

4.4.
5.5.

Span
Spanof
ofcontrol
control
Centralization
Centralizationand
and
decentralization
decentralization

6.6. Formalization
Formalization

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152

1-Work
1-Work Specialization..1
Specialization..1
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
trainingisismore
moreefficient.
efficient.
Allows
Allowsuse
useof
ofspecialized
specializedequipment.
equipment.

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153

Division
Division of
of Labor
Labor
Benefits include:

Increasing levels of skill


Less time is wasted moving from job to job
Training is less costly
Increased focus

Adam Smiths pin factory


Men are much more likely to discover easier and readier
methods of attaining any object, when the whole attention
of their minds is directed towards that single object, than
when it is dissipated among a great variety of things. WON p.
14

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154

1-Work
1-Work Specialization..2
Specialization..2
Work Specialization
The degree to which tasks in the organization are
divided into separate jobs with each step completed
by a different person. (Adam Smiths-Division of
Labor)
During the 1st half of the 20th century, managers
viewed work specialization as an unending source of
increased productivity, and , for a time, it was.
However, by 1960, it became evident that a good
thing could be carried too far.
The point reached in some jobs where human
diseconomies from work overspecialization resulted
- boredom, fatigue, stress, poor quality, increased
absenteeism, and higher turnover more than offset
the economic advantages.

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155

Economies and Diseconomies of


Work Specialization
Productivity

High

Low

Impact from
economies
of specialization

Low
Work
Specialization
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Impact from
human
diseconomies

High
156

1-Work
1-Work SpecializationTodays
SpecializationTodays View3
View3
Most managers today see work specialization as
an important org. mechanism but not as a source
of ever-increasing productivity.
They recognize the efficiencies it creates in
certain types of jobs, but they also recognize the
problems it creates when its carried to extremes.
McDonald uses high work specialization to
efficiently make & sell its products.
However, American Express & Ford Australia
have broadened the scope of employees jobs &
reduced work specialization.

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157

22- Departmentalization
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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158

22- Departmentalization
Departmentalization by
by Type
Type
The basis by which jobs are
grouped together is called.
Functional
Grouping jobs by
functions
performed
Product
Grouping jobs by
product line
Geographical
Grouping jobs on
the basis of
territory or
geography

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

159

Departmentalization
Functional
Functional
Major
Major
Types
Types
of
of
Department
Department
Organization
Organization
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Product
Product
Customer
Customer
Geographic
Geographic
Process
Process

22 -Departmentalization..continued
-Departmentalization..continued
Large orgs. Often combine most or all of these
forms of departmentalization.
For example a major Japanese electronic firm
organizes each of its divisions along functional
lines, its manufacturing units around processes,
its sales units around seven geographic regions,
and its sales regions into four customer
groupings.

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11

Departmentalization
Departmentalization ..todays
..todays view
view
Two popular trends today in departmentalization are the
increasing use of customer departmentalization & the use
of cross-functional teams.
customer departmentalization helps managers better
monitor customers needs & respond to changes in those
needs.
Managers are using cross-functional teams, which are work
teams composed of individuals from various functional
specialties. For example at Fords material planning &
logistics division, a cross-functional team with employees
from finance, purchasing, engineering, and quality control
areas and with representatives from outside logistics
suppliers has made several work improvements.

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12

Functional
FunctionalDepartmentalization
Departmentalization

Advantages
Efficiencies from putting together similar specialties and
people with common skills, knowledge, and orientations
Coordination within functional area
In-depth specialization
Disadvantages
Poor communication across functional areas
Limited view of organizational goals

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13

Geographical
GeographicalDepartmentalization
Departmentalization

Advantages
More effective and efficient handling of specific
regional issues that arise
Serve needs of unique geographic markets better
Disadvantages
Duplication of functions
Can feel isolated from other organizational areas

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14

Product
Product Departmentalization
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

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15

Process
ProcessDepartmentalization
Departmentalization

+ More efficient flow of work activities


Can only be used with certain types of products

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Customer
CustomerDepartmentalization
Departmentalization

+ Customers needs and problems can be met by specialists


- Duplication of functions
- Limited view of organizational goals

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17

33 -- Chain
Chain of
of Command
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.

Chain of Command involves three


other concepts:
Authority
Responsibility
Unity of Command

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18

33 -- Chain
Chain of
of Commandcontinued
Commandcontinued
Authority
Refers to the rights inherent in a managerial position to
tell people what to do and to expect them to do it.
An org.s managers, who are in the chain of command,
are granted a certain degree of authority to do their job of
coordinating & overseeing the work of others.
Responsibility
The obligation or expectation to perform any assigned
duties.
As managers assign work to employees, those employees
assume an obligation to perform any assigned duty.
Unity of Command
The concept that a person should have one boss and
should report only to that person.( Fayols 14 Principles of
Management)
Without unity of command, conflicting demands &
priorities from multiple bosses can create problems.

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33- Chain
Chain of
of Command.todays
Command.todays view
view
Early management theorists ( Fayol, Weber, Taylor, & others
) were enamored with the concepts of chain of command,
authority, responsibility, & unity of command.
However, the above mentioned concepts are considered
less relevant today because of things like IT.
With computers, employees communicate with anyone with
else anywhere in the org. without going through formal
channels- i.e., chain of command. Moreover, as more orgs.
use self-managed & cross-functional teams as new org.
designs with multiple bosses are implemented, these
traditional concepts are less relevant.

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20

44 -- Span
Span of
of Control
Control
The number of subordinates a manager can
efficiently and effectively direct.
Concept:
Concept:
Wider
Widerspans
spansof
ofmanagement
managementincrease
increaseorganizational
organizational
efficiency.
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
discouragement
ofemployee
employeeautonomy.
autonomy.
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44 -- Span
Span of
of Control.contd
Control.contd
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
Employee characteristics
Characteristics of the work being done
Similarity of tasks
Complexity of tasks
Physical proximity of subordinates
Standardization of tasks
Sophistication of org.s information system
Strength of the org. culture & preferred style of the manager

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Contrasting
ContrastingSpans
Spansof
of Control
Control

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44 -- Span
Span of
of Control
Control ..todays
..todays view
view
The trend in recent years has been toward larger
spans of control, which are consistent with
managers efforts to reduce costs, speed up
decision making, increase flexibility, get closer to
customers, and empower employees.
However, to ensure that performance doesnt
suffer because of these wider spans, orgs. are
investing heavily in employee training.
Managers recognize that they can handle a wider
span when employees know their jobs well or can
turn to co-workers if they have Qs.
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55 -- Centralization
Centralization &
& Decentralization
Decentralization
Centralization
The degree to which decision-making is
concentrated at a single point in the
organizations.
Organizations in which top managers make all the
decisions and lower-level employees simply carry out
those orders.

Decentralization
Organizations in which decision-making is pushed
down to the managers who are closest to the
action.

Employee Empowerment
Increasing the decision-making authority (power)
of employees.
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Factors
Factorsthat
thatInfluence
Influencethe
theAmount
Amountof
ofCentralization
Centralization
More Centralization
Environment is stable.
Lower-level managers are not as capable or experienced
at making decisions as upper-level managers.
Lower-level managers do not want to have a say in
decisions.
Decisions are relatively minor.
Organization is facing a crisis or the risk of company
failure.
Company is large.
Effective implementation of company strategies depends
on managers retaining say over what happens.

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Factors
Factorsthat
thatInfluence
Influencethe
theAmount
Amountof
ofCentralization
Centralization
More Decentralization
Environment is complex, uncertain.
Lower-level managers are capable and experienced at
making decisions.
Lower-level managers want a voice in decisions.
Decisions are significant.
Corporate culture is open to allowing managers to have
a say in what happens.
Company is geographically dispersed.
Effective implementation of company strategies
depends on managers having involvement and
flexibility to make decisions.

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Centralization
Centralization&&Decentralization.
Decentralization.Todays
Todaysview
view
An org. have had to become more flexible & responsive,
theres been a distinct trend toward decentralizing decision
making.
In large companies, especially, lower-level managers are
closer to the action & typically have more detailed
knowledge about problems & how best to solve them than
do top managers.
Honeywell Pacific, which moved from a hierarchical
management structure to one that is much flatter & teambased.
Result- increased revenues & more intimate knowledge of
the companys major customers.

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66--Formalization
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.

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Common
Common Organizational
Organizational Designs
Designs
Three of the more common org. designs in use: the simple
structure, the bureaucracy, and the matrix

Simple Structure
A structure characterized by a low degree of
departmentalization, wide spans of control, authority
centralized in a single person, and little formalization.
This structure is most widely practiced in small businesses in which
the manager & the owner are one & the same.
The strength of this structure lies in its simplicity. It is fast, flexible,
& inexpensive to maintain, and accountability is clear.
One major weakness is that its difficult to maintain in any other
than small orgs. As org. grows due to its low formalization & high
centralization creates information overload at the top.

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Common
Common Organization
Organization Designs
Designs (contd)
(contd)
Bureaucracy
Standardization! thats the key concept that
underlies all bureaucracies.
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.
The primary strength of the bureaucracy lies in its ability to
perform standardized activities in a highly efficient manner.
Putting like specialties together in functional depts. results in
economies of scale, minimum duplication of personnel &
equipment, and employees who have the opportunity to talk
2005language
Prentice Hall
Inc.their peers.
15
the same
among

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31

The
The Bureaucracy
Bureaucracy
Strengths
Functional
economies of
scale
Minimum
duplication of
personnel and
equipment
Enhanced
communication
Centralized
decision making
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Weaknesses
Subunit conflicts
with
organizational
goals
Obsessive concern
with rules and
regulations
Lack of employee
discretion to deal
with problems
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Common
Common Organization
Organization Designs
Designs (contd)
(contd)
Matrix Structure
Matrix management is a technique of managing an org.( or,
more commonly, part of an org.) through a series of dualreporting relationships instead of a more traditional linear
management structure.
In its simplest form, a matrix configuration may be known as a
cross-functional work team, which brings together individuals
who report to different parts of the company in order to
complete a particular project or task.
A structure that creates dual lines of authority and combines
functional and product departmentalization.

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33

Matrix
MatrixStructure
Structure

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34

Matrix
Matrix Structurecontinued
Structurecontinued
Matrix structure is used in aerospace firms, R&D
laboratories, construction companies, hospitals,
management consulting firms etc.
Essentially, the matrix combines two forms of
departmentalization: functional & product.
The strength of functional departmentalization
lies in putting like specialists together, which
minimizes the number necessary while allowing
the pooling & sharing of specialized resources
across products.
Its major disadvantage is the difficulty of
coordinating the tasks of diverse functional
specialists so that their activities are completed
time
& within
budget.
on
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Matrix
Matrix Structurecontinued
Structurecontinued
Product departmentalization, on the other hand, has exactly
the opposite benefits & disadvantages.
It facilitates coordination among specialties to achieve ontime completion & meet budget targets.
It provides clear responsibility for all activities related to a
product, but with duplication of activities & costs.
The matrix attempts to gain the strengths of each, while
avoiding their weaknesses.
The most obvious structural characteristic of the matrix is
that it breaks the unity-of-command concept.
Employees in the matrix have two bosses their functional
dept. managers & their product managers. Therefore, the
matrix has a dual chain of command.

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Matrix
Matrix Structurecontinuedadvantages
Structurecontinuedadvantages
The strength of the matrix lies in its ability to facilitate
coordination when the org. has a multiplicity of complex &
interdependent activities.
As an org. gets larger, its information-processing capacity
can become over-loaded.
In a bureaucracy, complexity results in increased
formalization.
The direct & frequent contact b/w different specialties in the
matrix can make for better communication & more
flexibility.
Information permeates the org. & more quickly reaches the
people who need to take account of it.
Matrix reduces bureau-pathologies - the dual lines of
authority reduce the tendencies of dept. members to
become so busy protecting their little worlds that the orgs
overall goals become secondary.

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Matrix
Matrix Structurecontinuedadvantages
Structurecontinuedadvantages
Matrix also facilitates the efficient allocation of
specialists.
When individuals with highly specialized skills
are stuck in one functional dept. or product
group, their talents are monopolized &
underused.
The matrix achieves the advantages of
economies of scale by providing the org. with
both the best resources & an effective way of
ensuring their efficient deployment.

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38

Matrix
Matrix Structurecontidisadvantages
Structurecontidisadvantages
The major disadvantages of the matrix lie in the confusion
it creates, its propensity to foster power struggles, & the
stress it places on individuals.
When unity-of-command concept is ignored, ambiguity
increases & ambiguity often leads to conflict.
Confusion & ambiguity also create the seeds of power
struggles.
Bureaucracy reduces the potential for power grabs by
defining the rules of the game. When those rules do not
exist, power struggles b/w functional & product managers
result.
For individuals who desire security & absence from
ambiguity, this work climate can produce stress.
Reporting to more than one boss introduces role conflict &
expectations
introduce role ambiguity.
unclear
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39

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
teamlevel.
level.
Requires
Requiresemployees
employeesto
tobe
begeneralists
generalistsas
aswell
wellas
as
specialists.
specialists.
Creates
Createsaaflexible
flexiblebureaucracy.
bureaucracy.

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40

New
New Design
Design Options
Options (contd)
(contd)
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
concentratingon
onwhat
whatthe
theorganization
organizationdoes
doesbest.
best.
Disadvantage:
Disadvantage:Reduced
Reducedcontrol
controlover
overkey
keyparts
partsof
of
the
thebusiness.
business.

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New
New Design
Design Options
Options (contd)
(contd)
Boundaryless Organization
General Electrics former chairman, Jack Welch, wanted to
eliminate vertical & horizontal boundaries within GE & break
down external barriers b/w the company & its customers &
suppliers.
The boundary-less organization seeks to eliminate the
chain of command, have limitless spans of control, and
replace departments with empowered teams.
And because such org. rely so heavily on IT, it is also
sometimes called the T-form ( or technology based)
org.

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Boundary-less
Boundary-lessOrganization.continued
Organization.continued

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43

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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44

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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45

Mechanistic
Mechanisticversus
versusOrganic
OrganicOrganization
Organization

High specialization

Cross-functional teams

Rigid departmentalization

Cross-hierarchical teams

Clear chain of command

Free flow of information

Narrow spans of control

Wide spans of control

Centralization

Decentralization

High formalization

Low formalization

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Organizational
Organizational Design
Design Decisions
Decisions
Mechanistic Organization
A rigid and tightly
controlled structure

Organic Organization
Highly flexible and
adaptable structure

High specialization

Non-standardized jobs

Rigid
departmentalization

Fluid team-based
structure

Narrow spans of control

Little direct supervision

High formalization

Minimal formal rules

Limited information
network (downward)

Open communication
network

Low decision
participation

Empowered employees

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47

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

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48

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
largeorganizations:
organizations:
More
Morespecialization
specialization
More
Morevertical
verticallevels
levels
More
Morerules
rulesand
andregulations
regulations

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49

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)
customized)ininactivities:
activities:
Routine
Routinetechnologies
technologiesare
areassociated
associatedwith
withtall,
tall,
departmentalized
departmentalizedstructures
structuresand
andformalization
formalizationinin
organizations.
organizations.
Routine
Routinetechnologies
technologieslead
leadto
tocentralization
centralizationwhen
when
formalization
formalizationisislow.
low.
Nonroutine
Nonroutinetechnologies
technologiesare
areassociated
associatedwith
withdelegated
delegated
decision
decisionauthority.
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 organizations
performance.
Key
KeyDimensionsDimensions Capacity:
Capacity:the
thedegree
degreeto
towhich
whichan
anenvironment
environmentcan
can
support
supportgrowth.
growth.
Volatility:
Volatility:the
thedegree
degreeof
ofinstability
instabilityininthe
theenvironment.
environment.
Complexity:
Complexity:the
thedegree
degreeof
ofheterogeneity
heterogeneityand
and
concentration
concentrationamong
amongenvironmental
environmentalelements.
elements.

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Bureaucracy
Bureaucracy Is
Is Dead
Dead
Characteristics of
Bureaucracies

Why Bureaucracy
Survives

Specialization

Large size prevails.

Formalization

Environmental
turbulence can be
largely managed.

Departmentalization
Centralization
Narrow spans of
control
Adherence to a chain
of command.

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Standardization
achieved through
hiring people who
have undergone
extensive
educational training.
Technology
maintains control.

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Organizational
Organizational Designs
Designs and
and Employee
Employee
Behavior
Behavior
Research
ResearchFindings:
Findings:
Work
Workspecialization
specializationcontributes
contributesto
tohigher
higheremployee
employee
productivity,
productivity,but
butititreduces
reducesjob
jobsatisfaction.
satisfaction.
The
Thebenefits
benefitsof
ofspecialization
specializationhave
havedecreased
decreasedrapidly
rapidlyas
as
employees
employeesseek
seekmore
moreintrinsically
intrinsicallyrewarding
rewardingjobs.
jobs.
The
Theeffect
effectof
ofspan
spanof
ofcontrol
controlon
onemployee
employeeperformance
performanceisis
contingent
contingentupon
uponindividual
individualdifferences
differencesand
andabilities,
abilities,task
task
structures,
structures,and
andother
otherorganizational
organizationalfactors.
factors.
Participative
Participativedecision
decisionmaking
makinginindecentralized
decentralized
organizations
organizationsisispositively
positivelyrelated
relatedto
tojob
jobsatisfaction.
satisfaction.

2005 Prentice Hall Inc.


All rights reserved.

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53

Common
Common Organizational
Organizational Designs
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 the
parent corporation.

2005 Prentice Hall Inc.


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15
54

Strengths
Strengthsand
andWeaknesses
Weaknessesof
ofTraditional
TraditionalOrganizational
OrganizationalDesigns
Designs

2005 Prentice Hall Inc.


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55

Key
KeyElements:
Elements:
Gains
Gainsthe
theadvantages
advantagesof
offunctional
functionaland
and
product
productdepartmentalization
departmentalizationwhile
while
avoiding
avoidingtheir
theirweaknesses.
weaknesses.
Facilitates
Facilitatescoordination
coordinationof
ofcomplex
complexand
and
interdependent
interdependentactivities.
activities.
Breaks
Breaksdown
downunity-of-command
unity-of-command
concept.
concept.

2005 Prentice Hall Inc.


All rights reserved.

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56

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