Chapter

SIXTEEN

Foundations of
Organizational
Structure

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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

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Formalization
Formalization

Key
KeyDesign
DesignQuestions
Questionsand
andAnswers
Answersfor
for Designing
Designingthe
the
Proper
ProperOrganization
OrganizationStructure
Structure
The Key Question
Provided By

The Answer Is

1. To what degree are articles

subdivided into separate jobs?

Work specialization

2. On what basis will jobs be grouped

together?

Departmentalization

3. To whom do individuals and groups Chain of command

report?
4. How many individuals can a manager
efficiently and effectively direct?
5. Where does decision-making
authority lie?

Span of control

Centralization
and decentralization

6. To what degree will there be rules

Formalization
to direct employees
and
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and managers?

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E X H I B I T 161
E X H I B I T 161

What
What Is
Is Organizational
Organizational Structure?
Structure? (contd)
(contd)
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
trainingisismore
moreefficient
efficient
Allows
Allowsuse
useof
ofspecialized
specializedequipment
equipment

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Economies
Economies and
and Diseconomies
Diseconomies of
of Work
Work
Specialization
Specialization

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E X H I B I T 162
E X H I B I T 162

What
What Is
Is Organizational
Organizational Structure?
Structure? (contd)
(contd)
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? (contd)
(contd)
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
he or Hall
she is directly responsible.
whom
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What
What Is
Is Organizational
Organizational Structure?
Structure? (contd)
(contd)
Span of 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
employee autonomy.
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Contrasting
Contrasting Spans
Spans of
of Control
Control

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E X H I B I T 163
E X H I B I T 163

What
What Is
Is Organizational
Organizational Structure?
Structure? (contd)
(contd)
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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Source: S. Adams, Dogberts Big Book of Business, DILBERT

reprinted by permission of United Features Syndicate, Inc.

E X H I B I T 164
E X H I B I T 164

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.
AASimple
SimpleStructure:
Structure:
Jack
JackGolds
GoldsMens
MensStore
Store

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E X H I B I T 165
E X H I B I T 165

Common
Common Organization
Organization Designs
Designs (contd)
(contd)
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
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of command.
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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

Common
Common Organization
Organization Designs
Designs (contd)
(contd)
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
theirweaknesses.
weaknesses.
++Facilitates
Facilitatescoordination
coordinationof
ofcomplex
complexand
and
interdependent
interdependentactivities.
activities.

Breaks
Breaksdown
downunity-of-command
unity-of-commandconcept.
concept.
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Matrix
MatrixStructure
Structure(College
(Collegeof
ofBusiness
BusinessAdministration)
Administration)

(Director)

(Dean)

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Employee

E X H I B I T 166
E X H I B I T 166

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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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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AAVirtual
Virtual Organization
Organization

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E X H I B I T 167
E X H I B I T 167

New
New Design
Design Options
Options (contd)
(contd)
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.

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Why
Why Do
Do Structures
Structures Differ?
Differ?
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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Mechanistic
Mechanistic Versus
Versus Organic
Organic Models
Models

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E X H I B I T 168
E X H I B I T 168

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
has Hall
already been proven.
viability
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The
The Strategy-Structure
Strategy-Structure Relationship
Relationship
Strategy

Structural Option

Innovation

Organic: A loose structure; low

specialization, low formalization,
decentralized

Cost minimization

Mechanistic: Tight control; extensive

work specialization, high formalization,
high centralization

Imitation

Mechanistic and organic: Mix of

loose with tight properties; tight
controls over current activities and
looser controls for new undertakings

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E X H I B I T 169
E X H I B I T 169

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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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
with
delegated
delegateddecision
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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The
The Three
Three Dimensional
Dimensional Model
Model of
of the
the
Environment
Environment
Volatility
Capacity

Complexity

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E X H I B I T 1610
E X H I B I T 1610

Bureaucracy
Bureaucracy Is
Is Dead
Dead
Characteristics of
Bureaucracies
Specialization
Formalization
Departmentalization
Centralization
Narrow spans of
control
Adherence to a chain
of command

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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

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.

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Organization
Organization Structure:
Structure: Its
Its Determinants
Determinants and
and
Outcomes
Outcomes
Associated
with

Implicit Models of
Organizational Structure
Perceptions that people hold
regarding structural variables
formed by observing things
around them in an unscientific
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E X H I B I T 1611
E X H I B I T 1611

Chapter Check-Up: Structure

What kind of structure might
someone who has a low
tolerance for ambiguity feel most
comfortable in?
Bureaucratic
Organic
Matrix
Virtual

Discuss with your neighbor why a virtual organization

would not make this same person feel comfortable.
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Chapter Check-Up: Structure

If someone has a high need for
affiliation, would a virtual organization be
a good fit for him or her? Why or why
not?

Discuss with a classmate whether or not an organic organization

would be a good fit for this same person.

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Chapter Check-Up: Structure

With which type of structure do you
think trust is most necessary?
Why? Are the substitutes for trust
that are potentially built into some
structures? If so, which ones?

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