Organizational

Organizational Structure
Structure
What
What Is
Is Organizational
Organizational Structure?
Structure?

Organizational Structure
How job tasks are formally Key
KeyElements
Elements
divided, grouped, and Work
Workspecialization
specialization
coordinated
Departmentalization
Departmentalization
Unity
UnityofofCommand
Command
Span
Spanofofcontrol
control
Centralization
Centralizationand
and
decentralization
decentralization
Formalization
Formalization
Key
Key Design
Design Questions
Questions and
andAnswers
Answers for
for
Designing
Designing the
the Proper
Proper Organization
Organization Structure
Structure
The Key Question The Answer Is Provided
by
1. To what degree are articles Work specialization
subdivided into separate jobs?
2. On what basis will jobs be grouped Departmentalization
together?
3. To whom do individuals and groups Chain of command
report?
4. How many individuals can a manager Span of control
efficiently and effectively direct?
5. Where does decision-making Centralization
authority lie? and decentralization
6. To what degree will there be rules Formalization
and regulations to direct employees
and managers?
What
What Is
Is Organizational
Organizational Structure?
Structure?
(contd)
(contd)
Work Specialization
The degree to which work in the organization are
subdivided into separate jobs. Sub divided work leads to
specialization.
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
Process
Process
Product
Product
Customer
Customer
Geography
Geography
Example
Example 1:
1: Functional
Functional Departmentalization
Departmentalization
Example
Example3:
3:Divisional
DivisionalStructure:
Structure:Product
Productisisthe
theKey
KeyBasis
Basis
Example
Example3:
3:Divisional
DivisionalStructure:
Structure:Geography
Geographyisisthe
theBasis
Basis
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

Unity of Command
A subordinate should have only one superior to whom he
or she is directly responsible
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
spansofofmanagement
managementincrease
increaseorganizational
organizational
efficiency
efficiency

Narrow
NarrowSpan
SpanDrawbacks
Drawbacks
Expense
Expenseofofadditional
additionallayers
layersofofmanagement
management
Increased
Increasedcomplexity
complexityofofvertical
verticalcommunication
communication
Encouragement
Encouragementofofoverly
overlytight
tightsupervision
supervisionand
and
discouragement
discouragementofofemployee
employeeautonomy
autonomy
Narrow
Narrow vs.
vs. wider
wider span
span of
of control
control
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.
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 of command
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
advantagesofoffunctional
functionaland
andproduct
product
departmentalization
departmentalizationwhile
whileavoiding
avoidingtheir
theirweaknesses
weaknesses
++Facilitates
Facilitatescoordination
coordinationofofcomplex
complexand
and
interdependent
interdependentactivities
activities
Breaks
Breaksdown
downunity-of-command
unity-of-commandconcept
concept
Matrix
Matrix Structure
Structure
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
AA Virtual
Virtual Organization
Organization

E X H I B I T 167
E X H I B I T 167
Why
Why Do
Do Structures
Structures Differ?
Differ?
Mechanistic Model
A structure characterized by extensive
departmentalization, high formalization, a
limited information network, and
centralization
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
Mechanistic
Mechanistic versus
versus Organic
Organic Models
Models
Apple
Apple Computer,
Computer, Inc.:
Inc.: Business
Business Strategy
Strategy

The companies business strategy leverages its

unique ability, through the design and
development of its own operating system,
hardware, and many software application and
technologies, to bring to its customers new product
and solutions with superior ease-of-use, seamless
integration, and innovative industrial design. The
company believes in continual investment in
research and development is critical to facilitate
innovation of new and improved products and
technologies..
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
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
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
Characteristicsofoflarge
largeorganizations:
organizations:
More
Morespecialization
specialization
More
Morevertical
verticallevels
levels
More
Morerules
rulesand
andregulations
regulations
 Why
Why Do
Do Structures
Structures Differ?
Differ? Technology
Technology
Technology
How an organization transfers its
inputs into outputs

Characteristics
Characteristicsofofroutineness
routineness(standardized
(standardized
or
orcustomized)
customized)ininactivities:
activities:
Routine
Routinetechnologies
technologiesare
areassociated
associatedwith
withtall,
tall,
departmentalized
departmentalizedstructures
structuresand
andformalization
formalization
ininorganizations.
organizations.
Nonroutine
Nonroutinetechnologies
technologiesare
areassociated
associatedwith
with
delegated
delegateddecision
decisionauthority.
authority.
Why
Why Do
Do Structures
Structures Differ?
Differ? Environment
Environment
Environment
Institutions or forces outside the organization that
potentially affect the organizations performance
Chapter
Chapter Check-up:
Check-up: Structure
Structure

What kind of structure might someone who

has a low tolerance for ambiguity feel most
comfortable in?

Bureaucratic
Organic
Matrix
Virtual

2007 Prentice Hall Inc. All rights reserved.