Professional Documents
Culture Documents
BY
Muhamma
d Hashim
Khan
ORGANIZATIONAL
STRUCTURE
AND DESIGN
McGraw-Hill/Irwin © 2005 The McGraw-Hill Companies, Inc. All rights rese
16-2
Organizational Structure and Design
Organizational Structure
Organizational structure is the Key
KeyElements:
Elements:
formal arrangement of jobs within • • Work
an organization. Workspecialization
specialization
• • Departmentalization
Departmentalization
• • Chain
Chainof
ofcommand
command
• • Span
Spanof
ofcontrol
control
Organizational Design
• • Centralization
Centralizationand
and
When an organizational
structure is under the process decentralization
decentralization
of development or any change • • Formalization
that is called an organizational Formalization
design.
Chief
Executive Legal
Officer counsel
President
Departmentalization
Departmentalization Bases
Functional Geographic
Process
Product Customer
Functional Departmentalization
• Jobs are combined according to the functions of the
organization by placing employees with shared skills and
knowledge into departments.
• Advantage is efficiency
• A major disadvantage is that organizational goals.
Product Departmentalization
• Tasks can also be grouped according to a specific product
or service. The process of grouping activities by product line.
.
Department
Stores
Geographic Departmentalization
• If the customers of an organization are geographically dispersed, It can group
jobs geographically. It can be defined as grouping jobs on the basis of
territory or geography.
Process Departmentalization
• Each process requires different skills there fore process
departmentalization allows homogenous activities to be
categorized. Process departmentalization can be defined as
grouping jobs on the basis of product/service or customer flows.
Hospital
Customer Departmentalization
• Jobs may be grouped according to the type of customers served by an
organization. Hence customer departmentalization can be defined as
grouping jobs according to the common customers or the types of customers
served by an organization.
• Example: The sales activities of a supply firm can be broken down into three
departments that serve retail, wholesale and government accounts.
(cont’d)
• 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 who.
10–12
• 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.
• Unity of Command
• The concept that a person should have one boss and
should report only to that person.
Narrow
NarrowSpan
Span
Expense
Expenseof ofadditional
additional
layers
layersofofmanagement.
management.
• •Increased
Increasedcomplexity
complexityof
of
Wider vertical
verticalcommunication.
Widerspans
spansofof communication.
management increase
management increase • •Encouragement
Encouragementof ofoverly
overly
organizational
organizationalefficiency.
efficiency. tight
tightsupervision
supervisionand
and
discouragement
discouragement of of
employee
employeeautonomy.
autonomy.
Relatively wide
span of control
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16-17
Centralization
The degree to which decision
making is concentrated at a
single point in the organization.
Decentralization
The degree to which lower level
employees provide input or actually
make decisions.
Centralization vs.
Decentralization
Example:
Library
VS. Example:
McDonald's
Distributed throughout
Centralized organization
Uncertain
Certain
Centralization vs.
Centralization Decentralization
Advantages:
Decentralization
Allows important decisions to be made by top-level
Advantages:
It increases the work efficiency of lower level
managers who have an overall picture of the company’s employees
objectives. Allows decisions to be made by individuals
close to the problem.
Leaves the decision-making process to top management
rather than adding it as an additional responsibility to
employees who have routine job functions.
Disadvantages: Disadvantages:
top-level managers may not be aware of problems. Lower level managers’ goals not
corresponding to top management’s
Since information flows upward from top management goals
which minimizes the open lines of communication with
lower level managers,. Increases information costs and services can
become duplicated.
Formalization
• High Formalization
• Low Formalization
Mechanistic Organization.
• An organizational design that’s rigid and tightly controlled.
Organic Organization.
• An organizational design that’s tightly adaptive and flexible.
• Environmental Uncertainty
and Structure.
Simple Structure
• The simple structure is characterized by a low degree of
departmentalization, wide span of control, authority
centralized in a single person and little formalization.
Functional Structure
• Departmentalization around specialized activities such as
production, marketing, and human resources.
Divisional Structure
• Departmentalization that groups units around products,
customers, or geographic regions.
Simple Structure
Functional Organization
ADVANTAGES
• Chain of command leads to Functional Heads
• Expertise in specialized functions
• Resources are allocated by functions
• Centralization helps unify organizational efforts
DISADVANTAGES
• Coordination and integration Becomes difficult as Org
grow geographically
• Encourages functional specialization rather General
management skills
• Functional units may focus on their specialties rather than
organizational overall needs
Division structure
ADVANTAGES
• Effective coordination of activities within each division
• Decentralized and self contained in decision making of day
to day activities
• Encounter the environmental changes on timely manner
• Top manager are not overburdened with decisions about
divisional activities, so they can concentrate on strategic
planning
• Top manager can allocate the resources according the
divisional performance.
Divisional Organization
DISADVANTAGES
• Expense & inefficiency of duplicating resources for each
division.
• Difficulty of providing adequate staff assistance to support
the divisions when needed.
• Coordination btw the divisions is much more difficult then
coordination within each division
Comparison
Functional Structure
Divisional Structure
Matrix Organization
ADVANTAGES
• Strengthen the horizontal and vertical
coordination
• Frequent communication enhance
responsiveness
• Organization can use specialists when they
are needed in projects.
• Interactions with specialists help them to
enhance there skills E.g conceptual,
interpersonal, techinical
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16-36
Matrix structure
• DISADVANTAGES
• Two manager holding equal authority
• Employee may feel confused
• If managers and employees lack good interpersonal skills,
this design quickly become unworkable.
• Is the need to provide functional specialist to every
divisional project or department, which means employing
large pool of specialists.
Matrix Structure
• Permanent Matrix (Team Structure): An
organizational structure in which the entire
organization is made up of work groups or
teams.
• Temporary Matrix (Project Structure): An
organizational structure that assigns specialists
from different functional departments to work
on one or more projects.
1. Strategy
2. The environment
3. Technology
4. Organization Size
5. Organization Life Cycle
1. Strategy
As Org grows in vertical and horizontal direction
• Opening new offices
• Factories
• new operating technologies
• new functional skills
• New goals
• Define work specialization
• Assign responsibilities
Example
2. The Environment
• Resource dependence
• Environmental uncertainty
Example
Limited resources (Centralized structure)
Depending upon the level of uncertainty
managers can choose a mechanistic or
organic structure.
Mechanistic Structure
• Static environment
• Inflexible structure
• Centralized decision making
• Narrow work specialization
• Hierarchical delegation and communication
• Information flows upwards to top managers
• Mechanistic structure is most effective in static
environment
r
e
s
Organic Structure o
u
• Dynamic environment r
• Flexible environment c
e
• Decentralized decision making
s
s
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Mechanistic Vs Organic 16-45
Structure
Mechanistic Structure Organic Structure
• Role of each member is • Work is defined in terms of tasks
precisely defined in terms of needed to achieve goals, & tasks
rights, obligations, technical are continually adjusted
methods • The role of each member is
• Authority, control & loosely defined in terms of
communication are structured responsibility for task completion
hierarchically • Authority, control & communication
• Information flows vertically. are based on interest.
• Information flow vertically &
• Managers direct activities and
horizontally.
make decisions that
subordinates implement • Managers act as consultants,
offering information and advice to
employees.
3. Technology
• Technology covers both tangible and intangible elements
Woodwards research identified three broad categories of
technology
1. Unit and small-Batch Technology: A type of technology in
which products are custom produced to customer specifications
or produced in small quantities by skilled technicians e.g
Shirtmakers, helicopters manufacturers.
2. Mass-Production and large batch technology: A type of
technology in which products are manufactured in large
quantities, frequently on assembly line. E.g General motors,
Ford, Pepsi Cola.
3. Continuous-flow-process technology: A type of technology in
which products are manufactured through a continually linked
series of transformation processes e.g Chemicals, Mobil to
produce gasoline
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16-47
4. Organization Size
Small Organization
• Small org need few managers to coordinate
• Decision making is centralized
Large Organization
• As organization size increases , more employees and
managers are hired to perform specific tasks.
• More efforts to integrate
• Rules and regulations to guide decisions and activities
• To avoid decision making bottleneck decentralized decision
making is used.