Organizational Theory, Design, and Change

Sixth Edition Gareth R. Jones

Chapter 5
Designing Organizational Structure: Authority and Control
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Authority: How and Why Vertical Differentiation Occurs

The hierarchy begins to emerge when the organization experiences problems in coordinating and motivating employees Division of labor and specialization make it hard to determine how well an individual performs Almost impossible to assess individual contributions to performance when employees cooperate
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Authority: How and Why Vertical Differentiation Occurs (cont.)

To deal with coordination and motivation problems, the organization can: Increase the number of managers it uses to monitor, evaluate, and reward employees Increase the number of levels in its managerial hierarchy, thereby making the hierarchy of authority taller
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Authority: How and Why Vertical Differentiation Occurs (cont.)

Size and height limitations

Tall organization: an organization in which the hierarchy has many levels relative to the size of the organization Flat organization: an organization that has few levels in its hierarchy relative to its size

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Figure 5.1: Flat and Tall Organizations

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Authority: How and Why Vertical Differentiation Occurs (cont.)

By the time an organization has 1,000 members, it has 4 levels in its hierarchy At 3,000 members, it likely has 7 levels Between 10,000 to 100,000, organizations have 9 or 10 levels Increase in size of the managerial component is less than proportional to increase in size of the organization
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Figure 5.2: Relationship Between Organizational Size and Number of Hierarchical Levels

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Figure 5.3: Types of Managerial Hierarchies

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Figure 5.4: Relationship Between Organizational Size and the Size of the Managerial Component

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Authority: How and Why Vertical Differentiation Occurs (cont.)

Problems with tall hierarchies:

Communication problems: communication takes longer and is likely to be distorted Information may be manipulated to serve managers own interests Motivation problems: as hierarchy increases, the relative difference in the authority possessed managers at each level decreases, as does their area of responsibility Less responsibility and authority could reduce motivation Increased bureaucratic costs: managers cost money
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Authority: How and Why Vertical Differentiation Occurs (cont.)

Parkinsons Law Problem

Argues that the number of managers and hierarchies are based on two principles

A manager wants to multiply subordinates, not rivals Managers make work for one another

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Authority: How and Why Vertical Differentiation Occurs (cont.)

Ideal number of hierarchical levels determined by:

Principle of minimum chain of command: an organization should choose the minimum number of hierarchical levels consistent with its goals and the environment in which it operates Span of control: the number of subordinates a manager directly manages

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Figure 5.5: Spans of Control

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Authority: How and Why Vertical Differentiation Occurs (cont.)

Factors that determine the appropriate span of control

There seems to be a limit to how wide a managers span of control should be Dependent on the complexity and interrelatedness of the subordinates tasks

Complex and dissimilar tasks small span of control Routine and similar tasks (e.g., mass production) large span of control

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Figure 5.6: The Increasing Complexity of a Managers Job as the Span of Control Increases

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Figure 5.7: Factors Affecting the Shape of the Hierarchy

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Control: Factors Affecting the Shape of the Hierarchy

Horizontal differentiation: an organization that is divided into subunits has many different hierarchies, not just one

Each function or division has its own hierarchy

Horizontal differentiation is the principal way an organization retains control over employees without increasing the number of hierarchical levels
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Figure 5.8: Horizontal Differentiation into Functional Hierarchies

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Figure 5.9: Horizontal Differentiation Within the R&D Functions

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Control: Factors Affecting the Shape of the Hierarchy (cont.)

Centralization: with decentralization, less direct managerial supervision is needed

Authority is delegated to the lower levels Decentralization does not eliminate the need for many hierarchical levels in large, complex organizations

Assists relatively tall structures to be more flexible and reduces the amount of direct supervision needed
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Control: Factors Affecting the Shape of the Hierarchy (cont.)

Standardization: reduces the need for levels of management because rules substitute for direct supervision
Gain control over employees by making their behavior and actions more predictable

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The Principles of Bureaucracy

Max Weber designed a hierarchy so that it effectively allocates decisionmaking authority and control over resources Bureaucracy: a form of organizational structure in which people can be held accountable for their actions because they are required to act in accordance with rules and standard operating procedures
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Max Weber, German Sociologist

The purely bureaucratic form of administrative organization, that is the monocratic variety of bureaucracy, is, as regards the precision, constancy, stringency, and reliability of its operations, superior to all other forms of administrative organization.

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The Principles of Bureaucracy

(cont.)
Principle one: a bureaucracy is founded on the concept of rationallegal authority

Rational-legal authority: the authority a person possesses because of his or her position in an organization Hierarchy should be based on the needs of the task, not on personal needs Peoples attitudes and beliefs play no part in how the bureaucracy operates
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The Principles of Bureaucracy

(cont.)
Principle two: Organizational roles are held on the basis of technical competence, not because of social status, kinship, or heredity Principles one and two establish the organizational role as the basic component of organization structure

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The Principles of Bureaucracy

(cont.)
Principle three: A roles task responsibility and decision-making authority and its relationship to other roles in the organization should be clearly specified

Role conflict: when two or more people have different views of what another person should do, and as a result, make conflicting demands on that person Role ambiguity: the uncertainty that occurs for a person whose tasks or authority are not clearly defined
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The Principles of Bureaucracy

(cont.)
Principle four: the organization of roles in a bureaucracy is such that each lower office in the hierarchy is under the control and supervision of a higher office

Organizations should be arranged hierarchically so that people can recognize the chain of command

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The Principles of Bureaucracy

(cont.)
Principle five: rules, standard operating procedures, and norms should be used to control the behavior and the relationships among roles in an organization

Rules and SOPs are written instructions that specify a series of actions intended to achieve a given end Norms are unwritten Rules, SOPs, and norms clarify peoples expectations and prevent misunderstanding
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The Principles of Bureaucracy

(cont.)
Principle six: administrative acts, decisions, and rules should be formulated and put in writing

Bureaucratic structure provides an organization with memory Organizational history cannot be altered

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Uniform Written Rules and Policies

Set by board and management. Rights and duties of employees and managers; who can give orders to whom. Limit arbitrary behavior. A structure with an obsession of control.
At every Holiday Inn, the best surprise is no surprise.

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When I was president of this big corporation, we lived in a small Ohio town, where the main plant was located. The corporation specified who you could socialize with, and on what level. (His wife interjects: Who were the wives you could play bridge with.) The presidents wife could do what she wants, as long as its with dignity and grace. In a small town they didnt have to keep check on you. Everybody knew. There are certain sets of rules.

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Obsession with control also explains the frequent proliferation of support staff. Purchasing staff services (e.g. law office, factory cafeteria) from outside suppliers exposes the bureaucracy to the uncertainties of the open market. So it makes rather than buys.

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Standardized Procedures

Govern how employees are to perform tasks.

You are not supposed to think. There are other people paid for thinking around here. Frederick Taylor
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Standardized Procedures (cont.)

When written down and stored as official documents, they increase the intelligence expressed in organizations by instituting a memory of lessons learned. Standardize actions to be learned where frequent employee turnover occurs.

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The Professional Career

Lifetime career of advancing to higher levels in the chain of command. Rising in ranks: Increase in power and status symbols. Lure of rising in hierarchy and security of professional career: Aid success of bureaucracy.
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Impersonal Relations
Role to role, not person to person. Holder of particular role expected to carry out its responsibilities in a rational and unemotional manner. Prevents feeling of friendship/family/pity etc. get in the way of tough decisions and enforcing rules.
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Role of Managers

Handling the disturbances that arise among the highly specialized workers of the operating core. By virtue of their design, Machine Bureaucracies are structures ridden with conflict; the control systems are required to contain it.
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Ya know, nothing happens in this place until we produce something. Production executive Wrong, nothing happens until we design something! R&D manager What are you talking about? Nothing happens here until we sell something! Marketing executive It doesnt matter what you produce, design or sell. No one knows what happens until we tally up the results! Accounting manager
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Advantages of Bureaucracy
It lays out the ground rules for designing an organizational hierarchy that efficiently controls interactions between organizational members Each persons role in the organization is clearly spelled out and they can be held accountable Written rules regarding the reward and punishment of employees reduce the costs of enforcement and evaluating employee performance It separates the position from the person It provides people with the opportunity to develop their skills and pass them on their successors
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The Problems of Bureaucracy

Managers fail to properly control the development of the organizational hierarchy Organizational members come to rely too much on rules and standard operating procedures (SOPs) to make decisions Such overreliance makes them unresponsive to the needs of customers and other stakeholders

Slow response to changing customer tastes, foreign competition, technological innovation, etc.
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Chuang-tzu, Chinese Sage, 4th century B.C.

As Tzu-gung was travelling through the regions north of river Han, he saw an old man working in his vegetable garden. He had dug an irrigation ditch. The man would descend into the well, fetch up a vessel of water in his arms, and pour it out into the ditch. While his efforts were tremendous, the results appeared to be very meager. Tzu-gung said, There is a way whereby you can irrigate a hundred ditches in one day, and whereby you can do much with little effort. Would you not like to hear of it?
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Then the gardener stood up, looked at him, and said, And what would that be? Tzu-gung replied, You take a wooden lever, weighted at the back and light in front. In this way you can bring up water so quickly that it just gushes out. This is called a draw-well. Then anger rose up in the old mans face, and he said, I have heard my teacher say that whoever uses machines does all his work like a machine. He
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who does his work like a machine grows a heart like a machine, and he who carries the heart of a machine loses his simplicity. He who loses his simplicity becomes unsure in the strivings of his soul. Uncertainty in the striving of the soul is something which does not agree with honest sense. It is not that I do not know of such things; I am ashamed to use them.

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Bureaupathic Pathologies
Bureaupathic behaviour: Tendency of
employees to become more interested in the rules and their enforcement than in their purposes and goals of the organization.

Bureautic behaviour: Seen in large

bureaucracies. Frustrated employees, bottled up by high formalization, resort to sabotage, absenteeism, etc. to express their alienation and powerlessness.

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Bureaupathic Pathologies (cont.)

Groupthink: Tendency of groups or organizations
for people to go along with the suggestions or directives of a dominant elite, even if they have doubts about them.

Lack of personal growth: Large organizations

treat people like children, reducing opportunities for personal growth and maturity.

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Bureaupathic Pathologies (cont.)

Failure to acknowledge the informal organization: The bureaucracy disregards the
influence of the informal power system, e.g. coffee room, gossip mill, grapevine.

Outdated systems of control and authority:

Formal authority is obsolete in relation to knowledge workers, who may know more about how to do a job than their bosses. lose strategies in bureaucracies lead to dysfunction.
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Poor conflict resolution technology: Win-

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Bureaupathic Pathologies (cont.)

Distorted communications: Upward,
downward, horizontal communications are distorted to achieve goals important to senders. Mistrust, fear of reprisals: Common wherever people are preoccupied with selfsafety strategies and staying within their job descriptions. E.g. Its not my job to worry about that, Im

here to do what Im told, Thats his responsibility, not mine.

Organization man syndrome: Tendency

to marry the organization, getting ones personal rewards there and becoming dependent on the bureaucracy and rewards its dispenses.
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Conditions of the Bureaucracy

Found in environments that are simple and stable.
Typically found in the mature organization, large enough to have the volume of operating work needed for repetition and standardization, and old enough to have been able to settle on the standards it wishes to use.
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The Influence of the Informal Organization

Decision making and coordination frequently take place outside the formally designed channels as people interact Rules and norms sometimes emerge from the interaction of people and not from the formal rules blueprint Managers need to consider the informal structure when they make changes as it may disrupt informal norms that work Informal organization can actually enhance organizational performance
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Charles Handy, The Age of Unreason

The Shamrock Organization

Contingent workers: workers who are employed temporarily by an organization and who receive no indirect benefits such as health insurance or pensions
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