Basic Organization Designs

BSM 12

ORGANIZING

The function of management that creates the organization’s structure

INTRODUCTION

Once decisions regarding corporate strategies are made, an effective structure must be put in place to allow achievement of those goals

When managers develop or change the organization’s structure, they are engaging in organization design.

Decisions must be made about how specialized jobs should be allocated, the rules to guide employee’s behaviours, and at what level decisions are to be made.

Organization design decisions are usually made by senior managers.

Organization design applies to any type of organization.

It is important to understand the process so we understand why we are grouped as we are.

The framework

for dividing,

assigning, and

coordinating

work

Developments in

or changes to

the structure of

an organization

OrganizationStructure

OrganizationDesign

Key Elements of Organization Structure

DepartmentalizationSpan of Control

WorkSpecialization

Chainof Command

Authority and Responsibility

Centralization vs. Decentralization

1. Work specialization jobs are broken down into a number of

steps and each step is completed by a separate individual• example: one person installs only

motherboards and/or hard disk drives in a computer assembly line

advantage: efficient use of diversity of skills that workers have

disadvantage: division of labour may cause boredom, fatigue or stress leading to low production, poor work quality, increased absenteeism and high staff turnover

2. Chain of command the principle that no person should

report to more than one boss

DistrictA

DistrictB

DistrictC

DistrictD

DistrictE

DistrictF

DistrictG

Region1

Region2

Region3

Region4

Region5

VicePresident

VicePresident

VicePresident

VicePresident

VicePresident

Chief ExecutiveOfficer

ExecutiveVice President

ExecutiveVice President

President

3. Span of control refers to the number of subordinates a

manager can direct efficiently and effectively

Factors that will influence how many:• level of management: top managers need a

smaller span than middle, etc.• the more training and experience employees

have, the less direct supervision they require• similarity of tasks, difficulty of tasks, how

close employees are physically, degree of standardization

4. Authority and responsibility

an obligation to perform assigned duties

no one should be held responsible for something over which he/she has no authority

the rights, that come with a managerial position, to give orders and expect them to be obeyed

related to one’s position--not the characteristics of the individual manager

Two forms of authority Line authority: the level of

authority that entitles a manager to direct the work of an employee • A line manager directs the work of

employees and makes certain decisions without consulting anyone

Staff authority: positions created to assist, support, and advise those holders of line authority

Authority vs Power

A right based on a position in an organization

An individual’s capacity to influence decisions

Example:

Administrative assistants (secretaries) are powerful in a company even though they have little authority. How and why?

How and why?

They are gatekeepers for bosses and can influence who bosses see and when.

They are relied up to pass information on to bosses and can control what they hear.

ExpertExpert LegitimateLegitimate

CoerciveCoercive

ReferentReferent RewardReward

PowerPower

Five sources of power1. Coercive power– based on fear2. Reward power– based on the ability to

distribute anything others may value3. Legitimate power – based on one’s

position in the formal hierarchy4. Expert power – based on one’s special

skills or knowledge5. Referent power – based on

identification with a person who has desirable resources or personal traits

5. Centralization vs decentralization

Centralization is a function of how much decision-making authority is pushed down to lower levels in an organization. The more centralized an organization is, the higher is the level at which decisions are made.

Decentralization is the pushing down of decision-making authority to the lowest levels of an organization

The Degree of Centralization

Higher

Em

plo

yee

Em

po

we

rme

nt

Centralization

Decentralization

HigherLower

To

p M

ana

gem

en

t C

on

tro

l

Lower

6. Departmentalization

Coordination of specialists together in departments under the direction of a manager as a result of work specialization

Five Ways to Departmentalize

Process

Functional

Customer

Product

Geographic

Grouping of activities by functions performed

Functional

Product

Grouping of activities by products produced

Customer or client

Grouping of activities by common customers

Geographic

Grouping of activities by territory or location

Process

Grouping of activities by work or customer flow

Contemporary View Most large organizations continue to use

most or all of the departmental groups• Example: Black and Decker

• Divisions are organized around function• Manufacturing around processes• Sales around geographic• Sales regions around customer groupings

80% of big firms are using teams There is no single ideal organization

structure

Line vs Staff Authority