Management Theory: Chapter 10

Organizational Structure

and Design

Learning Objectives

Explore the management task of “organizing” Understand organizational structure and

design– Elements of structure – Mechanistic vs. organic designs– Factors that influence organizational design– Common organizational designs– New organizational designs and ideas

Organizing

“Organizing” is the process of – creating an organization’s structure,– determining what tasks are to be done,– who is to do them, – how the tasks are to be grouped, – who reports to whom, and – where decisions are to be made

Organizational Structure

“The formal framework by which job tasks are divided, grouped, and coordinated.”– To allow employees to effectively and

efficiently do their work.

Elements of Organizational Structure

Specialization (separating) Departmentalization (grouping) Chain of command (authority) Span of control (coordination) Centralization/decentralization

(decision-making) Formalization (standardization)

Types of Departmentalization

functional product line process geography customer

Centralization vs Decentralization

Stable environment Experienced upper-

level management Significance of

decisions Large company Crisis or new

direction

Complex, uncertain environment

Capable lower-level managers

Minor decisions Inclusive culture Geographically

dispersed structure Involvement/flexibility

key to success

Organizational Chart

Diagram showing reporting relationships Shows how pieces of organization fit

together (visual “graph” of the structure) Often doesn’t reflect true authority

Factors that Influence Structural Design Choices

Strategy Culture Size Technology/nature of the work Skills & abilities of employees Degree of environmental uncertainty

Structure Types:Mechanistic Organic

Rigid, stable structure Standardized jobs &

regulations Rigid

departmentalization Narrow spans of control High formalization Centralized decisions Downward

communication

Adaptive, flexible structure

Jobs change frequently & rapidly

Jobs consist of diverse activities

Work often in teams Minimal formal rules Empowered employees Low level of direct

supervision

Simple Design

Low departmentalization Wide spans of control Centralized authority (one person) Informal Small or entrepreneurial businesses

Functional Design

Functional departmentalization applied to whole organization– R&D, manufacturing, sales & marketing,

finance, human resources Very common

Divisional Design

Separate, semi-autonomous business units

“Corporate” supplies some support services and financing

In some conglomerates, these are fully autonomous units

Hierarchical Design

Strict departmentalization– function, product, place or customer

Mechanistic/bureaucratic Centralized authority, strict chain of

command Follows traditional management

theories

Horizontal Design

Flattens the hierarchy Teams are primary building blocks Decentralized authority Small, strong, well-informed “center”

Team-Based Design

Structure based on teams, often self-managed

Employee-empowerment No clear line of authority/hierarchy Clear direction, goals are critical

Matrix Design Combines functional and

product/process/customer/place departmentalization

Uses cross-functional project teams Organic design:

– emphasis on integration of activities– breaks rule of “unity of command”

Decentralized decision-making Requires good communication skills

Project Design

Work designed completely around projects– “cross-functional” teams without the

“functions” No other hierarchy or structure Managers serve as coaches, mentors,

resource providers

Web (or Network) Design

Organization contracts out some or all operating functions

Maintains only core competencies internally

Coordinates activities through a centralized “hub”– Authority is centralized– Implementation is decentralized

Shamrock Design

Reflects three different types of employment relationships – the professional “core” of full-time,

permanent employees– contract workers/organizations– flexible labor force (part-time and

temporary workers)

New Ideas in Organizational Design

“Boundarylessness” Learning organizations

Issues

Constant restructuring Belief that there is a “right” structure

Summary

Defined management task of “organizing” Elements of structure Mechanistic vs. organic designs Factors that influence organizational

design Different organizational designs

– Basic concepts– Advantages and disadvantages