Spring 2007 Organization Structure 1

Organization Structure

Spring 2007 Organization Structure 2

Why Organizations Are Structured

• Organizing:• The deployment and structuring of organizational resources

to achieve organizational goals

• Dimensions• Specialization / division of labor

• Formal lines of authority

• Mechanisms for coordination

• Organization or structure is designed to:• Facilitate accomplishment of organizational goals

• Fit with technology and environment

Spring 2007 Organization Structure 3

Dimensions of Organization Structure

• Hierarchical• Vertical dimension• “...relative ranks in a manner similar to the organization

chart”

• Functional• Horizontal dimension• “...different types of work to be done”

• Inclusion or centrality• “...the degree to which any given person is nearer to or

farther from the central core of the organization”

Spring 2007 Organization Structure 4

Specialization / Division of Labor

• Adam Smith and the pins• Efficiency vs. effectiveness• Individuals perform well-defined tasks

• Short training time• Individuals become expert• Individuals can perform tasks for which they are best

suited• Problems

• Lose sight of overall goal• Boredom, fatigue, stress• Lack of flexibility

Spring 2007 Organization Structure 5

Issues in Determining Division of Labor

• Nature of the work• Complexity of work• Task interdependency

• Organization• Goals (re-engineering)• Resources

• Employees• Abilities• Expectations

Spring 2007 Organization Structure 6

Authority and Responsibility

• Look back at Fayol, Weber• Chain of command

• Unity of command• Scalar principle

• Authority• The right to make decisions, issue orders and allocate

resources• Does it exist if not accepted?

• Responsibility• Accountability • Unity of authority and responsibility

• Delegation• Line and staff

Spring 2007 Organization Structure 7

Span of Control

• Tall vs. flat organizations• Nature of work

• Stability• Task similarity• Location

• Employees• Preferences• Skills

• Organization• Policies and procedures• Support for managers

Spring 2007 Organization Structure 8

Centralization vs. Decentralization

• Where are decisions made?

• Need for pooled resources

• Speed and flexibility (environmental uncertainty)

• Consistency

• Where is the knowledge?

• Who must implement decisions

Spring 2007 Organization Structure 9

Formalization

• Policies and procedures• Bureaucracy• Max Weber again

• Pro• Uniformity• Less uncertainty

• Con• Less flexibility

• Deciding• Nature of the work• Nature of the employees

Spring 2007 Organization Structure 10

TeamsFree flow of information

Wide spans of controlDecentralization

Low formalization

Organic

Mechanistic vs. Organic Structures

High specializationRigid departmentalizationClear chain of commandNarrow span of control

CentralizationHigh formalization

Mechanistic

Spring 2007 Organization Structure 11

Departmentalization

• Functional• Divisional

• Product• Customer• Geographical

• Matrix• Project teams

Spring 2007 Organization Structure 12

Functional Structures

• Pro:• Specialization

• Efficiency

• Career progress for employees

• High-quality problem solving

• Con:• Poor communication between functions

• May be too centralized

• Employees have limited perspective on total organization

• Where best used• Stable environment

• Single product

Spring 2007 Organization Structure 13

Functional Structure

VPSalesVP

Sales

VPManufacturing

VPManufacturing

VPFinance

VPFinance

CEOCEO

G/ LG/ L

TaxTax

BudgetBudget

Spring 2007 Organization Structure 14

Divisional

• Types• Product• Geographical• Customer

• Pro:• Speed and flexibility of

response• Cross-fertilization of ideas• Focus on product /

customer / area• Emphasis on

organizational goals

• Where best used• Uncertain environment• Diversified organization

• Con:• Resources duplicated

(inefficient)• Less coordination

between divisions• Competition for resources

Spring 2007 Organization Structure 15

Sample Divisional Structure

VPCereal

VPCereal

VPDetergent

VPDetergent

VPPaperVP

Paper

CEOCEO

TissueTissue

DiapersDiapers

TowelsTowels

Spring 2007 Organization Structure 16

ThyssenKrupp

Spring 2007 Organization Structure 17

Sara Lee Structure

Household Products

Headquarters

Food and Beverage

Intimates and Underwear

Spring 2007 Organization Structure 18

University of Tennessee SystemBoard ofTrustees

UT- Martin UT - KnoxvilleUT -

Chattanooga

Health Science Center at Memphis

Space Institute at Tullahoma

Institute of Agriculture

Institute for Public Service

Spring 2007 Organization Structure 19

Mixed Structure

VPAdmin

VPAdmin

VPManufacturing

VPManufacturing

VPSalesVP

Sales

CEOCEO

RetailRetail

WholesaleWholesale

InternationalInternational

Spring 2007 Organization Structure 20

Unilever Structure

Home & Personal Care

• Africa, Middle East & Turkey Bestfoods

• Ice Cream and Frozen Foods

• Latin America & Slim.fast worldwide

• Unilever Bestfoods Asia

• Unilever Bestfoods, Europe

• Unilever Bestfoods, North America

Unilever Bestfoods

• Africa, Middle East & Turkey Home

• Diverseyever

• Home and Personal Care, Asia

• Home & Personal Care, Europe

• Home & Personal Care, North America

• Latin America

Spring 2007 Organization Structure 21

Matrix

• Dual lines of authority• Examples• Pro:

• Combines advantages of functional and divisional structures

• Con:• Conflict may arise• Cost associated with grater need for coordination

• Where best used:• Extreme environmental pressure• Very large or geographically dispersed organizations

Spring 2007 Organization Structure 22

Organizing Work Processes

• Unit production

• Mass production

• Process production

Spring 2007 Organization Structure 23

Technology, Structure and Effectiveness

Characteristic Unit Mass Process Vertical Differentiation

Low Moderate High

Horizontal Differentiation

Low High Low

Formalization Low High Low

Structure Organic Mechanistic Organic