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1 Organization Structure and Design

1.1 What is organizing as a managerial responsibility?

Organizing is one of the management functions
Organizing arranges people and resources to work toward a goal
Organization charts describe the formal structures of organizations
Organization structure is a formal arrangement that links the various parts of an organization to one
Organization chart is a diagram of positions and reporting relationships within an organization

Division of labor - people and groups performing different jobs, ideally ones for which they are

Formal structure - the official structure, the way things are supposed to operate

See Table 8.1 for a full listing of what can be learned from an organization chart

Organizations also operate with important informal structures

Informal structure - a shadow organization made up of unofficial but often critical working
relationships between members.
Social network analysis identifies the informal structure by discovering who employees communicate
with and ask for help.
Informal structures have good points and bad points
Good points include employees assisting each other, providing emotional and social support, building
friendships and helping the organization adapt to change.
Bad points include eavesdropping, gossip, rumors, breeding resistance to change and providing
1.2 What are the most common types of organization structures?
Functional structures group together people using similar skills
Departmentalization division of labor whose parts are well coordinated
See Figure 8.2 for a depiction of typical functional structures
A functional structure groups people together into formal work units based on their similar skills and
performing similar tasks. Example: Marketing, Finance, Production and Human Resources.

Work well in smaller organizations and stable organizations

Sharing of expertise within departments
Functional chimneys (or functional silos) when performance suffers due to a lack of communication,
coordination, and problem solving across functions
Divisional structures group together people by products, customers, or locations
A divisional structure groups people together into formal work units based on their working on the
same product, in the same area, or with similar customers. Figure 8.3 illustrates the concept.

Product - groups jobs and activities devoted to a single product or service

Geographical - groups jobs and activities in the same location or region

Customer - groups jobs and activities that serve the same customers or clients

Matrix structures combine the functional and divisional structures

Sets up permanent teams that operate across functions to support specific products, projects, or
Workers belong to at least two formal groups (a functional and a project group) and have two bosses
See Figure 8.4 for a depiction of a matrix structure

Cross functional teams are teams whose members come together from different functional
departments, to work on a common task.
Team structures use many permanent and temporary teams
Team structures use permanent and temporary cross-functional teams to improve lateral relations and
solve problems, projects, and for day-to-day tasks
See Figure 8.5 for a depiction of a team structure

Network structures extensively use strategic alliances and outsourcing

A network structure links a central core with networks of relationships with outside contractors and
partners that supply essential services
May lower costs, increase speed, and offers flexibility

A strategic alliance cooperation with other firms to pursue business activities of mutual interest

Outsourcing alliances contract to purchase important services from another organization

Supplier alliances link businesses in preferred supplier-customer relationships that guarantee

a smooth and timely flow of quality supplies among the partners

See Figure 8.6 for a depiction of a network structure

A virtual organization uses information technologies to operate a constantly shifting network of
1.3 What are the trends in organizational design?
Organizations are becoming flatter with fewer levels of management
Organizational design is the process of aligning the structure of the organization to best accomplish the
organizational mission and respond to the challenges of the external environment.
Span of control is the number of people reporting to an individual manager.

Narrow - managers supervise a small number of people

Wide - managers supervise a larger number of people

Flatter organizational structures mean span of control is wider

Inset illustrates the concept

Organizations are increasing decentralization

Centralization - top management keeps strong control over decision-making
Decentralization - top management allows decision-making responsibility to be distributed throughout
the organization to those who are best qualified.
Technology makes it easier for top management to decentralize much decision-making responsibility yet
stay informed about day-to-day performance results.
Organizations are increasing delegation and empowerment
Delegation is the process of entrusting work to others by giving them the right to make decisions and
take action; involves deciding what work you should do yourself and what work you should allow others
to accomplish
Steps in delegation

Assign responsibility

Grant authority

Create accountability

Empowerment is the process of giving people the freedom to contribute ideas, make decisions, show
initiative, and to do their jobs in the best possible ways
Organizations are becoming more horizontal and adaptive
A bureaucracy emphasizes formal authority, rules, order, fairness, and efficiency
Mechanistic designs are bureaucratic, using a centralized and vertical structure
Organic designs are adaptable using a decentralized and horizontal structure
Based on work of Burns and Stalker
Figure 8.7 depicts these two approaches

Organizations are using more alternative work schedules

Compressed workweek - full time work is completed in less than five days. For example, a 4-10 work
week means that employees work four 10-hour days and have an extra day off each week. Other
compressed schedules are spread over two weeks.
Flexible working hours or flextime offer employees a choice of starting and ending times each day, while
still working an entire work day.
Job sharing - splits one job between two or more people
Telecommuting - using technology like the internet and videoconferencing to work outside the office