Part 3: Organizing

Basic Organization Designs

LEARNING OUTCOMES After reading this chapter, I will be able to:
1. Identify and define the six elements of organization structure. 2. Describe the advantages and disadvantages of work specialization. 3. Contrast authority and power. 4. Identify the five different ways by which management can departmentalize. 5. Contrast mechanistic and organic organizations. 6. Summarize the effect of strategy, size, technology, and environment on organization structures.
5±2

Explain what is meant by the term learning organization. 10. 8. 9.L E A R N I N G O U T C O M E S (cont¶d) After reading this chapter. Describe the boundaryless organization and what elements have contributed to its development. Describe what is meant by the term organization culture. I will be able to: 7. Contrast the divisional and functional structures. 11. Explain the strengths of the matrix structure. 5±3 .

Organization Design and Structure ‡ Organization design  A process in which managers develop or change their organization¶s structure ‡ Work specialization  A component of organization structure that involves having each discrete step of a job done by a different individual rather than having one individual do the whole job 5±4 .

Economies and Diseconomies of Work Specialization EXHIBIT 5.1 5±5 .

Organizational Structure: Control ‡ Chain of command  The management principle that no person should report to more than one boss ‡ Span of control  The number of subordinates a manager can direct efficiently and effectively 5±6 .

Organizational Structure: Control (cont¶d) ‡ Authority  The rights inherent in a managerial position to give orders and expect them to be obeyed ‡ Power  An individual¶s capacity to influence decisions ‡ Responsibility  An obligation to perform assigned activities 5±7 .

. assist. organization policy enforcement) but that are created to support. and advise the holders of line authority 5±8 .g.Types of Organizational Authority ‡ Line authority  The position authority (given and defined by the organization) that entitles a manager to direct the work of operative employees ‡ Staff authority  Positions that have some authority (e.

2 5±9 .Chain of Command EXHIBIT 5.

Line Versus Staff Authority EXHIBIT 5.3 5±10 .

4a 5±11 .Authority Versus Power EXHIBIT 5.

Authority Versus Power (cont¶d) EXHIBIT 5.4b 5±12 .

the higher the level at which decisions are made ‡ Decentralization  The pushing down of decision-making authority to the lowest levels of an organization 5±13 . the more centralized an organization.Centralization And Decentralization ‡ Centralization  A function of how much decision-making authority is pushed down to lower levels in an organization.

or knowledge. Power based on the ability to distribute something that others value. Expert power Referent power Power based on one¶s expertise.5 5±14 . EXHIBIT 5. special skill.Types of Power Coercive power Reward power Power based on fear. Legitimate power Power based on one¶s position in the formal hierarchy. Power based on identification with a person who has desirable resources or personal traits.

Types of Departmentalization Functional Product Customer Geographic Process EXHIBIT 5 .6 5±15 .

Departmentalization ‡ Functional departmentalization  The grouping of activities by functions performed ‡ Product departmentalization  The grouping of activities by product produced ‡ Customer departmentalization  The grouping of activities by common customers ‡ Geographic departmentalization  The grouping of activities by territory ‡ Process departmentalization  The grouping of activities by work or customer flow 5±16 .

formalization. formalization.Mechanistic and Organic Organizations ‡ Mechanistic organization  The bureaucracy. a structure that is high in specialization. and centralization Structure follows strategy 5±17 . and centralization ‡ Organic organization  An adhocracy. a structure that is low in specialization.

7 5±18 .Mechanistic versus Organic Organizations Rigid hierarchical relationships Fixed duties Many rules Formalized communication channels ‡ Centralized decision authority ‡ Taller structures ‡ ‡ ‡ ‡ ‡ Collaboration (both vertical and horizontal) ‡ Adaptable duties ‡ Few rules ‡ Informal communication ‡ Decentralized decision authority ‡ Flatter structures EXHIBIT 5.

Technology and Structure ‡ Unit production  Production in terms of units or small batches ‡ Mass production  Production in terms of large batch manufacturing ‡ Process production  Production in terms of continuous processing 5±19 .

Organization Design Applications ‡ Simple structure  An organization that is low in specialization and formalization but high in centralization ‡ Functional structure  An organization in which similar and related occupational specialties are grouped together ‡ Divisional structure  An organization made up of self-contained units 5±20 .

8 5±21 .Functional Structure EXHIBIT 5.

9 5±22 .Divisional Structure EXHIBIT 5.

Other Organizational Structures ‡ Matrix structure  An organization in which specialists from functional departments are assigned to work on one or more projects led by a project manager ‡ Team-based structure  An organization that consists entirely of work groups or teams ‡ Boundaryless organization  An organization that is not defined or limited by boundaries or categories imposed by traditional structures 5±23 .

10 5±24 .Sample Matrix Structure EXHIBIT 5.

 Organization design  Information sharing  Leadership  Organizational culture 5±25 .Learning Organization ‡ An organization that has developed the capacity to continuously adapt and change because all members take an active role in identifying and resolving work-related issues.

Lee. ³New Paradigm Organizations: From Total Quality to Learning to World Class.M. Senge. 1990). 4±19 EXHIBIT 5. Hodgetts. F. The Fifth Discipline: The Art and Practice of Learning Organizations (New York: Doubleday. M. M.Characteristics of a Learning Organization Source: Based on P. and R.11 5±26 . Luthans and S.´ Organizational Dynamics (Winter 1994) pp.

to a large degree. how employees act  Shared values are shown in cultural elements:  Stories. and language unique to the organization  Results from the interaction between:  The founders¶ biases and assumptions  What the first employees learn subsequently from their own experiences. material symbols. rituals.Organization Culture ‡ Organization culture  A system of shared meaning within an organization that determines. 5±27 .

Ten Characteristics of Organization Culture ‡ Member identity ‡ Group emphasis ‡ People focus ‡ Unit integration ‡ Control ‡ Risk tolerance ‡ Reward criteria ‡ Conflict tolerance ‡ Means-end orientation ‡ Open-systems focus EXHIBIT 5.12 5±28 .

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