Organizational Structure and Design

What Is Organizational Structure?

How job tasks are formally divided,

grouped and coordinated
Key Design Questions and Answers for Designing the Proper
Organization Structure
Work specialization

• Work specialization/Division of Labor

– The degree to which tasks in an organization are subdivided
into separate jobs
– Henry Ford- work specialization (produce a car every 10 sec)
– Pit stop
https://www.youtube.com/watch?v=aHSUp7msCIE
Departmentalization
•The basis by which jobs in an organization
are grouped together
• By product
• By function
• By geography
Chain of command
• The unbroken line of authority that extends from the top of the organization to
the lowest level and clarifies who reports to whom

• Span of control
• The number of subordinates a manager can efficiently
and effectively manage
• The trend has been toward wider spans of control
 Centralization and Decentralization
• Centralization: the degree to which decision making is concentrated at a single
point in an organization
• In a centralized organization, top managers make all the decisions
• In the decentralized decision making is pushed down to the managers pushed
down to the actions
• Formalization
• The degree to which jobs within the organization are standardized
• Highly formalized job has a minimum amount of discretion of what, when and
how to do it
Common organizational designs

•Simple structure
•Bureaucratic structure
•Matrix structure
Simple structure
• Low degree of departmentalization
• Wide spans of control
• It is a “flat” organization
• Authority centralized in a single person
• Little formalization
• practiced in small businesses in which the manager and
owner are one and the same
Bureaucratic structure
• Standardization- key concept that underlies all bureaucracies
• Highly routine operating tasks achieved through specialization
• Centralized authority
• Narrow spans of control
• Decision making that follows the chain of command
 Matrix structure
• Two forms of departmentalization: functional and

product, For E.g

• Advertising agencies

• Hospitals

• Universities
 New Design Options
• Virtual organization
• Also called the network or modular organization
• Highly centralized with little or no departmentalization
• E.g. movie making organization, on-line firms

• Boundary-less organization
• Coined by Jack Welch, former CEO of GE
• He wanted to eliminate vertical and horizontal boundaries
• To eliminate the chain of command
• Replace departments with empowered teams
Why do structures differ?
• Structures differ because of four major
aspects
– Strategy
– Organization size
– Technology
– Environment
 Strategy
• Structure is a means to achieve objectives
• Objectives derived from overall strategy
• Structure should follow strategy
• Innovation strategy: emphasizes the introduction of major new
products and services
• Cost-minimization strategy: emphasizes tight cost control
• Imitation strategy: outperform competitors by imitating competitors'
new product development and introduction into its own
Organization size
•More people in the organization
• More specialization
• More departmentalization
• More vertical levels
• More rules and regulations
Technology
• The way in which an organization transfers its inputs to outputs

• Environment
• Institutions or forces outside an organization that potentially affect the
organization’s performance