Chapter 6 – Organizational Structure and Design

Fundamentals of Management Essential

Concepts and Applications 9th Edition by
Robbins ISBN 013349991X 9780133499919
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CHAPTER ORGANIZATIONAL
6 STRUCTURE AND
DESIGN

LEARNING OUTCOMES
After reading this chapter students should be able to:
1. Describe 6 key elements in organizational design.
2. Identify the contingency factors that favor the mechanistic model or the organic model.
3. Compare and contrast traditional and contemporary organizational designs.
4. Discuss the design challenges faced by today’s organizations.

Management Myth
MYTH: Bureaucracies are inefficient.
TRUTH: Bureaucratic organizations are still alive and well and continue to dominate most
medium-sized and large organization.
SUMMARY

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This chapter discusses the key concepts and their components and how managers create a
structured environment where employees can work efficiently and effectively. Once the
organization’s goals, plans, and strategies are in place, managers must develop a structure that
will best facilitate the attainment of those goals.

I. WHAT ARE THE SIX KEY ELEMENTS IN ORGANIZATIONAL DESIGN?

Learning Catalytics Question: Instructor Directions and Follow-Up

Question Question Answer/Response For the Instructor

Type
Word What are the six Options: work Use this at the start of class to aid
Cloud key elements in specialization, students' recall of the six key elements of
organizational departmentalization, organizational design.
design? authority,
responsibility and
power, span of
control,
centralization and
decentralization,
and formalization

A. Introduction
1. Organization design decisions are typically made by senior managers.
2. Organization design applies to any type of organization.
3. Formulated by management writers such as Henri Fayol and Max Weber in the
early 1900s.
4. These principles still provide valuable insights into designing effective and
efficient organizations.

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B. What Is Work Specialization?

1. Work specialization is dividing work activities into separate jobs tasks.
a) Individuals specialize in doing part of an activity.
b) Work specialization makes efficient use of the diversity of skills that workers
hold.
2. Some tasks require highly developed skills; others lower skill levels.
3. Excessive work specialization or human diseconomies, can lead to boredom,
fatigue, stress, low productivity, poor quality, increased absenteeism, and high
turnover. (See Exhibit 6-1.)
4. Today's view is that specialization is an important organizing mechanism for
employee efficiency, but it is important to recognize the economies work
specialization can provide as well as its limitations.
C. What Is Departmentalization?
1. Departmentalization is when common work activities are grouped back together so
work gets done in a coordinated and integrated way.
2. There are five common forms of departmentalization (see Exhibit 6-2).
a) Functional Groups - employees based on work performed (e.g., engineering,
accounting, information systems, human resources)
b) Product Groups - employees based on major product areas in the corporation
(e.g., women’s footwear, men’s footwear, and apparel and accessories)

c) Customer Groups - employees based on customers’ problems and needs (e.g.,

wholesale, retail, government)

d) Geographic Groups - employees based on location served (e.g., North, South,

Midwest, East)

e) Process Groups - employees based on the basis of work or customer flow (e.g.,
testing, payment)
3. With today's focus on the customer, many companies are using cross-functional
teams, which are teams made up of individuals from various departments and that
cross traditional departmental lines.
D. What are Authority and Responsibility?
1. The chain of command is the continuous line of authority that extends from upper
organizational levels to the lowest and clarifies who reports to whom.
2. An employee who has to report to two or more bosses might have to cope with
conflicting demands or priorities.
3. Authority refers to the rights inherent in a managerial position, to give orders and
expect the orders to be obeyed.

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4. Each management position has specific inherent rights that incumbents acquire
from the position’s rank or title.
a) Authority is related to one’s position and ignores personal characteristics.
5. When managers delegate authority, they must allocate commensurate
responsibility.
a) When employees are given rights, they assume a corresponding obligation to
perform and should be held accountable for that performance.
b) Allocating authority without responsibility creates opportunities for abuse.
c) No one should be held responsible for something over which he or she has no
authority.
6. What are the different types of authority relationships?
a) The early management writers distinguished between two forms of authority.
(1) Line authority entitles a manager to direct the work of an employee.
(a) It is the employer-employee authority relationship that extends from
top to bottom.
(b) See Exhibit 6-3.
(c) A line manager has the right to direct the work of employees and make
certain decisions without consulting anyone.
(d) Sometimes the term “line” is used to differentiate line managers from
staff managers.
(e) Line emphasizes managers whose organizational function contributes
directly to the achievement of organizational objectives (e.g.,
production and sales).
(2) Staff managers have staff authority (e.g., human resources and payroll).
(a) A manager’s function is classified as line or staff based on the
organization’s objectives.
(b) As organizations get larger and more complex, line managers find that
they do not have the time, expertise, or resources to get their jobs done
effectively.
(c) They create staff authority functions to support, assist, advice, and
generally reduce some of their informational burdens.
(d) Exhibit 6-4 illustrates line and staff authority.
7. What is Unity of Command?
a) The chain of command is the continuous line of authority that extends from
upper organizational levels to the lowest and clarifies who reports to whom.
b) An employee who has to report to two or more bosses might have to cope with
conflicting demands or priorities.

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c) Therefore, the early management writers argued that an employee should have
only one superior (Unity of command).
d) If the chain of command had to be violated, early management writers always
explicitly designated that there be a clear separation of activities and a
supervisor responsible for each.
e) The unity of command concept was logical when organizations were
comparatively simple.
f) There are instances today when strict adherence to the unity of command
creates a degree of inflexibility that hinders an organization’s performance.
8. How does the contemporary view of authority and responsibility differ from the
historical view?
a) The early management writers assumed that the rights inherent in one’s formal
position in an organization were the sole source of influence.
b) This might have been true 30 or 60 years ago.
c) It is now recognized that you do not have to be a manager to have power, and
that power is not perfectly correlated with one’s level in the organization.
d) Authority is but one element in the larger concept of power.
9. How do authority and power differ?
a) Authority and power are frequently confused.
b) Authority is a right, the legitimacy of which is based on the authority figure’s
position in the organization.
(1) Authority goes with the job.
c) Power refers to an individual’s capacity to influence decisions.
(1) Authority is part of the larger concept of power.
(2) Exhibit 6-5 visually depicts the difference.
d) Power is a three-dimensional concept.
(1) It includes not only the functional and hierarchical dimensions but also
centrality.
(2) While authority is defined by one’s vertical position in the hierarchy, power is
made up of both one’s vertical position and one’s distance from the
organization’s power core, or center.
e) Think of the cone in Exhibit 6-5 as an organization.
(1) The closer you are to the power core, the more influence you have on
decisions.
(2) The existence of a power core is the only difference between A and B in
Exhibit 6-5.
f) The cone analogy explicitly acknowledges two facts:
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(1) The higher one moves in an organization (an increase in authority), the closer
one moves to the power core.
(2) It is not necessary to have authority in order to wield power because one can
move horizontally inward toward the power core without moving up.
(a) Example, administrative assistants, “powerful” as gatekeepers with
little authority.
(3) Low-ranking employees with contacts in high places might be close to the
power core.
(4) So, too, are employees with scarce and important skills.
(a) The lowly production engineer with twenty years of experience might
be the only one in the firm who knows the inner workings of all the old
production machinery.
g) Power can come from different areas.
(1) John French and Bertram Raven have identified five sources, or bases, of
power.
(a) See Exhibit 6-6.
(b) Coercive power -based on fear; Reward power - based on the ability to
distribute something that others value; Legitimate power - based on
one’s position in the formal hierarchy; Expert power - based on one’s
expertise, special skill, or knowledge; Referent power -based on
identification with a person who has desirable resources.
E. What is Span of Control?
1. How many employees can a manager efficiently and effectively direct?
2. This question received a great deal of attention from early management writers.
3. There was no consensus on a specific number but early writers favored small spans
of less than six to maintain close control.
4. Level in the organization is a contingency variable.
a) Top managers need a smaller span than do middle managers, and middle
managers require a smaller span than do supervisors.
5. There is some change in theories about effective spans of control.
6. Many organizations are increasing their spans of control.
7. The span of control is increasingly being determined by contingency variables.
a) The more training and experience employees have, the less direct supervision
needed.
8. Other contingency variables should also be considered; similarity of employee
tasks, the task complexity, the physical proximity of employees, the degree of
standardization, the sophistication of the organization’s management information

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system, the strength of the organization’s value system, the preferred managing
style of the manager, etc.

A Question of Ethics
A small percentage of companies are revealing to employees details about everything from
financials to staff performance reviews. Advocates of this approach say it is a good way to build
trust and allow employees to see how they are making contributions to the company. Critics say
open management can be expensive and time consuming. As work becomes more collaborative
the sharing of details may become inevitable.

Questions for students to consider:

• What ethical issues they see in the case?
• What are the implications for (a) managers and (b) employees?

F. How Do Centralization and Decentralization Differ?

1. Centralization is a function of how much decision-making authority is pushed
down to lower levels in the organization.
2. Centralization-decentralization is a degree phenomenon.
3. By that, we mean that no organization is completely centralized or completely
decentralized.
4. Early management writers felt that centralization in an organization depended on
the situation.
a) Their objective was the optimum and efficient use of employees.
b) Traditional organizations were structured in a pyramid, with power and
authority concentrated near the top of the organization.
c) Given this structure, historically, centralized decisions were the most
prominent.
5. Organizations today are more complex and are responding to dynamic changes.
a) Many managers believe that decisions need to be made by those closest to the
problem.
6. Today, managers often choose the amount of centralization or decentralization that
will allow them to best implement their decisions and achieve organizational goals.
7. One of the central themes of empowering employees was to delegate to them the
authority to make decisions on those things that affect their work.
a) That’s the issue of decentralization at work.
b) It doesn’t imply that senior management no longer makes decisions.
G. What is Formalization?
1. Formalization refers to how standardized an organization’s jobs are and the extent
to which employee behavior is guided by rules and procedures.

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2. Early management writers expected organizations to be fairly formalized, as

formalization went hand-in-hand with bureaucratic-style organizations.
3. Today, organizations rely less on strict rules and standardization to guide and
regulate employee behavior.

II. WHAT CONTINGENCY VARIABLES AFFECT STRUCTURAL CHOICE?

Learning Catalytics Question: Instructor Directions and Follow-Up

Question Question Answer/Response For the Instructor

Type
Region Families are There is no correct Use the structure of the college/university
organizations that answer. to explain how organizations function.
function best when
roles and
responsibilities are
clearly defined.
Was your family
more mechanistic
or organic?

A. Introduction
1. The most appropriate structure to use will depend on contingency factors.
2. The more popular contingency variables are strategy, size, technology, and
environment.
B. How Is a Mechanistic Organization Different from an Organic Organization?
1. Exhibit 6-7 describes two organizational forms.
2. The mechanistic organization (or bureaucracy) was the natural result of combining
the six elements of structure.
a) The chain-of-command principle ensured the existence of a formal hierarchy of
authority.
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b) Keeping the span of control small created tall, impersonal structures.

(1) Top management increasingly imposed rules and regulations.
c) The high degree of work specialization created simple, routine, and
standardized jobs.
d) Departmentalization increased impersonality and the need for multiple layers
of management.
3. The organic form is a highly adaptive form that is a direct contrast to the
mechanistic one.
a) The organic organization’s loose structure allows it to change rapidly as needs
require.
(1) Employees tend to be professionals who are technically proficient and trained
to handle diverse problems.
(2) They need very few formal rules and little direct supervision.
b) The organic organization is low in centralization.
4. When each of these two models is appropriate depends on several contingency
variables.
C. How Does Strategy Affect Structure?
1. An organization’s structure should facilitate goal achievement.
a) Strategy and structure should be closely linked.
b) Certain structural designs work best with different organizational strategies.
2. Accordingly, organizational structure should follow strategy. If management
makes a significant change in strategy, it needs to modify its structure as well.
D. How Does Size Affect Structure?
1. There is historical evidence that an organization’s size significantly affects its
structure.
2. Large organizations—employing 2,000 or more employees—tend to have more
work specialization, horizontal and vertical differentiation, and rules and
regulations than do small organizations.
3. The relationship is not linear; the impact of size becomes less important as an
organization expands.
a) Example, once an organization has around 2,000 employees, it is already fairly
mechanistic—an additional 500 employees will not have much effect.
b) Adding 500 employees to an organization that has only 300 members is likely
to result in a shift toward a more mechanistic structure.
E. How Does Technology Affect Structure?
1. Every organization uses some form of technology to convert its inputs into outputs.

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2. To attain its objectives, the organization uses equipment, materials, knowledge,

and experienced individuals and puts them together into certain types and patterns
of activities.
a) For example, your tablet or smartphone has a standardized assembly line.
b) For example, your resume is custom design and print.
c) For example, your bottle of Ibuprofen was manufactured using a continuous
flow production line by the pharmaceutical company.
From the Past to the Present
Joan Woodward (British scholar) found that distinct relationships exist between size of
production runs and the structure of the firm. The effectiveness of organizations was related to
“fit” between technology and structure. Most studies focused on the processes or methods that
transform inputs into outputs and how they differ by their degree of routine.
Three categories, representing three distinct technologies, had increasing levels of complexity
and sophistication. Unit production described the production of items in units or small batches.
Mass production described large batch manufacturing. The most technically complex group,
process production, included continuous-process production. The more routine the technology,
the more standardized and mechanistic the structure can be. Organizations with more non-
routine technology are more likely to have organic structures. See Exhibit 6-8.
Discuss This:
• Why is (a) mechanistic structure more appropriate for an organization with routine
technology and (b) organic structure more appropriate for an organization with
nonroutine technology?
• Does Woodward’s framework still apply to today’s organizations? Why or why not?
F. How Does Environment Affect Structure?
1. Mechanistic organizations are most effective in stable environments.
2. Organic organizations are best matched with dynamic and uncertain environments.
3. The environment-structure relationship is why so many managers have
restructured their organizations to be lean, fast, and flexible.

III. WHAT ARE SOME COMMON ORGANIZATIONAL DESIGNS?

A. The main designs are simple, functional and divisional.
1. See Exhibit 6-9.
B. What Is a Simple Structure?
1. Most organizations start as an entrepreneurial venture with a simple structure.
2. There is low departmentalization, wide spans of control, authority centralized in a
single person, and little formalization.
3. The simple structure is most widely used in smaller businesses.

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4. The strengths of the simple structure are that it is fast, flexible, and inexpensive to
maintain, and accountability is clear.
5. Major weaknesses.
a) It is effective only in small organizations.
b) It becomes increasingly inadequate as an organization grows; its few policies
or rules to guide operations and its high centralization result in information
overload at the top.
c) As size increases, decision making becomes slower and can eventually stop.
d) It is risky since everything depends on one person.
C. What is the functional structure?
1. Many organizations do not remain simple structures because structural
contingency factors dictate it.
2. As the number of employees rises, informal work rules of the simple structure give
way to more formal rules.
3. Rules and regulations are implemented; departments are created, and levels of
management are added to coordinate the activities of departmental people.
4. At this point, a bureaucracy is formed.
5. Two of the most popular bureaucratic design options are called the functional and
divisional structures.
6. Why do companies implement functional structures?
a) The functional structure merely expands the functional orientation.
b) The strength of the functional structure lies in work specialization.
(1) Economies of scale, minimizes duplication of personnel and equipment,
makes employees comfortable and satisfied.
c) The weakness of the functional structure is that the organization frequently
loses sight of its best interests in the pursuit of functional goals.
D. What is the divisional structure?

1. An organization design made up of self-contained units or divisions.

2. Health care giant Johnson & Johnson, for example, has three divisions:
pharmaceuticals, medical devices and diagnostics, and consumer products.
3. The chief advantage of the divisional structure is that it focuses on results.
a) Division managers have full responsibility for a product or service.
b) It also frees the headquarters from concern with day-to-day operating details.
4. The major disadvantage is duplication of activities and resources.
a) The duplication of functions increases the organization’s costs and reduces
efficiency.
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E. What Contemporary Organizational Designs Can Managers Use?

1. See Exhibit 6-10 for the three contemporary organization designs.
a) Team structure is when the entire organization consists of work groups or
teams.
b) Team members have the authority to make decisions that affect them, because
there is no rigid chain of command.
c) Companies such as Amazon, Boeing, Hewlett-Packard, Louis Vuitton,
Motorola, and Xerox extensively use employee teams to improve productivity.
d) In these teams, Employees must be trained to work on teams, receive cross-
functional skills training, and be compensated accordingly.
2. The matrix structure assigns specialists from different functional departments to
work on projects led by a project manager.
a) Exhibit 6-11 illustrates the matrix structure of a firm.
b) The unique characteristic of the matrix is that employees in this structure have
at least two bosses, a dual chain of command: their functional departmental
manager and their product or project managers.
c) Project managers have authority over the functional members who are part of
that manager’s team.
d) Authority is shared between the two managers.
(1) Typically, the project manager is given authority over project employees
relative to the project’s goals.
(2) Decisions such as promotions, salary recommendations, and annual reviews
remain the functional manager’s responsibility.
e) To work effectively, project, and functional managers must communicate and
coordinate.
f) The primary strength of the matrix is that it can facilitate coordination of a
multiple set of complex and interdependent projects while still retaining the
economies that result from keeping functional specialists grouped together.
g) The major disadvantages of the matrix are in the confusion it creates and its
propensity to foster power struggles.
3. Project structure - is when employees continuously work on projects.
a) Tends to be more flexible
b) The major advantages of that are that employees can be deployed rapidly to
respond to environmental changes, no ridged hierarchical structure to slow
down decision-making, managers serve as facilitators, mentors, and coaches to
eliminate or minimize organizational obstacles.
c) The two major disadvantages of the project structure are the complexity of
assigning people to projects and the inevitable task and personality conflicts
that arise.
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4. What is a boundaryless Organization?

a) A boundaryless organization, coined by former GE CEO, Jack Welch, is not
defined or limited by boundaries or categories imposed by traditional
structures.
b) It blurs the historical boundaries surrounding an organization by increasing its
interdependence with its environment.
c) There are two types of boundaries:
(1) Internal—the horizontal ones imposed by work specialization and
departmentalization and the vertical ones that separate employees into
organizational levels and hierarchies.
(2) External—the boundaries that separate the organization from its customers,
suppliers, and other stakeholders.
5. A virtual organization consists of a small core of full-time employees and outside
specialists temporarily hired as needed to work on projects.
6. A network organization - is one that uses its own employees to do some work
activities and networks of outside suppliers to provide other needed product
components or work processes. Also called a modular organization by
manufacturing firms.
Technology and the Manager’s Job - The Changing World of Work

It is almost cliché to say that technology has had a dramatic impact on how people work.
Mobile communication and technology has allowed organizations to stay connected. Hand-
held devices, cellular phones, webcams, etc. allow employees to work virtually. Information
technology continues to grow and become an integral part of the way business is conducted.
However, one challenges caused by some the high level of integrated technology is security.
Software and other disabling devices have helped in this arena and many companies are
developing creative applications for their workforce.
Discuss This:
• What benefits do you see with being able to do work anywhere, anytime? (Think in terms
of benefits for an organization and for its human resources.)
• What other issues, besides security, do you see with being able to do work anywhere,
anytime? (Again, think about this for an organization and for its employees.)

IV. WHAT ARE TODAY'S ORGANIZATIONAL DESIGN CHALLENGES?

A. How Do You Keep Employees Connected?

1. Choosing a design that will best support and facilitate employees doing their work
efficiently and effectively, creates challenges.
2. A major structural design challenge for managers is finding a way to keep widely
dispersed and mobile employees connected to the organization.

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B. How Do Global Differences Affect Organizational Structure?

1. Researchers have concluded that the structures and strategies of organizations

worldwide are similar, “while the behavior within them is maintaining its cultural
uniqueness.”
2. When designing or changing structure, managers may need to think about the
cultural implications of certain design elements, such as rules and bureaucratic
mechanisms.
C. How Do You Build a Learning Organization?

1. Building a learning organization is a mindset in which the learning organization

has developed the capacity to continuously adapt and change because all members
take an active role in identifying and resolving work-related issues.
2. Employees are practicing knowledge management.
a) Continually acquiring and sharing new knowledge.
b) Willing to apply that knowledge in making decisions or performing their work.
3. According to some organizational design theorists, an organization’s ability to
learn and to apply that learning may be the only sustainable source of competitive
advantage.
See Exhibit 6-12 for characteristics of a learning organization.
a) Members share information and collaborate on work activities throughout the
entire organization.
b) Minimize or eliminate existing structural and physical boundaries.
(1) Employees are free to work together and to collaborate.
(2) Teams tend to be an important feature of the structural design.
(3) Managers serve as facilitators, supporters, and advocates.
c) For a learning organization to "learn" information is shared openly, in a timely
manner, and as accurately as possible.
d) Leadership creates a shared vision for the organization’s future and keeps
organizational members working toward that vision.
(1) Leaders should support and encourage the collaborative environment.
e) A learning organization’s culture is one in which everyone agrees on a shared
vision and everyone recognizes the inherent interrelationships among the
organization’s processes, activities, functions, and external environment.
f) There is a strong sense of community, caring for each other, and trust.
(1) Employees feel free to openly communicate, share, experiment, and learn
without fear of criticism or punishment.
g) Organizational culture is an important aspect of being a learning organization.
A learning organization’s culture is one in which everyone agrees on a shared
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vision and everyone recognizes the inherent interrelationships among the

organization’s processes, activities, functions, and external environment.
D. How Can Managers Design Efficient and Effective Flexible Work Arrangements?

1. As organizations adapt their structural designs to fit a diverse workforce, growing

competition, customer demands and new technology, we see more of them adopting
flexible working arrangements.

2. Such arrangements not only exploit the power of technology, but give organizations
the flexibility to deploy employees when and where needed.

3. Telecommuting is a work arrangement in which employees work at home and are

linked to the workplace by their computer.

a) Telecommuting provides the company a way to grow without having to incur

any additional fixed costs such as office buildings, equipment, or parking lots.

b) Some companies view the arrangement as a way to combat high gas prices and
to attract talented employees who want more freedom and control.

c) Some managers are reluctant to have their employees become “laptop hobos”
wasting time surfing the Internet or playing online games instead of working.

d) Employees often express concerns about being isolated.

e) Managing the telecommuters then becomes a matter of keeping employees

feeling like they’re connected and engaged, a topic we delve into at the end of
the chapter as we look at today’s organizational design challenges.

4.Compressed workweek, which is a workweek where employees work longer hours

per day but fewer days per week.

a) Flextime (also known as flexible work hours), which is a scheduling system in

which employees are required to work a specific number of hours a week but
are free to vary those hours within certain limits.

b) Job sharing—the practice of having two or more people split a full-time job.

5. Contingent Workers are temporary, freelance, or contract workers whose

employment is contingent upon demand for their services.

a) As organizations eliminate full-time jobs through downsizing and other means

of organizational restructuring, they often rely on a contingent workforce to fill
in as needed.

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b) One of the main issues businesses face with their contingent workers,
especially those who are independent contractors or freelancers, is classifying
who actually qualifies as one.

REVIEW AND APPLICATIONS

CHAPTER SUMMARY
1 Describe six key elements in organizational design. The first element, work
specialization, refers to dividing work activities into separate job tasks. The
second, departmentalization, is how jobs are grouped together, which can be one
of five types: functional, product, customer, geographic, or process. The third—
authority, responsibility, and power—all have to do with getting work done in an
organization. Authority refers to the rights inherent in a managerial position to
give orders and expect those orders to be obeyed. Responsibility refers to the
obligation to perform when authority has been delegated. Power is the capacity of
an individual to influence decisions and is not the same as authority. The fourth,
span of control, refers to the number of employees a manager can efficiently and
effectively manage. The fifth, centralization and decentralization, deals with
where the majority of decisions are made—at upper organizational levels or
pushed down to lower-level managers. The sixth, formalization, describes how
standardized an organization’s jobs are and the extent to which employees’
behavior is guided by rules and procedures.
2 Identify the contingency factors that favor the mechanistic model or the
organic model. A mechanistic organizational design is quite bureaucratic
whereas an organic organizational design is more fluid and flexible. The strategy-
determines structure factor says that as organizational strategies move from single
product to product diversification, the structure will move from organic to
mechanistic. As an organization’s size increases, so does the need for a more
mechanistic structure. The more non-routine the technology, the more organic a
structure should be. Finally, stable environments are better matched with
mechanistic structures, but dynamic ones fit better with organic structures.
3 Compare and contrast traditional and contemporary organizational designs.
Traditional structural designs include simple, functional, and divisional. A simple
structure is one with low departmentalization, wide spans of control, authority
centralized in a single person, and little formalization. A functional structure is
one that groups similar or related occupational specialties together. A divisional
structure is one made up of separate business units or divisions. Contemporary
structural designs include team-based structures (the entire organization is made
up of work teams); matrix and project structures (where employees work on
projects for short periods of time or continuously); and boundaryless
organizations (where the structural design is free of imposed boundaries). A
boundaryless organization can either be a virtual or a network organization.
4 Discuss the design challenges faced by today’s organizations. One design
challenge lies in keeping employees connected, which can be accomplished
through using information technology. Another challenge is understanding the
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global differences that affect organizational structure. Although structures and

strategies of organizations worldwide are similar, the behavior within them
differs, which can influence certain design elements. Another challenge is
designing a structure around the mind-set of being a learning organization.
Finally, managers are looking for organizational designs with efficient and
effective flexible work arrangements. They’re using options such as
telecommuting, compressed workweeks, flextime, job sharing, and contingent
workers.

DISCUSSION QUESTIONS
6-1 Describe what is meant by the term organizational design.
Answer: Once decisions regarding corporate strategies are made, an effective structure must
be implemented to facilitate the attainment of those goals. When managers develop or change
the organization’s structure, they are engaging in organization design. Organization design
decisions are typically made by senior managers. Organization design applies to any type of
organization.
6-2 Discuss the traditional and contemporary views of each of the six key elements of
organizational design.

Answer: Traditionally, work specialization was viewed as a way to divide work activities
into separate job tasks. Today’s view is that it is an important organizing mechanism but it
can lead to problems. The chain of command and its companion concepts—authority,
responsibility, and unity of command—were viewed as important ways of maintaining
control in organizations. The contemporary view is that they are less relevant in today’s
organizations. The traditional view of span of control was that managers should directly
supervise no more than five to six individuals. The contemporary view is that the span of
control depends on the skills and abilities of the manager and the employees and on the
characteristics of the situation.

6-3 Can an organization’s structure be changed quickly? Why or why not? Should it be
changed quickly? Why or why not?
Answer: No, it takes time and a lot of planning and communication. Cultures usually evolve
based initially on the founder's values. Whether or not it should be changed quickly is
dependent upon the competition, its efficiency and success and its financial viability. A
boundaryless organization provides the flexibility and fluid structure that facilitates quick
movements to capitalize on opportunities. An organic structure versus a bureaucracy could
adapt more quickly to changes.
6-4 “An organization can have no structure.” Do you agree or disagree with this statement?
Explain.
Answer: A boundaryless or virtual organization is not without structure, structure is
minimized but not eliminated. There is always some degree of reporting relations, some type
of division of labor, some need for the management of processes, etc. Boundaryless
organizations are not merely flatter organizations. They attempt to eliminate vertical,
horizontal, and inter-organizational barriers.
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6-5 Contrast mechanistic and organic organizations.

Answer: A mechanistic organization is a rigid and tightly controlled structure. An organic

organization is highly adaptive and flexible. See Exhibit 6-7 for additional differences.

6-6 Explain the contingency factors that affect organizational design.

Answer: An organization’s structure should support the strategy. If the strategy changes the
structure also should change. An organization’s size can affect its structure up to a certain
point. Once an organization reaches a certain size (usually around 2,000 employees), it’s
fairly mechanistic. An organization’s technology can affect its structure. An organic structure
is most effective with unit production and process production technology. A mechanistic
structure is most effective with mass production technology. The more uncertain an
organization’s environment, the more it needs the flexibility of an organic design.

6-7 With the availability of advanced information technology that allows an organization’s
work to be done anywhere at any time, is organizing still an important managerial
function? Why or why not?

Answer: Although an organization’s work may be done anywhere at any time, organizing
remains a vital managerial function because the work that must be accomplished still must be
divided, grouped, and coordinated. Regardless of where employees work, there are basic
managerial functions that must be served, such as scheduling of work, setting goals, and
maintaining employee morale.

6-8 Researchers are now saying that efforts to simplify work tasks actually have negative
results for both companies and their employees. Do you agree? Why or why not?
Answer: Student responses may vary based on their respective opinion. Simplifying tasks
may result in monotony and boredom, even turnover. The 21st century workforce is smarter,
more independent, better educated and more trustworthy employees, so they will demand
more challenging work. They will work with more individual authority and less direct
supervision.
6-9 The boundaryless organization has the potential to create a major shift in the way we
work. Do you agree or disagree with this statement? Explain.

Answer: Students’ responses to this will vary with most students focusing on the topics of
flexibility at work. Some organizations that adopt a boundaryless design also implement
flextime and flexplace work arrangements for their employees. This question could serve as
an interesting springboard for a class debate. Students could break into teams, with each team
taking the opposite position in the debate. Give students an opportunity to discuss their
strategy as a team before presenting their viewpoints to the class.

6-10 Draw an organization chart of an organization with which you’re familiar (where
you work, a student organization to which you belong, your college or university, etc.).

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Be very careful in showing the departments (or groups) and especially be careful to get
the chain of command correct. Be prepared to share your chart with the class.
Answer: Student answers will depend on the organization that they choose.

Management Skill Builder: Increasing Your Power

One of the more difficult aspects of power is acquiring it. For managers, the more power they
have the more effective they are at influencing others. What can one do to develop power? In this
section students will learn about their power orientation in relation to Machiavellianism.
Students will also practice skills based on French and Raven’s Five Bases of power.
Teaching Tips:
Personal Insights
When most people hear the name Machiavelli they automatically associate it with
something negative. The Machiavellianism personality inventory is much the same way.
High-Machs are described as likely to manipulate more, win more, are persuaded less,
and persuade others more than do low-Machs. But historians emphasize that several of
Machiavelli’s ideas on leadership have been taken out of context, such as “it is better to
be feared, than loved.” When discussing this assessment with students ask if some of
these traits are necessary for management. Take for example, question 8, “There is no
excuse for lying to someone else.” Discuss with students if it is acceptable for managers
to not disclose the entire truth in certain situations.

Skill Basics
This section reviews seven sources of power.
• Coercive
• Reward
• Authority
• Information
• Expert
• Reward
• Charismatic

Skill Application
Margaret, like most employees, engaged in impression management to strengthen her
position and power base in the organization. By volunteering to undertake the project, she
is putting herself out in front of other employees in the hopes that this will give her added
leverage in the future. According to the case, Margaret has also increased her expert
power by becoming knowledgeable and taking addition training in areas important to the
organization. Is there anything she should have done differently? Most students will point
out that blaming the delay on someone else was not ethical (if it didn’t happen).
However, this is a common tactic in impression management so that employees will not
lose face. Be prepared for students to complain that there isn’t enough information
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regarding how she built a power base to evaluate her skill. Brainstorm with students what
things she should do, specifically in this type of business, to build a power base.
Skill Practice

6-20 What can you do to improve your Mach score? Create a specific one-year plan to
implement a program that will lead to an improved score.
6-21 Identify someone—a boss, coworker, friend, parent, sibling, significant other—
with whom you would like to increase your power. Determine what tactic(s) might work,
then cautiously practice your tactic(s).

Experiential Exercise
Ontario Electronics Ltd.
To: Claude Fortier, Special Assistant to the President
From: Ian Campbell, President
Subject: Learning Organizations
It is important for organizations to be responsive to customer and marketplace needs. One of
the approaches discussed is becoming a learning organization. Recent information convinced
him that his company’s future may well depend on how well we’re able to “learn.”
Ian would like you to find some current information on learning organizations.
Teaching Tip: There are two good books that I would suggest for student:
1. Senge, P.M. 1990. The Fifth Discipline. London: Century Business
2. Argyris, C. 1999. On Organizational Learning. 2nd Ed. Oxford: Blackwell
Publishing
Students should also be encouraged to use their library’s on-line database to search
articles for the learning organization. Students may find summaries of Senge’s ideas on
some internet sites of companies that specialize in organizational development

Case Application 1: A New Kind of Structure

Discussion Questions

6-22 Describe and evaluate what Pfizer is doing with its PfizerWorks.

Pfizer has outsourced menial tasks to another company allowing employees to focus on
the most important parts of their job. According to the case this seems to be working
great and Pfizer employees are pleased with the outcomes.

6-23 What structural implications – good and bad – does this approach have? (Think
in terms of the six organizational design elements.)

Work specialization – the case clearly shows how the outsourcing of menial tasks is
allowing employees to focus more on the specific jobs they were hired to do that they
have expertise in rather than spending time on less important tasks.
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Departmentalization – Does not really apply here.

Authority and responsibility – Authority does not seem to be altered in this case but the
responsibilities or each employee may be different now since they can shift some of the
work-load to the outsourcing firm.
Span of control – this may different because manager may be able to widen their span of
control with since they may have more time to focus on the support/management aspects
of their jobs as opposed to spending that time competing reports, etc.
Centralization/decentralization – the case seems to demonstrate some decentralization
where individual employees make decisions about what work they want to outsource or
not.
Formalization – The case describes evidence of low formalization because employees can
chose what work to outsource so they have more control of how and when work gets
done.

6-24 Do you think this arrangement would work for other types of organizations? Why
or why not? What types of organizations might it also work for?

Responses will vary across students but look for them to cite examples from the text in
their answer.

6-25 What role do you think organizational structure plays in an organization’s

efficiency and effectiveness? Explain.

Student’s answers may vary but one example might include the following: The structure
of an organization plays a large role in how efficient or effective a company is. Structure
dictates who does what, when and how they do their work and where the work goes once
it has left that employee. Structure determines the levels in an organization and how
communication flows through a company. If the structure is rigid with many levels then
communication may take more time to pass through all of the levels or vice versa.

Case Application 2: Volunteers Work

Discussion Questions

6-26 What do you think about using “volunteers” to do work that other people get paid
to do?

Opinions of using volunteers at work may vary, but it should be emphasized that many
companies regularly use volunteers to supplement their workforce. Who hasn’t heard of
volunteer firefighters? Some volunteers work because they feel attached to the cause or
goal of the organization (i.e. the Salvation Army Bell Ringers or volunteers at the SPCA),
and others may volunteer to learn a skill and build their resume (i.e. interns). Volunteers
sometimes receive benefits, which makes the idea of working for ‘free’ more palatable.
Volunteers may gain access to company resources (i.e. access to beta versions of
software).

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6-27 If you were in Mark Studness’s position, what would you be most concerned about
in this arrangement? How would you “manage” that concern?

Answers to this question should address control and conflict. With regard to control, the
following issues might arise: How do you make sure people show up for ‘work?’ What if
these volunteers make a mistake that puts the company at risk for a lawsuit? What if they
are rude to customers? With regard to conflict: How do employees feel about the
volunteers? How do the volunteers feel about the employees? Are there some equity
issues involved with regard to compensation or the lack there of? On managing
volunteers, control systems should be in place to assure the quality of their work. If
volunteers are unable to meet expectations then they can be removed, which may mean
losing the benefits cited in question 1.

6-28 How do these “volunteers” fit into an organization’s structure? Take each of the
six elements of organization design and discuss how each would affect this structural
approach.

Verizon’s volunteers are operating in a specific role for the organization and do not fit
into the traditional organizational structure. They have no power to manage other
employees and do not have decision making authority over organizational plans. For
specialization, it would be high, for departmentalization it would be product, for authority
and power it would be low, for span of control it would be zero, for decision making it
would be centralized, and for formalization it would be high.

6-29 Do you think this approach could work for other types of work being done or in
other types of organizations? Explain.
What make this situation unique is the Web-based structure and boundaryless nature of
Web forums. While managers may see the potential benefit of this program, the
technological challenges for personnel with the experience may be difficult.
As addressed in question 1, many organizations currently use volunteers. Get students to
think of other companies that use volunteers and examples where volunteers should not
be used.
Case Application 3: You Work Where?

Discussion Questions

6-30 Evaluate Yahoo!’s new work initiative. Did it have to be an “all or nothing”
proposition? Discuss.

Student’s answer will vary but one example might include something like the following.
Yahoo is in need to great change so the “all of nothing” proposition was probably a good
decision. It will help create and maintain a sense of community and support. Employees
can collaborate more effectively if they are working close to one another. Managers can
better follow-up on each employee’s work and their productivity from an office setting
than if the company is mostly working remotely.

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6-31 What can managers and organizations do to help employees who work from home
be efficient and effective?

Managers and organizations need to create clear work standards and a performance
review process that rewards key performance indicators. If employees know what the
rewards are based on then they are more likely to work hard to achieve them. Also,
managers need to check in with telecommuters regularly to make sure everything is going
well and that they are getting their work completed.

6-32 Take the three main concerns—productivity, innovation, and collaboration. From
the perspective of management, how do you think flexible arrangements stack up? How
about from the employee’s perspective?

If performance standards are clear then productivity should not be a problem. Innovation
and collaboration will not be as prevalent in a flexible work environment because people
will not see co-workers on a regular basis thus limiting new ideas and opportunities to
develop new things together. Form the employee’s perspective the same is probably true.
Employees may feel more isolated and that collaboration is not really an option.

6-33 Is “face-time” (that is, showing up atwork to be seen by your boss and others)
critical to one’s career? Discuss.

Responses from students will vary.

6-34 Is being able to work remotely important to you? Why or why not?

Responses from students will vary.

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