Management 13th Edition Daft Solutions Manual

Management 13th Edition Daft
Solutions Manual
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CHAPTER 10
DESIGNING ORGANIZATION STRUCTURE
CHAPTER OUTLINE
10-1. Organizing the Vertical Structure
10-1A. Division of Labor
10-1B. Chain of Command
10-1C. Span of Management
10-1D. Centralization and Decentralization
10-2. Departmentalization
10-2A. Vertical Functional Approach
10-2B. Divisional Approach
10-2C. Matrix Approach
10-2D. Team Approach
10-2E. Virtual Network Approach
10-3. Organizing for Horizontal Coordination
10-3A. The Need for Coordination
10-3B. Task Forces, Teams, and Project Management
10-3C. Relational Coordination
10-4. Factors Shaping Structure
10-4A. Structure Follows Strategy
10-4B. Structure Fits the Technology
ANNOTATED LEARNING OUTCOMES

After studying this chapter, students should be able to:
1. Discuss the fundamental characteristics of organizing and explain division of labor, chain
of command, span of management, and centralization versus decentralization.
Organizing is the deployment of organizational resources to achieve strategic goals. Organizing

is important because it follows the management function of planning. Planning and strategy
define what to do; organizing defines how to do it. Organization structure is a tool that managers
use to harness resources for getting things accomplished. The deployment of resources is
reflected in the organization's division of labor into specific departments and jobs, formal lines of
authority, and mechanisms for coordinating diverse organization tasks.
Division of labor, sometimes called work specialization, is the degree to which organizational
tasks are subdivided into separate jobs. When division of labor is extensive, employees
specialize in a single task. Jobs tend to be small, but they can be performed efficiently.
© 2018 Cengage. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part . 168
Designing Organization Structure • 169
The chain of command is an unbroken line of authority that links all employees in an
organization and shows who reports to whom.
The span of management is the number of employees reporting to a supervisor. Sometimes

called the span of control, this characteristic of structure determines how closely a supervisor can
monitor subordinates. The average span of control used in an organization determines whether
the structure is tall or flat. A tall structure has an overall narrow span and more hierarchical
levels. A flat structure has a wide span, is horizontally dispersed, and has fewer hierarchical
levels.
Centralization and decentralization pertain to the hierarchical level at which decisions are made.
Centralization means that decision authority is located near the top of the organization. With
decentralization, decision authority is pushed downward to lower organization levels.
2. Describe functional and divisional approaches to structure.
Functional structure is the grouping of positions into departments based on similar skills,
expertise, work activities, and resource use. A functional structure can be thought of as
departmentalization by organizational resources because each type of functional activity such as
accounting, human resources, engineering, and manufacturing, represent specific resources for
performing the organization's task. People and facilities representing a common organizational
resource are grouped together into a single department.
Divisional structure occurs when departments are grouped together based on similar
organizational outputs. In the divisional structure, divisions are created as self-contained units for
producing a single product. Each functional department resource needed to produce the product
is assigned to one division. In a functional structure, all engineers are grouped together and work
on all products whereas, in a divisional structure, separate engineering departments are
established within each division. Each department is smaller and focuses on a single product line.
Departments are duplicated across product lines.
3. Explain the matrix approach to structure and its application to both domestic and
international organizations.
The matrix structure combines aspects of functional and divisional structures simultaneously in
the same part of the organization. The matrix structure has dual lines of authority. The functional
hierarchy of authority runs vertically, and the divisional hierarchy of authority runs horizontally.
The matrix approach to structure provides a formal chain of command for both the functional
and divisional relationships. The matrix structure is typically used when the organization
experiences environmental pressure for both a strong functional departmentalization and a
divisional departmentalization. Global corporations often use the matrix structure. The problem
for global companies is to achieve simultaneous coordination of various products within each
country or region and for each product line. The two lines of authority typically are geographic
and product, and the matrix provides excellent simultaneous coordination.
© 2018 Cengage. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part .
170 • Chapter 10
4. Describe the contemporary team and virtual network structures and why they are being
adopted by organizations.
The implementation of team concepts has been a widespread trend in departmentalization. The
vertical chain of command is a powerful means of control, but moving decisions through the
hierarchy takes much time and keeps responsibility at the top. The trend is to delegate authority,
push responsibility to lower levels, and be more flexible and responsive in a competitive global
environment. Some organizations take the networking approach to the extreme to create a new
kind of structure. The virtual network structure means that the firm subcontracts most of its
major functions to separate companies and coordinates their activities from a small headquarters
organization. Networks allow a company to concentrate on what it does best and contract out
other activities to companies with distinctive competence in those area.
5. Explain why organizations need coordination across departments and hierarchical levels,
and describe mechanisms for achieving coordination.
As organizations grow and evolve, new positions and departments are added, and senior
managers have to find a way to tie all of these departments together. Coordination refers to the
managerial task of collaborating across departments. It is required whether there is a functional,
divisional, or team structure. It is required whether there is a functional, divisional, or team
structure. Coordination problems are amplified in the global arena, because units differ not only
by goals and work activities but by distance, time, culture, and language. Coordination is the
outcome of information and cooperation; managers can design systems and structures to promote
horizontal coordination. The vertical structure is flattened, with perhaps only a few senior
executives in traditional support functions such as finance or human resources. A task force is a
temporary team or committee designed to solve a short-term problem involving several
departments. Task force members represent their departments and share information that enables
coordination. Companies also set up cross-functional teams for coordination. Companies also use
project managers, responsible for coordinating the activities of several departments on a full-time
basis for the completion of a specific project. Reengineering is the radical redesign of business
processes to achieve dramatic improvements in cost, quality, service, and speed. Because the
focus of reengineering is on horizontal workflows rather than function, reengineering generally
leads to a shift away from a strong vertical structure.
6. Identify how structure can be used to achieve an organization’s strategic goals.
Structure depends on a variety of contingencies. The right structure is “designed to fit” the
contingency factors of strategy, environment, and technology. These three areas are changing for
organizations, creating a need for stronger horizontal coordination. Two strategies proposed by
Porter are differentiation and cost leadership; these strategies require different structural
approaches. The pure functional structure is appropriate for achieving internal efficiency goals.
The vertical functional structure uses task specialization and a strict chain of command. It does
not enable the organization to be flexible or innovative. Horizontal teams are appropriate when
the primary goal is innovation and flexibility. The firm can differentiate itself and respond
quickly to change. Other forms of structure represent intermediate steps on the firm’s path to
efficiency or innovation. The functional structure with cross-functional teams and project teams
provides greater coordination and flexibility than the pure functional structure. The divisional
structure promotes differentiation because each division can focus on specific products and
customers.
7. Define production technology and explain how it influences organization structure.
Technology includes the knowledge, tools, techniques, and activities used to transform
organizational inputs into outputs. Joan Woodward described three types of manufacturing
technology.
• Small-batch and unit production. Small-batch production firms produce goods in batches of
one or a few product products designed to customer specification. Examples include custom
clothing, special-order machine tools, space capsules, satellites, and submarines.
• Large-batch and mass production. Mass production technology is distinguished by
standardized production runs in which a large volume of products is produced and all
customers receive identical products. This technology makes greater use of machines than
does small-batch production. Examples include automobiles, tobacco products, and textiles.
• Continuous process production. In continuous process production, the entire workflow is
mechanized in a sophisticated and complex form of production technology. The process runs
continuously and therefore has no starting or stopping. Human operators are not part of
actual production because machinery does all the work. Examples include chemical plants,
distilleries, petroleum refineries, and nuclear power plants.
Service organizations include consulting companies, law firms, brokerage houses, airlines,
hotels, advertising companies, amusement parks, and educational organizations. Service
technology also characterizes departments such as legal, human resources, finance, and market
research in large corporations. Service technology involves the following:
• Intangible output. Services are perishable and, unlike physical products, cannot be stored in
inventory.
• Direct contact with customers. Employees and customers interact directly to provide and
purchase the service. Production and consumption are simultaneous.
LECTURE OUTLINE
SELF-ASSESSMENT: WHAT ARE YOUR LEADERSHIP BELIEFS?
The fit between a new manager and the organization is often based on personal beliefs
about the role of leaders. Things work best when organization design matches a new
manager’s beliefs about his or her leadership role. This graded assignment in MindTap
helps students identify whether their leadership beliefs are primarily position based or
nonhierarchical.
172 • Chapter 10
10-1. ORGANIZING THE VERTICAL STRUCTURE Exhibit 10.1
Organizing is the deployment of organizational resources to achieve strategic goals. It is

important because it follows from strategy. Strategy defines what to do, and organizing defines
how to do it. The organizing process leads to the creation of organization structure, which
defines how tasks are divided, resources are deployed, and departments are coordinated.
Organization structure refers to:

• the set of formal tasks assigned to individuals and departments;
• formal reporting relationships including lines of authority, decision responsibility,
number of hierarchical levels, and span of managers’ control; and
• design of systems to ensure effective coordination of employees across departments.
The organization chart is the visual representation of an organization's structure. It delineates

the chain of command, indicates departmental tasks and how they fit together, and provides order
and logic for the organization. There are several important features of the vertical structure
Teaching Tip: Use Exhibit 10.1 to discuss an organization chart. Ask students to create a simple organization
chart for the school, department, or a business where they worked.
10-1A. Division of Labor
1. A fundamental principle is that work can be performed more efficiently if employees are
allowed to specialize. Division of labor, sometimes called work specialization, is the
degree to which organizational tasks are subdivided into separate jobs. Production is
efficient because employees perform small, well-defined tasks.
2. Organizations are moving away from this principle because too much specialization leads
to employees being isolated and doing only a single boring job. Many companies are
enlarging jobs to provide greater challenges or assigning teams to tasks so employees can
rotate among the jobs performed by the team.
10-1B. Chain of Command
1. The chain of command is an unbroken line of authority that links all employees in an
organization and shows who reports to whom. It is associated with two underlying
principles. Unity of command means that each employee is held accountable to only one
supervisor. The scalar principle refers to a clearly defined line of authority in the
organization that includes all employees.
2. Authority, Responsibility, and Delegation
a. The chain of command illustrates the authority structure of the organization.

Authority is the formal and legitimate right of a manager to make decisions, issue
orders, and allocate resources to achieve organizationally desired outcomes.
Authority is distinguished by three characteristics.
• Authority is vested in organizational positions, not people. People in the same

position have the same authority because of the position they hold.
• Authority flows down the vertical hierarchy. Positions at the top have more
formal authority than those at the bottom.
• Authority is accepted by subordinates. The acceptance theory of authority argues
that a manager has authority only if subordinates choose to accept the commands.
b. Responsibility is the duty to perform the task or activity an employee has been
assigned. Managers are assigned the authority commensurate with responsibility.
Accountability is the mechanism through which authority and responsibility are
brought into alignment. Those with authority and responsibility are subject to
reporting and justifying task outcomes to those above them in the chain of command.
c. Delegation is another concept related to authority; it is the process managers use to

transfer authority and responsibility to positions below them in the hierarchy.
Organizations encourage managers to delegate authority to the lowest possible level
to gain flexibility to meet customer needs and adapt to the environment.
SELF-ASSESSMENT: WHAT KIND OF AUTHORITY DID YOUR PARENTS USE?
Expectations about authority for a new manager are often based on experiences with their
first authority figures and role models—Mom and Dad. This graded assignment in
MindTap helps students understand authority role models by thinking about each
statement as it applies to the parent or parents who made primary decisions about raising
them. .Authoritarian expectations fit in a traditional vertical structure with fixed rules and
a clear hierarchy of authority. Flexible authority expectations typically would fit with
horizontal organizing, such as managing teams, projects, and reengineering.
3. Line and Staff Authority
a. Line departments perform tasks that reflect the organization's primary goal and
mission. In a software company, line departments make and sell the product. Line
authority means that managers have formal authority to direct and control immediate
subordinates.
b. Staff departments include all those who provide specialized skills in support of line
departments. The finance department of software firm has staff authority. Staff
authority is narrower than line authority and includes the right to advise,
recommend, and counsel in the staff specialists' area of expertise.
10-1C. Span of Management Exhibit 10.2
1. The span of management, or span of control, is the number of employees reporting to a

supervisor. This characteristic of structure determines how closely a supervisor can
monitor subordinates.
174 • Chapter 10
2. Factors that determine the span of management include:
a. Work performed by subordinates is stable and routine.
b. Subordinates perform similar work tasks.
c. Subordinates are concentrated in a single location.
d. Subordinates are highly trained and need little direction in performing tasks.
e. Rules and procedures defining task activities are available.
f. Support systems and personnel are available for the manager.
g. Little time is required in nonsupervisory activities, such as coordination with other

departments or planning.
h. Managers’ personal preferences favor a large span.
3. The average span of control used in an organization determines whether the structure is
tall or flat. A tall structure has an overall narrow span and more hierarchical levels. A
flat structure has a wide span, is horizontally dispersed, and has fewer hierarchical
levels. The trend is toward wider spans of control as a way to facilitate delegation.
Teaching Tip: Use Exhibit 10.2 to compare tall and flat structures. Ask students to suggest advantages and
disadvantages of tall and flat structures.
10-1D. Centralization and Decentralization
Centralization and decentralization pertain to the hierarchical level at which decisions are
made. Centralization means that decision authority is located near the top of the
organization. With decentralization, decision authority is pushed down the chain of
command to lower organization levels. The trend is toward decentralization, which uses
workers' skills, relieves top managers, has well-informed people make decisions, and permit
rapid response. Factors that influence centralization versus decentralization include:
1. Greater change and uncertainty in the environment are usually associated with
decentralization.
2. The amount of centralization or decentralization should fit the firm’s strategy.
3. In times of crisis or risk of company failure, authority may be centralized at the top.
EOC Discussion Question #1: If you wanted to add a group of big data scientists to a large
organization such as PepsiCo, would you centralize the scientists in a central pool at
headquarters or decentralize them to separate divisions? Discuss your reasons.
EOC Discussion Question #8: Experts say that organizations are becoming increasingly
decentralized, with authority, decision-making responsibility, and accountability being pushed
farther down into the organization. How will this trend affect what will be asked of you as a new
manager?
10-2. DEPARTMENTALIZATION Exhibit 10.3
Departmentalization is the basis for grouping individuals into departments and departments
into the total organization. Managers make choices about how to use the chain of command to
group people together to perform their work. Five approaches to structural design reflect
different uses of the chain of command in departmentalization.
Teaching Tip: Use Exhibit 10.3 to compare the five approaches as you discuss each one.
10-2A. Vertical Functional Approach Exhibit 10.4
1. What It Is
Functional structure is the grouping of activities by common function from the bottom
to the top of the organization. Positions are grouped into departments based on similar
skills, expertise, work activities, and resource use. People, facilities, and other resources
representing a common function are grouped into a single department.
Teaching Tip: Use Exhibit 10.4 to discuss the functional structure.
2. How It Works
a. The major departments under the president are groupings of similar expertise and
resources, such as accounting, human resources, production, and marketing. Each of
the functional departments is concerned with the organization as a whole. The
functional structure is a strong vertical design. Information flows up and down the
vertical hierarchy, and the chain of command converges at the top of the organization.
b. People in a department communicate primarily with others in the same department to

coordinate work and accomplish tasks or implement decisions. Managers and
employees are compatible because of similar training and expertise.
3. Functional Advantages and Disadvantages
a. Advantages include enhanced development of in-depth skills, centralized decision

making, and unified direction from top managers.
b. Disadvantages include barriers across departments, slow response to environmental

changes, and delay in decisions that involve more than one department.
EOC Discussion Question #3: An organizational consultant said, “Some aspect of functional
structure appears in every organization.” Do you agree? Explain.
176 • Chapter 10
10-2B. Divisional Approach
1. What It Is
The divisional structure occurs when departments are grouped together based on similar
organizational outputs. Diverse departments are brought together to produce a single
organizational output. The divisional structure is sometimes called a product structure,
program structure, or self-contained unit structure. Most large corporations have separate
divisions that perform different tasks, use different technologies or serve different
customers.
Teaching Tip: Use Exhibit 10.4 to compare the divisional structure to the functional structure.
2. How It Works
a. Divisions are created as self-contained units with separate functional departments for
each division. For example, separate engineering departments are created within each
division, and each department is similar and focuses on a single product.
b. The primary difference between divisional and functional structures is that in

divisional structures, the chain of command from each function converges lower in
the hierarchy and differences of opinion would be resolved at the divisional level
rather than by the top executive.
3. Geographic- or Customer-Based Divisions Exhibit 10.5
Grouping company activities by geographic region or customer group is an alternative for

assigning divisional responsibility. In this structure, all functions in a specific country or
region report to the same division manager. The structure focuses company activities on
local market conditions; competitive advantage comes from the selling a product adapted
to a given country.
Teaching Tip: Use Exhibit 10.5 to discuss a geographic-based structure. Ask students to suggest the types of
businesses that might find a geographic- or customer-based division.
4. Divisional Advantages and Disadvantages
a. Advantages include flexibility, responsiveness to change, concern for customers’

needs, and coordination across functional departments.
b. Disadvantages include autonomous divisions going opposite ways, duplication of

resources, loss of efficiency, higher costs, and lack of specialization, expertise, and
training.
10-2C. Matrix Approach Exhibit 10.6

Exhibit 10.7
1. What It Is
The matrix approach combines aspects of both functional and divisional structures
simultaneously in the same part of the organization. The matrix has dual lines of
authority. The functional hierarchy of authority runs vertically, providing traditional
control within functional departments. The divisional hierarchy runs horizontally,
providing coordination across departments. The matrix structure supports a formal chain
of command for both the functional (vertical) and divisional (horizontal) relationships.
Teaching Tip: Use Exhibits 10.6 and 10.7 to discuss the matrix approach. Ask students to identify the
characteristics of functional and divisional structures.
2. How It Works
The dual lines of authority make the matrix structure unique. The success of the matrix
structure depends on the abilities of people in key matrix roles.
a. Two-boss employees report to two supervisors simultaneously and must resolve

conflicting demands from the matrix bosses.
b. The matrix boss is the product or functional boss who is responsible for one side of
the matrix.
c. The top leader oversees both the product and functional chains of command and is
responsible for the entire matrix.
3. Matrix Advantages and Disadvantages
a. Advantages include frequent meetings to raise and resolve issues and the efficient use
of HR.
b. Disadvantages include confusion and frustration caused by the dual chain of

command, conflict, rivalry, and time spent on meetings and discussions.
EOC Discussion Question #4: Some people argue that the matrix structure should be adopted
only as a last resort because the dual chains of command can create more problems than they
solve. Discuss. Do you agree or disagree? Why?
10-2D. Team Approach Exhibit 10-8
1. What It Is
The team approach is probably the most widespread trend in departmentalization. The
vertical chain of command is a powerful means of control, but passing all decisions up
the hierarchy takes too long and keeps responsibility at the top. Managers can delegate
178 • Chapter 10
authority, push responsibility to lower levels, and be more flexible and responsive in the
competitive global environment.
Teaching Tip: Use Exhibit 10.8 to discuss the team approach. Ask students why the team approach is a trend.
2. How It Works
a. Cross-functional teams consist of employees from various functional departments

who are responsible to meet as a team and resolve mutual problems. Team members
report to their functional departments, but also to the team. These teams provide
needed horizontal coordination to complement existing functional or divisional
structures.
b. Permanent teams are groups of employees who are organized in a way similar to a
formal department. Emphasis is on horizontal communication and information
sharing because representatives from all functions coordinate to complete a specific
task. Authority is pushed down to lower levels, and front-line employees are given
the freedom to make decisions and take action on their own.
c. With a team-based structure, the entire organization is made up of horizontal teams

that coordinate their work and work directly with customers to accomplish the
organization’s goals.
3. Team Advantages and Disadvantages
a. Advantages include improved coordination and cooperation, adaptability, and high

morale.
b. Disadvantages include conflicts and dual loyalties, demands on team members, time
requirements, loss of production efficiency, too much decentralization, and absence
of seeing the big picture.
10-2E. Virtual Network Approach Exhibit 10-9

Exhibit 10-10
1. What It Is
a. The most recent approach to departmentalization extends the idea of horizontal

coordination beyond the boundaries of the organization. Outsourcing, which means
farming out certain activities, has become a significant trend. Partnerships, alliances,
and other collaborative forms are now a leading approach to accomplishing strategic
goals.
b. Some organizations take this networking approach to the extreme to create a new
kind of structure. The virtual network structure means that the firm subcontracts
most of its major functions to separate companies and coordinates their activities
from a small headquarters organization.
Teaching Tip: Use Exhibit 10.9 to discuss the network approach. Ask students to explain the organization.
2. How It Works
a. The organization may be viewed as a central hub surrounded by a network of outsider

specialists. Services such as accounting are outsourced to separate organizations that
are connected electronically to the central office. Networked computer systems,
collaborative software, and the Internet enable organizations to exchange data and
information rapidly and seamlessly.
b. Networks allow a company to concentrate on what it does best and contract out other
activities to companies with distinctive competence in those areas.
3. Virtual Network Advantages and Disadvantages
a. Advantages include extreme flexibility, ability of the organization to redefine itself,

and lean structure.
b. Disadvantages include lack of hands-on control, partner’s actions based on self-

interest, reliance on outsourcing partners, and the possibility of weak employee
loyalty.
Teaching Tip: Use Exhibit 10.10 to compare the advantages and disadvantages of the five approaches.
EOC Discussion Question #5: What is the virtual network approach to structure? Is the use of
authority and responsibility different compared to other forms of departmentalization? Explain.
EOC Discussion Question #10: Would you expect the structure of a company such as Facebook,
which operates almost entirely online, to differ from the structure of a bricks-and-mortar
company, such as AT&T, which uses the Internet for some things, such as customer service and
business-to-business transactions? Why or why not?
10-3. ORGANIZING FOR HORIZONTAL COORDINATION
10-3A. The Need for Coordination Exhibit 10.11
1. As organizations grow and evolve, new positions and departments are added, and senior
managers have to find a way to tie all of these departments together. Coordination refers
to the managerial task of collaborating across departments. It is required whether there is
a functional, divisional, or team structure.
2. Collaboration means a joint effort between people from two or more departments to
produce outcomes that meet a common goal or shared purpose and that are typically
greater than what any of the individuals or departments could achieve working alone.
3. Coordination problems are amplified in the global arena because units differ not only by
goals and work activities but by distance, time, culture, and language. Coordination is the
180 • Chapter 10
outcome of information and cooperation. Managers can design systems and structures to
promote horizontal coordination and collaboration.
Teaching Tip: Use Exhibit 10.11 to discuss how organizational structures evolve.
4. Organizational structures evolve by placing a growing emphasis on horizontal

coordination.
5. Re-engineering refers to the radical redesign of business processes to achieve dramatic

improvements in cost, quality, service, and speed.
10-3B. Task Forces, Teams, and Project Management Exhibit 10.12
1. A task force is a temporary team or committee designed to solve a problem involving

several departments. Task force members represent their departments and share
information that enables coordination. Companies also set up cross-functional teams for
coordination which work with continuing rather than temporary problems that might exist
for several years.
2. A project manager is a person who is responsible for coordinating the activities of

several departments for the completion of a specific project. A distinctive feature of a
project manager is that the person is not a member of one of the departments being
coordinated. Project managers need excellent people skills. They use expertise and
persuasion to achieve coordination among various departments.
Teaching Tip: Use Exhibit 10.12 to discuss how project managers fit into an organization’s structure. Ask
students why it is important that a project manager not be a member of a department involved in the project.
10-3C. Relational Coordination
1. Relational coordination refers to frequent, timely, problem-solving communication

carried out through employee relationships of shared goals, shared knowledge, and
mutual respect.
2. It is not based on formal coordination roles or mechanisms.
EOC Discussion Question #2: How does relational coordination differ from teams and task
forces? Do you think relational coordination seems more valuable for a service technology or a
manufacturing technology? Explain your answer.
EOC Discussion Question #6: A report published by Hay Group found that some managers have
personalities suited to horizontal relationships, such as project management, and achieve results
with little formal authority. Other managers are more suited to operating roles with much formal
authority in a vertical structure. What type of structure—functional, matrix, team, or virtual
network—do you believe your personality would best fit into? Which structure would be the most
challenging for you? Give your reasons.
10-4. FACTORS SHAPING STRUCTURE Exhibit 10.13
Strategic needs and operational needs shape an organization’s structure.
Teaching Tip: Use Exhibit 10.13 to illustrate the factors affecting an organization’s structure. Ask students to
suggest examples as you discuss this section.
10-4A. Structure Follows Strategy Exhibit 10.14
Teaching Tip: Use Exhibit 10.14 to discuss how an organization’s strategy affects its structure.
1. Porter’s strategies of differentiation and cost leadership typically require different

structural approaches. A simplified continuum illustrates how structural approaches are
associated with strategic and environmental goals. The terms mechanistic and organic
refer to organizations where efficiency is the goal in a stable environment and
organizations where innovation is the goal in a rapidly-changing environment,
respectively.
2. The pure functional structure is appropriate for achieving internal efficiency goals, but it
does not enable the organization to be flexible or innovative. A horizontal team structure
is appropriate when the primary goal is innovation and flexibility. The firm can
differentiate itself and respond quickly to change.
3. Other forms of structure represent intermediate steps on the firm’s path to efficiency or
innovation. The functional structure with cross-functional teams and project teams
provides greater coordination and flexibility than the pure functional structure. The
divisional structure promotes differentiation because each division can focus on specific
products and customers.
10-4B. Structure Fits the Technology Exhibit 10.15
Technology includes the knowledge, tools, techniques, and activities used to transform
organizational inputs into outputs. You can think of technology as “production activities.”
Teaching Tip: Use Exhibit 10.15 to discuss how technology affects an organization’s structure.
1. Woodward’s Manufacturing Technology
a. Categories of manufacturing firms based on production technology
• Small-batch and unit production. Small-batch production firms produce goods

in batches of one or a few products designed to customer specification. Examples
include custom clothing, special-order machine tools, space capsules, satellites,
and submarines.
182 • Chapter 10
• Large-batch and mass production. Mass production technology is distinguished

by standardized production runs. A large volume of products is produced and all
customers receive identical products. Examples include automobiles, tobacco
products, and textiles.
• Continuous process production. In continuous process production, the entire

work flow is mechanized in a sophisticated and complex form of production
technology. The process runs continuously and therefore has no starting or
stopping. Examples include chemical plants, distilleries, petroleum refineries, and
nuclear power plants.
b. Technical complexity is the degree to which machinery is involved in the production

to the exclusion of people.
EOC Discussion Question #9: The chapter suggested that structure should be designed to fit
strategy. Some theorists argue that strategy should be designed to fit the organization’s
structure. With which theory do you agree? Explain.
2. Service Technology
Service organizations include consulting companies, law firms, brokerage houses,

airlines, hotels, advertising companies, amusement parks, and educational organizations.
Service technology also characterizes departments such as legal, human resources,
finance, and market research in large corporations. Service technology involves:
a. Intangible output. Services are perishable and, unlike physical products, cannot be
stored in inventory.
b. Direct contact with customers. Employees and customers interact directly to provide
and purchase the service. Production and consumption are simultaneous. Service firm
employees have direct contact with customers.
EOC Discussion Question #7: Describe the primary differences between manufacturing and
service technology. How do these differences influence the type of structure that will be most
effective?
On the Job Video Case Answers
On the Job: Honest Tea: Designing Organization Structure
1. What are some of Seth Goldman’s responsibilities as “TeaEO” of Honest Tea? Provide at
least three detailed examples.
Seth is in charge of sourcing the tea, managing the production of the tea, overseeing the bottling
of the tea, and managing the distribution of the tea.
2. How does Goldman’s experience as the founder of the company influence his ability to
delegate?
As the entrepreneur who started the company and developed it according to his vision, Seth
would have difficulty delegating tasks. He tried to solve the bottling of Honest Tea by owning
and managing the bottling company. This took him away from his mission of developing low-
sugar, healthy drinks. Ultimately, he sold the company and delegated the bottling of his products
to someone else. As the company has grown, Seth has realized that delegating decision making to
lower-level managers and employees can be highly motivating and improve speed, flexibility, and
creativity.
3. Referring to Woodward’s research on manufacturing technology and structure, how would

you categorize Honest Tea’s production? In what ways has this probably influenced the
company’s structure?
According to Woodward’s research on manufacturing technology and structure, Honest Teas

would be categorized as small-batch production. Small-batch production firms produce goods in
batches of one or a few products designed to specification. This technology also is used to make
large, one-of-a-kind products. Honest Teas started by producing three different low-calorie
products and has now grown to produce thirty different products in batches. In small-batch
manufacturing, human beings are a large part of the process. Tea leaves are sourced in
developing nations and harvested by local agricultural workers. Then the tea drinks are processed
and bottled in the Maryland.
Small batch production companies to include Honest Teas have a structure than is organic, low
centralization, high verbal (horizontal) communication and low written (vertical) communication
as outlined in Exhibit 10. 15.
184 • Chapter 10
Suggested Answers to End-of-Chapter Discussion Questions

1. If you wanted to add a group of big data scientists to a large organization such as PepsiCo,
would you centralize the scientists in a central pool at headquarters or decentralize them to
separate divisions? Discuss your reasons.
I would decentralize the big data scientists to separate divisions. With decentralization, decision
authority is pushed down the chain of command to lower organization levels. The trend is toward
decentralization, which uses the big data scientists’ skills, relieves top managers, allows the
scientists to make decisions, and permits rapid response. Factors that influence centralization
versus decentralization include:
• Greater change and uncertainty in the environment are usually associated with
decentralization.
• The amount of centralization or decentralization should fit the firm’s strategy.
2. How does relational coordination differ from teams and task forces? Do you think relational
coordination seems more valuable for a service technology or a manufacturing technology?
Explain your answer.
Relational coordination refers to frequent, timely, problem-solving communication carried out

through employee relationships of shared goals, knowledge, and mutual respect.
Teams, which are the most widespread trend in departmentalization, consist of the vertical chain
of command as the powerful means of control; however, passing all decisions up the hierarchy
takes too long and keeps responsibility at the top. A task force is a temporary team or committee
designed to solve a problem involving several departments. Task force members represent their
departments and share information that enables coordination. Companies also set up cross-
functional teams for coordination which work with continuing rather than temporary problems
that might exist for several years.
As an organization grows and evolves, new positions and departments are added to meet the
changing needs, and it grows more complex, performing incredibly diverse activities. This leads
to a need for coordination among these departments.
Relational coordination, which is the highest level of horizontal coordination, seems more
valuable for a service technology than for a manufacturing technology. Service technology
characterizes departments such as legal, human resources, finance, and market research in large
corporations. Service technology involves intangible output—services are perishable and, unlike
physical products, cannot be stored in inventory; and direct contact with customers—employees
and customers interact directly to provide and purchase the service. And also, production and
consumption are simultaneous. Therefore, relational coordination would prove to be more
valuable in such an organization as it is not based on formal coordination roles or mechanisms;
rather it is part of the very fabric and culture of the organization. People can share information
freely across departmental boundaries, and interact on a continuous basis to share knowledge and
solve problems.
3. An organizational consultant said, “Some aspect of functional structure appears in every

organization.” Do you agree? Explain.
The consultant is probably correct. In all organizations, people who do similar jobs are grouped
together in functional departments. For example, functional departments exist in a divisional
structure, although they are smaller than if the organization had a functional structure. The
hybrid structure and the matrix structure also take advantage of functional departments. Thus, at
the lowest levels in all organizations, there are functional groupings. These functional
departments, however, may be grouped together into a divisional, matrix, hybrid, or functional
structure for the organization as a whole.
4. Some people argue that the matrix structure should be adopted only as a last resort because
the dual chains of command can create more problems than they solve. Discuss. Do you
agree or disagree? Why?
Many experts would agree that the matrix structure should be adopted only after other structures
have been tried. If the organization is in a functional structure and that doesn’t work, and then
reorganizes into a divisional structure and that doesn’t work either, a matrix structure may be
appropriate. The matrix structure requires extensive training to help people understand the dual
hierarchies, and it may take one or two years to complete the implementation. Often, after the
matrix structure has been implemented, it evolves back into either a functional or divisional
structure if one side of the matrix becomes more powerful than the other. Dual chains of
command create more problems than they solve if the matrix structure is not suited to the
situation. The situation must demand equality along the two lines of authority, the sharing of
functional resources across divisions, and a rapid response to a changing environment. Recent
thinking on organization structure suggests that the matrix is appropriate in only a few situations.
Most organizations can get by with other forms, such as a functional structure with lateral
relationships, to meet the needs for coordination.
5. What is the virtual network approach to structure? Is the use of authority and responsibility
different compared to other forms of departmentalization? Explain.
In the virtual network approach, the organization becomes a small central broker, electronically
connected to other organizations that perform vital functions. Each department is an independent
contracting service to the broker for a profit and can be located anywhere. The central broker, or
headquarters, has only contractual arrangements with the departments and, therefore, very little
authority. Total responsibility for the component of the product or service is given to each
department, and each has complete authority over its own operation. The major difference is that
the headquarters has very little control over the departments and cannot exercise authority over
them very well.
186 • Chapter 10
6. A report published by Hay Group found that some managers have personalities suited to
horizontal relationships, such as project management, and achieve results with little formal
authority. Other managers are more suited to operating roles with much formal authority in
a vertical structure. What type of structure—functional, matrix, team, or virtual network—do
you believe your personality would best fit into? Which structure would be the most
challenging for you? Give your reasons.
Students should demonstrate a clear understanding of the structures they select, and how those
structures work, as they explain why they would feel more comfortable or more challenged
operating within those structures. Students who seek more formal authority should be more
comfortable with a functional or matrix structure and more challenged by a team or virtual
network structure. Students who seek more flexibility and autonomy should be more comfortable
with a team or virtual network structure and more challenged by a functional or matrix structure.
7. Describe the primary differences between manufacturing and service technology. How do
these differences influence the type of structure that will be most effective?
Joan Woodward described the following three types of manufacturing technology:

• Small-batch and unit production
• Large-batch and mass production
• Continuous process production
The difference among these manufacturing technologies is technical complexity, which is the
degree to which machinery is involved in the production to the exclusion of people. With a
complex technology, employees are hardly needed except to monitor the machines. Woodward
found that the relationship between the structure and technology was directly related to company
performance. Low-performing firms tend to deviate from the preferred structural form, often
adopting a structure appropriate for another type of technology.
Service organizations include consulting companies, law firms, brokerage houses, airlines,
hotels, advertising companies, amusement parks, and educational organizations. Service
technology also characterizes departments such as legal, human resources, finance, and market
research in large corporations. Service technology involves:
• Intangible output—services are perishable and, unlike physical products, cannot be stored in
inventory; and
• Direct contact with customers—employees and customers interact directly to provide and
purchase the service. Production and consumption are simultaneous.
One distinct feature of service technology that directly influences structure is the need for
employees to be close to customers.
8. Experts say that organizations are becoming increasingly decentralized, with authority,
decision-making responsibility, and accountability being pushed farther down into the
organization. How will this trend affect what will be asked of you as a new manager?
The trend toward increased decentralization, with authority, decision-making responsibility, and
accountability being pushed farther down into the organization will require new managers to
have good delegating skills and very strong interpersonal skills. They must be able to work
effectively in a flexible environment in which they rely on subordinates to make a wide variety
of important decisions. New managers in such an environment must be able to work through
cooperation and influence rather than by telling others what to do.
9. This chapter suggested that structure should be designed to fit strategy. Some theorists argue
that strategy should be designed to fit the organization’s structure. With which theory do you
agree? Explain.
If the company is an already existing company, the argument for adapting strategy to structure is
stronger simply because the structure may be very difficult to change. It does not make much
sense for a local, bricks-and-mortar “mom and pop” store to have a multidomestic strategy; a
small company like that will not have the resources to pursue such a strategy. If the company is
new, the argument for adapting structure to strategy is stronger. The major point to understand is
that structure and strategy must be compatible, regardless of which comes first.
10. Would you expect the structure of a company such as Facebook, which operates almost
entirely online, to differ from the structure of a bricks-and-mortar company, such as AT&T,
which uses the Internet for some things, such as customer service and business-to-business
transactions? Why or why not?
Both companies are service organizations, but because AT&T provides Internet, television, and
telephone services to its customers, all of which require installation and/or repair work, it must
operate a “field” service component to meet these requirements. Facebook doesn’t need a field
operation. AT&T also operates bricks-and-mortar stores across the country to sell their services
and mobile phone products. The field service and stores components of AT&T’s structure not
only require the inclusion of entirely different categories of employees from Facebook, but also
involve the operation and maintenance of equipment and vehicles, which Facebook also does not
require. As a result, the structures of the two companies will be quite different.
Apply Your Skills: Experiential Exercise

Organic Versus Mechanistic Organization Structure
Students interview an employee at their university, such as a department head or secretary. The
employee will answer questions about his or her job and organizational conditions. Students will
then answer the same set of questions for a job that they have held.
A score of 52 or above suggests that a student or the other respondent is working in an organic
organization. The score reflects a loose, flexible structure that is often associated with uncertain
environments and small-batch or service technology. People working in this structure feel
empowered. Many organizations today are moving in the direction of flexible structures and
empowerment
A score of 26 or below suggests a mechanistic structure. This structure uses traditional control
and functional specialization, which often occurs in a certain environment, a stable organization,
and routine or mass-production technology. People in this structure may feel controlled and
constrained. Students can discuss the pros and cons of organic versus mechanistic structure.
188 • Chapter 10
Apply Your Skills: Small Group Breakout

Family Business
In this exercise, students assume the role of consultant to a family business and rank the priority
of departmental functions in order of importance for assigning additional resources to improve
business in the future. Students rank functions individually first, then discuss their individual
rankings in groups and develop a group ranking. Finally, they analyze what they learned about
organizational structure and design from the exercise.
Apply Your Skills: Ethical Dilemma

A Matter of Delegation
1. Prepare a memo to Golopolus summarizing the new safety guidelines that affect the
Rockingham product line and requesting his authorization for implementation.
This course of action would probably have no effect. Golopolus is already aware of the
guidelines and hasn’t done anything about them yet.
2. Mind your own business. Golopolus hasn’t said anything about the new guidelines and you
don’t want to overstep your authority. You’ve been unemployed and need this job.
Tom Harrington is in a tough position. He feels loyalty to his boss, but he is also concerned
about product safety as well as the company’s reputation. This option would clearly be unethical.
Harrington is aware of the safety guidelines, which have been devised to ensure the safety of
children, so he cannot just “look the other way.”
3. Send copies of the reports anonymously to the operations manager, who is Golopolus’s boss.
The operations manager is ultimately responsible for whether Rockingham’s toys meet federal
guidelines and he or she needs to be aware of what those guidelines are. By sending the reports
to the operations manager anonymously, Harrington does not have to criticize his boss or accuse
him of wrong-doing; but he is making sure that higher-level managers are aware of the new
safety standards. Tom is right that he does not have the authority to monitor the federal
regulations, but the operations manager does have that authority.
Apply Your Skills: Case for Critical Analysis

Abraham’s Grocery Store
1. Based on the information available in the case, sketch a picture of the original structure
within an Abraham’s store and the store managers’ relationships with district specialist
managers. What type of structure is this? Explain.
The original structure within the store was a functional structure, which can be represented as
below:
PRESIDENT
Meat Grocery Produce

Department Department Department
District Meat District Store District Produce

Manager Supervisor Manger
Specialist Specialist
Store Meat Store/Grocery Produce

Department Department Department
Manager Manager Manager
Functional structure is the grouping of positions into departments based on similar skills,
expertise, work activities, and resource use. The major departments under the president are
groupings of similar expertise and resources, such as the meat, grocery, and produce
departments. Each of the functional departments is concerned with the organization as a whole.
This functional structure is a strong vertical design. Information flows up and down the vertical
hierarchy, and the chain of command converges at the top of the organization. It does not enable
the organization to be flexible or innovative and reflects barriers across the departments.
190 • Chapter 10
2. Based on the information available in the case, sketch a picture of the consultant’s
recommended structure within the store and the relationship of store department managers
with district specialist managers. What type of structure is this? Explain.
The consultant’s recommended structure within the store is a divisional structure. Divisional
structure occurs when departments are grouped together based on similar organizational outputs.
In the divisional structure, divisions are created as self-contained units for producing a single
product. The new divisional structure recommended by the consultant within the store and the
relationship of store department managers with district specialist managers are represented as
below:
PRESIDENT
District Store Supervisor
Store Manager
District Meat District Produce
Specialist Specialist
Meat Department Grocery Department Produce Department

Manager Manager Manager
3. What are some of the advantages and disadvantages you see for the two types of structures?
Which structure do you think will work best for Abraham’s? Why?
Advantages of functional structure:

• Grouping employees by common task permits economies of scale and efficient resource use.
• Functional structure enhances development of in-depth skills because people work on a
variety of related problems and are associated with other experts within the department.
• The convergence of the chain of command at the top offers a way to centralize decision
making and provide unified direction from top managers.
Disadvantages of functional structure:

• Barriers exist across departments.
• Communication and coordination are poor as people are separated into distinct departments,
causing a slow response to environmental change.
• Innovation and change require involvement of several departments.
• Decisions involving more than one department may pile up at the top of the organization and
be delayed.
Advantages of divisional structure:

• Organization will be more flexible and responsive to change.
• Coordination across functional departments is better because employees are grouped together
in a single location and committed to one product line
Disadvantages of divisional structure:

• Poor coordination across division
• Duplication of resources and the high cost of running separate divisions
• Loss of efficiency and economies of scale
• Small size of departments within each division may result in a lack of technical
specialization, expertise, and training.
Divisional structure will work best for Abraham’s as it will ensure more coordination across the
departments and be more flexible and responsive to change.

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Management 13th Edition Daft

DESIGNING ORGANIZATION STRUCTURE

ANNOTATED LEARNING OUTCOMES

Organizing is the deployment of organizational resources to achieve strategic goals. Organizing

The span of management is the number of employees reporting to a supervisor. Sometimes

2. Describe functional and divisional approaches to structure.

6. Identify how structure can be used to achieve an organization’s strategic goals.

7. Define production technology and explain how it influences organization structure.

10-1. ORGANIZING THE VERTICAL STRUCTURE Exhibit 10.1

Organizing is the deployment of organizational resources to achieve strategic goals. It is

Organization structure refers to:

The organization chart is the visual representation of an organization's structure. It delineates

10-1A. Division of Labor

10-1B. Chain of Command

2. Authority, Responsibility, and Delegation

a. The chain of command illustrates the authority structure of the organization.

• Authority is vested in organizational positions, not people. People in the same

c. Delegation is another concept related to authority; it is the process managers use to

SELF-ASSESSMENT: WHAT KIND OF AUTHORITY DID YOUR PARENTS USE?

3. Line and Staff Authority

10-1C. Span of Management Exhibit 10.2

1. The span of management, or span of control, is the number of employees reporting to a

2. Factors that determine the span of management include:

a. Work performed by subordinates is stable and routine.

b. Subordinates perform similar work tasks.

c. Subordinates are concentrated in a single location.

e. Rules and procedures defining task activities are available.

f. Support systems and personnel are available for the manager.

g. Little time is required in nonsupervisory activities, such as coordination with other

h. Managers’ personal preferences favor a large span.

10-1D. Centralization and Decentralization

2. The amount of centralization or decentralization should fit the firm’s strategy.

10-2. DEPARTMENTALIZATION Exhibit 10.3

10-2A. Vertical Functional Approach Exhibit 10.4

Teaching Tip: Use Exhibit 10.4 to discuss the functional structure.

b. People in a department communicate primarily with others in the same department to

3. Functional Advantages and Disadvantages

a. Advantages include enhanced development of in-depth skills, centralized decision

b. Disadvantages include barriers across departments, slow response to environmental

10-2B. Divisional Approach

b. The primary difference between divisional and functional structures is that in

3. Geographic- or Customer-Based Divisions Exhibit 10.5

Grouping company activities by geographic region or customer group is an alternative for

4. Divisional Advantages and Disadvantages

a. Advantages include flexibility, responsiveness to change, concern for customers’

b. Disadvantages include autonomous divisions going opposite ways, duplication of

10-2C. Matrix Approach Exhibit 10.6

a. Two-boss employees report to two supervisors simultaneously and must resolve

3. Matrix Advantages and Disadvantages

b. Disadvantages include confusion and frustration caused by the dual chain of

10-2D. Team Approach Exhibit 10-8

a. Cross-functional teams consist of employees from various functional departments

c. With a team-based structure, the entire organization is made up of horizontal teams

3. Team Advantages and Disadvantages

a. Advantages include improved coordination and cooperation, adaptability, and high

10-2E. Virtual Network Approach Exhibit 10-9

a. The most recent approach to departmentalization extends the idea of horizontal

a. The organization may be viewed as a central hub surrounded by a network of outsider

3. Virtual Network Advantages and Disadvantages

a. Advantages include extreme flexibility, ability of the organization to redefine itself,

b. Disadvantages include lack of hands-on control, partner’s actions based on self-

10-3. ORGANIZING FOR HORIZONTAL COORDINATION

10-3A. The Need for Coordination Exhibit 10.11

4. Organizational structures evolve by placing a growing emphasis on horizontal