Introduction to Business

Chapter 7 DESIGNING ORGANIZATIONAL STRUCTURES

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Learning Outcomes

1. What are the traditional forms of organizational structure?

2. What contemporary organizational structures are companies using?
3. Why are companies using team-based organizational structures?
4. What tools do companies use to establish relationships within their
organizations?
5. How can the degree of centralization/decentralization be altered to make an
organization more successful?
6. How do mechanistic and organic organizations differ?
7. How does the informal organization affect the performance of the company?
8. What trends are influencing the way businesses organize?
Traditional Forms of Organizational Structure
• Organizing
 Accomplished by
o Division of Labor
• Specialization
o Departmentalization
• Functional Departmentalization
• Product Departmentalization
• Process Departmentalization
• Customer Departmentalization
• Geographic Departmentalization
o Delegation
• Organization
This slide added by Jennifer Hicks.
Exhibit 7.4 Organization Chart for a Typical Appliance
Manufacturer
Exhibit 7.5 Five Traditional Ways to Organize
Exhibit 7.5 Five Traditional Ways to Organize, continued
Exhibit 7.6 Line-and-Staff Organization
1. What are the traditional forms of organizational structure?

CONCEPT CHECK

1. How does specialization lead to greater efficiency and

consistency in production?

2. What are the five types of departmentalization?

Contemporary Organizational Structures
• Matrix Structure
 Advantages
o Teamwork
o Efficient use of Resources
o Flexibility
o Ability to balance conflicting objectives
o Higher performance
o Opportunities for personal and professional
development
 Disadvantages
o Power struggles
o Confusion among team members
o Lack of cohesiveness
• Committee Structure
This slide added by Jennifer Hicks.
Exhibit 7.7 Matrix Organization
2. What contemporary organizational structures are companies
using?

CONCEPT CHECK

1. Why does the matrix structure have a dual chain of command?

2. How does a matrix structure increase power struggles or reduce

accountability?

3. What are advantages of a committee structure? Disadvantages?

Why Use a Team-Based Structure

• Group Behavior
• Group Cohesiveness
• Work Groups vs Work Teams
• Types of Teams
 Problem-solving teams
 Self-managed teams
 Cross-functional teams
• High Performance Teams

This slide added by Jennifer Hicks.

Table 7.1 Strengths and Weaknesses of Group Decision Making
3. Why are companies using team-based organizational
structures?

CONCEPT CHECK

1. What is the difference between a work team and a work group?

2. Identify and describe three types of work teams.

3. What are some ways to build a high-performance team?

Tools to Establish Relationships Within an Organization

• Managerial Hierarchy

• Chain of Command
 Unity of Command Principle

• Authority = Legitimate Power

 Delegation of Authority
 Accountability

• Span of Control

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Table 7.2 Narrow and Wide Spans of Control
4. What tools do companies use to establish relationships within
their organizations?

CONCEPT CHECK

1. How does the chain of command clarify reporting relationships?

2. What is the role of a staff position in a line-and-staff organization?

3. What factors determine the optimal span of control?

5. How can the degree of centralization/decentralization be
altered to make an organization more successful?

CONCEPT CHECK

1. What are the characteristics of a centralized organization?

2. What are the benefits of a decentralized organization?

3. What factors should be considered when choosing the degree

of centralization?
Mechanistic vs Organic Structures

• Mechanistic – Tall • Why pick one over the

other?

• Organic – Flat  Strategy

 Size
 Environment

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Table 7.3 The Mechanistic versus Organic Structure
Exhibit 7.9 Flat versus Tall Organizational Structures
6. How do mechanistic and organic organizations differ?

CONCEPT CHECK

1. Compare and contrast mechanistic and organic organizations.

2. What factors determine whether an organization should be

mechanistic or organic?
Informal Organization

• Functions

• Provides friendships and social contact

• Interpersonal relationships

• Provides status and recognition hat the formal organization cannot or

will not provide

• Aid the socialization of new employees

• Organizational grapevine

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7. How does the informal organization affect the performance of
the company?
CONCEPT CHECK

1. What is the informal organization?

2. How can informal channels of communication be used to

improve operational efficiency?
Trends Influencing Business Organization

• Reboot

• Virtual Corporation

• Key Attributes:
• Technology
• Opportunism
• Excellence
• Trust
• No Borders

• Virtual Teams
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8. What trends are influencing the way businesses organize?
CONCEPT CHECK

1. How does technology enable firms to organize as virtual

corporations?

2. What effect could the gig economy have on a company’s

decision to outsource?

3. What are some organizational issues that must be addressed

when two firms merge?
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This slide added by Jennifer Hicks.