Management Fourteenth Edition BHI Chapter 11 Designing Organizational Structure Ui} OB ero @ Pearson Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights ReservedLearning Objectives 11.1 Describe six key elements in organizational design. 11.2 Contrast mechanistic and organic structures. 11.3 Discuss the contingency factors that favor either the mechanistic model or the organic model of organizational design. 11.4 Describe traditional organizational design options. 11.5 Discuss organizing flexibility in the twenty-first century. Develop your skill at acquiring and using power. Know how to stay connected and “in the loop” when working remotely. @ Pearson Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights ReservedElements of Organizational Design * Organizing: management function that involves arranging and structuring work to accomplish the organization's goals * Organizational structure: the formal arrangement of jobs within an organization + Organizational chart: the visual representation of an organization's structure * Organizational design: creating or changing an organization's structure @reanen Copyright © 2018, 2016, 2014 Parson Education, the. Al RightsReservedExhibit 11-1 Purposes of Organizing Purposes "Divides work to be done into specific jobs and departments. Assigns tasks and responsibilities associated with individual jobs. Coordinates diverse organizational tasks. Clusters jobs into units. Establishes relationships among individuals, groups, and departments. Establishes formal lines of authority. Allocates and deploys organizational resources. Fearon Copyright © 2018, 2016, 2014 Pearson Education, In. Al Rights ReservedWork Specialization » Work specialization: dividing work activities into separate job tasks Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights ReservedExhibit 11-2 Economies and Diseconomies of Work ‘ah Work Specialization Exhibit 11-2 shows the economies and diseconomies of work specialization. @Pearsn Copyight © 2018, 2016, 2014 Pearson Edvation, Ie. A RightsReservedDepartmentalization » Departmentalization: the basis by which jobs are grouped together Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights ReservedExhibit 11-3 The Five Common Forms of Departmentalization (1 of 3) oxatete we owt nr seer era [Ee ao ee groraene we ater Cah ecg Yor Se ruraabona was Exhibit 11-9 illustrates each type of departmentalization as well as the advantages and disadvantages of each. @ Person Copyright © 2018, 2016, 2014 Pearson Education, Inc. Al RightsReservedExhibit 11-3 The Five Common Forms of Departmentalization (2 of 3) PRODUCT DEPARTMENTALIZATION—Groups Jobs by Product Line ‘Source: Bombardier Annual Report. upton threo Ute vew of rgaizatona goals Exhibit 11-3 illustrates each type of departmentalization as well as the advantages and disadvantages of each. @ Pearson Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights ReservedExhibit 11-3 The Five Common Forms of Departmentalization (3 of 3) PROCESS DEPARTMENTALIZATION Groups Jobs on the Basis of Product or Customer Flow 1 Ghvey be usec ncaa ype of prota customer ‘Groups Jobs on the Basis of Speciic and Unique Customers. Who Have Common Needs + amamar nade a pobame can bat spac 2 Sieuaton ofhnesore Exhibit 11-2 illustrates each type of departmentalization as well as the advantages and disadvantages of each. @ Pearson Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights ReservedCross-Functional Team » Cross-functional team: a work team composed of individuals from various functional specialties Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights ReservedChain of Command * Chain of command: the line of authority extending from upper organizational levels to the lowest levels, which clarifies who reports to whom Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights ReservedAuthority + Authority: the line of authority extending from upper organizational levels to the lowest levels, which clarifies who reports to whom + Line authority: authority that entitles a manager to direct the work of an employee + Staff authority: positions with some authority that have been created to support, assist, and advise those holding line authority Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights ReservedResponsibility » Responsibility: the obligation or expectation to perform any assigned duties * Unity of command: the management principle that each person should report to only one manager Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights ReservedSpan of Control * Span of control: the number of employees a manager can efficiently and effectively manage Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights ReservedExhibit 11-4 Contrasting Spans of Controls ‘Members at Each Level (Highest) Assuming Span of 4 ‘Assuming Span of 8 Span of 4: Span of 8: Employees: =4,096 Employees: =4,096 Managers (level 1-6) = 1,385 Managers (evel 1-4) = "585 ‘As Exhibit 11-4 shows, if one organization has a span of four and the other a span of eight, ‘the organization with the wider span will have two fewer levels and approximately 800 ‘fewer managers. @rearvon Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights ReservedCentralization and Decentralization + Centralization: the degree to which decision making is concentrated at upper levels of the organization * Decentralization: the degree to which lower-level employees provide input or actually make decisions Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights ReservedExhibit 11-5 Centralization or Decentralization More Centralization Environment is stable. Lower-level managers are not as capable or experienced at making decisions as upper-level managers. Lower-level managers do not want a say in decisions. Decisions are relatively minor. Organization is facing a crisis or the risk of company failure. Company is large. Effective implementation of company strategies depends on managers retaining say over what happens. More Decentralization Environment is complex, uncertain. Lower-level managers are capable and experienced at making decisions. Lower-level managers want a voice in decisions. Decisions are significant. Corporate culture is open to allowing managers a say in what happens. Company is geographically dispersed. Effective implementation of company strategies depends on managers having involvement and flexibility to make decisions. Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights ReservedEmployee Empowerment - Employee empowerment: giving employees more authority (power) to make decisions Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights ReservedFormalization +» Formalization: how standardized an organization’s jobs are and the extent to which employee behavior is guided by rules and procedures Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights ReservedMechanistic and Organic Structures * Mechanistic organization: an organizational design that’s rigid and tightly controlled * Organic organization: an organizational design that's highly adaptive and flexible Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights ReservedExhibit 11-6 Mechanistic Versus Organic Organizations Mechanistic Organic High specialization Cross-functional teams Rigid departmentalization __Cross-hierarchical teams Clear chain of command Free flow of information Narrow spans of control Wide spans of control Centralization Decentralization High formalization Low formalization Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights ReservedStrategy and Structure » An organization's structure should facilitate goal achievement. Because goals are an important part of the organization's strategies, it’s only logical that strategy and structure are closely linked. Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights ReservedSize and Structure * There’s considerable evidence that an organization's size affects its structure, but once an organization grows past a certain size, size has less influence on structure. Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights ReservedTechnology and Structure + Unit production: the production of items in units or small batches + Mass production: the production of items in large batches * Process production: the production of items in continuous processes Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights ReservedExhibit 11-7 Mechanistic Versus Organic Organizations Unit Production Mass Production Process Production ‘Structural Low vertical Moderate vertical High vertical Low horizontal High horizontal Low horizontal differentiation differentiation differentiation Low formalization High formalization Low formalization Most effective Organic Mechanistic Organic structure: @Pearson Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights ReservedEnvironmental Uncertainty and Structure * In stable and simple environments, mechanistic designs can be more effective. * The greater the uncertainty, the more an organization needs the flexibility of an organic design. Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights ReservedTraditional Organizational Design Options * Simple structure: an organizational design with little departmentalization, wide spans of control, centralized authority, and little formalization + Functional structure: an organizational design that groups together similar or related occupational specialties » Divisional structure: an organizational structure made up of separate, semiautonomous units or divisions @ rears Copyright © 2018, 2016, 2014 Pearson Education, Inc. Al RightsReservedExhibit 11-8 Traditional Organizational Designs ‘Asummary of the strengths and weaknesses of each type of organizational design can be found in Exhibit 11-8. @Paarwn Copyaht © 2018, 2016, 2014 Person Edt, Inc Al RightsReservedTeam Structures +» Team structure: an organizational structure in which the entire organization is made up of work teams Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights ReservedMatrix and Project Structures + Matrix structure: an organizational structure that assigns specialists from different functional departments to work on one or more projects * Project structure: an organizational structure in which employees continuously work on projects Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights ReservedExhibit 11-9 Example of a Matrix Organization Exhibit 11-9 shows an example of a matrix organization. Orearsn Copyight © 2018, 2016, 2014 Person Edvation, Ie Al RightsReservedThe Boundaryless Organization » Boundaryless organization: an organization whose design is not defined by, or limited to, the horizontal, vertical, or external boundaries imposed by a predefined structure + Virtual organization: an organization that consists of a small core of full-time employees and outside specialists temporarily hired as needed to work on projects @rearvon Copyront © 2018, 2016, 2014 Person Education, Inc Al Rahs ReservedTask Forces * Task force (or ad hoc committee): a temporary committee or team formed to tackle a specific short-term problem affecting several departments + Open innovation: opening up the search for new ideas beyond the organization’s boundaries and allowing innovations to easily transfer inward and outward Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights ReservedExhibit 11-10 Benefits and Drawbacks of Open Innovation Benefits Drawbacks Gives customers what they want—a voice High demands of managing the process Allows organizations to respond to Extensive support needed ‘complex problems Nurtures internal and external relationships Cultural challenges Brings focus back to marketplace Greater need for flexibility Provides way to cope with rising costs and Crucial changes required in how uncertainties of product development knowledge is controlled and shared Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights ReservedTelecommuting * Telecommuting: a work arrangement in which employees work at home and are linked to the workplace by computer Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights ReservedCompressed Workweeks, Flextime, and Job Sharing » Compressed workweek: a workweek where employees work longer hours per day but fewer days per week + Flextime (or flexible work hours): 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 + Job sharing: the practice of having two or more people split a full-time job e Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights ReservedThe Contingent Workforce * Contingent workers: temporary, freelance, or contract workers whose employment is contingent on demand for their services Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights ReservedReview Learning Objective 11.1 + Describe six key elements in organizational design. 1. Work specialization 2. Departmentalization 3. Chain of command 4. Span of control 5. Centralization/decentralization 6. Formalization Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights ReservedReview Learning Objective 11.2 » Contrast mechanistic and organic structures. — Mechanistic structure: rigid, tightly controlled — Organic structure: highly adaptable, flexible Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights ReservedReview Learning Objective 11.3 + Discuss the contingency factors that favor either the mechanistic model or the organic model of organizational design. — An organization's structure should support the strategy. — Structure can be affected by size and technology. — Organic structure is most effective with unit production and process production technology. — Mechanistic structure is most effective with mass production technology. Orarwn Copyght 2018, 2016, 2014 Person Edt, Ine Al Rs ReservedReview Learning Objective 11.4 » Describe traditional organizational design options. — Simple structure: little departmentalization, wide spans of control, authority centralized in one person, and little formalization. — Functional structure — Divisional structure Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights ReservedReview Learning Objective 11.5 + Discuss organizing for flexibility in the twenty-first century. — Structures: = Team = Matrix = Project — Boundaryless organization — Virtual organization — Compressed workweeks, flextime, job sharing — Contingent workforce Orearsn Copyight 2018, 2016, 2014 Person Edvation, te: Al Rigs Reserved