Exploring Management

John R. Schermerhorn, Jr. and Daniel G. Bachrach

Sixth Edition

Chapter 8

Organization Structure and Design

Organizing brings people
and resources together to
accomplish lofty goals.

Copyright ©2018 John Wiley & Sons, Inc. 2

Your Chapter 8 Takeaways
• Understand organizing as a managerial responsibility
(8.1)
• Identify common types of organization structures
(8.2)
• Recognize current trends in organizational design
(8.3)

Copyright © 2018 John Wiley & Sons, Inc. 3

ORGANIZING AS A MANAGERIAL RESPONSIBILITY 8.1

Takeaway 8.1 – answers to come

• Organizing is one of the management
functions.
• Organization charts describe the formal
structures of organizations.
• Organizations also have informal structures.
• Informal structures have good points and bad
points.

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ORGANIZING AS A MANAGERIAL RESPONSIBILITY 8.1

Management Functions
Organizing is the
process of arranging
people and resources
so they can work
together to
accomplish goals.

FIGURE 8.1 What Is the Importance of Organizin

in the Management Process?
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ORGANIZING AS A MANAGERIAL RESPONSIBILITY 8.1

Organizational Charts
Structure
• a formal arrangement
of people, tasks,
positions, and
reporting relationships
Organization Charts
• a diagram of
positions—job titles,
and reporting
relationships—the
hierarchy of authority,
within a team or
organization

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ORGANIZING AS A MANAGERIAL RESPONSIBILITY 8.1

Formal Structure
Division of Labor
• People and groups performing different jobs
Formal Structure
• The official structure of the organization
Informal Structure
• The unofficial relationships that develop among an
organization’s members

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ORGANIZING AS A MANAGERIAL RESPONSIBILITY 8.1

Informal Structure
Informal Structure
• Unofficial but
important working
relationships between
members.

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ORGANIZING AS A MANAGERIAL RESPONSIBILITY 8.1

Informal Structure
Informal Structures have good points and downsides
• Social network analysis identifies communication
relationships
• Good points include problem solving, support,
friendship and fill gaps in the formal structure
• Bad points include rumors, inaccurate information
and resistance to change

Copyright © 2018 John Wiley & Sons, Inc. 9

ORGANIZING AS A MANAGERIAL RESPONSIBILITY 8.1

Study Guide for Takeaway 8.1

Rapid Review:
• Organizing is the process of arranging people and resources to work
toward a common goal.
• Structure is the system of tasks, reporting relationships, and
communication that links people and positions within an organization.
• Organization charts describe the formal structure and how an
organization should ideally work.
• The informal structure of an organization consists of the unofficial
relationships that develop among its members.
• Informal structures create helpful relationships for social support and
task assistance, but they can be susceptible to rumors.

Copyright © 2018 John Wiley & Sons, Inc. 10

ORGANIZING AS A MANAGERIAL RESPONSIBILITY 8.1

Study Guide for Takeaway 8.1

Questions for Discussion:
1. Why is organizing such an important management
function?
2. If organization charts are imperfect, why bother with
them?
3. Could an organization consistently perform well
without the help of its informal structure?

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ORGANIZING AS A MANAGERIAL RESPONSIBILITY 8.1

Be Sure You Can…for Takeaway 8.1

• explain what you can learn from an organization
chart.
• differentiate formal and informal structures.
• discuss potential good and bad points about informal
structures.

Copyright © 2018 John Wiley & Sons, Inc. 12

COMMON ORGANIZATION STRUCTURES 8.2

Takeaway 8.2 – answers to come

•Functional structures group together people using
similar skills.
•Divisional structures group together people by products,
customers or locations.
•Matrix structures combine the functional and divisional
structures.
•Team structures make extensive use of permanent and
temporary teams.
•Network structures make extensive use of strategic
alliances and outsourcing.
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COMMON ORGANIZATIONAL STRUCTURES 8.2

Functional Structures
Functional Structures group people with similar skills
• Departmentalization
• Grouping people and jobs into a work unit
• Functional Structure
• Work units have similar skills and tasks such as
finance, marketing, production and human
resources.
• Work best in smaller or stable organizations

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COMMON ORGANIZATIONAL STRUCTURES 8.2

Functional Structures
Potential Advantages of Functional Structures
•Economies of scale make efficient use of human
resources.
•Functional experts are good at solving technical
problems.
•Training within functions promotes skill development.
•Career paths are available within each function.

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COMMON ORGANIZATIONAL STRUCTURES 8.2

Functional Structures

Figure 8.2 Common Functional Structure

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COMMON ORGANIZATIONAL STRUCTURES 8.2

Functional Structures
• Functional Chimneys or Functional Silos
• Communication and performance decrease across
functions

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COMMON ORGANIZATIONAL STRUCTURES 8.2

Divisional Structures
Divisional structures group together people who work on
a similar product, work in the same geographical region,
or serve the same customers

FIGURE 8.3
What Are Some Ways
Organizations Use Divisional
Structures?

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COMMON ORGANIZATIONAL STRUCTURES 8.2

Divisional Structures
Potential Advantages of Divisional Structures
•Expertise focused on special products, customers,
regions
•Better coordination across functions within divisions
•Better accountability for product or service delivery
•Easier to grow or shrink in size as conditions change

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Divisional Structures
• Product structures group together people and jobs
devoted to a single product or service.
• Geographic structures group together people and jobs
in the same geographic regions.
• Customer structures group together people and jobs
that serve the same customers or clients.

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COMMON ORGANIZATIONAL STRUCTURES 8.2

Matrix Structures
Matrix Structures combine functional and
divisional structures
•uses permanent cross functional teams to try to gain the
advantages of both the functional and divisional
approaches

Figure 8.4
How Does a Matrix Structure Combine
Functional and Divisional Structures?

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COMMON ORGANIZATIONAL STRUCTURES 8.2

Matrix Structures
Potential advantages of Matrix structures
• Performance accountability rests with program,
product, or project managers.
• Better communication exists across functions.
• Teams solve problems at their levels.
• Top managers spend more time on strategy.

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COMMON ORGANIZATIONAL STRUCTURES 8.2

Team Structures
Team Structures
•Make use of permanent and temporary cross functional teams
•Improved problem solving and project management

Figure 8.5 How Do Team Structures Capture the Benefits of Cross-

Functional Teams?

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COMMON ORGANIZATIONAL STRUCTURES 8.2

Team Structures
Potential advantages of team structures
• Team assignments improve communication,
cooperation, and decision making.
• Team members get to know each other as persons,
not just job titles.
• Team memberships boost morale, and increase
enthusiasm and task involvement.

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COMMON ORGANIZATIONAL STRUCTURES 8.2

Network Structures
•Consist of a central core with networks of relationships
with contractors
•Contractors and network partners supply essential
services

Figure 8.6 How Do Network

Structures Take Advantage of
Strategic Alliances and
Outsourcing?

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COMMON ORGANIZATIONAL STRUCTURES 8.2

Network Structures
Possible advantages of network structures
• Lower costs due to fewer full-time employees.
• Better access to expertise through specialized alliance
partners and contractors.
• Easy to grow or shrink with market conditions.

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COMMON ORGANIZATIONAL STRUCTURES 8.2

Network Structures
Virtual Organizations
•Network that depends on information technology to link
alliances

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COMMON ORGANIZATIONAL STRUCTURES 8.2

Study Guide for Takeaway 8.2

Rapid Review:
• Functional structures group together people using similar skills to perform
similar activities.
• Divisional structures group together people who work on a similar product,
work in the same geographical region, or serve the same customers.
• A matrix structure uses permanent cross-functional teams to try to gain the
advantages of both the functional and divisional approaches.
• Team structures make extensive use of permanent and temporary teams,
often cross-functional ones, to improve communication, cooperation, and
problem solving.
• Network structures maintain a staff of core full-time employees and use
contract services and strategic alliances to accomplish many business needs.

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COMMON ORGANIZATIONAL STRUCTURES 8.2

Study Guide for Takeaway 8.2

Questions for Discussion:
1. Why use functional structures if they are prone to
functional chimneys problems?
2. Could a matrix structure improve performance for an
organization familiar to you?
3. How can the disadvantages of group decision making
hurt team structures?

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COMMON ORGANIZATIONAL STRUCTURES 8.2

Be Sure You Can…for Takeaway 8.2

• compare the functional, divisional, and matrix
structures.
• draw charts to show how each structure might be
used in a business.
• list advantages and disadvantages of each structure.
• explain the functional chimneys problem.
• describe how cross-functional and project teams
operate in team structures.
• illustrate how an organization familiar to you might
operate as a network structure.
• list advantages and disadvantages of the network
approach to organizing.
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ORGANIZATIONAL DESIGN TRENDS 8.3

Takeaway 8.3 – answers to come

• Organizations are becoming flatter, with fewer levels
of management.
• Organizations are increasing decentralization.
• Organizations are increasing delegation and
empowerment.
• Organizations are becoming more horizontal and
adaptive.
• Organizations are using more alternative work
schedules.

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 ORGANIZATIONAL DESIGN TRENDS 8.3

Organizational Design
Aligns structure to best accomplish
mission and respond to external
environment
Span of control
How many people report to a manager?
• Narrow
• manger supervises few people
• Wide
• manger supervises larger
number of people
• flatter organizations have wide
span of control
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ORGANIZATIONAL DESIGN TRENDS 8.3

Decentralized Decision Making

Centralization
• Top management keeps strong decision-making
control.
Decentralization
• Decision making is distributed throughout the
organization.

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ORGANIZATIONAL DESIGN TRENDS 8.3

Increased Delegation
Delegation
•Giving others the right to make decisions and take action

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ORGANIZATIONAL DESIGN TRENDS 8.3

Empowerment
• A way of unlocking talent and motivation so that
people can act in ways that make a performance
difference
• Gives people freedom to make decisions about how
they work
• Gives people the freedom to contribute ideas, make
decisions, show initiative, and do their jobs in the
best possible ways.
• When delegation is done well it leads to
empowerment

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ORGANIZATIONAL DESIGN TRENDS 8.3

Horizontal and Adaptive Organizations

Bureaucracy
Formal authority
• Rules
• Order
• Fairness
Mechanistic Designs
• Bureaucratic
• Centralized
A bureaucracy emphasizes formal
• Vertical structure authority, rules, order, fairness, and efficiency.

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ORGANIZATIONAL DESIGN TRENDS 8.3

Horizontal and Adaptive Organizations

Figure 8.7 What Are the Major Differences Between

Mechanistic and Organic Organizations Designs?

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ORGANIZATIONAL DESIGN TRENDS 8.3

Alternative Work Schedules

Alternative schedules increase flexibility and increase
satisfaction for employers and employees
• Compressed workweek
• Flextime
• Job sharing
• Telecommuting

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ORGANIZATIONAL DESIGN TRENDS 8.3

Study Guide for Takeaway 8.3

Rapid Review:
• Organizations are becoming flatter—having fewer management
levels, combining decentralization with centralization, and using
more delegation and empowerment.
• Mechanistic organizational designs are vertical and bureaucratic;
they perform best in stable environments with mostly routine
and predictable tasks.
• Organic organizational designs are horizontal and adaptive; they
perform best in change environments requiring adaptation and
flexibility.
• Organizations are using alternative work schedules such as the
compressed workweek, flexible working hours, and job sharing.
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ORGANIZATIONAL DESIGN TRENDS 8.3

Study Guide for Takeaway 8.3

Questions for Discussion:
1. Is “empowerment” just a buzzword, or is it something
that can really make a difference in organizations
today?
2. Knowing your personality, will you fit in better with an
organization that has a mechanistic or an organic
design?
3. How can alternative work schedules work to the
benefit of both organizations and their members?

Copyright © 2018 John Wiley & Sons, Inc. 40

ORGANIZATIONAL DESIGN TRENDS 8.3

Be Sure You Can... Takeaway 8.3

• illustrate the link between tall or flat organizations and
spans of control
• explain how decentralization and centralization can
work together
• list the three steps in delegation
• differentiate mechanistic and organic organizational
designs
• differentiate compressed workweek, flexible working
hours, and job sharing
• list advantages and disadvantages of telecommuting

Copyright © 2018 John Wiley & Sons, Inc. 41

Copyright
Copyright © 2018 John Wiley & Sons, Inc.
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or from the use of the information contained herein.

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