Chapter 15

Foundations of
Organization Structure

ORGANIZATIONAL BEHAVIOR
S T E P H E N P. R O B B I N S
E L E V E N T H E D I T I O N
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 What
What Is
Is Organizational
Organizational Structure?
Structure?

Organizational Structure
How job tasks are formally
divided, grouped, and Key
KeyElements:
Elements:
coordinated. • • Work
Workspecialization
specialization
• • Departmentalization
Departmentalization
• • Chain
Chainof
ofcommand
command
• • Span
Spanof
ofcontrol
control
• • Centralization
Centralizationand
and
decentralization
decentralization
• • Formalization
Formalization

© 2005 Prentice Hall Inc. All rights reserved. 15–2

 What
What Is
Is Organizational
Organizational Structure?
Structure? (cont’d)
(cont’d)

Work Specialization
The degree to which tasks in the organization are
subdivided into separate jobs.

Division
Divisionof
oflabor:
labor:
• • Makes
Makesefficient
efficientuse
useof
ofemployee
employeeskills
skills
• • Increases
Increasesemployee
employeeskills
skillsthrough
throughrepetition
repetition
• • Less
Lessbetween-job
between-jobdowntime
downtimeincreases
increasesproductivity
productivity
• • Specialized
Specializedtraining
trainingisismore
moreefficient.
efficient.
• • Allows
Allowsuse
useof
ofspecialized
specializedequipment.
equipment.

© 2005 Prentice Hall Inc. All rights reserved. 15–3

 What
What Is
Is Organizational
Organizational Structure?
Structure? (cont’d)
(cont’d)

Departmentalization
The basis by which jobs are grouped together.

Grouping
GroupingActivities
ActivitiesBy:
By:
•• Function
Function
•• Product
Product
•• Geography
Geography
•• Process
Process
•• Customer
Customer

© 2005 Prentice Hall Inc. All rights reserved. 15–4

 What
What Is
Is Organizational
Organizational Structure?
Structure? (cont’d)
(cont’d)
Authority
The rights inherent in a managerial position to give
orders and to expect the orders to be obeyed.

Chain of Command
The unbroken line of authority that extends from the
top of the organization to the lowest echelon and
clarifies who reports to whom.

Unity of Command
A subordinate should have only one superior to
whom he or she is directly responsible.
© 2005 Prentice Hall Inc. All rights reserved. 15–5
 What
What Is
Is Organizational
Organizational Structure?
Structure? (cont’d)
(cont’d)
Span of Control
The number of subordinates a manager can efficiently
and effectively direct.

Concept:
Concept:
Wider
Widerspans
spansof
ofmanagement
managementincrease
increaseorganizational
organizational
efficiency.
efficiency.

Narrow
NarrowSpan
SpanDrawbacks:
Drawbacks:
• •Expense
Expenseof
ofadditional
additionallayers
layersof
ofmanagement.
management.
• •Increased
Increasedcomplexity
complexityof
ofvertical
verticalcommunication.
communication.
• •Encouragement
Encouragementofofoverly
overlytight
tightsupervision
supervisionand
and
discouragement
discouragementof
ofemployee
employeeautonomy.
autonomy.
© 2005 Prentice Hall Inc. All rights reserved. 15–6
 What
What Is
Is Organizational
Organizational Structure?
Structure? (cont’d)
(cont’d)

Centralization
The degree to which decision making is
concentrated at a single point in the organization.

Decentralization
The degree to which decision making is spread
throughout the organization.

Formalization
The degree to which jobs within the organization are
standardized.

© 2005 Prentice Hall Inc. All rights reserved. 15–7

 Common
Common Organization
Organization Designs
Designs

Simple Structure
A structure characterized by a low degree of
departmentalization, wide spans of control, authority
centralized in a single person, and little
formalization.

© 2005 Prentice Hall Inc. All rights reserved. 15–8

 Common
Common Organization
Organization Designs
Designs (cont’d)
(cont’d)

Bureaucracy
A structure of highly operating routine tasks
achieved through specialization, very formalized
rules and regulations, tasks that are grouped into
functional departments, centralized authority,
narrow spans of control, and decision making that
follows the chain of command.

© 2005 Prentice Hall Inc. All rights reserved. 15–9

 The
The Bureaucracy
Bureaucracy
 Strengths  Weaknesses
– Functional – Subunit conflicts with
economies of scale organizational goals
– Minimum duplication – Obsessive concern
of personnel and with rules and
equipment regulations
– Enhanced – Lack of employee
communication discretion to deal
– Centralized decision with problems
making

© 2005 Prentice Hall Inc. All rights reserved. 15–10

 Common
Common Organization
Organization Designs
Designs (cont’d)
(cont’d)

Matrix Structure
A structure that creates dual lines of authority and
combines functional and product departmentalization.

Key
KeyElements:
Elements:
++Gains
Gainsthe
theadvantages
advantagesof
offunctional
functionaland
andproduct
product
departmentalization
departmentalizationwhile
whileavoiding
avoidingtheir
theirweaknesses.
weaknesses.
++Facilitates
Facilitatescoordination
coordinationof
ofcomplex
complexand
and
interdependent
interdependentactivities.
activities.
––Breaks
Breaksdown
downunity-of-command
unity-of-commandconcept.
concept.

© 2005 Prentice Hall Inc. All rights reserved. 15–11

 New
New Design
Design Options
Options

Team Structure
The use of teams as the central device to coordinate
work activities.

Characteristics:
Characteristics:
• •Breaks
Breaksdown
downdepartmental
departmentalbarriers.
barriers.
• •Decentralizes
Decentralizesdecision
decisionmaking
makingto tothe
theteam
teamlevel.
level.
• •Requires
Requiresemployees
employeesto tobe
begeneralists
generalistsasaswell
wellas
as
specialists.
specialists.
• •Creates
Createsaa“flexible
“flexiblebureaucracy.”
bureaucracy.”

© 2005 Prentice Hall Inc. All rights reserved. 15–12

 New
New Design
Design Options
Options (cont’d)
(cont’d)

Virtual Organization
A small, core organization that outsources its major
business functions.
Highly centralized with little or no
departmentalization.

Concepts:
Concepts:
Advantage:
Advantage:Provides
Providesmaximum
maximumflexibility
flexibilitywhile
while
concentrating
concentratingon
onwhat
whatthe
theorganization
organizationdoes
doesbest.
best.
Disadvantage:
Disadvantage:Reduced
Reducedcontrol
controlover
overkey
keyparts
partsof
of
the
thebusiness.
business.

© 2005 Prentice Hall Inc. All rights reserved. 15–13

 New
New Design
Design Options
Options (cont’d)
(cont’d)

Boundaryless Organization
An organization that seeks to eliminate the chain of
command, have limitless spans of control, and
replace departments with empowered teams.

T-form
T-formConcepts:
Concepts:
Eliminate
Eliminatevertical
vertical(hierarchical)
(hierarchical)and
andhorizontal
horizontal
(departmental)
(departmental)internal
internalboundaries.
boundaries.
Breakdown
Breakdownexternal
externalbarriers
barriersto
tocustomers
customersand
and
suppliers.
suppliers.

© 2005 Prentice Hall Inc. All rights reserved. 15–14

 Why
Why Do
Do Structures
Structures Differ?
Differ?
Mechanistic Model
A structure characterized by extensive
departmentalization, high formalization, a limited
information network, and centralization.

Organic Model
A structure that is flat, uses cross-hierarchical and
cross-functional teams, has low formalization,
possesses a comprehensive information network, and
relies on participative decision making.

© 2005 Prentice Hall Inc. All rights reserved. 15–15

 Why
Why Do
Do Structures
Structures Differ?
Differ? –– Strategy
Strategy

Innovation Strategy
A strategy that emphasizes the introduction of major
new products and services.

Cost-minimization Strategy
A strategy that emphasizes tight cost controls,
avoidance of unnecessary innovation or marketing
expenses, and price cutting.

Imitation Strategy
A strategy that seeks to move into new products or
new markets only after their viability has already
been proven.
© 2005 Prentice Hall Inc. All rights reserved. 15–16
 Why
Why Do
Do Structures
Structures Differ?
Differ? –– Size
Size

Size
How the size of an organization affects its structure.
As an organization grows larger, it becomes more
mechanistic.

Characteristics
Characteristicsof
oflarge
largeorganizations:
organizations:
• •More
Morespecialization
specialization
• •More
Morevertical
verticallevels
levels
• •More
Morerules
rulesand
andregulations
regulations

© 2005 Prentice Hall Inc. All rights reserved. 15–17

 Why
Why Do
Do Structures
Structures Differ?
Differ? –– Technology
Technology

Technology
How an organization transfers its inputs into outputs.

Characteristics
Characteristicsof
ofroutineness
routineness(standardized
(standardizedor
or
customized)
customized)ininactivities:
activities:
• •Routine
Routinetechnologies
technologiesare
areassociated
associatedwith
withtall,
tall,
departmentalized
departmentalizedstructures
structuresand
andformalization
formalizationinin
organizations.
organizations.
• •Routine
Routinetechnologies
technologieslead
leadto
tocentralization
centralizationwhen
when
formalization
formalizationisislow.
low.
• •Nonroutine
Nonroutinetechnologies
technologiesare
areassociated
associatedwith
withdelegated
delegated
decision
decisionauthority.
authority.

© 2005 Prentice Hall Inc. All rights reserved. 15–18

 Why
Why Do
Do Structures
Structures Differ?
Differ? –– Environment
Environment

Environment
Institutions or forces outside the organization that
potentially affect the organization’s performance.

Key
KeyDimensions-
Dimensions-
• • Capacity:
Capacity:the
thedegree
degreeto
towhich
whichan
anenvironment
environmentcan
can
support
supportgrowth.
growth.
• • Volatility:
Volatility:the
thedegree
degreeof
ofinstability
instabilityininthe
theenvironment.
environment.
• • Complexity:
Complexity:the
thedegree
degreeof
ofheterogeneity
heterogeneityand
and
concentration
concentrationamong
amongenvironmental
environmentalelements.
elements.

© 2005 Prentice Hall Inc. All rights reserved. 15–19

 “Bureaucracy
“Bureaucracy Is
Is Dead”
Dead”
 Characteristics of  Why Bureaucracy
Bureaucracies Survives
– Specialization – Large size prevails.
– Formalization – Environmental
turbulence can be
– Departmentalization
largely managed.
– Centralization
– Standardization
– Narrow spans of control achieved through hiring
people who have
– Adherence to a chain of
undergone extensive
command.
educational training.
– Technology maintains
control.

© 2005 Prentice Hall Inc. All rights reserved. 15–20

 Organizational
Organizational Designs
Designs and
and Employee
Employee
Behavior
Behavior

Research
ResearchFindings:
Findings:
• • Work
Workspecialization
specializationcontributes
contributesto
tohigher
higheremployee
employee
productivity,
productivity,but
butititreduces
reducesjob
jobsatisfaction.
satisfaction.
• • The
Thebenefits
benefitsof
ofspecialization
specializationhave
havedecreased
decreasedrapidly
rapidlyas
as
employees
employeesseek
seekmore
moreintrinsically
intrinsicallyrewarding
rewardingjobs.
jobs.
• • The
Theeffect
effectof
ofspan
spanof
ofcontrol
controlon
onemployee
employeeperformance
performanceisis
contingent
contingentupon
uponindividual
individualdifferences
differencesand
andabilities,
abilities,task
task
structures,
structures,and
andother
otherorganizational
organizationalfactors.
factors.
• • Participative
Participativedecision
decisionmaking
makinginindecentralized
decentralized
organizations
organizationsisispositively
positivelyrelated
relatedto
tojob
jobsatisfaction.
satisfaction.

© 2005 Prentice Hall Inc. All rights reserved. 15–21