Engineering Management

Lesson No. 7 – Organizing (Basic

Elements of an Organizational
Structure) (continuation)
 Elements of Organizational
Structure
1. Job Design. The assignment of tasks and responsibilities
that define the jobs of individuals and units.
2. Departmentalization. The clustering of individual
positions into units and of units into departments and
larger units to form an organizations hierarchy.
3. Vertical Coordination. Top to bottom coordination such
as number of persons reporting to a supervisor and
degree of delegation of authority.
4. Horizontal Coordination. Linkages across departments,
such as taskforces and interdepartmental teams.
VERTICAL COORDINATION
 It is the linking of activities at the top of
the organization with those at the
middle and lower levels in order to
achieve organizational goals.
 Without vertical coordination, the
various parts of the organization have
difficulty working effective together.
 Means of Achieving Effective
Vertical Coordination

 Formalization
 Span of Management (Span of control)
 Formalization
 It is the degree to which written policies,
rules, procedures, and other documents
specify what actions are (or are not) to be
taken under a given set of circumstances.
 Most organizations rely on at least some
means of formalization.
 Example: Major students organization are
likely to have written policies about basic
qualification for office, as well as procedures
governing how elections should be conducted.
 Span of Management (Span of
Control)
 It is the number of subordinates who report directly to a
specific manager
 It directly influences the number of levels of hierarchy
in an organization.
 Types of Organizational Structure Based on Level of
Hierarchy and Span of Control:
 Tall Structure

 It is one that has many hierarchical levels and

narrow span of control.

 Flat Structure

 It is one that has few hierarchical levels and wide

span of control
 If one wanted to reduce the number of
hierarchical level in an organization, the only
way to do it without reducing the number of
employees at the bottom would be in increase
spans of control.
 When average spans of control in an
organization are narrow, the organization most
likely is a tall structure.
 Tall organizations raise administrative overhead
(because more managers to be paid, given office
space, etc), slow communication and decision
making (because of many levels), difficult to
pinpoint responsibility and encourage dull or
routing jobs.
 Due to such problems with tall structures, many
companies have recently been downsizing, the
process of significantly reducing the layers of
middle management, increasing the span of
control, and shrin-king the size of the work force
for purposes of improving organizational efficiency
and effectiveness.
 Synonymous with downsizing is restructuring,
the process of making a major change in
organization structure. It involves reducing
management levels and changing some major
components of the organization.
 Centralization versus
Decentralization
 To foster vertical coordination, managers also
need to consider appropriate level of
centralization, the extent to which power
and authority are retained at the top
organizational levels.
 The opposite of centralization is
decentralization, the extent to which power
and authority are delegated to lower levels.
 Centralization and decentralization form a
continuum, with many possible degrees of
delegation of power and authority in between.
The extent of centralization affects vertical
coordination by influencing the amount of
decision making at the upper and lower levels.
 Centralization has several positive aspects. If all
major decisions are made at the top levels, it can
be easier to coordinate the activities of various
units and individuals. It can also promotes strong
leadership in an organization because much of
the power remains at the top.
 Decentralization has also major
advantages. Encouraging decision making at
lower levels tends to ease the heavy
workloads of executives, leaving them more
time to focus on major issues. It also enriches
the jobs of lower level employees by offering
workers the challenge associated with making
significant decisions that affect their work.
 Then he thought, what the hell am I doing? "I'm too old for
this kind of thing" and pulled over to the side of the road, and
waited for the Police car to catch up with him.
 The Policeman pulled in behind the Porsche and walked up on
the driver's side.
 "Sir, my Shift ends in five minutes and today is Wednesday 22
November a day before Thanksgiving "If you can give me a
good reason that I've never heard before as to why you were
speeding, I'll let you go.“
 The man looked back at the Policeman and said,
 "Last week my wife ran off with an American Policeman and I
thought you were bringing her back.“
 The Policeman said, "Have a nice day, sir"
 Delegation
 Another means of vertical coordination
that is closely related to the
centralization-decentralization issue is
delegation.
 Situational Example of an
Inadequate Delegation
 Supposed that you have just become the
manager of a restaurant that is part of a
chain. Let’s assume that you are one of
the tenth restaurant managers who report
to a district manager. When you take over
as restaurant manager, you probably
expect to be assigned responsibility, the
obligation to carry out duties and achieve
goals related to a position.
 For example, you might have responsibility of
keeping the restaurant open during certain
hours, seeing that food is served, making
sure the customers are satisfied, and
achieving a certain profit margin. You
probably also expect to be given authority,
the right to make decisions, carry out actions
and direct others in matters related to the
duties and goals of a position.
 For example, as the restaurant manager, you
might expect to have the authority over
employees, assign work, and order the food
and supplies necessary to keep things
running smoothly. You would expect the
position to involve accountability,
requirement to provide satisfactory reasons
for significant deviations from duties or
expected results.
 Let us go further, suppose you soon found
out that when you attempted to make
decisions, such as hiring a new worker, the
district manager tended to interfere and even
frequently reversed your decisions. Yet, when
the end of the month came and you had not
achieved your expected profit margin (largely
because of the interference from the district
manager), the district manager still held you
accountable for the shortfall in profit.
 Under this set of circumstances, you might
correctly conclude that you had been given the
responsibility but not the authority needed to do
the job.
 In this situation, the district manager failed to
engage in adequate delegation, the assignment
of part of a manager’s work to others, along with
both the responsibility and the authority
necessary to achieve expected results.
 Delegation involves moving decision making
authority and responsibility from one level of
the organization to the next lower level.
 Delegation is important to vertical
coordination because it allows the hierarchy
to be both more efficient and more effective
by enabling work to be done at the lowest
level possible.
 Although even classical theorists placed
considerable emphasis on the need to
delegate, many managers still find
delegation difficult. Some managers are
reluctant to delegate because they fear
blame if subordinate fail, believe they lack
the time to train subordinates, or wish to
hold on to their authority and power.
 In the case of 1-800-FLOWERS, John McCann
says his biggest challenge has been learning to
delegate. For various periods of time he was the
best designer, the best telephone representative,
and the best delivery person because he was the
only one doing these jobs As the business began
to grow, he realized it would be advantageous to
hire people because there were things he could
do that they couldn’t. Now he says he has
people doing every job who are “probably doing
10 times better than I ever could have done.
You have to make the transition to bring other
people on board,” he notes.
 How to Be a
More Effective Delegator
1. Trust your staff to do a good job
2. Avoid seeking perfection
3. Give effective instructions
4. Know your true interests
5. Follow up on progress

Adapted from Exhibit 11.7

 How to Be a
More Effective Delegator
6. Praise the efforts of your staff
7. Don’t wait until the last minute to
delegate
8. Ask questions, expect answers and
assist employees
9. Provide sufficient resources
10. Delegate to the lowest possible level
Adapted from Exhibit 11.7
Line and Staff Positions
 Another issue related to vertical coordination
is the configuration of line and staff positions.
A line position is a position that has
authority and responsibility for achieving the
major goals of the organization. A staff
position is a position whose primary purpose
is providing specialized expertise and
assistance to line positions (e.g.,
administrative assistant to a division head).
 The position and related departments that are
considered either line or staff vary with the type
of organizations.
 For example:
 In a grocery chain, line department might be store
operations, pharmacy operations, and food operations
(directly related to major organizational goals), while
staff departments might be human resources and
consumer affairs (more indirectly related to major
goals). In manufacturing organizations, production
and sales are typically considered line departments,
while purchasing and accounting are normally a staff
department.
 The usefulness of the distinction between
line and staff departments becomes more
clear when one considers the differences
between line authority and staff authority.
 Line departments have line authority,
which is the authority that follows the
chain of command established by formal
hierarchy.
 Staff departments have functional authority,
which is the authority over the others in the
organization in matters related directly to their
respective function.

 For example: LINE AND STAFF DEPARTMENTS

OF A BANK (Shown Below)
 In the structure of a bank shown, the line
departments receive their authority through the
chain of command connected to the president. The
bank’s staff departments have functionality authority
in relation to the other departments, that is,
authority only in their area of staff expertise. Staff
departments facilitates vertical coordination by
making their considerable expertise available where
it is needed, rather than following the strict chain of
command.
LINE AND STAFF
DEPARTMENTS OF A BANK

PRESIDENT
STAFF SERVICES
INFORMATION SYSTEM
HUMAN RESOURCES
FINANCE
LEGAL
ADMINISTRATIVE SERVICES

VICE PRESIDENT VICE PRESIDENT VICE PRESIDENT VICE PRESIDENT VICE PRESIDENT
OPERATIONS MARKETING INVESTMENTS TRUST LOANS
 METHODS OF HORIZONTAL
COORDINATION
 Suppose that you purchased a television set at a
large department store with the understanding
that the TV would be delivered within 3 days but
the set failed to arrive on time. Imagine that when
you called to inquire about the delay, your call was
passed up the hierarchy until you were talking with
a vice president of the department store. You
would probably began to wonder about an
organization in which a vice president is drawn to
what should have been a routine transaction
between sales and shipping.
 If such a problem had to be handled
vertically, organizations would quickly
become paralyzed.
 Instead, most organizations takes steps
to facilitate horizontal coordination,
the linking of activities across
departments at similar levels.
 Horizontal coordination provides an additional
means of processing information in organizations.
It was argued that the more organizations need
to process information in the course of producing
their products or services, the more method of
horizontal coordination they need to use.
 Organizations typically need to process more
information when they face complex and/or
changing technology, environmental uncertainty,
and growing size.
 For example:
 When William H. Wilson founded the Pioneer/Eclipse
Corporation, a small company that specializes in floor-
cleaning systems, he was able to provide most of the
necessary coordination himself within a traditional
functional structure. As the company grew larger and more
complex, it began to lose money because of insufficient
horizontal coordination. In one situation, the sales
department launched a promotion only to find that
manufacturing and purchasing knew nothing about it and
had insufficient materials and stock on hand to fill orders.
In another instance, the credit department denied credit to
a major account before the sales department could resolve
the conflict more amicably. “The left hand,” says one
observer, “did not know what the right hand is doing.”
 Because horizontal coordination facilitates
processing information across the organization,
it also helps promote innovations. There are
three reasons for this:
 New ideas are more likely to emerge when a
diversity of views are shared.
 Awareness of problems and opportunities across
areas can spark creative ideas.
 Involving other in the development of ideas often
positively influences their willingness to help
implement new ideas.
Useful means in promoting
Horizontal Coordination are:
 Slack Resources
 One interesting means of supporting
horizontal coordination is the use of
slack resources, a cushion of
resources that facilitates adaptation to
internal and external pressures, as well
as initiation of changes.
 For Example:
 In your family, a slack resource might be
an extra car, an extra television set or your
own telephone line. Through coordination
and tighter programming of mutual
schedules, your family might be able to get
by with less, but doing so would take more
effort and might hinder quick changes in
plans.
 Because organizations face similar
choices, they too, often use slack
resources, such as extra people, time,
equipment, and inventory, to reduce
the need for constant coordination
among units and to provide some
latitude in how resources are used.
 Information System
 Another important and growing means
of horizontal coordination is the use of
information systems, particularly
computerized ones, to coordinate
various parts of organizations.
 For Example:
 Because of its far flung international operations and its
use of divisional structures, Citicorp experience
horizontal coordination difficulties. The company was
frequently embarrassed when client of one of Citicorp
unit would use the service of other units, perhaps even
in other parts of the world, and receive conflicting
advice. Even when the advice did not actually conflict,
the fragmented guidance offered to clients did not
maximize Citicorp’s capacity to provide good service. The
solution, Citicorp greatly enhances the ability of various
departments to exchange information by instituting a
new computerized conference system. Called
PARTICIPATE, the system allows offices around the
world to communicate and coordinate their efforts
quickly.
 Lateral Relations
 Another approach to horizontal coordination
that is increasingly being used is lateral
relations. It is the coordination of efforts
through communicating and problem solving
with peers in other departments or units,
rather than referring most issues up the
hierarchy for consideration.
 Major means of Lateral
Relations:
 Direct Contact – communication between two or more
persons at similar levels in different work units for
purposes of coordinating work and solving problems.
 Liaison Roles – is a role to which specific individual is
appointed to facilitate communication and resolution of
issues between two or more departments.
 Task Forces and Teams
 Task Force – is a temporary interdepartmental group
usually formed to make recommendations on a specific
issue.
 Teams – are either temporary or ongoing groups that are
expected to solve the problems and implement solution
related to a particular issue or area.
 Managerial Integrators – is a separate manager
who is given the task of coordinating related work that
involves several functional departments.
 Such managers typically have titles like Project
Managers, Product Managers or Brand Managers and
are not members of any of the different department
whose activities they help coordinate.
 Project Managers – coordinate projects until its
completion.
 Product Managers – coordinate launching of new
products.
 Brand Managers – coordinates efforts regarding
particular brand-name products.