Organization Design

Chapter 15
 Organization Structure
 Definition: It is how job tasks are formally divided, grouped and coordinated.

Work Specialization
 Also known as Division of Labor – This is to describe the degree to which
activities in organization are divided into separate jobs.
 Organization Structure
Work Specialization:
Ford Automobiles – every worker’s assigned a specific, repetitive task. They divide the job
into small standardized tasks that could be performed over and over. Ford was able to
produce a car every 10 seconds using employees who had very limited skills

Departmentalization
This is when jobs are divided through work specialization and
they must be grouped so common tasks can be coordinated.
 Organization Structure
Chain of Command
 This is the unbroken line of authority that extends from the top of the organization
to the lowest echelon and clarifies who reports them
 Authority – refers to the rights inherent in a managerial position to give orders and
expect them to be obeyed
 Principle of Unity of Command – the person should have one and only one superior
to whom she is directly responsible
 Organization Structure
Span of Control
 This is important because it largely determines the number of levels and managers
an organization creates.
 Narrow or Small Span Advantages – Manager
 can maintain control
 Wide Span Advantages – Lower cost
 Organization Structure
Centralization and Decentralization
 Centralization refers to the degree which decision making is concentrated at a
single point in the organization.
 In a centralized organization, upper management makes all decisions and lower
management is there to carry those decisions out.
 In a decentralized organization, employees are empowered to make decisions, so
action can be taken quickly to solve problems, and employee input is considered.
 Organization Structure
Formalization
 refers to the degree to which jobs within the organization are standardized.
 An employee in a highly formalized job has little input as to how that job is done, when it’s
done or how it should be done.
 Example:
 worker on the assembly line is probably in a highly formalized job, where he doesn’t have much
say in how he does his job.
 accounts payable associate also doesn’t have a lot of say in how those many invoices are
processed, but her job is probably a little less formalized than the assembly line worker.
 Common Organizational Designs
Simple Structure
-basic organizational design structure with low departmentalization, little work
specialization, wide spans of control, centralized authority (typically the owner
has most of the power) and little formalization or rules that govern operation.
 Common Organizational Designs
Bureaucracy
 This is characterized by highly routine operating 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.
 Common Organizational Designs
Matrix Structure
 The matrix organizational structure is a combination of two or more types of organizational
structures. The matrix organization is the structure uniting these other organizational
structures to give them balance.
 Pros - it allows the sharing of highly skilled resources between functional units and projects
 Cons - There can be some confusion when
a team member is subject to two managers.
That can also create unnecessary conflict.
 New Design Options
Virtual Organization
 Also known as Network or Modular
 A small, core organization that outsources its major business functions.
 Advantage: Flexibility, improved employee efficiency, access to new markets
 Disadvantages: Reputational risks, security and compliance issues
 New Design Options
Boundaryless Organization
 lack of structures and an approach to business that is based on the free flow of
information and ideas to drive innovation, efficiency and growth in a world that’s
constantly changing.
 Seeks to remove vertical, horizontal and external barriers so that employees,
managers, customers, and suppliers can work together, share ideas, and identify the
best course for the organization
 New Design Options
The Learner Organization: Downsizing
 Downsizing - reduction in organizational size and operating costs implemented
by management in order to improve organizational efficiency, productivity
and/or the competitiveness of the organization.
 This affects the work processes of an organization since the end result of the
downsizing is typically fewer people performing the same workload that
existed before the downsizing took place
 New Design Options
Effective Strategies for Downsizing
1. Investment – Companies that downsize to focus on core competencies are more
effective when they invest in high-involvement work practices afterward.
2. Communication – When employees make effects to discuss downsizing with employees
early, employees are less worried about the outcomes and feel the company is taking
their perspective into account.
3. Participation – Employees worry less if they can participate in the process in some
way.
4. Assistance – Provide assistance to make employees feel that the company cares.
 Why Do Structures Differ?
Mechanic Model
 High specialization
 Rigid Departmentalization
 Clear Chain of Command
 Narrow Spans of Control
 Centralization
 High Formalization
 Why Do Structures Differ?
Organization Model
 Cross-functional teams
 Cross-hierarchal teams
 Free flow of information
 Wide spans of control
 Decentralization
 Low Formalization
 Organizational Strategies
 Innovation Strategy - Strives to achieve meaningful and unique innovations

 Cost-minimization Strategy - aims to achieve the most cost-effective way of

delivering goods and services to the require level of quality.

 Imitation Strategy - imitation strategy try to both minimum risk and minimize
opportunity for profit, moving new products or entering new market only after
innovators have proven their viability
 Organization Structure
 Organization Size significantly affects its structure. More people, there should be
more rules and regulation.
 Technology – describes the way an organization transfers inputs into outputs
 Environment – this includes outside institutions, or forces than can affect the
performance.
 Organization Structure
 Three dimensions of Organization’s Environment
 Capacity - the degree to which the environment can support
growth
 Volatility – the degree of instability in the environment
 Complexity – degree of heterogeneity and concentration
among environmental environments
 Organizational Designs and Employee
Behavior
 Work Specialization – Contributes to higher employee productivity, but it reduces
job satisfaction.
 The Benefits of Specialization have decreased rapidly as employees seek more
intrinsically rewarding jobs
 The effect of Span of Control on employee performance is contingent upon
individual differences and abilities, task structures and other organizational factors