Organization

Organization Structure
Structure

15-1
Organizational
Organizational Structure
Structure and
and design
design

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What
What IsIs Organizational
Organizational Structure?
Structure?
 Organizational Structure
– How job tasks are formally divided, grouped, and
coordinated
– Key Elements:
1. Work specialization
2. Departmentalization
3. Chain of command
4. Span of control
5. Centralization and decentralization
6. Formalization

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1.
1. Work
Work Specialization
Specialization
 The degree to which tasks in the organization are
subdivided into separate jobs
 Division of Labor
– Makes efficient use of employee skills
– Increases employee skills through repetition
– Less between-job downtime increases productivity
– Specialized training is more efficient
– Allows use of specialized equipment
 Can create greater economies and efficiencies – but not
always…

E X H I B I T 15-1
E X H I B I T 15-1

15-4
2.
2. Departmentalization
Departmentalization
 The basis by which jobs are grouped together
 Grouping Activities by:
– Function
– Product
– Geography
– Process
– Customer

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3.
3. Chain
Chain of
of Command
Command
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
 Authority
– The rights inherent in a managerial position to give orders
and to expect the orders to be obeyed
 Unity of Command
– A subordinate should have only one superior to whom he or
she is directly responsible

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4.
4. Span
Span of
of Control
Control

The number of subordinates a manager can efficiently and effectively direct

– Wider span of management
control increases
organizational efficiency
– Drawbacks of narrow span of
control:
• Expense of additional layers of
management
• Increased complexity of vertical
communication
• Encouragement of overly tight
supervision and discouragement
of employee autonomy
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5.
5. Centralization
Centralization and
and Decentralization
Decentralization
 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.

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6.
6. Formalization
Formalization
The degree to which jobs within the organization are
standardized.
– High formalization
• Minimum worker discretion in how to get the job done
• Many rules and procedures to follow
– Low formalization
• Job behaviors are nonprogrammed
• Employees have maximum discretion

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Common
CommonOrganization
OrganizationDesigns:
Designs:Simple
SimpleStructure
Structure
 Simple Structure
– A structure characterized by a low degree of
departmentalization, wide spans of control, authority
centralized in a single person, and little formalization

E X H I B I T 15-4
E X H I B I T 15-4

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 Common
CommonOrganizational
OrganizationalDesigns:
Designs:Bureaucracy
Bureaucracy
 Bureaucracy
– A structure of 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

Strengths
–Results in economies of scale
–Minimum duplication of
personnel and equipment
–Enhanced communication
–Centralized decision making
Weaknesses
–Subunit conflicts with
organizational goals
–Obsessive concern with rules
and regulations
–Lack of employee discretion to
deal with problems
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Common
Common Organizational
Organizational Designs:
Designs: Matrix
Matrix
Matrix Structure
– A structure that creates dual lines of authority and combines
functional and product departmentalization
 Key Elements
– Gains the advantages of functional and product
departmentalization while avoiding their weaknesses
– Facilitates coordination of complex and interdependent
activities
– Breaks down unity-of-command concept

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New
New Design
Design Options:
Options: Virtual
Virtual Organization
Organization
– A small, core organization
that outsources its major
business functions
• Highly centralized with
little or no
departmentalization
• Provides maximum
flexibility while
concentrating on what the
organization does best
• Reduced control over key
parts of the business

E X H I B I T 15-6
E X H I B I T 15-6

15-15
Four
Four Reasons
Reasons Structures
Structures Differ
Differ

1. Strategy
2. Organizational Size
3. Technology
4. Environment

SEE E X H I B I T 15-8
SEE E X H I B I T 15-8

15-14