Chapter 5

Organizational structure, design,

and change
HNDBA
BA2205: Organization Change and Development
 Learning outcomes

• To understand meaning of organizational structure

• To understand dimensions of organizational structure
• To understand influences on organizational structure
• To understand the organizational structure and change
• To understand the techno structural interventions

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 The meaning of organization structure

• The established pattern of

relationship between the component
parts of an organization, outlining
both communication, control and
authority patterns.

• Structure distinguishes the parts of

an organization and delineates the
relationship between them.

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The meaning of organization
structure cont.…

• The formal pattern of

interactions and coordination
designed by management to
link the tasks of individuals and
groups in achieving
organizational goals
Bartol and Martin (1994)

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 The meaning of organization structure
cont.…

• In other words, the work and the people who will manage and do it
must be structured if chaos is not to ensue.

• The allocation of responsibilities, the grouping of workers’ activities

and the coordination and control of these are all basic elements of
what is called an organization’s structure, which is in essence the
social structuring of people and processes.

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The meaning of organization structure
cont.…...

• The structure of an organization is the formal way of

identifying,
- Who is to take responsibility for what
- Who is to exercise authority over whom
- Who is to be answerable to whom.

• The structure is a hierarchy of managers and is the

source of authority, as well as the legitimacy of
decisions and actions.
Stacey (2003)
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The dimensions of structure

• Pugh, Hickson, Hinings

and Turner (1969)
identified the following six
primary dimensions of
organizations structure.

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…

1. Specialization
The number of different specialist
roles in an organization and their
distribution

2. Standardization
The number of regularly occurring
procedures that are supported by
bureaucratic procedures of
invariable rules and processes
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The dimensions of structure
cont.…

3. Formalization
The number of written rules,
procedures, instructions, and
communications.

4.Centralization
where authority lies in the hierarchy
to make decisions that have an
impact for the whole organization
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The dimensions of structure
cont.…

5. Configuration
The width and the height of the role
structure. The ‘shape’ of the organization,
how many layers there are and the number
of people who, typically, report to any one
person.

6. Traditionalism
How many procedure are ‘understood’
rather than having to be written down, how
commonly accepted is the notion of ‘the way
things are done around this organization’

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Models of structure

Bureaucracy
Weber specified several characteristics of the ideal
organization structure. The four major one are the following;

1. Specialization and division of labor

Work is finely divided between well-defined and highly
specialized jobs or roles

2. Hierarchical arrangement of positions

Roles are hierarchically arranged with a single chain of
command from the top of the organization to the bottom
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Models of structure

3. A system of impersonal rules

The incumbents of roles or positions carry out their duties
impersonally in accordance with clearly defined rules.

4. Impersonal relationships
Coordination of activities relies heavily on the use of rules,
procedures and written records and on the decision of the
lowest common superior to the people concerned

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 Models of
structure
• Other characteristics of a bureaucracy
identified by Weber are the selection of
officials solely based on technical
qualifications, appointment not an
election, remuneration by fixed salaries
with a right to pensions, only under
certain conditions can the employing
authority terminate employment, the
employee can leave at any time, a system
of promotion according to seniority or
achievement or both.

Weber, M. (1947)

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Models of structure
cont.….

• A continuous organization of official functions bound by rules

• A specified sphere of competence

differentiation of function, the organization of offices (positions),
follows the principle of hierarchy

• The separation of members of the administrative staff from

ownership of production or administration, no appropriation of his/
her official position by the incumbent

• Administrative acts, decisions and rules are formulated and

recorded in writing, even in cases where oral discussion is the rule
or is even mandatory HNDBA - BA2205 14
 Models of
structure

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by function

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Advantages and disadvantages of functional structures

Advantages

• Departmentalization by function has advantages in the logical mirroring of the basic

functions of business. Each function has its high-level representative to guard on interests.
Tight control is possible at the top. It encourage the development of specialist skills and
experience and provides a career structure within the function

• Training can be organized relatively easily along specified lines. In organizations where
technical skill gives competitive advantage, the functional structure can enhance this

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Advantages and disadvantages of functional structures

Disadvantages

• The advantages of a functional structure to small and medium-sized organization become

disadvantages as organization grow and diversify products or services or locate in
geographically distant places.
• These can be delays as one function waits for another to complete its work and
coordination of activities across functions can be difficult
• Functionalization sometimes encourages narrowness of viewpoint and works against the
development of innovation, which requires corporation from a number of sources
• Functional structures limit the opportunity for the development of general managers

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 Based on the factors suggested by
Cummings and Worley 2005

• Stable and certain environment

Contingency • Small and medium size
factors • Routine technology: interdependence
with functions
• Goal of efficiency and technical
quality

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by product or service

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Advantages and disadvantages of
departmentalization by product or services
Advantages
• Departmentalization of product or service has
advantages of maximizing the use of employees’ skills
and specified knowledge. Staff is able to work more
than with a strictly functional structure.
• For instance, building designers may be specialized in
factory design or design from homes.
• Salespeople, in particular, can concentrate on
developing expertise in just one mange of the products
• There is more opportunity for innovative ideas for new
or modified products

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Advantages and disadvantages of
departmentalization by product or services

• Product differentiation facilitates the use of specialized

capital and equipment
• Product divisions can be made cost concern
• Differentiation by-product makes it is easier to concentrate
on different classes of customer, particularly when different
products coincide with different customer groups
• Where a product division has its own set of business
functions these can be coordinated towards the product
markets.
• Finally, this type of structure offers good opportunities for
training of general managers

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Advantages and disadvantages of
departmentalization by product or services
Disadvantages

• There can be overlap of functions from one product division to

another, that is duplication of central service and other staff
activities
• Overall administration costs tend to be higher than in pure
functional structures
• Where business functions are not wholly developed, product-
based divisions are ‘top sliced’ to provide resources for more
centralized functions
• This can be felt by product line managers as burdensome
overloads
• Top management may have more difficulty in controlling what
happens at the product divisional level
• Coordinating policy and practices across product areas can be
complex HNDBA - BA2205 23
Matrix organization

• The essence of a matrix structure is that a set of department or divisions is

superimposed, horizontally, across a traditional hierarchically organized structure.
• Thus, the structure is functionally designed in terms of its vertical axis, but designed
on some other principle (product, customer, region) in terms of its horizontal axis.
• Matrix structures rely heavily on teamwork for their success, with managers needing
high level behavioral and people management skills.
• The focus is on solving problems through team action.
• In a matrix structure, team members are managed simultaneously by two different
managers – one is their functional line manager and the other one is team or project
leader.

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Advantages and disadvantages of matrix structure

Advantages
• With a matrix organizational design decisions can be decentralized to the
functional and divisional project level managers
• This facilitates speed of operation and decision making
• There is increased flexibility in being able to form and re-form cross functional
teams according to business priorities
• These teams can monitor their own business environment and more quickly to
adapt to change in them
• Staff belonging to functional departments have the opportunity of working with
staff from those functional departments, yet maintain their alliance and
information sharing with their own professional grouping
• Through allocating functional staff to one or more projects on a permanent or
semi-permanent basis, loyalties to the projects are built.
• Matrix structures allow for flexible use of human resources and the efficient use of
support systems
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Advantages and disadvantages of matrix structure
Disadvantages
• Matrix structure are complex and, because they add a layer of
project managers can be administratively expensive
• There can be confusion over who is ultimately responsible for staff
and project outcomes, particularly if things go wrong
• The arrangement and need for enhanced communications
between the ‘arms’ of the matrix can increase the potential for
conflict, particularly between the functional and project managers
• Staff may have to juggle their time between different projects or
divisions and project managers may make competing demands on
staff who work across more than one team
• The emphasis on group decision making could increase the time to
respond to change
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 • Focus on unique product demands and
technical specialization
• Pressure for high information – processing
Contingencie capacity
s • Pressure for shared resources
• Divided loyalties between two or more
managers

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The virtual organization
• The virtual organization is a temporary network of
companies that come together quickly to exploit
fast-changing opportunities
• Different from traditional mergers and acquisitions,
the partners in the virtual organization share costs,
skills, and access to international markets
• Each partner contributes to the virtual organization
what it is best at

Luthans, (1995)

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