Organization Structure and

Design

1
The Organization Chart

Organization Chart
is a box-and-lines
illustration showing the
formal lines of authority
and the organization’s
official positions or
division of labor

2
Information in Organization Charts

The Vertical Hierarchy of

Authority: A glance up and
a glance down shows the
chain of command
The Horizontal
Specialization: A glance
to the left and right on the
line of an organization chart
shows the different jobs or
work specialization

3
Organization structure
 The fundamental and relatively
unchanging features of an
organization which are officially
sanctioned by those who control it
and consist of the way activities
and component parts are grouped ,
controlled and coordinated in order to
achieve specific aims and outcomes

4
Organization structure

How jobs tasks are formally divided, grouped

and coordinated
Structure is a means for attaining the objectives
and goals of an organization

5
 While a poor structure makes a high
performance impossible, the best
structure in the world will not ensure
good performance
Peter Drucker

6
Organization Chart—Example
Panel 8.1
for a Hospital
Board of
Directors

Strategic Chief Executive Legal Counsel

Planning Advisor Officer

Cost Containment
President Staff

Executive Executive
Administrative Medical Director
Director

Director Director of Director of Director of Director Chief

of Nutrition & X-Ray & of Physician
Personne Admissions Food Laboratory Pharmac
l Services Services y

Director of Director of Director of Director of

Patient & Accounting Surgery Outpatient
Public Services7
Relations
Key elements in org.structure
 Work specialization
 Departmentalization
 Chain of command
 Span of control
 Centralization and decentralization
 formalization

8
Work specialization (division of
labour)
 To what degree are tasks subdivided
into separate jobs?
 The degree to which tasks in
organization are subdivided into
separate jobs

9
Departmentalization
 On what basis will jobs be grouped
together?
 By function
 By product
 By customer
 By territory

10
Chain of command
 To whom individuals and grouips
report?
 Chain of command is an unbroken
line of Authority than extends
from the top to the lowest level of
organization

11
Span of Control

How many individuals can a manager

direct?
The following factors are important:
 Required Contact
 Degree of Specialization
 Ability to Communicate

12
Spans
Panel 8.2
of Control: Narrow versus Wide
Key:
T = Top manager
CEO M = Middle manager
F = First-line (supervisory) manager
Narrow
T T T

M M M M M M M M M

F F F F F F F F F F F F F F

F F F F F F F F F F F F F

Wide CEO

M M M M M M M M M

F F F F F F F F F F F F F F

F F F F F F F F F F F F 13 F
Identify Seven Elements of an
Organization’s Structure (7 of 10)
Exhibit 14-3 Contrasting Spans of Control
Centralization

Refers to the location of decision-

making authority in the hierarchy of the
organization
Where does decision-making authority
lie?

15
 Centralized Vs.
Decentralized Organizations

Centralized Authority
important decisions are made by
higher-level managers

Decentralized Authority
important decisions are made by
middle-level and supervisory-level
managers

16
Formalization

Refers to the extent to which expectations

regarding the means and ends of work are
specified and written
To what degree will there be rules to
direct employees and managers?

17
Types of Organizational Structures

1. Simple Structure
2. Functional Structure
3. Divisional Structure
4. Conglomerate Structure
5. Hybrid Structure
6. Matrix Structure
7. Team-Based Structure
8. Network Structure

18
Panel 8.4

Simple Structure

Owner

Administrative
Assistant

There is only one hierarchical level of

management beneath the owner

19
 Functional Structure
Panel 8.5

Structure for
President
a business

Vice
Vice Vice Vice
President,
President, President, President,
Human
Marketing Finance Production
Resources

Chief
Structure for Administrator
a hospital

Chief of Director of Director of Director of

Medical Administrative Outpatient Nutrition &
Services Services Services Food Services
20
Divisional Structure

1. functionProduct Divisions group activities

are arranged around similar products or services
2. Customer Divisions group activities around
common customers or clients

3. Geographic Divisions group activities around

defined regional locations

21
Divisional Structure
Panel 8.6

Product Divisional President

Structure

Motion Magazine & Internet

Music
Pictures & TV Book Products
Division
Division Division Division

Customer Divisional President

Structure

Consumer Mortgage Business Agriculture

Loans Loans Loans Loans

Geographic Divisional President

Structure

Western Northern Southern Eastern

Region Region Region Region 22
el 8.7
Conglomerate Structures

This resembles the structure of General Electric

President

Lighting Aircraft Financial Broad-

Appliances Plastics
Products Engines Services casting

23
Panel 8.8
Hybrid Structures
Product
Divisional
President
Structure

President President President President

Cadillac Buick Pontiac Chevrolet

Vice-
Vice- Vice- Vice- Functional
President,
President, President, President, divisional
Human
Production Marketing Finance structure
Resources

Manager Manager Manager Manager Geographical

Region I Region II Region III Region IV divisional structure

A Hypothetical example of what GM might use

24
 Matrix Structure
Panel 8.9
President
Functional
Structure
Project
Project
structure
Vice Vice Vice Vice
President, President, President, President.
Engineering Finance Production Marketing
Project
Manager,
Taurus

Project
Manager,
Mustang
Subordinate
Project reports to
Manager, both Vice
Explorer President of
marketing &
Project
Manager, to project
Expedition
Manager for
Mustang
Example of Ford Motor Company 25
Advantages of Matrix
Organization
 Efficient use or resources
 Flexibility in conditions of change and
uncertainty
 Technical excellence
 Freeing top management for long-run
planning
 Improving motivation and commitment
 Providing opportunities for personal
development

26
New Design options:
 Team structure – the use of teams as the
central device to coordinate work activities
 The virtual organization – a small, core
organization that outsources major
business functions
 The boundaryless organization – an
organization that seeks to eliminate the
chain of command, have limitless spans of
control, and replace departments with
empowered teams
27
Team-Based
Panel 8.10 Structures
Functional
President
structure
Vice
Vice Vice Vice
President,
President, President, President,
Research &
Design Engineering Marketing
Development

Project Product Team Product Team Product Team

Manager, Manager, Manager,
Manufacturing Manufacturing Manufacturing
Light Trucks Sedans Sport Cars
teams

Project
28
team
Network
Panel 8.11
Structure
Design Components
Studio Assembly

Sweden Mexico, Asia

Core of
personal
computer
company
USA
Engineering Distribution
Company Company

Japan Canada
Accounting
& Finance
29
USA
Contingency Design
Contingency Design
the process of fitting the
organization to the
environment

30
Characteristics of Mechanistic
Panel 8.12
& Organic Organizations
Mechanistic
organizations
Centralized hierarchy of authority
Many rules and procedures
Specialized tasks
Formalized communication
Few teams or task forces
Narrow span of control, taller structure
Organic
organizations
Decentralized hierarchy of authority
Few rules and procedures
Shared tasks
Informal communication
Many teams or task forces
Wider span of control, flatter structure
31
Organizational Design Model
 The Mechanistic  The Organic
Model Model
 High specialization
 Cross-functional
 Rigid teams
departmentalization
 Cross-hierarchical
 Clear chain of
teams
command
 Free flow of info
 Narrow span of
control  Wide span of control
 Centralization  Decentralization
 High formalization  low formalization

32
Mechanistic vs. Organic
Structural Models (1 of 8)
Exhibit 14-7 Mechanistic versus Organic Models
Factors Affecting Organizational Design

1. Strategy
2. Size
3. Technology
4. Environmental Uncertainty

34
Mechanistic vs. Organic
Structural Models
Exhibit 14-8 The Strategy–Structure Relationship

Strategy Structural Option

Innovation Organic: A loose structure; low specialization, low
formalization, decentralized
Cost minimization Mechanistic: Tight control; extensive work
specialization, high formalization, high centralization
Imitation Mechanistic and organic: Mix of loose with tight
properties; tight controls over current activities and
looser controls for new undertakings
Mechanistic vs. Organic
Structural Models
Organizational Size
 Large organizations—employing 2,000 or more
people—tend to have more specialization, more
departmentalization, more vertical levels, and
more rules and regulations than do small
organizations.
 The impact of size becomes less important as
an organization expands.
Mechanistic vs. Organic
Structural Models
Technology: the way an organization transfers
its inputs into outputs.
 Numerous studies have examined the
technology-structure relationship.
 Organizational structures adapt to their
technology.
Mechanistic vs. Organic
Structural Models
An organization’s environment includes outside
institutions or forces that can affect its performance.
 Dynamic environments create significantly more
uncertainty for managers than do static ones.
 To minimize uncertainty:
 Broaden structure to sense and respond to
threats.
 Form strategic alliances.