Organizational

Structure
Jeff Madura Ch.8
Agenda
1 Purpose and Types of Organizational Structure

2 Accountability in an Organizational Structure

3 Distributing Authority among the Job Positions

4 Structures That Allow More Employee Input

5 Methods of Departmentalizing Task

 “Identifies responsibilities for each job position and the relationships
among those positions.”

A firm wants to establish an organizational structure that ensures

that all employees are in positions where they can be properly
guided and monitored by someone above them to do their jobs effi-
ciently.

The decisions regarding a firm’s organizational structure is depen-

dent on the characteristics of the firm.

Organization chart shows the interaction among the job positions

and indicates the chain of command.

Chain of command
• Identifies the job position to which each type of employee
must report.
Organizational • Indicates who is responsible for various activities and each
type of task.
Structure • Ensure that managers make decisions that maximize the
firm’s value rather than serve their own interest
How Organizational Span of Control
The number of employees managed by each manager
Structure Varies • When numerous employees perform similar tasks, a firm
uses a wide span of control because these employees can
among Firms be easily managed by one or a few managers.
• A firm with highly diverse tasks may need more managers
with various skills to manage the different task, resulting in
a narrow span of control.

Organizational Height
Organizational structure can also be described by its height
• Many firms that are able to use a wide span of control tend
to have a flat organizational structure because they don’t
require many layers.
• Conversely, firms that need to use a narrow span of control
tend to have a tall organizational structure with many lay-
ers
How Organizational
Structure Varies
among Firms

Line versus Staff Positions

Classify job positions in an organizational structure
• Line positions are established to make decisions that
achieve specific business goals.
• Staff positions are established to support the efforts of line
positions, rather than to achieve specific goals of the firm.
• An organizational structure that contains only line positions
and no staff position is referred to as line organization.
• An organizational structure that includes both line and staff
positions and assigns authority from higher level manage-
ment to employee is referred to as line-and-staff organiza-
tion.
 Accountability in an Organizational Structure
How accountability can be achieved in an organizational structure
Ensure that its employees and managers are accountable

Role of the Board of Directors Oversight of the Internal Auditor

BoD are responsible for monitoring the activities of the firm’s
president and other high level managers, supervising the
business and affairs of the firm, and monitoring operations
and ensuring that the firm complies with the law.
Inside board Members – also managers of the same firm.
Outside board members – are not managers of the same firm
(firm can provide directors with stock as compensation.
Responsible for ensuring that all departments fol-
low the firm’s guidelines and procedures.
Some attention is commonly given to ensuring
that employees actions are consistent with the
recommended procedures for hiring new employ-
ees, evaluating employee, maintaining safety and
responding ti customer complaints.
 Distributing Authority among the Job Positions
Describe how centralized and decentralized organizational structures differ.

Decentralization
Centralization Authority is spread among several
Most authority is held by the divisions or managers.
high level managers.
Divisions are permitted to make their
Middle and supervisory own decisions and act independently
managers are responsible for – Autonomy
day-to-day tasks and for re-
porting to the top managers Advantages :
but top manager will make • Reduces operating expenses
decision. • Shorten the decision making
process
• Improve the morale of employees,

Disadvantages
• Force some managers to make
major decisions even though they
lack the experience
• Middle and supervisory managers
may be unable to complete all of
their tasks..
 Distributing Authority among the Job Positions
Describe how centralized and decentralized organizational structures differ.

Effect of Downsizing
on Decentralization
An attempt by a firm to cut expenses by
eliminating job positions.

As some management positions are elim-

inated, many of those responsibilities are
delegated to employees who previously
reported to the managers whose posi-
tions have been eliminated.

In addition to removing some manage-

ment layers and creating a wider span of
control, downsizing has also led to the
combination of various job responsibili-
ties.
Structures That Allow More Employee Input
Mtehod that firms can use to obtain employee input
Intrapreneurship
The assignment of particular employees of a firm to generate
ideas, as if they were entrepreneurs running their own firm.
It can pull employees away from normal tasks but it allow
firms to be more innovative Informal Organizational Struc-
ture
An informal communications network
Matrix Organization that exist among a firm’s employees
Various parts of the firm interact to (Ex : Grapevine).
focus on specific projects (Ex : Spe-
cial Project). Advantage :
• Encourage communication between
It brings together employees who managers and employees in a less
can offer insight from different per- formal environment
spectives. • Employees who need help in per-
forming a task may benefit from oth-
Each participant who is assigned toa ers.
specific group has particular skills
that can contribute to the project. Disadvantage :
• Employees may obtain incorrect or
unfavorable information
 Methods of Departmentalizing Tasks
Identify methods that can be used to departmentalize tasks
*assign tasks and responsibilities to different department

By Function By Product
They allocate their tasks and re- Tasks and responsibilities are sepa-
sponsibilities according to employee rated according to the type of prod-
functions (Ex ; finance and market- uct produced. ( Ex : Snack, Bever-
ing separated) ages, Groceries)

By Location By Customer
Establish regional offices to cover Establish separate divisions based
specific geographic regions. on the type of customer. (Ex : Pre-
mium Customer In Banking).
Small Group Task
*1 Group consist of 2 person, *TNR 12, space 1,5 in PDF format

XYZ Inc. is one of the state companies that has been prepared
to handle, manage and develop energy consumption needs, as
one of the alternative substitution of Fuel Oil. A special project
has been launched for the construction of the Integrated Trans-
mission Pipeline network whose implementation is divided into
three stages - short, medium and long term planning stages.

With this plan, XYZ Inc. needs to find strategic partners who can
help provide funds, management capabilities and technology.

What organizational structure is appropriate for XYZ Inc. in order

to attract partnerships?.
Thank you