Chapter 14: Foundations of

Organization Structure
What Is Organizational Structure?
• Organizational Structure
– How job tasks are formally divided, grouped, and
coordinated
– Key Elements: step to build structure
1. Work specialization
2. Departmentalization
3. Chain of command
4. Span of control
5. Centralization and decentralization
6. Formalization
1. Work 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…
Work Specialization Economies and
Diseconomies

• Specialization can reach a point of diminishing returns

• Then job enlargement gives greater efficiencies than
does specialization
2. Departmentalization
• The basis by which jobs are grouped together
• Grouping Activities by:
– Function
– Product
– Geography
– Process
– Customer
3. Chain of Command
• Authority
– The rights inherent in a managerial position to give orders
and to expect the orders to be obeyed
• 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
• Unity of Command ( employees should have only 1
leader )
– A subordinate should have only one superior to whom he or
she is directly responsible
4. Span of Control
• The number of subordinates a manager can
efficiently and effectively direct
– Wider spans of management increase organizational
efficiency
– Narrow span drawbacks:
• Expense of additional layers of management ( khi có nhiều nhân
viên hơn => tốn nhiều layer of management hơn )
• Increased complexity of vertical communication
• Encouragement of overly tight supervision and discouragement of
employee autonomy
Contrasting Spans of Control
5. Centralization and Decentralization

• Centralization ( top mânger make decision )

– The degree to which decision making is
concentrated at a single point in the organization.
– ( university )
• Decentralization (decision make by lower
organization )
– The degree to which decision making is spread
throughout the organization.
6. 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
Common Organization Designs: Simple Structure

• Simple Structure ( start up company )

– A structure characterized by a low degree of
departmentalization, wide spans of control,
authority centralized in a single person, and little
formalization
Common Organizational Designs: Bureaucracy

• Bureaucracy ( University )
– A structure of highly operating routine 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
An Assessment of Bureaucracies
• Strengths • Weaknesses
– Functional economies of – Subunit conflicts with
scale organizational goals
– Minimum duplication of – Obsessive concern with
personnel and equipment rules and regulations
– Enhanced communication – Lack of employee
– Centralized decision discretion to deal with
making problems
Common Organizational Designs: 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
New Design Options: Virtual 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
New Design Options: Boundaryless Organization

– An organization that seeks to eliminate the chain

of command, have limitless spans of control, and
replace departments with empowered teams
– T-form Concepts
• Eliminate vertical (hierarchical) and horizontal
(departmental) internal boundaries
• Breakdown external barriers to customers and suppliers
Two Extreme Models of Organizational Design
Four Reasons Structures Differ
1. Strategy
– Innovation Strategy : organic
• A strategy that emphasizes the introduction of major new
products and services
• Organic structure best
– Cost-minimization Strategy : mechanistic
• A strategy that emphasizes tight cost controls, avoidance of
unnecessary innovation or marketing expenses, and price
cutting
• Mechanistic model best
– Imitation Strategy
• A strategy that seeks to move into new products or new
markets only after their viability has already been proven
• Mixture of the two types of structure
Why Structures Differ
2. Organizational Size: organic
– As organizations grow, they become more mechanistic,
more specialized, with more rules and regulations
3. Technology
– How an organization transfers its inputs into outputs
• The more routine the activities, the more mechanistic the
structure with greater formalization
• Custom activities need an organic structure
4. Environment
– Institutions or forces outside the organization that
potentially affect the organization’s performance
– Three key dimensions: capacity, volatility, and complexity
Three-Dimensional Environment Model
• Capacity
– The degree to which an environment can support
growth
• Volatility
– The degree of instability in the environment
• Complexity
– The degree of heterogeneity and concentration
among environmental elements
 Volatility

Complexity Capacity
Organizational Designs and Employee Behavior

• Impossible to generalize due to individual differences in the

employees
• Research findings
– 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.
– Participative decision making in decentralized organizations is
positively related to job satisfaction.
• People seek and stay at organizations that match their needs.
Global Implications
• Culture and Organizational Structure
– Many countries follow the U.S. model
– U.S. management may be too individualistic
• Culture and Employee Structure Preferences
– Cultures with high-power distance may prefer mechanistic
structures
• Culture and the Boundaryless Organization
– May be a solution to regional differences in global firms
– Breaks down cultural barriers, especially in strategic alliances
– Telecommuting also blurs organizational boundaries
Chapter 15: Organizational Culture
Organizational Culture
– A common perception held by the
organization’s members; a system of shared
meaning
– Seven primary characteristics
1. Innovation and risk taking
2. Attention to detail
3. Outcome orientation
4. People orientation
5. Team orientation
6. Aggressiveness
7. Stability
Do Organizations Have Uniform Cultures?
• Culture is a descriptive term: it may act as a substitute for
formalization
• Dominant Culture ( share by whole company )
– Expresses the core values that are shared by a majority of the
organization’s members
• Subcultures
– Minicultures within an organization, typically defined by
department designations and geographical separation
• Core Values
– The primary or dominant values that are accepted throughout
the organization
• Strong Culture
– A culture in which the core values are intensely held and widely
shared
What Do Cultures Do?
• Culture’s Functions
1. Defines the boundary between one organization and
others
2. Conveys a sense of identity for its members
3. Facilitates the generation of commitment to
something larger than self-interest
4. Enhances the stability of the social system
5. Serves as a sense-making and control mechanism for
fitting employees in the organization
Culture as a Liability
• Institutionalization
– A company can become institutionalized where it is valued for
itself and not for the goods and services it provides
• Barrier to change
– Occurs when culture’s values are not aligned with the values
necessary for rapid change
• Barrier to diversity
– Strong cultures put considerable pressure on employees to
conform, which may lead to institutionalized bias
• Barrier to acquisitions and mergers
– Incompatible cultures can destroy an otherwise successful
merger
How Culture Begins
• Stems from the actions of the founders:
– Founders hire and keep only employees who think
and feel the same way they do.
– Founders indoctrinate and socialize these
employees to their way of thinking and feeling.
– The founders’ own behavior acts as a role model
that encourages employees to identify with them
and thereby internalize their beliefs, values, and
assumptions.
Stages in the Socialization Process
• Prearrival
– The period of learning prior to a new employee
joining the organization
• Encounter
– When the new employee sees what the
organization is really like and confronts the
possibility that expectations and reality may
diverge
• Metamorphosis
– When the new employee changes and adjusts to
the work, work group, and organization
Stages in the Socialization Process
Socialization Program Options
• Choose the appropriate alternatives:
– Formal versus Informal
– Individual versus Collective
– Fixed versus Variable
– Serial versus Random
– Investiture versus Divestiture
• Socialization outcomes:
– Higher productivity
– Greater commitment
– Lower turnover
Summary: How Organizational Cultures Form

• Organizational cultures are derived from the

founder
• They are sustained through managerial action
How Employees Learn Culture
• Stories
– Anchor the present into the past and provide explanations and
legitimacy for current practices
• Rituals
– Repetitive sequences of activities that express and reinforce the
key values of the organization
• Material Symbols
– Acceptable attire, office size, opulence of the office furnishings,
and executive perks that convey to employees who is important
in the organization
• Language
– Jargon and special ways of expressing one’s self to indicate
membership in the organization
Creating an Ethical Organizational Culture

• Characteristics of Organizations that Develop High

Ethical Standards
– High tolerance for risk
– Low to moderate in aggressiveness
– Focus on means as well as outcomes
• Managerial Practices Promoting an Ethical Culture
– Being a visible role model
– Communicating ethical expectations
– Providing ethical training
– Rewarding ethical acts and punishing unethical ones
– Providing protective mechanisms
Creating a Positive Organizational Culture

• Positive Organizational Culture

– A culture that:
• Builds on employee strengths
– Focus is on discovering, sharing, and building on the strengths of
individual employees
• Rewards more than it punishes
– Articulating praise and “catching employees doing something right”
• Emphasizes individual vitality and growth
– Helping employees learn and grow in their jobs and careers

• Limits of Positive Culture:

– May not work for all organizations or everyone within
them
Spirituality and Organizational Culture
• Workplace Spirituality
– The recognition that people have an inner life that
nourishes and is nourished by meaningful work that
takes place in the context of the community

– NOT about organized religious practices

• People seek to find meaning and purpose in

their work.
Why Spirituality Now?
– As a counterbalance to the pressures and stress of a
turbulent pace of life and the lack of community many
people feel and their increased need for involvement and
connection.
– Job demands have made the workplace dominant in many
people’s lives, yet they continue to question the meaning of
work.
– The desire to integrate personal life values with one’s
professional life.
– An increasing number of people are finding that the pursuit
of more material acquisitions leaves them unfulfilled.
Characteristics of a Spiritual Organization

• Concerned with helping people develop and

reach their full potential
• Directly addresses problems created by
work/life conflicts
• Four characteristics of spiritual organizations:
1. Strong sense of purpose
2. Trust and respect
3. Humanistic work practices
4. Toleration of employee expression
Criticisms of Spirituality
• What is the scientific foundation?
– It is still pending: needs more research
• Are spiritual organizations legitimate – do they have
the right to impose values on employees?
– Spirituality is not about God or any religious values
– It is an attempt to help employees find meaning and
value in their work
• Are spirituality and profits compatible?
– Initial evidence suggests that they are
– Spirituality may result in greater productivity and
dramatically lower turnover
Global Implications
• Organization cultures, while strong, can’t ignore
local culture
• Managers should be more culturally sensitive
by:
– Adjusting speech to cultural norms
– Listening more
– Avoiding discussions of controversial topics
• All global firms (not just U.S. firms) need to be
more culturally sensitive
Culture as an Intervening Variable
• Employees form an overall subjective perception of the
organization based on these objective factors:

• The opinions formed affect employee performance and

satisfaction.
END.