CHAPTER NINE

ORGANIZATIONAL DESIGN
AND Structures
 Designing Organization Structure
Organization Design: The process involves decision
about six key elements:
•Work specialization
•Departmentalization
•Chain of command
•Span of control
•Centralization vs decentralization
•Formalization
• Organizational Structure
– Formal system of task and reporting relationships
showing how workers use resources.
– The set of formal tasks assigned to individuals and
departments;
– Formal reporting relationships, including lines of authority,
decision responsibility, number of hierarchical levels, and
span of managers’ control; and
– The design of systems to ensure effective coordination of
employees across departments
Factors Affecting Organizational Structure
 Factors Affecting Organizational Structure
• The Organizational Environment
– The quicker the environment changes, the more
problems face managers.
– Structure must be more flexible (i.e., decentralized
authority) when environmental change is rapid.
• Strategy
– Different strategies require the use of different
structures.
• A differentiation strategy needs a flexible structure, low
cost may need a more formal structure.
• Increased vertical integration or diversification also
requires a more flexible structure.
 Factors Affecting Organizational Structure
• Technology
– The combination of skills, knowledge, tools,
equipment, computers and machines used in the
organization.
– More complex technology makes it harder for
managers to regulate the organization.
• Organizations utilizing complex technology require a
flexible structure to be managed efficiently.
• Organizations utilizing routine technology can be more
readily managed using a formal structure.
• Organizations with high employee interaction
requirements need a flexible structure.
 Factors Affecting Organizational Structure
• Human Resources
– Highly skilled workers whose jobs require
working in teams usually need a more flexible
structure.
– Higher skilled workers often have internalized
professional norms.
• Managers must take into account all four
factors (environment, strategy, technology and
human resources) when designing the structure
of the organization.
 Dimensions of Organizational Structure
Division of Labor or Specialization
•The degree to which tasks in the organization are divided into separate jobs
with each step by a separate person
Formalization:
•The degree to which jobs within the organization are standardized and the
extent to which employee behavior is guided by rules and procedure.
Delegation
 Delegation is a the “passing” of formal authority to another person.
 The downward transfer of formal authority.
 Cont’d…
Chain of command
•The continuous line of authority that extends from upper levels of an

organization to the lowest levels of the organization and clarifies who

report to whom
Unity of Command
•Each and every employee should report to one and only one
superior in an organization.
Authority
•The rights inherent in a managerial position to tell people what to do and to
expect to do it.
 Cont’d…
Responsibility
•The obligation or expectation to perform

Span of Control
The number of employee who can be effectively and efficiently supervised by
a manager
Centralization
The degree to which decision making is concentrated at upper levels in the
organization
Decentralization
Organizations in which decision making is pushed down to the managers who
are closest to the action
 Departmentation
• A. Functional
• B. Product
• C. Geographical
• D. Process
• E. Customers
 Cont’d…
Accountability: to be held answerable for action and
inaction of assignment responsibilities that flows upward
 Cont’d…
• Differentiation and Integration
– Differentiation: means that the organization is composed of units that
work on specialized tasks using different work methods and requiring
employees with unique competencies.
– Integration: means that the various units must be put back together so
that work is coordinated.
• Line and Staff Authority
– Line Authority: authority that entitles a manager to direct the work of
an employee
– Staff Authority: positions with some authority that has been created to

support, assist and advise those holding line authority.