Organizational Behavior

Lecture 29
Dr. Amna Yousaf
PhD (HRM)
University of Twente, the
Netherlands
Foundations of Organizational Structure

Lecture 29
 Lecture Objectives
• What is Structure
• Matching Strategy with structure
• Forms of organizational structure
• Functional structure
• Divisional structure
• SBU Structure
• Matrix structure
• Conclusions and implications

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Why Do Structures Differ? – Strategy
Innovation Strategy
A strategy that emphasizes the introduction of major
new products and services.

Cost-minimization Strategy
A strategy that emphasizes tight cost controls,
avoidance of unnecessary innovation or marketing
expenses, and price cutting.

Imitation Strategy
A strategy that seeks to move into new products or
new markets only after their viability has already
been proven.
© 2007 Prentice Hall Inc. All rights
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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

EXHIBIT
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reserved.
Why Do Structures Differ? – Size
Size
How the size of an organization affects its structure.
As an organization grows larger, it becomes more
mechanistic.

Characteristics of large organizations:

• More specialization
• More vertical levels
• More rules and regulations

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 “Bureaucracy Is Dead”
• Why Bureaucracy Survives
• Characteristics of Bureaucracies
– Specialization
– Formalization
– Departmentalization
– Centralization
– Narrow spans of control
– Adherence to a chain of command
– Large size prevails
– Environmental turbulence
can be largely managed
– Standardization achieved
through hiring people
who have undergone
extensive educational
training
– Technology maintains
control

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reserved.
Organizational Designs and Employee Behavior

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.

© 2007 Prentice Hall Inc. All rights

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 Organization Structure: Its
Determinants and Outcomes

Associated
with

Implicit Models of Organizational

Structure
Perceptions that people hold
regarding structural variables
formed by observing things around
them in an unscientific fashion.
EXHIBIT
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reserved.
 Matching Structure with Strategy

Changes in Strategy Changes in Structure

1. Structure largely dictates how objectives and policies will be

established.

2. Structure dictates how resources will be allocated

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 Chandler’s Strategy-Structure
Relationship

Organizational
New strategy New administrative
performance
Is formulated problems emerge
declines

Organizational
New organizational
performance
structure is established
improves

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 Basic Forms of Structure

1. Functional Structure
• Groups tasks and activities by business function
• Simple and inexpensive
• Speicalization of business activities
• Minimizes need of elaborate control systems
• Accountability at the top
• Delegation of authority not encouraged

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 Basic Forms of Structure
1. Functional Structure

• Low employee morale

• Inadequate planning of products and markets
• Leads to short term and narrow thinking
• Lack of integration and communication
• Centralized

R & D may strive to overdesign products while manufacturing may favor low frills
products that are mass produced.
Speicailization, economies of scale, standarized products such as manufacturing.
Sharp – consumer electronics firm as an examaple

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reserved.
Thank You