BATUMI STATE MARITIME ACADEMY

Faculty of Navigation

BASICS OF BUSINESS
ADMINISTRATION

ORGANIZATIONAL STRUCTURE AND DESIGN

Lecturer: Guladi Tkhilaishvili
# 7 Lecture Batumi 2022 g.tkhilaishvili@bsma.edu.ge 591 00 52 92
CONTENT
1. What Are the Six Key Elements in Organizational Design?
2. What Contingency Variables Affect Structural Choice?
3. What Are Some Common Organizational Designs?
4. What Are Today’s Organizational Design Challenges?

Book #2: “FUNDAMENTALS OF MANAGEMENT” Essential Concepts

and Applications. [Pg. 130-153]

ORGANIZATIONAL STRUCTURE AND DESIGN #7 Lecture 2

1. What Are the Six Key Elements in Organizational Design
When managers develop or change the organization’s structure, they’re engaging in
organization design
This process involves making decisions about how specialized jobs should be, the rules to guide
employees’ behaviors, and at what level decisions are to be made

Managers are reevaluating traditional approaches and exploring new structural designs that best
support and facilitate employees’ work—designs that can achieve efficiency but are also flexible.

SIX BASIC ELEMENTS OF ORGANIZATIONAL STRUCTURE:

1. Work specialization,
2. Departmentalization,
3. Authority and responsibility,
4. Span of control,
5. Centralization versus decentralization,
6. Formalization.

ORGANIZATIONAL STRUCTURE AND DESIGN #7 Lecture 3

1.1. What Are the Six Key Elements in Organizational Design
What Is Work Specialization? - dividing work activities into separate job tasks.
• In most organizations, some tasks require highly developed skills
• Skilled workers are paid more than unskilled workers

TODAY’S VIEW OF
SPECIALIZATION
Most managers today see work
specialization as an important
organizing mechanism because it helps
employees be more efficient.

ORGANIZATIONAL STRUCTURE AND DESIGN #7 Lecture 4

1.2. What Are the Six Key Elements in Organizational Design
What Is Departmentalization? – the way jobs are grouped together

TODAY’S VIEW OF DEPARTMENTALIZATION.

Most large organizations continue to use most, or all
the departmental groups suggested by the early
management writers
ORGANIZATIONAL STRUCTURE AND DESIGN #7 Lecture 5
1.3. What Are the Six Key Elements in Organizational Design
Cross-functional teams, which are teams made up of individuals from various
departments and that cross traditional departmental lines.

To better monitor the needs of

customers and to be able to respond to
changes in those needs, many
organizations are giving greater
emphasis to customer
departmentalization

ORGANIZATIONAL STRUCTURE AND DESIGN #7 Lecture 6

1.4. What Are the Six Key Elements in Organizational Design
What Are Authority and Responsibility? - the chain of command, the line of
authority extending from upper organizational levels to lower levels, which clarifies
who reports to whom.

“Who do I report to?”

“Who do I go to if I have a problem?”

Authority the right inherent in a

managerial position to give orders and
expect the orders to be obeyed.
Commensurate (equal) responsibility -
When managers delegate authority
and they should be held accountable
for their performance!
ORGANIZATIONAL STRUCTURE AND DESIGN #7 Lecture 7
1.5. What Are the Six Key Elements in Organizational Design
WHAT ARE THE DIFFERENT TYPES OF AUTHORITY RELATIONSHIPS?
Distinguish between two forms of authority: line authority and staff authority
Line authority -entitles a manager
to direct the work of an employee.
Managers whose organizational
function contributes directly to
the achievement of organizational
objectives

Staff authority - functions to

support, assist, advise, and
generally reduce some of
their informational weights.

ORGANIZATIONAL STRUCTURE AND DESIGN #7 Lecture 8

1.6. What Are the Six Key Elements in Organizational Design
WHAT IS UNITY OF COMMAND? - An employee who has to report to two or
more bosses might have to cope with conflicting demands or priorities

ORGANIZATIONAL STRUCTURE AND DESIGN #7 Lecture 9

1.7. What Are the Six Key Elements in Organizational Design
TODAY’S VIEW OF AUTHORITY AND RESPONSIBILITY DIFFER FROM THE
HISTORICAL VIEW?

The early management writers assumed that the rights characteristic in one’s formal
position in an organization were the sole source of influence, this assumption might
have been true 60 or even 30 years ago

HOW DO AUTHORITY AND POWER DIFFER? - authority and power are often
considered the same thing, but they’re not.
Authority - Its legitimacy is based on an authority figure’s position in the
organization
Power - an individual’s capacity to influence decisions

ORGANIZATIONAL STRUCTURE AND DESIGN #7 Lecture 10

1.8. What Are the Six Key Elements in Organizational Design

The two-dimensional
arrangement of boxes in part
A portrays authority

ORGANIZATIONAL STRUCTURE AND DESIGN #7 Lecture
Power - is a three-dimensional
concept. Includes not only the
functional and hierarchical
dimensions but also a
The third dimension called
centrality 11
1.9. What Are the Six Key Elements in Organizational Design
What Is the Span (range) of Control? - early writers came to no consensus on a
specific number, most favored small spans—no more than six workers—in order to
maintain close control
Many
organizations are
Top managers need a smaller span than increasing their
do middle managers and middle managers spans of control
require a smaller span than do supervisors

ORGANIZATIONAL STRUCTURE AND DESIGN #7 Lecture 12

1.9. What Are the Six Key Elements in Organizational Design
How Do Centralization and Decentralization Differ?
 Centralization is the degree to which decision-making takes place at the upper
levels of the organization.
 Decentralization is the degree to which lower-level managers provide input or
actually make decisions

ORGANIZATIONAL STRUCTURE AND DESIGN #7 Lecture 13

1.10. What Are the Six Key Elements in Organizational Design
What Is Formalization? - how standardized an organization’s jobs are and the extent
to which employee behavior is guided by rules and procedures.
In highly formalized organizations, there are explicit job descriptions, numerous
organizational rules, and clearly defined procedures covering work processes.

ORGANIZATIONAL STRUCTURE AND DESIGN #7 Lecture 14

2. What Contingency Variables Affect Structural Choice
Two generic organization structure models:
 Mechanistic Organization - (or bureaucracy) was the natural result of combining
the six elements of the structure.
 Organic Organization - is a highly adaptive form that is as loose and flexible as
the mechanistic organization is rigid and stable

ORGANIZATIONAL STRUCTURE AND DESIGN #7 Lecture 15

2.1. What Contingency Variables Affect Structural Choice
How Does Strategy Affect Structure? - structure should facilitate goal achievement.
Because goals are an important part of the organization’s strategies

How Does Size Affect Structure? - There’s considerable evidence that an

organization’s size affects its structure.
Large organizations—more than 2,000 employees—tend to have more
specialization, departmentalization, centralization, and rules and regulations than do
small organizations.
Size has less influence on structure. Why? Essentially, once there are around 2,000
employees, it’s already fairly mechanistic. Adding another 500 employees won’t
impact the structure much. On the other hand, adding 500 employees to an
organization that has only 300 employees is likely to make it more mechanistic

ORGANIZATIONAL STRUCTURE AND DESIGN #7 Lecture 16

3. What Are Some Common Organizational Designs
What Traditional Organizational Designs Can Managers Use? - simple, functional,
and divisional—tend to be more mechanistic

Simple structure - an organizational design with low departmentalization, wide

spans of control, authority centralized in a single person, and little formalization

Functional structure - an organizational design that groups similar or related

occupational specialties together.

A divisional structure - an organizational structure made up of separate business

units or divisions. In this structure, each division has limited autonomy, with a
division manager who has authority over his or her unit and is responsible for the
performance

ORGANIZATIONAL STRUCTURE AND DESIGN #7 Lecture 17

3.1. What Are Some Common Organizational Designs
What Contemporary Organizational Designs Can Managers Use? Instead,
organizations need to be lean, flexible, and innovative; that is, more organic.
managers are finding creative ways to structure and organize work as team-based
structures, matrix and project structures, and boundaryless structures

ORGANIZATIONAL STRUCTURE AND DESIGN #7 Lecture 18

3.2. What Are Some Common Organizational Designs
What

ORGANIZATIONAL STRUCTURE AND DESIGN #7 Lecture 19

3.3. What Are Some Common Organizational Designs
A Boundaryless organization - is an organization
whose design is not defined by, or limited to, the
horizontal, vertical, or external boundaries imposed
by a predefined structure

A virtual organization - consists of a small core of

full-time employees and outside specialists
temporarily hired as needed to work on projects.
“free agents”

Network organization - option for managers

wanting to minimize or eliminate organizational
boundaries
“modular organization”
ORGANIZATIONAL STRUCTURE AND DESIGN #7 Lecture 20
4. What Are Today’s Organizational Design Challenges
How Do You Keep Employees Connected? - Many organizational design concepts
were developed during the twentieth century when work tasks were fairly
predictable and constant
Learning organization - an organization that has developed the capacity to
continuously learn, adapt, and change

ORGANIZATIONAL STRUCTURE AND DESIGN #7 Lecture 21

4.1. What Are Today’s Organizational Design Challenges
How Can Organizations Use Compressed Workweeks, Flextime, And Job Sharing?

 Compressed workweek - in which employees work longer hours per day but
fewer days per week - four 10-hour days (a 4-40 program)
 Flextime – in which is a scheduling system in which employees are required to
work a specific number of hours a week but are free to vary those hours within
certain limits.
 Job sharing— the practice of having two or more people split a full-time job
 Contingent workers - labor force has begun shifting away from traditional full-
time jobs toward temporary, freelance, or contract workers whose employment
is contingent upon demand for their services

ORGANIZATIONAL STRUCTURE AND DESIGN #7 Lecture 22

Thanks For Your Attention

ORGANIZATIONAL STRUCTURE AND DESIGN #7 Lecture 23