Organizational Structure and

Design

Prof. B.Nishantha (PhD)

 Task 1
• Think of an activity or an event that you have organized. Write down
what you did when you organized that activity or event.
 What is Organizing?
• Organizing can be defined as arranging and structuring work
to accomplish organizational goals
(Robbins et al., 2017)
• The development of organizational resources to achieve
strategic goals
(Daft, 2012)
• The process of deciding how best to group organizational
elements
(Griffin, 2012)
 Organizational Structure
Organization structure is defined as:
(1) the set of formal tasks assigned to individuals
and departments;
(2) formal reporting relationships, including lines
of authority, decision responsibility, number of
hierarchical levels, and span of managers’
control; and
(3)the design of systems to ensure effective
coordination of employees across departments.
The Organization Chart

Visual representation
Set of formal tasks
Framework for vertical control
Formal reporting relationships
Sample Organization Chart

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 Some Purposes of Organizing
• Divides work to be done into specific jobs and
departments
• Assigns tasks and responsibilities associated with
individual jobs
• Coordinates diverse organizational tasks
• Clusters jobs into units
• Establishes relationships among individuals, groups,
and departments
• Establishes formal lines of authority
• Allocates and deploys organizational resources
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 The Process of Organizing

• Identification of work that needs to be done to accomplish

organizational goals.
• Dividing total workload into jobs that can logically and
comfortably be performed by individuals. (Division of work)
• Grouping of jobs in a logical manner. (Departmentalization)
• Deciding the appropriate spans of control and arranging the
jobs in a hierarchy.
 The Process of Organizing (cont.)

• Assigning authority and responsibility for accomplishment of

tasks. (Delegation)
• Determining detailed rules and systems of working
(Formalization)
• Allocating resources among members
• Establishing mechanisms for integration of individual, group
and department efforts (Coordination)
 Elements of Organizing

• Designing jobs
• Grouping jobs
• Establishing reporting
relationships
• Distributing authority
• Coordinating activities
• Differentiating between positions
 Designing Jobs

• The determination of an individual’s work-related

responsibilities
• The natural starting point for designing jobs is determining the
level of desired specialization
 Work Specialization

– The degree to which tasks in the organization are

divided into separate jobs with each step
completed by a different person
• Overspecialization can result in human diseconomies
from boredom, fatigue, stress, poor quality, increased
absenteeism, and higher turnover

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Contemporary Views on Specialization
• Specialization helps employee be more
efficient
Eg : McDonalds
• But extreme of specialization create problems
such as boredom, fatigue, stress, poor
quality….
 Alternatives to Specialization
• Job Rotation
Involves systematically moving employees from one job to another
• Job Enlargement
Involves giving the employee more task to perform
• Job Enrichment
Involves increasing both the number of tasks the worker does and
the control the worker has over the job.
• Work Teams
Allows the entire group to design the work system it will use to
perform an interrelated set of tasks
 Departmentalization
How jobs are grouped together

Types of Departmentalization
• Functional • Process
– Grouping jobs by – Grouping jobs on the
functions performed basis of product or
• Product customer flow
– Grouping jobs by product • Customer
line – Grouping jobs by
• Geographical customers’ problems
– Grouping jobs on the and needs
basis of territory or
geography
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Common Bases of Departmentalization
 Functional Departmentalization

• Groups together those jobs involving the same or similar

activities.
• Function refers to organizational functions such as Finance,
Production, Marketing, HRM etc.
 Product Departmentalization

• Grouping and arranging activities around products or product

groups
 Geographical Departmentalization

• Grouping jobs on the basis of defined geographic sites or

areas.
 Process Departmentalization

• Group jobs on the basis of product or flow

 Customer Departmentalization

• Grouping activities to respond to and interact with specific

customers or customer groups.
 Mixed Departmentalization

• Collaboration of all departmentalization bases

 Contemporary views on
Departmentalization
• More popular departmentalization :
• Customer departmentalization
• Cross- functional teams
 Establishing Reporting Relationships

• Clarifying the chain of command and the span of management.

 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 reports to whom

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 Organizational Structure (cont’d)
• Authority
– The rights inherent in a managerial position to tell people what to do
and to expect them to do it
• Responsibility
– The obligation or expectation to perform. Responsibility brings with it
accountability (the need to report and justify work to manager’s
superiors)
• Unity of Command
– The concept that a person should have one boss and should report
only to that person
• Delegation
– The assignment of authority to another person to carry out specific
duties

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Contemporary views on Chain of Command

• Concepts such as chain of command, authority,

responsibility, and unity of command are less
important today.
• Every day 05 minutes regular meetings where
employees to refer simple tables & charts to
identify the production bottle necks
• Development of the IT has made such concept
less relevant today……..
 Organizational Structure (cont’d)
• Span of Control
– The number of employees who can be effectively and
efficiently supervised by a manager
– Width of span is affected by:
• Skills and abilities of the manager and the employees
• Characteristics of the work being done
• Similarity of tasks
• Complexity of tasks
• Physical proximity of subordinates
• Standardization of tasks
• Sophistication of the organization’s information system
• Strength of the organization’s culture
• Preferred style of the manager

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 Contrasting Spans of Control

Members at Each Level

(Highest) Assuming Span of 4 Assuming Span of 8

1 1 1
Organizational Level

2 4 8
3 16 64
4 64 512
5 256 4096
6 1024
7 4096

(Lowest)
Span of 4: Span of 8:
Employees: = 4096 Employees: = 4096
Managers (level 1–6) = 1365 Managers (level 1–4) = 585

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 Contemporary Views on Span of Control

• SC determine by various factors including skills and

abilities of the manager and the employee,
characteristics of the work, physical proximity of
subordinates, training and experience levels of the
employees
• The trend is larger spans of control……..
 Organizational Structure (cont’d)
• Centralization
– The degree to which decision making is concentrated at a
single point in the organization
• Organizations in which top managers make all the decisions and
lower-level employees simply carry out those orders
• Decentralization
– The degree to which lower-level employees provide input or
actually make decisions
– Employee Empowerment
• Increasing the decision-making discretion of employees

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Contemporary Views on Centralization and
Decentralization
• Lower level employees are very “close to the
action”
• They have more detailed knowledge about
problems.
• Now the trend is Decentralization
( Employee empowerment)
 Factors that Influence the Amount of
Centralization
• More Centralization
– Environment is stable
– Lower-level managers are not as capable or experienced at
making decisions as upper-level managers
– Lower-level managers do not want to have a say in decisions
– Decisions are significant
– Organization is facing a crisis or the risk of company failure
– Company is large
– Effective implementation of company strategies depends on
managers retaining say over what happens

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 Factors that Influence the Amount of
Decentralization
• More Decentralization
– Environment is complex, uncertain
– Lower-level managers are capable and experienced at
making decisions
– Lower-level managers want a voice in decisions
– Decisions are relatively minor
– Corporate culture is open to allowing managers to have a say
in what happens
– Company is geographically dispersed
– Effective implementation of company strategies depends on
managers having involvement and flexibility to make
decisions

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 Organizational Structure (cont’d)
• Formalization
– The degree to which jobs within the organization
are standardized and the extent to which
employee behaviour is guided by rules and
procedures
• Highly formalized jobs offer little discretion over what is
to be done
• Low formalization means fewer constraints on how
employees do their work

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 Organizational Design Decisions
• Mechanistic
Organic Organization
Organization
– Highly
A rigid flexible
and tightly
andcontrolled
adaptablestructure
structure
• Nonstandardized
High specializationjobs
• Rigid team-based
Fluid departmentalization
structure
• Narrow
Little direct
spans
supervision
of control
• High formalization
Minimal formal rules
• Limited
Open communication
information network
network(mostly downward communication)
• Low decisionemployees
Empowered participation by lower-level employees

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Mechanistic Versus Organic Organization

Mechanistic Organic

• High Specialization • Cross-Functional Teams

• Rigid Departmentalization
• Clear Chain of Command
• Narrow Spans of Control
• Centralization
• High Formalization
• Cross-Hierarchical Teams
• Free Flow of Information
• Wide Spans of Control
• Decentralization
• Low Formalization

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Contemporary Views on Mechanistic Versus
Organic Organization
Many managers trying to structure lean, fast &
flexible
• Global competition, Accelerated innovation,
demand for high quality & fast deliveries are a
dynamic environmental forces where
mechanistic org. cannot cope up. Hence org.
tend to become more organic
 Structural Contingency Factors

• Structural decisions are influenced by:

– Overall strategy of the organization
• Organizational structure follows strategy
– Size of the organization
• Firms change from organic to mechanistic organizations as
they grow in size
– Technology use by the organization
• Firms adapt their structure to the technology they use
– Degree of environmental uncertainty
• Dynamic environments require organic structures;
mechanistic structures need stable environments

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Structural Contingency Factors (cont’d)
• Strategy Frameworks:
– Innovation
• Pursuing competitive advantage through meaningful
and unique innovations favours an organic structuring
– Cost minimization
• Focusing on tightly controlling costs requires a
mechanistic structure for the organization
– Imitation
• Minimizing risks and maximizing profitability by copying
market leaders requires both organic and mechanistic
elements in the organization’s structure

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Structural Contingency Factors (cont’d)
• Strategy and Structure
– Achievement of strategic goals is facilitated by
changes in organizational structure that
accommodate and support change
• Size and Structure
– As an organization grows larger, its structure tends
to change from organic to mechanistic with
increased specialization, departmentalization,
centralization, and rules and regulations

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Structural Contingency Factors (cont’d)
• Technology and Structure
– Organizations adapt their structures to their
technology
– Woodward’s classification of firms based on the
complexity of the technology employed:
• Unit production of single units or small batches
• Mass production of large batches of output
• Process production in continuous process of outputs
– Routine technology = mechanistic organizations
– Non–routine technology = organic organizations

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Structural Contingency Factors (cont’d)
• Environmental Uncertainty and Structure
– Mechanistic organizational structures tend to be
most effective in stable and simple environments
– The flexibility of organic organizational structures
is better suited for dynamic and complex
environments

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 Common Organizational Designs
• Traditional Designs
– Simple Structure
• Low departmentalization, wide spans of control, centralized
authority, little formalization
– Functional Structure
• Departmentalization by function
– Operations, finance, human resources, and product research and
development
– Divisional Structure
• Composed of separate business units or divisions with limited
autonomy under the coordination and control of the parent
corporation

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 Strengths and
Weaknesses of Common Traditional Organizational Designs

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 Organizational Designs (cont’d)
• Contemporary Organizational Designs
– Team Structures
• The entire organization is made up of work groups or
self-managed teams of empowered employees
– Matrix Structures
• Specialists for different functional departments are
assigned to work on projects led by project managers
• Matrix participants have two managers
– Project Structures
• Employees work continuously on projects, moving on
to another project as each project is completed

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Contemporary Organizational Designs

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Sample Matrix Organization
 Organizational Designs (cont’d)
• Contemporary Organizational Designs (cont’d)
– Boundaryless Organization
• A flexible and an unstructured organizational design that
is intended to break down external barriers between the
organization and its customers and suppliers
• Removes internal (horizontal) boundaries:
– Eliminates the chain of command
– Has limitless spans of control
– Uses empowered teams rather than departments
• Eliminates external boundaries:
– Uses virtual, network, and modular organizational structures to
get closer to stakeholders

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 Removing Boundaries
• Virtual Organization
– An organization that consists of a small core of full-time
employees and that temporarily hires specialists to work on
opportunities that arise
• Network Organization
– A small core organization that outsources its major business
functions (e.g., manufacturing) in order to concentrate on
what it does best
• Modular Organization
– A manufacturing organization that uses outside suppliers to
provide product components for its final assembly operations

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 Virtual Network Example

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