Chapter 016 - Organizational Structure & Design16-*
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Organization structure – the pattern of jobs and groups of jobs in an organization.
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Structure as an influence on behavior
Structure as recurring activities
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Organizational Design Decisions
Managers decide how to divide the overall task into successively smaller jobs
Managers decide the bases by which to group the jobs
Managers decide the appropriate size of the group reporting to each superior
Managers distribute authority among the jobs
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Division of Labor
Division of labor – concerns the extent to which jobs are specialized
It is the process of dividing work into relatively specialized jobs to achieve advantages of specialization
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1. Personal specialties
2. Natural sequence of work
e.g., dividing work in a manufacturing plant into fabricating and assembly (horizontal specialization)
3. Vertical plane
e.g., hierarchy of authority from lowest-level manager to highest-level manager
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Delegation of Authority
Managers decide how much authority should be delegated to each job and to each jobholder
Delegation of authority – process of distributing authority downward in an organization
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Relatively high delegation of authority encourages the development of professional managers
High delegation of authority can lead to a competitive climate within the organization
Managers who have relatively high authority can exercise more autonomy, and thus satisfy their desires to participate in problem solving
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Reasons to Centralize Authority (1 of 2)
Managers must be trained to make the decisions that go with delegated authority
Many managers are accustomed to making decisions and resist delegating authority to their subordinates
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Reasons to Centralize Authority (2 of 2)
Administrative costs are incurred because new control systems must be developed to provide top management with information about the effects of subordinates’ decisions
Decentralization means duplication of functions
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Delegation Decision Guidelines (1 of 2)
How routine and straightforward are the job’s or unit’s required decisions?
The authority for routine decisions can be centralized
Are individuals competent to make the decision?
Even if the decision is non-routine, if the local manager is not capable, then the decision should be centralized
Delegation of authority can differ among individuals depending upon each one’s ability to make the decision
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Are individuals motivated to make the decision?
Capable individuals are not always motivated individuals
Motivation must accompany competency to create conducive conditions for decentralization
Do the benefits of decentralization outweigh its costs?
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Jobs are combined according to the functions of the organization
The principal advantage is efficiency
By having departments of specialists, management creates efficient units
A major disadvantage is that organizational goals may be sacrificed in favor of departmental goals
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Engineering
Reliability
Finance
Manufacturing
Distribution
Human
Resources
Public
Relations
Purchasing
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Establish groups according to geographic area
The logic is that all activities in a given region should be assigned to a manager
Advantageous in large organizations because physical separation of activities makes centralized coordination difficult
Provides a training ground for managerial personnel
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Departmental Bases:
Product Departmentalization
All jobs associated with producing and selling a product or product line will be placed under the direction of one manager
Product becomes the preferred basis as a firm grows by increasing the number of products it markets
Concentrating authority, responsibility, and accountability in a specific product department allows top management to coordinate actions
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Departmental Bases:
Customer Departmentalization
The importance of customer satisfaction has stimulated firms to search for creative ways to serve people better
Organizations with customer-based departments are better able to satisfy customer-identified needs than organizations that base departments on non-customer factors
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Number of individuals who report to a specific manager
Narrow span
Wide span
The frequency and intensity of actual relationships is the critical consideration in determining the manager’s span of control
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Span of Control (2 of 2)
If we shift our attention from potential to actual relationships as the bases for determining optimum span of control, three factors appear to be important:
Key Factors
Required Contact
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Dimensions of Structure
Formalization – the extent to which expectations regarding the means and ends of work are specified, written, and enforced
Centralization – the location of decision-making authority in the hierarchy
Complexity – the direct outgrowth of dividing work and creating departments
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Emphasizes importance of achieving high levels of production and efficiency through:
Extensive use of rules and procedures
Centralized authority
Emphasizes importance of achieving high levels of production and efficiency through:
Limited use of rules and procedures
Decentralized authority
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Process
Includes no perceived confidence and trust between superiors and subordinates.
Includes perceived confidence and trust between superiors and subordinates.
2. Motivation
Taps only physical, security, and economic motives, through use of fear and sanctions.
Taps a full range of motives through participatory methods.
3. Communication
Information flows downward and tends to be distorted, inaccurate, and viewed with suspicion by subordinates.
Information flows freely: upward, downward, and laterally. The information is accurate and undistorted.
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Process
Closed and restricted. Subordinates have little effect on departmental goals, methods, and activities.
Open and extensive. Both superiors and subordinates are able to affect departmental goals, methods, and activities.
5. Decision
Relatively centralized. Occurs only at the top of the organization.
Relatively decentralized. Occurs at all levels through group processes.
6. Goal setting
Located at the top of the organization, discouraging group participation.
Encourages group participation in setting high, realistic objectives.
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Process
Dispersed throughout the organization. Emphasizes self-control and problem solving.
8. Performance goals
Low and passively sought by managers, who make no commitment to developing the organization’s human resources.
High and actively sought by superiors, who recognize the need for full commitment to developing, through training, the organization’s human resources.
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Matrix organization – attempts to maximize the strengths and minimize the weaknesses of both the functional and product bases
Superimpose a horizontal structure of authority, influence, and communication on the vertical structure
Facilitates the utilization of highly specialized staff and equipment
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Technical excellence
Improving motivation and commitment
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Multinational corporations frequently exist in very divergent environments
The most prevalent departmental basis is geographic
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Subsidiaries or affiliates of multinational corporations can act as conduits that introduce changes into the host country’s environment
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Multinational Corporations: Implications for Organizational Design (2 of 2)
Subsidiaries of multinational corporations can act as conduits through which features of the host country culture are introduced throughout the multinational organization
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Assembled and disassembled according to needs
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Culturally diverse
Horizontally arranged with little emphasis on command and control authority
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Relationships are tenuous
Caution needed in managing feedback, discussion, performance review, and reward systems
Greater equity of participation
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rigidly structured departments are eliminated
Implemented to reduce barriers between people and constituencies