Organizational Structure and Design_Wk9_260309

8/14/2019 Organizational Structure and Design_Wk9_260309

1/39

Organizational Structure and

Design

Wk 9

26 Mar 2009


2/39

2

Organizational Structure and Design

Consider for a moment PIA, FBR

HP, BP

What they want?

How to achieve

Organizing

is defined as the process of creating Organizations

Structure The process is very important as managers need to develop

an organisational structure that allow employees to

effectively and efficiently achieve the tasks


3/39

3

Defining Organizational Structure Organizational Structure

The formal arrangement of jobs within an organization

Organizational Design

When managers develop or change the structure they

are engaged in Organisation Design

A process involving decisions about six key elements:

Work specialization

Departmentalization

Chain of command

Span of control

Centralization and decentralization

Formalization


4/39

4

Exhibit 9.1 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


5/39

5

Organizational Structure

Work Specialization

The degree to which tasks in the organization are

divided into separate jobs with each stepcompleted by a different person

Overspecialization can result in human diseconomies

from boredom, fatigue, stress, poor quality, increased

absenteeism, and higher turnover


6/39

6

Departmentalization by Type

Functional

Grouping jobs by

functions performed

Product

Grouping jobs by

product line

Geographical Grouping jobs on the

basis of territory or

geography

Process

Grouping jobs on the

basis of product or

customer flow

Customer

Grouping jobs by type

of customer and needs


7/39

7

Exhibit 9.2a Functional

Departmentalization

Plant Manager

Manager,Manufacturing

Manager,Human Resources

Manager,Accounting

Manager,Engineering

Manager,Purchasing

+ Efficiencies from putting together similar specialties and

people with common skills, knowledge, and orientations

+ Coordination within functional area

+ In-depth specialization

Poor communication across functional areas

Limited view of organizational goals


8/39

8

Exhibit 9.2b Geographical

Departmentalization

Vice Presidentfor Sales

Sales Director,Central RegionSales Director,Prairies RegionSales Director,Western Region Sales Director,Eastern Region

+ More effective and efficient handling of specific

regional issues that arise

+ Serve needs of unique geographic markets better

Duplication of functions

Can feel isolated from other organizational areas


9/39

9

Exhibit 9.2c Product Departmentalization

+ Allows specialization in particular products and services+ Managers can become experts in their industry

+ Closer to customers



Source: Bombardier Annual Report.

Bombardier, Ltd.

IndustrialEquipment Division

Recreational andUtility VehiclesSector

Mass Transit Sector Rail ProductsSector

Rail and DieselProducts Division

BombardierRotax(Gunskirchen)

RecreationalProducts Division

LogisticEquipment Division

Mass TransitDivision

BombardierRotax(Vienna)


10/39

10

Exhibit 9.2d Process

Departmentalization

+ More efficient flow of work activities

Can only be used with certain types of products

PlantSuperintendent

SawingDepartmentManager

PlaningandMillingDepartmentManager

AssemblingDepartmentManager

LacqueringandSandingDepartmentManager

FinishingDepartmentManager

InspectionandShippingDepartmentManager


11/39

11

Exhibit 9.2e Customer

Departmentalization

+ Customers needs and problems can be met by specialists



Directorof Sales

Manager,Wholesale Accounts

Manager,Retail Accounts

Manager,Government Accounts


12/39

12

Organizational Structure (contd)

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


13/39

13


Authority

The rights inherent in a managerial position to tell people what todo and to expect them to do it

Responsibility

The obligation or expectation to perform. Responsibility bringswith it accountability (the need to report and justify work tomanagers superiors)

Unity of Command

The concept that a person should have one boss and should reportonly to that person

Delegation

The assignment of authority to another person to carry out specificduties


14/39

14


Line and Staff Authority

Line managers are responsible for the essentialactivities of the organization, includingproduction and sales. Line managers have theauthority to issue orders to those in the chain ofcommand

The president, the production manager, and the sales

manager are examples of line managers

Staff managers have advisory authority, andcannot issue orders to those in the chain ofcommand (except those in their own department)


15/39

15


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 organizations information system

Strength of the organizations culture

Preferred style of the manager


16/39

16

Exhibit 9.3 Contrasting Spans of

Control

Assuming Span of 4

Span of 4:Employees:Managers (level 16)

= 4096= 1365

Span of 8:Employees:Managers (level 14)

Assuming Span of 8

1

23

4

5

6

7

(Highest)

(Lowest)

Members at Each Level

1

416

64

256

1024

4096

1

864

512

4096

OrganizationalL

evel

= 4096= 585


17/39

17


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


18/39

18

Figure 9.4a 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 indecisions

Decisions are significant

Organization is facing a crisis or the risk of company

failure Company is large

Effective implementation of company strategies dependson managers retaining say over what happens


19/39


20/39

20


Formalization

The degree to which jobs within the organization

are standardized and the extent to whichemployee 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


21/39

21

Organizational Design Decisions

Mechanistic Organization

A rigid and tightly

controlled structure

High specialization

Rigid departmentalization

Narrow spans of control

High formalization

Limited information

network (mostlydownward

communication)

Low decision participation

by lower-level employees

Organic Organization

Highly flexible and

adaptable structure

Nonstandardized jobs

Fluid team-based structure

Little direct supervision

Minimal formal rules

Open communication

network

Empowered employees


22/39

22

Exhibit 9.5 Mechanistic Versus

Organic Organization

Mechanistic

High Specialization

Rigid Departmentalization

Clear Chain of Command

Narrow Spans of Control

Centralization

High Formalization

Organic

Cross-Functional Teams

Cross-Hierarchical Teams

Free Flow of Information

Wide Spans of Control

Decentralization

Low Formalization


23/39

23

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


24/39

24


(contd) 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 andmechanistic elements in the organizations structure


25/39

25


(contd) Strategy and Structure

Achievement of strategic goals is facilitated by

changes in organizational structure thataccommodate 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


26/39

26


(contd) Technology and Structure

Organizations adapt their structures to theirtechnology

Woodwards classification of firms based on thecomplexity 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

Nonroutine technology = organic organizations


27/39

27


(contd) 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


28/39

28

Exhibit 9.6 Woodwards Findings on

Technology, Structure, andEffectiveness


29/39

29

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 anddevelopment

Divisional Structure Composed of separate business units or divisions with limited

autonomy under the coordination and control of the parentcorporation


30/39

30

Exhibit 9.7 Strengths and

Weaknesses of Common TraditionalOrganizational Designs


31/39

31

Organizational Designs (contd)

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 toanother project as each project is completed


32/39

32

Exhibit 9.8 Contemporary

Organizational Designs


33/39

33

Exhibit 9.9 A Matrix Organization

in an Aerospace Firm

DesignEngineering

ManufacturingContract

AdministrationPurchasing Accounting

HumanResources (HR)

Design

Group

Alpha

Project

Manufacturing

Group

Contract

Group

Purchasing

Group

Accounting

Group

HR

Group

DesignGroup

BetaProject

ManufacturingGroup

ContractGroup

PurchasingGroup

AccountingGroup

HRGroup

DesignGroup

GammaProject

ManufacturingGroup

ContractGroup

PurchasingGroup

AccountingGroup

HRGroup

Design

Group

Omega

Project

Manufacturing

Group

Contract

Group

Purchasing

Group

Accounting

Group

HR

Group


34/39


35/39

35

Removing Boundaries

Virtual Organization An organization that consists of a small core of full-time

employees and that temporarily hires specialists to workon opportunities that arise

Network Organization A small core organization that outsources its major

business functions (e.g., manufacturing) in order toconcentrate on what it does best

Modular Organization A manufacturing organization that uses outside suppliersto provide product components for its final assemblyoperations


36/39

36

Outsourcing Issues

Problems in Outsourcing

Choosing the wrong activities to outsource

Choosing the wrong vendor

Writing a poor contract

Failing to consider personnel issues

Losing control over the activity

Ignoring the hidden costs Failing to develop an exit strategy (for either moving to

another vendor, or deciding to bring the activity back in-

house)


37/39

37

Organizational Designs (contd)

Learning Organization

An organization that has developed the capacity tocontinuously learn, adapt, and change through the practice

of knowledge management by employees Characteristics of a learning organization:

An open team-based organization design that empowersemployees

Extensive and open information sharing

Leadership that provides a shared vision of the organizationsfuture; support; and encouragement

A strong culture of shared values, trust, openness, and a senseof community


38/39

38

Exhibit 9.10 Characteristics of a

Learning OrganizationOrganizational Design

Boundaryless Teams Empowerment

Organizational Culture

Strong Mutual RelationshipsSense of Community Caring Trust

Information Sharing

Open Timely Accurate

Leadership Shared Vision Collaboration

THE LEARNINGORGANIZATION


39/39

39

References

http://choo.fis.utoronto.ca/FIS/courses/lis1230/

Robbins and Coulter Book http://www.managementhelp.org/org_thry/dim

http://www.centerod.com/three-stages-of-orgn

http://www.see.ed.ac.uk/~gerard/MENG/MEA
http://choo.fis.utoronto.ca/FIS/courses/lis1230/lis1230sharma/od1.htmhttp://www.managementhelp.org/org_thry/dimensns.htmhttp://www.centerod.com/three-stages-of-orgnaizational-development.htmlhttp://www.see.ed.ac.uk/~gerard/MENG/MEAB/lo_index.htmlhttp://www.see.ed.ac.uk/~gerard/MENG/MEAB/lo_index.htmlhttp://www.centerod.com/three-stages-of-orgnaizational-development.htmlhttp://www.managementhelp.org/org_thry/dimensns.htmhttp://choo.fis.utoronto.ca/FIS/courses/lis1230/lis1230sharma/od1.htm

Organizational Structure and Design_Wk9_260309

Documents

Transcript of Organizational Structure and Design_Wk9_260309