STRUCTURAL COMPONENTS & ORGANIZATION DESIGNS

Organization Design – A Definition

Used to manage the total organizationthe overall pattern of structuralcomponents and arrangement

.

Research on Organizational Design

There are three popular approaches to thestudy of organizational design:

1. The researcher attempts to relate the behavior of individuals to such phenomena as organization structure and various applications of the principles.

Research on Org Design II

2. The researcher attempts to explain the features of organizational structures and the principles of organization theory.

3. The researcher conducts comparative research which is concerned with the similarities, dissimilarities and consequences of various organization structures and approaches to designing organizations.

An Organization Chart

The Organization Chart – What it Shows

Organization charts convey five major points about anorganization’s structure:

1. Activities of the organization: the chart as a whole indicates the range of activities in which the organization is involved.2. Subdivisions of the organization: each box represents a subdivision of the organization responsible for a portion of the work.3. Type of work performed: the label in each box indicates the department’s area of responsibility.

The Organization Chart – What it Shows II

4. Levels of management: the chart shows the management hierarchy; all persons who report to the same individual are on the same management level, or horizontal level on the chart.

5. Lines of Authority: the lines that connect the boxes show the official lines of authority and channels of communication for the organization.

The Organization Chart – What it Doesn’t Show

There are a number of things the organization chart does not show about the firm:

1. Degree of responsibility and authority of individuals;2. Degree of decentralization that exists;3. Staff and line functions;4. Position status or importance;5. Lines of actual communication;6. Relationships among members; and7. The ‘informal’ organization.

The Chain of Command

Line Organization Chart

Board of Directors

President

VP - Finance VP - Operations VP - Marketing

Region 1 Region 2 Region 3

Line & Staff Organization Chart

Functional Authority in a Line-Staff Organization

Fully-Developed Functional Authority in a Line-Staff

Organization

Personal Staff vs Professional Staff

Structural Components

OrganizationStructure

Departmentalization Span of Control Height of Hierarchy Coordination Internal Factors

Formalization

Centralization

Complexity

Span of Control

Span of Control is the number of employees who report to a singlemanager or supervisor.

Height of the HierarchyThe hierarchy describes who reports to whom and the span of control of each manager. The hierarchy is depicted by the vertical lines on the organization chart.

The hierarchy is related to the span of control. When spans are narrow the height of the hierarchy will be large (tall). When spans are wide, the height of the hierarchy will be low (flat).

Span of Control - Illustration

Factors Influencing the Span of Control

• Competence of supervisor and subordinates• Physical dispersion of subordinates• Extent of non-supervisory work in manager’s

job• Degree of interaction required• Extent of standardized procedures• Similarity of tasks being performed• Frequency of new problems• Preferences of supervisors and subordinates

James Worthy – Sears, Roebuck

In 1950, James Worthy, an early behaviorist studied the Sears store network. He found that there were two distincttypes of stores present in the network: tall and flat.

Metropolitan stores: larger, many employees, many staff,and large inventory.

Rural stores: small, few employees, little/no staff, andmodest inventory.

Worthy/Sears, continued

• Tall stores were characterized by relatively high turnover among employees, significant numbers of grievances, low employee morale.

• Flat stores were characterized by low rates of turnover, few grievances, and moderate morale.

Organizational Design Forms

Simple Organization

Entrepreneur

Employees

Characteristics of Simple Organizations

1. Small2. Flat3. Highly Centralized4. Very Flexible5. Fast

Departmentalization

Departmentalization is the lateral (horizontal)differentiation of the organization in departments.

Departments are organizational units that sharea common supervisor and common resources, are jointly responsible for performance, and tendto identify and collaborate with one another.

Bases of Departmentalization

1. Organizational function2. Product3. Process4. Geography or territory5. Customer

Criteria for Relative Advantages of Alternative Departmentalization Bases

1. Which approach (basis) permits the maximum use of special technical language?

2. Which provides the most efficient utilization of machinery and equipment?

3. Which provides the best hope of obtaining the required control and coordination?

Functional Structure

Functional structure is a design that groups similar orrelated occupational specialties together.

President

VP - Marketing VP - Operations VP - HRM

Advantages of Functional Departmentalization

• Promotes skill specialization• Reduces duplication of resources and

coordination problems within the functions• Enhances career development within

departments• Superiors & subordinates share common

expertise• Promotes high-quality technical problem

solving

Disadvantages of Functional Departmentalization

• Emphasizes routine tasks• Reduces communication between departments• May create conflict over product priorities• Can make scheduling difficult across

departments• Focuses on departmental as opposed to

organizational issues• Develops managers who are experts in narrow

fields

Strengths of Functional Departmentalization

• Best in a stable environment

• Best in small-medium sized organizations

• Best when only one/few products or services

• Economies of scale within functional groups

Weaknesses of Functional Departmentalization

• Slow response time to environmental changes

• Less innovation

• “Tunnel vision” on organizational goals

• Decisions may pile up at top: hierarchy overload

Fully Implemented Functional Design