Chapter 016 - Organizational Structure & Design16-*
16-*
Organization structure – the pattern of jobs and groups of jobs in
an organization.
*
16-*
Structure as an influence on behavior
Structure as recurring activities
16-*
*
16-*
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
McGraw-Hill/Irwin
16-*
*
16-*
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
McGraw-Hill/Irwin
16-*
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
McGraw-Hill/Irwin
16-*
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
McGraw-Hill/Irwin
16-*
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
McGraw-Hill/Irwin
16-*
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
McGraw-Hill/Irwin
16-*
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
McGraw-Hill/Irwin
16-*
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
McGraw-Hill/Irwin
16-*
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?
McGraw-Hill/Irwin
16-*
*
16-*
16-*
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
McGraw-Hill/Irwin
16-*
Engineering
Reliability
Finance
Manufacturing
Distribution
Human
Resources
Public
Relations
Purchasing
16-*
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
McGraw-Hill/Irwin
16-*
16-*
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
McGraw-Hill/Irwin
16-*
16-*
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
McGraw-Hill/Irwin
16-*
16-*
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
McGraw-Hill/Irwin
16-*
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
16-*
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
McGraw-Hill/Irwin
16-*
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
McGraw-Hill/Irwin
16-*
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.
McGraw-Hill/Irwin
16-*
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.
McGraw-Hill/Irwin
16-*
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.
McGraw-Hill/Irwin
16-*
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
McGraw-Hill/Irwin
16-*
*
16-*
Technical excellence
Improving motivation and commitment
McGraw-Hill/Irwin
16-*
*
16-*
Multinational corporations frequently exist in very divergent
environments
The most prevalent departmental basis is geographic
McGraw-Hill/Irwin
16-*
Subsidiaries or affiliates of multinational corporations can act as
conduits that introduce changes into the host country’s
environment
McGraw-Hill/Irwin
16-*
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
McGraw-Hill/Irwin
16-*
Assembled and disassembled according to needs
McGraw-Hill/Irwin
16-*
Culturally diverse
Horizontally arranged with little emphasis on command and control
authority
McGraw-Hill/Irwin
16-*
McGraw-Hill/Irwin
16-*
Relationships are tenuous
Caution needed in managing feedback, discussion, performance
review, and reward systems
Greater equity of participation
16-*
rigidly structured departments are eliminated
Implemented to reduce barriers between people and
constituencies