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Ten
OrganizationalStructureandDesign
INTRODUCTION.
Organizationalstructurecanplayanimportantroleinanorganization’ssuccess.Theprocessoforganizing—thesecondmanagementfunction—ishowanorganization’sstructureiscreated.
DEFININGORGANIZATIONALSTRUCTURE.
Managersareseekingstructuraldesignsthatwillbestsupportandallowemployeestoeffectivelyandefficientlydotheirwork.
Beforewelookattheelementsoforganizationalstructureanddesign,weneedtodefinesomeimportantterms.
Organizingistheprocessofcreatinganorganization’sstructure.Thatprocesshasseveralpurposes,asshowninExhibit10.1.
Anorganizationalstructureistheformalarrangementofjobswithinanorganization.
Organizationaldesignistheprocessofdevelopingorchanginganorganization’sstructure.Itinvolvesdecisionsaboutsixkeyelements:workspecialization,departmentalization,chainofcommand,spanofcontrol,centralization/decentralization,andformalization.Weneedtotakeacloserlookateachofthesestructuralelements.
Workspecializationisthedegreetowhichtasksinanorganizationaredividedintoseparatejobs.Mostmanagerstodayseeworkspecializationasanimportantorganizingmechanismbutnotasasourceofeverincreasingproductivity.
Onceworktaskshavebeendefined,theymustbegroupedtogetherinsomewaythroughaprocesscalleddepartmentalization—thebasisonwhichjobsaregroupedinordertoaccomplishorganizationalgoals.Therearefivemajorwaystodepartmentalize.(Exhibit10.2)
Functionaldepartmentalizationisgroupingjobsbyfunctionsperformed.
Productdepartmentalizationisgroupingjobsbyproductline.
Geographicaldepartmentalizationisgroupingjobsonthebasisofterritoryorgeography.
Processdepartmentalizationisgroupingjobsonthebasisofproductorcustomerflow.
Customerdepartmentalizationisgroupingjobsonthebasisofcommoncustomers.
Twopopulartrendsindepartmentalizationinclude:
Customerdepartmentalizationcontinuestobeahighlypopularapproachbecauseitallowsbettermonitoringofcustomers’needsandrespondingtothosechangesinneeds.
Cross-functionalteams,ahybridgroupingofindividualswhoareexpertsinvariousspecialties(orfunctions)andwhoworktogether,arebeingusedalongwithtraditionaldepartmentalarrangements.
Thechainofcommandisthecontinuouslineofauthoritythatextendsfromtheupperorganizationallevelstothelowestlevelsandclarifieswhoreportstowhom.Threerelatedconceptsincludeauthority,responsibility,andunityofcommand.
Authorityistherightinherentinamanagerialpositiontotellpeoplewhattodoandtoexpectthemtodoit.
Responsibilityistheobligationorexpectationtoperform.
Unityofcommandistheclassicalmanagementprinciplethatasubordinateshouldhaveoneandonlyonesuperiortowhomheorsheisdirectlyresponsible;thatis,apersonshouldreporttoonlyonemanager.
Theconceptofspanofcontrolreferstothenumberofsubordinatesamanagercansuperviseeffectivelyandefficiently.
Thespanofcontrolconceptisimportantbecauseitdetermineshowmanylevelsandmanagersanorganizationwillhave.(SeeExhibit10.3foranexample.)
Whatdeterminesthe“ideal”spanofcontrol?Contingencyfactorssuchastheskillsandabilitiesofthemanagerandtheemployees,thecharacteristicsoftheworkbeingdone,similarityofemployeetasks,thecomplexityofthosetasks,thephysicalproximityofsubordinates,thedegreetowhichstandardizedproceduresareinplace,thesophisticationoftheorganization’sinformationsystem,thestrengthoftheorganization’sculture,andthepreferredstyleofthemanagerwillinfluencetheidealnumberofsubordinates.
Thetrendinrecentyearshasbeentowardlargerspansofcontrol.
Theconceptsofcentralizationanddecentralizationaddresswho,where,andhowdecisionsaremadeinorganizations.
Centralizationisthedegreetowhichdecision-makingisconcentratedatasinglepointintheorganization,usuallyintheupperlevelsoftheorganization.
Decentralizationisthehandingdownofdecision-makingauthoritytolowerlevelsinanorganization.
Thetrendistowarddecentralizingdecisionmakinginordertomakeorganizationsmoreflexibleandresponsive.
Employeeempowermentisanothertermforincreaseddecentralizationandistheincreasingofthedecision-makingdiscretionofemployees.
Anumberoffactorswillinfluencetheamountofcentralizationordecentralizationanorganizationuses.(SeeExhibit10.4.)
Formalizationreferstothedegreetowhichjobswithinanorganizationarestandardizedandtheextenttowhichemployeebehaviorisguidedbyrulesandprocedures.
Inahighlyformalizedorganization,employeeshavelittlediscretion,andthere’sahighlevelofconsistentanduniformoutput.Formalizedorganizationshaveexplicitjobdescriptions,lotsoforganizationalrules,andclearlydefinedprocedures.
Inaless-formalizedorganization,employeeshavealotoffreedomandcanexercisediscretioninthewaytheydotheirwork.
Standardizationnotonlyeliminatesthepossibilitythatemployeeswillengageinalternativebehaviors,itevenremovestheneedforemployeestoconsideralternatives.
Thedegreeofformalizationcanvarywidelybetweenorganizationsandevenwithinorganizations.
ORGANIZATIONALDESIGNDECISIONS.
Organizationsdon’thavethesamestructures.Evencompaniesofsimilarsizedonotnecessarilyhavesimilarstructures.
MechanisticandOrganicorganizationalforms.(SeeExhibit10.5.)
Amechanisticorganizationisanorganizationalstructurethat’scharacterizedbyhighspecialization,rigiddepartmentalization,narrowspansofcontrol,highformalization,alimitedinformationnetwork,andlittleparticipationindecision-makingbylow-levelemployees.
Anorganicorganizationisastructurethat’shighlyadaptiveandflexiblewithlittleworkspecialization,minimalformalization,andlittledirectsupervisionofemployees.
Wheniseachdesignfavored?It“depends”onthecontingencyvariables.
Contingencyfactors—appropriatestructuredependsonfourcontingencyvariables:
Strategyandstructure.
Oneofthecontingencyvariablesthatinfluencesorganizationaldesignistheorganization’sstrategy.
AlfredChandlerdidtheoriginalworkonthestrategystructurerelationship.Hisfindingthatstructurefollowedstrategypointedoutthatasorganizationschangedtheirstrategies,theyhadtochangetheirstructuretosupportthatstrategy.
Mostcurrentstrategy-structureframeworkstendtofocusonthreestrategydimensions:
Innovation—needstheflexibilityandfreeflow
ofinformationoftheorganicorganization
Cost minimization—needs theefficiency,
stability,andtightcontrolsofthemechanisticorganization
Imitation—whichusescharacteristicsofboth
mechanisticandorganic
Sizeandstructure.
There’sconsiderablehistoricalevidencethatanorganization’ssizesignificantlyaffectsitsstructure.Largerorganizationstendtohavemorespecialization,departmentalization,centralization,andformalizationalthoughthesize-structurerelationshipisnotlinear.
Technologyalsohasbeenshowntoaffectanorganization’schoiceofstructure.
Everyorganizationusessomeformoftechnologytotransforminputsintooutputs.
JoanWoodward’sstudyofstructureandtechnologyfoundthatorganizationsadaptedtotheirtechnology.Shefoundthatthreedistincttechnologieshadincreasinglevelsofcomplexityandsophistication.
Unitproductionistheproductionofitemsinunitsorsmallbatches.
Massproductionislarge-batchmanufacturing.
Processproductioniscontinuous-process
production.
Woodwardfoundinherstudyofthesethreegroupsthatdistinctrelationshipsexistedbetweenthesetechnologies,thesubsequentstructureoftheorganization,andtheeffectivenessoftheorganization.Exhibit10.6providesasummaryofthesefindings.
Environmentaluncertaintyandstructure.
Thefinalcontingencyfactorthathasbeenshowntoaffectorganizationalstructureisenvironmentaluncertainty.Onewaytomanageenvironmentaluncertaintyisthroughadjustmentsintheorganization’sstructure.Themoreuncertaintheenvironment,themoreflexibleandresponsivetheorganizationmayneedtobe.
COMMONORGANIZATIONALDESIGNS.
Traditionalorganizationaldesigns.
Wenowneedtolookatvariousorganizationaldesignsthatyoumightseeintoday’sorganizations.Exhibit10.8summarizesthestrengthsandweaknessesofeachofthesedesigns.
Asimplestructureisanorganizationaldesignwithlowdepartmentalization,widespansofcontrol,authoritycentralizedinasingleperson,andlittleformalization.
Itsstrengthsareitsflexibility,speed,andlowcosttomaintain.
Itsmajordrawbackisthatit’smosteffectiveinsmallorganizations.
Asanorganizationgrows,thestructuretendstobecomemorespecializedandformalized.Whencontingencyfactorsfavorabureaucraticormechanisticdesign,oneoftwooptionsislikelytobeused.
Oneoptionexpandsfunctionaldepartmentalizationintothefunctionalstructure,whichisanorganizationaldesignthatgroupssimilarorrelatedoccupationalspecialtiestogether.
Theotheroptionisthedivisionalstructure,whichisanorganizationalstructuremadeupofautonomous,self-containedunits.
Contemporaryorganizationaldesigns.
However,manyoftoday’sorganizationsarefindingthatthetraditionalhierarchicalorganizationaldesignsaren’tappropriatefortheincreasinglydynamicandcomplexenvironmentstheyface.
Teamstructures.
Oneofthenewerconceptsinorganizationaldesignistheteamstructure,whichisanorganizationalstructuremadeupofworkgroupsorteamsthatperformstheorganization’swork.
Matrixandprojectstructures.
Anothervariationinorganizationalarrangementsisbasedonthefactthatmanyoftoday’sorganizationsdealwithworkactivitiesofdifferenttimerequirementsandmagnitude.
Oneofthesearrangementsisthematrixorganizationthatassignsspecialistsfromdifferentfunctionaldepartmentstoworkononeormoreprojectsbeingledbyprojectmanagers.(SeeExhibit10.9.)
Anotherofthesedesignsistheprojectstructure,whichisastructureinwhichemployeesarepermanentlyassignedtoprojects.
TheBoundarylessOrganization.
Anotherapproachtoorganizationaldesignistheboundarylessorganization,whichdescribesanorganizationwhosedesignisnotdefinedby,orlimitedto,thehorizontal,vertical,orexternalboundariesimposedbyapredefinedstructure.
Avirtualorganizationisonethatconsistsofasmallcoreoffulltimeemployeesandthattemporarilyhiresoutsidespecialiststoworkonopportunitiesthatarise
Anetworkorganizationisasmallcore
organization
thatoutsourcesmajorbusinessfunctions.
Amodularorganizationisamanufacturingorganizationthatusesoutsidesupplierstoprovideproductcomponentsthatarethenassembledintofinalproducts.
TheLearningOrganization.
Finally,someorganizationshaveadoptedanorganizationalphilosophyofalearningorganization—anorganizationthathasdevelopedthecontinuouscapacitytoadaptandchangebecauseallmemberstakeanactiveroleinidentifyingandresolvingwork-relatedissues.Exhibit10.10showsthecharacteristicsofalearningorganization.
Cananorganization’sstructurebechangedquickly?Whyorwhynot?
Thespeedofchanginganorganization’sstructuredependsonitssize.Asmallorganizationcouldchangeitsstructuremuchmorerapidlythanalargeone.Butevenalargeorganizationcanchangeitsstructureandoftendoesinresponsetochangingenvironmentalconditionsandchangingstrategies.
Wouldyouratherworkinamechanisticoranorganicorganization?Why?
Students’answerstothiswillvary.You’llfindthatmanystudentspreferthestructureprovidedbyamechanisticorganizationwhereasotherswouldhatethattypeofrigidity.JustareminderthattheOnlineSelf-AssessmentLibraryScale#39,“WhatTypeofOrganizationStructureDoIPrefer?”addresseswhetherornotstudentswouldliketoworkinabureaucracy(amechanisticorganization).Youmightwanttouse(orreuse)itinansweringthisquestionorasafollow-uptothisquestion.
Whattypesofskillswouldamanagerneedtoeffectivelyworkina
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