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MGT301PresentationPearson17eChapter15.pdf

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Foundations of

Organization

Structure

Learning Objectives

Identify seven elements of an organization’s structure.

Identify the characteristics of the functional structure, the

divisional structure, and the matrix structure.

Identify the characteristics of the virtual structure, the team

structure, and the circular structure.

Describe the effects of downsizing on organizational

structures and employees.

Contrast the reasons for mechanistic and organic structural

models.

Analyze the behavioral implications of different organizational

designs.

15-3

Identify Seven Elements

of an Organization’s Structure

15-4

LO 1

Identify Seven Elements

of an Organization’s Structure

Work specialization: the division of

labor into separate activities.

Repetition of work.

Training for specialization.

Increasing efficiency through invention.

Henry Ford

15-5

LO 1

Identify Seven Elements

of an Organization’s Structure

15-6

LO 1

Identify Seven Elements

of an Organization’s Structure

Grouping jobs together so common tasks can

be coordinated is called departmentalization.

 By functions performed.

 By type of product or service the

organization produces.

 By geography or territory.

 By process differences.

 By type of customer.

15-7

LO 1

Identify Seven Elements

of an Organization’s Structure

Chain of command: an unbroken line of

authority that extends from the top of the

organization to the lowest echelon and clarifies

who reports to whom.

 Once a basic cornerstone in organization

design.

 Two complementary concepts:

Authority

Unity of command

15-8

LO 1

Identify Seven Elements

of an Organization’s Structure

The chain of command is less relevant today

because of technology and the trend of

empowering people.

 Operating employees make decisions once

reserved for management.

 Increased popularity of self-managed and

cross-functional teams.

Many organizations still find that enforcing the

chain of command is productive.

15-9

LO 1

Identify Seven Elements

of an Organization’s Structure

15-10

LO 1

Identify Seven Elements

of an Organization’s Structure Centralization and Decentralization

 Centralization refers to the degree to which

decision making is concentrated at a single

point in the organization.

 Advantages of a decentralized organization:

Can act more quickly to solve problems.

More people provide input into decisions.

Employees are less likely to feel alienated

from those who make decisions that affect

their work lives. 15-11

LO 1

Identify Seven Elements

of an Organization’s Structure

Formalization: the degree to which jobs within

the organization are standardized.

 A highly formalized job means a minimum

amount of discretion.

 Low formalization – job behaviors are

relatively non-programmed, and employees

have a great deal of freedom to exercise

discretion in their work.

15-12

LO 1

Identify Seven Elements

of an Organization’s Structure

Boundary spanning occurs when individuals

form relationships with people outside their

formally assigned groups.

 Positive results are especially strong in

organizations that encourage extensive

internal communication; in other words,

external boundary spanning is most effective

when it is followed up with internal boundary

spanning.

15-13

LO 1

Common Organizational

Frameworks and Structures

15-14

LO 2

Common Organizational

Frameworks and Structures Simple structure: the manager and the owner are

one and the same.

 Strengths:

Simple, fast, and flexible.

Inexpensive to maintain.

Accountability is clear.

 Weaknesses:

Difficult to maintain in anything other than

small organizations.

Risky—everything depends on one person. 15-15

LO 1

Common Organizational

Frameworks and Structures A bureaucracy is characterized by

standardization.

 Highly routine operating tasks.

 Very formalized rules and regulations.

 Tasks grouped into functional departments.

 Centralized authority.

 Narrow spans of control.

 Decision making that follows the chain of

command. 15-16

LO 2

Common Organizational

Frameworks and Structures  Strengths of bureaucracy:

Ability to perform standardized activities in a

highly efficient manner.

 Weaknesses of bureaucracy:

Subunit conflicts.

Unit goals dominate.

Obsessive behavior.

Covering weak management. 15-17

LO 2

Common Organizational

Frameworks and Structures

The matrix structure combines two forms of

departmentalization—functional and product:

 The strength of functional is putting

specialists together.

 Product departmentalization facilitates

coordination.

It provides clear responsibility for all

activities related to a product, but with

duplication of activities and costs.

15-18

LO 2

Common Organizational

Frameworks and Structures

15-19

LO 2

Alternate Design Options

The Virtual Organization

 The essence of the virtual organization is

that it is typically a small, core organization

that outsources major business functions.

Also referred to as a modular or network

organization.

It is highly centralized, with little or no

departmentalization.

15-20

LO 3

Alternate Design Options

15-21

LO 3

Alternate Design Options

The team structure: eliminates the chain of

command and replaces departments with

empowered teams.

Removes vertical and horizontal boundaries.

Breaks down external barriers.

Flattens the hierarchy and minimizes status

and rank.

When fully operational, the team structure may

break down geographic barriers.

15-22

LO 3

Alternate Design Options

In the circular structure: in the center are the

executives, and radiating outward in rings

grouped by function are the managers, then the

specialists, then the workers.

Has intuitive appeal for creative entrepreneur.

However, employees may be unclear about

whom they report to and who is running the

show.

We are still likely to see the popularity of the

circular structure spread. 15-23

LO 3

Effects of Downsizing on

Organizations and Employees The Leaner Organization: Downsizing

 The goal of the new organizational forms

we’ve described is to improve agility by

creating a lean, focused, and flexible

organization.

 Downsizing is a systematic effort to make an

organization leaner by selling off business

units, closing locations, or reducing staff.

15-24

LO 4

Effects of Downsizing on

Organizations and Employees

Strategies for downsizing include:

 Investment

 Communication

 Participation

 Assistance

Make cuts carefully and help employees

through the process.

15-25

LO 4

Mechanistic vs. Organic

Structural Models

15-26

LO 5

Mechanistic vs. Organic

Structural Models

An organization’s structure is a means to help

management achieve its objectives.

Most current strategy frameworks focus on

three strategy dimensions:

 Innovation

 Cost Minimization

 Imitation

15-27

LO 5

Mechanistic vs. Organic

Structural Models

15-28

LO 5

Mechanistic vs. Organic

Structural Models

Organizational Size

 Large organizations—employing 2,000 or

more people—tend to have more

specialization, more departmentalization,

more vertical levels, and more rules and

regulations than do small organizations.

The impact of size becomes less

important as an organization expands.

15-29

LO 5

Mechanistic vs. Organic

Structural Models

Technology: the way an organization transfers

its inputs into outputs.

 Numerous studies have examined the

technology-structure relationship.

Organizational structures adapt to their

technology.

15-30

LO 5

Mechanistic vs. Organic

Structural Models An organization’s environment includes

outside institutions or forces that can affect its performance.

 Dynamic environments create significantly more uncertainty for managers than do static ones.

 To minimize uncertainty:

Broaden structure to sense and respond to threats.

Form strategic alliances.

15-31

LO 5

Mechanistic vs. Organic

Structural Models

15-32

LO 5

Mechanistic vs. Organic

Structural Models Another factor that shapes organizational

structure is institutions.

 Regulatory pressures.

 Simple inertia.

 Culture.

 Fads or trends.

Institutional pressures are often difficult to see

specifically because we take them for granted,

but that doesn’t mean they aren’t powerful.

15-33

LO 5

Analyze the Behavioral Implications

of Different Organizational Designs

An organization’s structure can have significant

effects on its members.

It’s impossible to generalize!

 Not everyone prefers the freedom and flexibility

of organic structures.

 Some people are most productive and satisfied

when work tasks are standardized and ambiguity

minimized.

15-34

LO 6

Analyze the Behavioral Implications

of Different Organizational Designs

Organizational Designs and Employee Behavior

 Work specialization contributes to higher employee

productivity.

 No evidence supports a relationship between span

of control and employee satisfaction or

performance.

 Fairly strong evidence links centralization and job

satisfaction, meaning that less centralization is

associated with higher satisfaction.

 National culture influences the preference for

structure. 15-35

LO 6

Implications for Managers

15-36

Implications for Managers

Specialization can make operations more

efficient, but remember that excessive

specialization can create dissatisfaction and

reduced motivation.

Avoid designing rigid hierarchies that overly

limit employees’ empowerment and autonomy.

Balance the advantages of virtual and

boundaryless organizations against the

potential pitfalls before adding flexible

workplace options. 15-37

Implications for Managers

Downsize your organization to realize major

cost savings, and focus the company around

core competencies, but only if necessary,

because downsizing can have a significant

negative impact on employee affect.

Consider the scarcity, dynamism, and

complexity of the environment, and balance the

organic and mechanistic elements when

designing an organizational structure.

15-38