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and Design
Chapter 15

Learning Objectives


Describe what is meant by organizational structure and

how it is revealed by an organizational chart.
Explain the basic characteristics of organizational
structure revealed in an organizational chart.
Describe different approaches to departmentalization.
Distinguish between classical and neoclassical
approaches to organizational design and between
mechanistic organizations and organic organizations, as
described by the contingency approach to organizational
Describe the five organizational forms identified by
Characterize two forms of interorganizational design.
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Basic Concepts
Organizational Structure:
Structure The formal
configuration between individuals and
groups with respect to the allocation of
tasks, responsibilities, and authorities
within organizations.
Organizational Chart:
Chart A diagram
representing the connections between the
various departments within an
organization: a graphic representation of
organizational design.
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Sample Organizational

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Structure Concepts I
Hierarchy of Authority:
Authority A configuration of
the reporting relationships within
organizations; that is, who reports to
Division of Labor:
Labor The process of dividing
the many tasks performed within an
organization into specialized jobs.
Span of Control:
Control The number of
subordinates in an organization who are
supervised by an individual manager.
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Modern Trends:

As todays organizations restructure, the middle layers of

organizational hierarchies tend to get removed. The result is a
flatter organizational structure, which puts managers closer to the
issues about which they have to make decisions.

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Division of Labor

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Tall vs. Flat Organizations

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Structure Concepts II
Line Positions:
Positions Positions in organizations in
which people can make decisions related to doing
its basic work.
Staff Positions:
Positions Positions in organizations in
which people make recommendations to others
but who are not themselves involved in making
decisions concerning the organizations day-today operations.
Decentralization The extent to which authority
and decision making are spread throughout all
levels of an organization rather than being
reserved exclusively for top management

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The process of breaking up organizations into
coherent units.
Functional Organization:
Organization The type of
departmentalization based on the activities or
functions performed (e.g., sales, finance).
Product Organization:
Organization The type of
departmentalization based on the products (or
product lines) produced.
Matrix Organization:
Organization The type of
departmentalization in which a product or project
form is superimposed on a functional form.
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Functional Organization

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Product Organization

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Matrix Organization

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Organizational Design

process of coordinating the

structural elements of an
organization in the most appropriate
Approaches include
Classical and Neoclassical Approaches
The Contingency Approach
Mintzbergs Framework
The Boundaryless Organization
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Classical vs. Neoclassical

Classical Organizational Theory: The approach that
assumes that there is a single best way to design
This approach assumes that managers need to have close
control over their subordinates and calls for designing
organizations with tall hierarchies and a narrow span of

Neoclassical Organizational Theory: An attempt to

improve on the classical organizational theory that argues
that not only economic effectiveness, but also employee
satisfaction, should be goals of an industrial organization.
This approach assumes that managers do not have to
carefully monitor their subordinates and calls for designing
organizations with flat hierarchies and a wide span of control.

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Classical vs. Neoclassical


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The Contingency Approach

The contemporary approach that recognizes that

no one approach to organizational design is best,
but that the best design is the one that best fits
with the existing environmental conditions.
Mechanistic Organization:
Organization An internal
organizational structure in which people perform
specialized jobs, many rigid rules are imposed,
and authority is vested in a few top-ranking
Organic Organization:
Organization An internal organizational
structure in which jobs tend to be very general,
there are few rules, and decisions can be made by
lower-level employees.

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Mechanistic vs. Organic


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Design Effectiveness

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Mintzbergs Framework

Mintzberg claims that

organizations are
composed of five basic
elements, or groups of
individuals, any of which
may predominate in an
The element that
predominates will
determine the most
effective design in that
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Mintzberg: Five Basic

Operating Core:
Core Employees who perform the basic
work related to an organizations product or service.
Strategic Apex:
Apex Top-level executives responsible for
running an entire organization.
Middle Line:
Line Managers who transfer information
between higher and lower levels of the
organizational hierarchy.
Technostructure Organizational specialists
responsible for standardizing various aspects of an
organizations activities.
Support Staff:
Staff Individuals who provide indirect
support services to an organization.

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Mintzberg: Organizational
Designs I
Simple Structure:
Structure An organization characterized as
being small and informal, with a single powerful
individual, often the founding entrepreneur, who is
in charge of everything.
Machine Bureaucracy:
Bureaucracy An organizational form in
which work is highly specialized, decision making
is concentrated at the top, and the work
environment is not prone to change (e.g., a
government office).
Professional Bureaucracy:
Bureaucracy Organizations (e.g.,
hospitals and universities) in which there are lots of
rules to follow, but employees are highly skilled and
free to make decisions on their own.

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Mintzberg: Organizational
Designs II
Divisional Structure:
Structure The form used by many
large organizations, in which separate
autonomous units are created to deal with entire
product lines, freeing top management to focus
on large-scale, strategic decisions.
Adhocracy A highly informal, organic
organization in which specialists work in teams,
coordinating with each other on various projects
(e.g., many software development companies).

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Mintzberg: A Summary

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Boundaryless Organization
An organization in which chains of command are
eliminated, spans of control are unlimited, and rigid
departments give way to empowered teams.
Modular Organization:
Organization An organization that
surrounds itself by a network of other organizations
to which it regularly outsources noncore functions.
Virtual Organization:
Organization A highly flexible, temporary
organization formed by a group of companies that
join forces to exploit a specific opportunity.
Affiliate Networks:
Networks Satellite organizations affiliated
with core companies that have helped them
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Boundaryless Organization

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Modular Organization

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Virtual Organization

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Organizational designs in which two or more
organizations come together.
Conglomerates A form of organizational
diversification in which an organization
(usually a very large, multinational one) adds
an entirely unrelated business or product to
its organizational design.
Strategic Alliance:
Alliance A type of
interorganizational design in which two or
more separate companies combine forces to
develop and operate a specific business.
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Strategic Alliances

Mutual Service Consortia:

Consortia A type of strategic
alliance in which two similar companies from the
same or similar industries pool their resources to
receive a benefit that would be too difficult or
expensive for either to obtain alone.
Value-Chain Partnerships:
Partnerships Strategic alliances
between companies in different industries that
have complementary capabilities.
Joint Ventures:
Ventures Strategic alliances in which
several companies work together to fulfill
opportunities that require the capabilities of one
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Continuum of Alliances

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