Chapter 13

Organization
Structure and
Design
PowerPoint Presentation by Charlie Cook
Copyright 2005 South-Western. All rights reserved.

Learning Objectives
After reading and studying this chapter and doing the
exercises, you should be able to:
1. Identify and define the foundation concepts of organization
structure, including the informal organization.
2. Specify the basic features of the bureaucratic form of
organization structure, including how it is divided into
departments.
3. Describe three key modifications of a bureaucratic structure:
matrix, flat, and outsourcing.
4. Describe the two contemporary organizational designs
referred to as horizontal structures and network structures.
5. Specify the criteria for an effective organization design.

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Learning Objectives (contd)

After reading and studying this chapter and doing the
exercises, you should be able to:
6. Understand why a new type of organization chart called an
organigraph can contribute to understanding organization
structure.

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Organizations
Organization
Is a collection of people working together to achieve a
common purpose (or simply a big group).

Organization structure
Is the arrangement of people and tasks to accomplish
organizational goals.

Organizational design
Is the process of creating a structure that best fits a
purpose, strategy, and environment.

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Types of Organizational Structures

Mechanistic organizations
Hierarchical bureaucracies that:
Emphasize

specialization and control

Engage in vertical communications
Rely heavily on rules, policies, and procedures.

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Types of Organizational Structures

Organic structures
Networks designed to respond to rapid changes in the
environment by emphasizing:
Horizontal

specialization and personal coordination

Extensive

informal communications

Loose

rules, policies, and procedures

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Organizational Structures (contd)

Formal organizational structure
Is an official statement of the reporting relationships,
rules, and regulations that guide and govern the
conduct of business by the organization.

Informal organizational structure

Is a set of unofficial working relationships providing
the flexibility to take care of events and transactions
not covered by the formal structure.
Is revealed using social network analysis to trace
informal social relationships and communication
channels.
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Organizational Structures (contd)

Formalization
Is the degree to which expectations regarding the
methods of work are specified, written down, and
enforced.
Produces

an organization with a highly specialized

labor and high delegation of authority.

Is associated with mechanistic (bureaucratic)

organizations.

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Organizational Structures (contd)

Centralization
Is the extent to which executives delegate authority to
lower organizational units.
Less

delegation = more centralization.

Strategic decisions are more likely to be centralized

than operational decisions.
The use of functional units is a feature of
centralization.

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Organizational Structures (contd)

Complexity
Refers to the number of different job titles and
organizational units in an organization.
Complexity increases the difficulty of managing an
organization and typically increases with the size of
the organization.

Differentiation
A horizontally differentiated organization will have
many different job titles.
A vertically differentiated organization will have many
different levels.

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Organizational Structures (contd)

Coupling
Is the extent to which organizational parts are
interdependent.
Tight coupling between parts is indicated if a minor
change in one part produces a large change in an
associated part.
Has increased due to the increasing interdependence
of the parts or subsystems of organizations today.
Organizational design is influenced by coupling and
the increased necessity for flexibility to meet
changing market conditions.
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Webers Ideal Organization: the Bureaucracy

1.

Rules and procedures controlling the organizational

structure

2.

A high degree of differentiation among organizational

functions

3.

A high degree of job specialization

4.

An organization of offices determined by hierarchy, with

each unit reporting to a higher unit

5.

A heavy emphasis on rules and norms to regulate behavior

6.

Interpersonal relations characterized by impersonality in

place of favoritism

7.

Selection and promotion based on merit

8.

All administrative actions recorded in writing

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Forms of Bureaucratic Organizations

Machine bureaucracy
Uses standardized work processes and is efficient.
Best use is in large organizations.

Professional bureaucracy
Standardizes skills for coordination and is composed
of a core of highly trained professionals.

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The Bureaucratic Form of Organization

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Bureaucratic Organizations
Contributions
Large-scale accomplishments
Accountability for results
Managers with precious skills and expertise
Valuable organizational memory

Potential dysfunctions
Suppression of innovation and decision making
Lower productivity
Inconvenience and inefficiency
High worker frustration and low satisfaction
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Departmentalization
The process of subdividing work into specialized
departments.
Advantageous

in enhancing product growth or

service to customers.

Types of departmentalization:
Functional
Territorial
Product or service
Customer
Hybrid
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Departmentalization (contd)
Functional departmentalization
Grouping people according to their expertise
Most common type of organization

Territorial departmentalization
Grouping subunits according to the geographic
areas that they serve.
Internationalization

of business has increased the

need for organizing subunits territorially.

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Functional Departmentalization within

the Davenport Machine Company

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Departmentalization (contd)
Product/Service departmentalization
Is arranging units by the product or service they
provide.

Customer departmentalization
Creates a structure based on customer needs.

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Product/Service Departmentalization at
GE Capital

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Other Organizational Structures

Hybrid (or Mixed) organization structure
Combines the advantages of different organizational
types.
Both specialized and self-contained units are included
within the organizational structure.

Line versus staff

Line groups are responsible for the primary purposes
of the firm whereas staff groups are responsible for
secondary purposes.
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Hybrid Organization Structure

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Matrix Organization
A project structure superimposed on a functional
structure to take advantage of new opportunities
and solve special problems.
Projects are temporary groups of specialists working
under one manager to accomplish a fixed objective
such as launching a new product.
Matrix

structure creates a dual reporting challenge

the involved employees may have to report to
two bosses.

A key advantage is its ability to implement projects

quickly.

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Matrix Organization
in an Electronics
Company

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Organizational Structures (contd)

Flat organization
Has relatively few levels
Is less bureaucratic because:
There

are fewer managers available to review and

approve decisions.

The

short chain-of-command creates less concern

about authority differences among people.

Are more efficient than tall organizations.

Downsizing to a flatter structure has strong effects on
surviving employees.
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Outsourcing as an Organizational
Arrangement
Outsourcing
Is having work done by other organizations as a
method of dividing the work between groups on the
outside with groups on the inside.
Reduces

the need for employees and physical

assets and reduce payroll costs.

Can

create ethical dilemmas for companies who

have no control over the actions of their
outsourcing supplier.

Can

cause conflict with unions over outsourcing.

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Leading-Edge Organization Structures

The horizontal structure
Is the arrangement of work by teams that are
responsible accomplishing a process.
Is a structure in which employees take collective
responsibility for customers.

Reengineering
Is the radical redesign of work to achieve substantial
improvements in performance.
Searches for the most efficient way to perform a task.
Organizes work horizontally rather than vertically.
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A Horizontal Structure

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The Network Structure

Network structure (or Virtual organization)
Is a temporary association of otherwise independent
firms that are linked by technology to share resources
and markets.
Is horizontally oriented.
Requires that its members
trust one another.

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Nine Criteria for an Effective Organization

Design

Source: Diagram developed from text information presented in Michael Gould and Andrew Campbell,
Do You Have a Well-Designed Organization? Harvard Business Review, March 2002, pp. 117124.

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Organigraphs: Drawing How Companies

Really Work
Organigraphs
A map that provides an overview of the companys
functions and the way people organize themselves at
work.
Help

in the understanding of organizational

functioning.

Assist

in expanding into new markets and

identifying opportunities.

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