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Foundations of
Organization Structure
ORGANIZATIONAL BEHAVIOR
S T E P H E N P. R O B B I N S
E L E V E N T H E D I T I O N
2005 Prentice Hall Inc. WWW.PRENHALL.COM/ROBBINS PowerPoint Presentation
All rights reserved. by Charlie Cook
What Is Organizational Structure?
Organizational Structure
Defines how job tasks are
formally divided, grouped, Key Elements:
and coordinated. 1. Work specialization
There are six key elements 2. Departmentalization
that managers need to 3. Chain of command
address when they design
4. Span of control
their org.s structure.
5. Centralization and
decentralization
6. Formalization
Division of labor:
Makes efficient use of employee skills
Increases employee skills through repetition
Less between-job downtime increases productivity
Specialized training is more efficient.
Allows use of specialized equipment.
Benefits include:
Increasing levels of skill
Less time is wasted moving from job to job
Training is less costly
Increased focus
Adam Smiths pin factory
Men are much more likely to discover easier and readier methods of
attaining any object, when the whole attention of their minds is
directed towards that single object, than when it is dissipated among
a great variety of things. WON p. 14
human
Impact from diseconomies
economies
of specialization
Low
Low High
Work Specialization
2005 Prentice Hall Inc. All rights reserved. 156
1-Work SpecializationTodays View3
Most managers today see work specialization as
an important org. mechanism but not as a source
of ever-increasing productivity.
They recognize the efficiencies it creates in
certain types of jobs, but they also recognize the
problems it creates when its carried to extremes.
McDonald uses high work specialization to
efficiently make & sell its products.
However, American Express & Ford Australia
have broadened the scope of employees jobs &
reduced work specialization.
Functional
Product
Major
Types
of Customer
Department
Organization
Geographic
Process
2005 Prentice Hall Inc. All rights reserved.
2 -Departmentalization..continued
Large orgs. Often combine most or all of these
forms of departmentalization.
For example a major Japanese electronic firm
organizes each of its divisions along functional
lines, its manufacturing units around processes,
its sales units around seven geographic regions,
and its sales regions into four customer
groupings.
Advantages
Efficiencies from putting together similar specialties and
people with common skills, knowledge, and orientations
Coordination within functional area
In-depth specialization
Disadvantages
Poor communication across functional areas
Limited view of organizational goals
Advantages
More effective and efficient handling of specific
regional issues that arise
Serve needs of unique geographic markets better
Disadvantages
Duplication of functions
Can feel isolated from other organizational areas
Concept:
Wider spans of management increase organizational
efficiency.
More Centralization
Environment is stable.
Lower-level managers are not as capable or experienced at
making decisions as upper-level managers.
Lower-level managers do not want to have a say in decisions.
Decisions are relatively minor.
Organization is facing a crisis or the risk of company failure.
Company is large.
Effective implementation of company strategies depends on
managers retaining say over what happens.
More Decentralization
Environment is complex, uncertain.
Lower-level managers are capable and experienced at making
decisions.
Lower-level managers want a voice in decisions.
Decisions are significant.
Corporate culture is open to allowing managers to have a say in
what happens.
Company is geographically dispersed.
Effective implementation of company strategies depends on
managers having involvement and flexibility to make decisions.
Simple Structure
A structure characterized by a low degree of departmentalization, wide
spans of control, authority centralized in a single person, and little
formalization.
This structure is most widely practiced in small businesses in which the
manager & the owner are one & the same.
The strength of this structure lies in its simplicity. It is fast, flexible, &
inexpensive to maintain, and accountability is clear.
One major weakness is that its difficult to maintain in any other than small
orgs. As org. grows due to its low formalization & high centralization creates
information overload at the top.
Matrix Structure
Matrix management is a technique of managing an org.( or, more
commonly, part of an org.) through a series of dual-reporting
relationships instead of a more traditional linear management structure.
In its simplest form, a matrix configuration may be known as a cross-
functional work team, which brings together individuals who report to
different parts of the company in order to complete a particular project or
task.
A structure that creates dual lines of authority and combines functional
and product departmentalization.
Team Structure
The use of teams as the central device to coordinate
work activities.
Characteristics:
Breaks down departmental barriers.
Decentralizes decision making to the team level.
Requires employees to be generalists as well as
specialists.
Creates a flexible bureaucracy.
Virtual Organization
A small, core organization that outsources its major
business functions.
Highly centralized with little or no departmentalization.
Concepts:
Advantage: Provides maximum flexibility while
concentrating on what the organization does best.
Disadvantage: Reduced control over key parts of
the business.
Boundaryless Organization
General Electrics former chairman, Jack Welch, wanted to
eliminate vertical & horizontal boundaries within GE & break
down external barriers b/w the company & its customers &
suppliers.
The boundary-less organization seeks to eliminate the chain of
command, have limitless spans of control, and replace
departments with empowered teams.
And because such org. rely so heavily on IT, it is also
sometimes called the T-form ( or technology based) org.
Mechanistic Model
A structure characterized by extensive
departmentalization, high formalization, a limited
information network, and centralization.
Rigid, narrow span of control, rules n reg r given
Organic Model
A structure that is flat, uses cross-hierarchical and
cross-functional teams, has low formalization,
possesses a comprehensive information network, and
relies on participative decision making.
Not rigid
Innovation Strategy
A strategy that emphasizes the introduction of major
new products and services.
Cost-minimization Strategy
A strategy that emphasizes tight cost controls,
avoidance of unnecessary innovation or marketing
expenses, and price cutting.
Imitation Strategy
A strategy that seeks to move into new products or
new markets only after their viability has already
been proven.
Using products which r already acceptedby customers
2005 Prentice Hall Inc. All rights reserved. 1548
Why Do Structures Differ? Size
Size
How the size of an organization affects its structure.
As an organization grows larger, it becomes more
mechanistic.
Technology
How an organization transfers its inputs into outputs.
Environment
Institutions or forces outside the organization that
potentially affect the organizations performance.
Key Dimensions-
Capacity: the degree to which an environment can
support growth.
Volatility: the degree of instability in the environment.
Complexity: the degree of heterogeneity and
concentration among environmental elements.
Research Findings:
Work specialization contributes to higher employee
productivity, but it reduces job satisfaction.
The benefits of specialization have decreased rapidly as
employees seek more intrinsically rewarding jobs.
The effect of span of control on employee performance is
contingent upon individual differences and abilities, task
structures, and other organizational factors.
Participative decision making in decentralized
organizations is positively related to job satisfaction.