ORGANIZATION

STRUCTURE & DESIGN

Defining Organizational Structure

Organizational Design Decisions
Common Organizational Designs
DEFINING ORGANIZATIONAL
STRUCTURE
Organizing the process of creating an
organizations structure

Purpose of organizing:
Divides work to be done into specific jobs & departments
Assigns tasks & responsibilities associated with individual jobs
Coordinates diverse organizational tasks
Clusters jobs into units
Establishes relationships among individuals, groups, &
departments
Establishes formal lines of authority
Allocates & deploy organizational resources
 Organizational structure the formal
framework by which jobs tasks are divided,
grouped, & coordinated

Organizational design developing or

changing an organizations structure.

6 key elements: work specialization,

departmentalization, chain of
command, span of control,
centralization & decentralization, &
formalization.
Work Specialization

The degree to which tasks in an

organization are divided into
separate jobs; also known as
division of labor

Essence: an entire job is not done by

one individual but instead is broken
down into steps, & each step is
completed by a different person.
Departmentalization
The basis by which jobs are grouped
together

Functional departmentalization
groups jobs by functions performed

Forms:
Product departmentalization
Geographical departmentalization
Process departmentalization
Customer departmentalization
Cross-functional teams
Chain of Command

The continuous line of authority that

extends from upper organizational
levels to the lowest levels & clarifies
who reports to whom.

Concepts: authority, responsibility, &

unity of command
 Authority the rights inherent in a
managerial position to tell people what to
do & to expect them to do it.

Responsibility the obligation to

perform any assigned duties

Unity of command the

management principle that each person
should report to only one manager
Span of Control

The number of employees a manager

can efficiently & effectively manage.
Centralization &
Decentralization
Centralization the degree to
which decision making is concentrated
at a single point in the organization

Decentralization the degree to

which lower-level employees provide
input or actually make decisions
 Factors that Influence the
Amount of Centralization &
Decentralization
More Centralization
Environment is stable
Lower-level managers are not as
capable or experience at making
decisions as upper-level managers
Lower-level managers do not want to
have a say in decisions
Decisions are significant
Organizations 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
& experienced at making decisions
Lower-level managers want a voice
in decisions
Decisions are relatively minor
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 &
flexibility to make decisions
Formalization

The degree to which jobs within

the organization are
standardized & the extent to
which employee behavior is
guided by rules & procedures
ORGANIZATIONAL
DESIGN DECISIONS
Mechanistic organization an
organizational design thats rigid &
tightly controlled.

Organic organization an
organizational design thats highly
adaptive & flexible
 Mechanistic VS Organic
Organization
Mechanistic
High specialization
Rigid departmentalization
Clear chain of command
Narrow spans of control
Centralization
High formalization
Organic
Cross-functional teams
Cross-hierarchical teams
Free flow of information
Wide spans of control
Decentralization
Low formalization
Contingency Factors
1. Strategy
- Innovation meaningful & unique innovation
- Cost minimization tightly controlled cost
- Imitation minimize risk, maximize profits

2. Size & structure

3. Technology
- Unit production
- Mass production
- Process production

4. Degree of environmental uncertainty

COMMON
ORGANIZATIONAL
DESIGNS

Traditional organizational
designs

Contemporary organizational
designs
Traditional
Organizational Designs
Simple structure low
departmentalization, wide spans of control,
centralized authority, & little formalization

Functional structure groups similar or

related occupational specialties together

Divisional structure made up of

separate, semiautonomous units or divisions
Strengths & Weaknesses of Traditional
Organization Designs

Designs Strengths Weaknesses

Simple Fast Not appropriate as
Structure Flexible organization grows
Inexpensive to maintain Reliance on one person is
Clear accountability risky

Functional Cost-saving advantage Managers can lose sight of

Structure from specialization & whats best for overall
employees grouped organization
Insulated & have little
understanding of other units
activities

Divisional Focuses on results Duplication of activities &

Structure resources increases costs &
reduces efficiency
Contemporary
Organizational Designs
1. Team-based structure the entire
organization is made up of work groups or
teams

2. Matrix & project structure

Matrix structure assigns specialists from
different functional departments to work on one
or more projects
Project structure employees continuously
work on projects
3. Autonomous internal units separate
decentralized business units, each with its own
products, clients, competitors & profit goals.

4. The boundary less organization design is

not defined by, or limited to, the horizontal, vertical,
or external boundaries imposed by a predefined
structure.

5. The learning organization has developed

the capacity to continuously adapt & change
because all members take an active role in
identifying & resolving work-related issues