Chapter 10

Managing Organizational Structure

Leanne Powers
MHR301

From McGraw-Hill Irwin

Contemporary Management
Designing Organizational
Structure
• Organizing
– The process by which managers establish
working relationships among employees
to achieve goals.
• Organizational Structure
– Formal system of task and reporting
relationships showing how workers use
resources.
• Organizational design
– The process by which managers make
specific choices that result in a particular
kind of organizational structure.
The Organizational Environment

The Organizational Environment

– The quicker the environment
changes, the more problems face
managers.
– Structure must be more flexible
(i.e., decentralized authority) when
environmental change is rapid.
Formal or Flexible?
More flexible structure More formal structure

Rapidly-changing Stable environment

environment
More complex (or non- Less-complex technology
routine) technology used in task environment
Higher task variety Higher task analyzability

Small batch or continuous- Mass-production

process production
More highly-skilled More entry-level or
workforce semiskilled workforce
Strategic necessity Strategic necessity (low-
(differentiation strategy) cost strategy)
More vertical integration Less vertical integration;
or global expansion fewer global operations
 Job Design
• Job Design
– The process by which managers
decide how to divide tasks into
specific jobs.
– The appropriate division of labor
results in an effective and efficient
workforce.
• Job Simplification
– The process of reducing the tasks
each worker performs.
• Too much simplification and boredom
results.
 Job Design
• Job Enlargement
– Increasing the number of tasks for
a given job to reduce boredom.
• Job Enrichment
– Increasing the degree of
responsibility a worker has over a
job can lead to increased worker
involvement.
Job Characteristics Model

Job characteristics

Skill variety Employee uses a wide range of

skills
Task identity Worker is involved in all tasks of
the job from beginning to end of
the production process
Task significance Worker feels the task is
meaningful to organization.
Autonomy Employee has freedom to
schedule tasks and carry them
out.
Feedback Worker gets direct information
about how well the job is done.
Functional Structure
An organizational structure composed
of all the departments that an
organization requires to produce its
goods or services.
– Advantages
• Encourages learning from others doing similar
jobs.
• Easy for managers to monitor and evaluate
workers.
– Possible Disadvantages
• Difficult for departments to communicate with
others.
• Preoccupation with own department and losing
sight of organizational goals.
Divisional Structures
An organizational structure composed of
separate business units within which are
the functions that work together to
produce a specific product for a specific
customer
• Divisions create smaller, manageable parts of
a firm.
• Divisions develop a business-level strategy to
compete.
• Divisions have marketing, finance, and other
functions.
• Functional managers report to divisional
managers who then report to corporate
management.
Types of Divisional Structures

• Product structure
– Divisions by the product group or
category
• Market structure
– Divisions by type of customer
• Geographic structure
– Global or regional divisions
Divisional Structures
Divisional Structures
Divisional Structures
Matrix Design Structure
An organizational structure that
simultaneously groups people and
resources by function and product.
• Results in a complex network of
superior-subordinate reporting
relationships.
• The structure is very flexible and can
respond rapidly to the need for
change.
• Each employee has two bosses
(functional manager and product
manager) and may not be able to
satisfy both.
Product Team Design Structure

• The members are permanently

assigned to the team and empowered
to bring a product to market.
• Avoids problems of two-way
communication and the conflicting
demands of functional and product
team bosses.
• Cross-functional team is composed of
a group of managers from different
departments working together to
perform organizational tasks.
Product Team Design Structure
Hybrid Structures
The structure of a large organization
that has many divisions an
simultaneously uses many different
organizational structures
• Managers can select the best structure
for a particular division—one division
may use a functional structure,
another division may have a
geographic structure.
• The ability to break a large
organization into smaller units makes
it easier to manage.
Strategic Alliances
• Strategic Alliance
– An agreement in which managers pool or
share firm’s resources and know-how
with a foreign company and the two firms
share in the rewards and risks of starting
a new venture.
• Network Structure:
– A series of strategic alliances that an
organization creates with suppliers,
manufacturers, and distributors to
produce and market a product.
– Network structures allow firms to bring
resources together in a boundary-less
organization.
B2B Network Structures and IT

• Boundaryless Organization
– An organization whose members are
linked by computers, faxes, computer-
aided design systems, and video-
conferencing and who, rarely, if ever, see
one another face-to-face.
• Knowledge Management System
– A company-specific virtual information
system that allows workers to share their
knowledge and expertise and find others
to help solve problems.