Copyright ? 2002 by The McGraw-Hill Companies,Inc,All rights reserved,McGraw-Hill/Irwin
Copyright ? 2002 by The McGraw-Hill Companies,Inc,All rights reserved,McGraw-Hill/Irwin
15 C H
A
P
T
E
R
Organizational Structure
and Design
?IDENTIFY the choices which must be made in designing an
organization,
?DEFINE what is meant by the term division of labor,
?DISCUSS the role of delegation of authority in design decisions,
?DESCRIBE several forms of departmentalization,
?EXPLAIN the importance of span of control,
?DEFINE three important dimensions of structure,
?COMPARE mechanistic and organic organizational design,
?IDENTIFY the major advantages of matrix organizational design,
?DISCUSS multinational organizational structure and design issues,
?EXPLAIN the meaning of the term virtual organization,
Copyright ? 2002 by The McGraw-Hill Companies,Inc,All rights reserved,McGraw-Hill/Irwin
15-3
Organizational Structure
and Design
Organizational Design
? Purposeful and goal-oriented process
? Decisions/actions to predetermine the way employees do their work
Organizational Structure
? Relatively stable relationships and processes of the organization,
?,The anatomy of the organization,providing a foundation within
which the organization functions.”
? Purpose is to regulate,or at least reduce,uncertainty,
S u b o r d i n a t e S u b o r d i n a t e S u b o r d i n a t e
M a n a g e r
Copyright ? 2002 by The McGraw-Hill Companies,Inc,All rights reserved,McGraw-Hill/Irwin
15-4
Organizational Design
Decision Process
? Managers must decide how to divide the overall tasks of the
organization into successively smaller jobs,
? Managers must decide the basis by which to group the
individual jobs,
? Managers must decide the appropriate size of the group
reporting to each supervisor,
? Managers must distribute authority among the jobs,
Copyright ? 2002 by The McGraw-Hill Companies,Inc,All rights reserved,McGraw-Hill/Irwin
15-5
Organizational Design
Components
Components
Specialization
High Low
Division of
Labor
Number
Few Many
Span of
Control
Basis
Homogenous Heterogeneous
Departmentalization
Delegation
High Low
Authority
Design Decisions
Copyright ? 2002 by The McGraw-Hill Companies,Inc,All rights reserved,McGraw-Hill/Irwin
15-6
Division of Labor
Ways that Division of Labor Can Occur,
? Work can be divided into different personal specialties,
? Occupational and professional specialties
? Work can be divided into different activities necessitated
by the natural sequence of the work the organization
does,
? Horizontal specialization
? Work can be divided along the vertical plane of an
organization,
? Hierarchy of authority
The Extent to Which Jobs Are Specialized
Copyright ? 2002 by The McGraw-Hill Companies,Inc,All rights reserved,McGraw-Hill/Irwin
15-7
Reasons to Delegate or
Decentralize Authority
?Encourages management
development
?Leads to a more
competitive climate
?Enables managers to
exercise more autonomy
Delegation of Authority
Extent to which managers allow subordinates to
make decisions without approval of higher
management and exact obedience from others
Reasons to Centralize
Authority
?Increases training costs
?Heightens fear and
resistance
?Raises administrative
costs
?Duplicates efforts and
some functions
Copyright ? 2002 by The McGraw-Hill Companies,Inc,All rights reserved,McGraw-Hill/Irwin
15-8
Functional Departmentalization
Major Advantage
Creating efficiency and more cost
effective units
Engineering Finance Personnel
Major Disadvantage
Sacrificing organizational goals
for departmental ones
Manufacturing
OMB
Company
Marketing
Copyright ? 2002 by The McGraw-Hill Companies,Inc,All rights reserved,McGraw-Hill/Irwin
15-9
Territorial Departmentalization
Southern Eastern Rocky Mountain Pacific Midwestern
OMB
Company
Copyright ? 2002 by The McGraw-Hill Companies,Inc,All rights reserved,McGraw-Hill/Irwin
15-10
Product Departmentalization
Small
Household
Appliances
Commercial
Appliances
Major Advantages
?Creating profit responsibility
?Fostering innovation and
autonomy
Major Disadvantages
?Creating redundant functions
?Increasing administrative
costs
OMB
Company
Large
Household
Appliances
Copyright ? 2002 by The McGraw-Hill Companies,Inc,All rights reserved,McGraw-Hill/Irwin
15-11
Customer Departmentalization
Retail
Stores
Mail
Order
Government
Contracts
OMB
Company
Institutional
Sales
Copyright ? 2002 by The McGraw-Hill Companies,Inc,All rights reserved,McGraw-Hill/Irwin
15-12
Span of Control
The number of jobs to be included in a specific group
determines the frequency and intensity of interpersonal
relationships required of a manager,
Potentially Creates Three Types of Relationships,
? Direct single
? Between a manager and each subordinate individually
? Direct group
? Between a manager and each possible permutation of
subordinates
? Cross
? Between subordinates and other subordinates
Copyright ? 2002 by The McGraw-Hill Companies,Inc,All rights reserved,McGraw-Hill/Irwin
15-13
Critical Factors Affecting
Span of Control
Required Contact
Degree of Specialization
Ability to Communicate
Copyright ? 2002 by The McGraw-Hill Companies,Inc,All rights reserved,McGraw-Hill/Irwin
15-14
Dimensions of Structure
Formalization
The extent to which
expectations regarding the
means and ends of work are
specified,written,and
enforced,
Centralization
The location of decision-
making authority in the
hierarchy of the
organization,
Complexity
The number of distinctly different job titles,
or occupational groupings,and the number
of distinctly different units,or departments,
Copyright ? 2002 by The McGraw-Hill Companies,Inc,All rights reserved,McGraw-Hill/Irwin
15-15
High
Formalization
Dimensions of Structure
Dimensions Decisions
1,High specialization
2,Delegated authority
3,Functional departments
4,Wide spans of control
High
Centralization
High
Complexity
1,High specialization
2,Centralized authority
3,Functional departments
4,Wide spans of control
1,High specialization
2,Delegated authority
3,Territorial,customer,and
product departments
4,Narrow spans of control
Copyright ? 2002 by The McGraw-Hill Companies,Inc,All rights reserved,McGraw-Hill/Irwin
15-16
Organization Design Models
The
Organic
Model
The
Matrix
Model
The
Mechanistic
Model
Copyright ? 2002 by The McGraw-Hill Companies,Inc,All rights reserved,McGraw-Hill/Irwin
15-17
The Mechanistic Model
Organizations should function in a machinelike
way to accomplish the organization’s goals
in a highly efficient manner,
? It’s highly complex because of its emphasis on
specialization of labor,
? It’s highly centralized because of its emphasis
on authority and accountability,
? It’s highly formalized because of its emphasis on
function as the basis of departments,
Copyright ? 2002 by The McGraw-Hill Companies,Inc,All rights reserved,McGraw-Hill/Irwin
15-18
The Organic Model
? It’s relatively simple because of its de-emphasis on
specialization and its emphasis on increasing job
range,
? It’s relatively decentralized because of its emphasis
on delegation of authority and increasing job depth,
? It’s relatively informal because of its emphasis on
product and customer as bases for departments,
Organizations should seek designs that maximize
satisfaction,flexibility,and development,
Copyright ? 2002 by The McGraw-Hill Companies,Inc,All rights reserved,McGraw-Hill/Irwin
15-19
The Matrix Model
Advantages
? Efficient Use of Resources
? Flexibility in Conditions of Change and Uncertainty
? Technical Excellence
? Freeing Top Management for Long-Range Planning
? Improving Motivation and Commitment
? Providing Opportunities for Personal Development
Organizations should combine functional and
product departmental bases to maximize the
strengths and minimize the weaknesses of each,
Copyright ? 2002 by The McGraw-Hill Companies,Inc,All rights reserved,McGraw-Hill/Irwin
15-20
Multinational Structure and Design
?National boundaries help define organizational environments
?National boundaries are of varying importance for different
elements of organizational structure and processes,
?Subsidiaries of multinational corporations can act as conduits
that introduce changes into the host country’s environment,
?Subsidiaries of multinational corporations can act as conduits
through which features of the host country’s environment are
introduced throughout the organization,
Factors with Important Implications for
Multinational Structure and Design,
Copyright ? 2002 by The McGraw-Hill Companies,Inc,All rights reserved,McGraw-Hill/Irwin
15-21
Virtual Organizations
? One of the fastest developing practices in business
throughout the world,
? Involves firms in cooperative relationships with their
suppliers,distributors,and even competitors,
? Virtual units are assembled and disassembled according to
needs,
? Characteristics flexible enough to accommodate a wide
range of organizations,(See Exhibit 15.7)
A collection of geographically distributed,functionally
and/or culturally diverse aggregations of individuals
linked by electronic forms of communication,
Copyright ? 2002 by The McGraw-Hill Companies,Inc,All rights reserved,McGraw-Hill/Irwin
15-22
“Boundaryless Organizations”
Barrier-Breaking Features,
Creating flatter hierarchies
Increasing participative decision-making
Developing multiple-hierarchy teams
Encouraging team building
Facilitating coordination
Promoting telecommuting or teleworking
Attempts to minimize and,in some cases,
eliminate vertical and horizontal structures,
tightly defined work roles,and top-down control,
Copyright ? 2002 by The McGraw-Hill Companies,Inc,All rights reserved,McGraw-Hill/Irwin
15 C H
A
P
T
E
R
Organizational Structure
and Design
?IDENTIFY the choices which must be made in designing an
organization,
?DEFINE what is meant by the term division of labor,
?DISCUSS the role of delegation of authority in design decisions,
?DESCRIBE several forms of departmentalization,
?EXPLAIN the importance of span of control,
?DEFINE three important dimensions of structure,
?COMPARE mechanistic and organic organizational design,
?IDENTIFY the major advantages of matrix organizational design,
?DISCUSS multinational organizational structure and design issues,
?EXPLAIN the meaning of the term virtual organization,
Copyright ? 2002 by The McGraw-Hill Companies,Inc,All rights reserved,McGraw-Hill/Irwin
15-3
Organizational Structure
and Design
Organizational Design
? Purposeful and goal-oriented process
? Decisions/actions to predetermine the way employees do their work
Organizational Structure
? Relatively stable relationships and processes of the organization,
?,The anatomy of the organization,providing a foundation within
which the organization functions.”
? Purpose is to regulate,or at least reduce,uncertainty,
S u b o r d i n a t e S u b o r d i n a t e S u b o r d i n a t e
M a n a g e r
Copyright ? 2002 by The McGraw-Hill Companies,Inc,All rights reserved,McGraw-Hill/Irwin
15-4
Organizational Design
Decision Process
? Managers must decide how to divide the overall tasks of the
organization into successively smaller jobs,
? Managers must decide the basis by which to group the
individual jobs,
? Managers must decide the appropriate size of the group
reporting to each supervisor,
? Managers must distribute authority among the jobs,
Copyright ? 2002 by The McGraw-Hill Companies,Inc,All rights reserved,McGraw-Hill/Irwin
15-5
Organizational Design
Components
Components
Specialization
High Low
Division of
Labor
Number
Few Many
Span of
Control
Basis
Homogenous Heterogeneous
Departmentalization
Delegation
High Low
Authority
Design Decisions
Copyright ? 2002 by The McGraw-Hill Companies,Inc,All rights reserved,McGraw-Hill/Irwin
15-6
Division of Labor
Ways that Division of Labor Can Occur,
? Work can be divided into different personal specialties,
? Occupational and professional specialties
? Work can be divided into different activities necessitated
by the natural sequence of the work the organization
does,
? Horizontal specialization
? Work can be divided along the vertical plane of an
organization,
? Hierarchy of authority
The Extent to Which Jobs Are Specialized
Copyright ? 2002 by The McGraw-Hill Companies,Inc,All rights reserved,McGraw-Hill/Irwin
15-7
Reasons to Delegate or
Decentralize Authority
?Encourages management
development
?Leads to a more
competitive climate
?Enables managers to
exercise more autonomy
Delegation of Authority
Extent to which managers allow subordinates to
make decisions without approval of higher
management and exact obedience from others
Reasons to Centralize
Authority
?Increases training costs
?Heightens fear and
resistance
?Raises administrative
costs
?Duplicates efforts and
some functions
Copyright ? 2002 by The McGraw-Hill Companies,Inc,All rights reserved,McGraw-Hill/Irwin
15-8
Functional Departmentalization
Major Advantage
Creating efficiency and more cost
effective units
Engineering Finance Personnel
Major Disadvantage
Sacrificing organizational goals
for departmental ones
Manufacturing
OMB
Company
Marketing
Copyright ? 2002 by The McGraw-Hill Companies,Inc,All rights reserved,McGraw-Hill/Irwin
15-9
Territorial Departmentalization
Southern Eastern Rocky Mountain Pacific Midwestern
OMB
Company
Copyright ? 2002 by The McGraw-Hill Companies,Inc,All rights reserved,McGraw-Hill/Irwin
15-10
Product Departmentalization
Small
Household
Appliances
Commercial
Appliances
Major Advantages
?Creating profit responsibility
?Fostering innovation and
autonomy
Major Disadvantages
?Creating redundant functions
?Increasing administrative
costs
OMB
Company
Large
Household
Appliances
Copyright ? 2002 by The McGraw-Hill Companies,Inc,All rights reserved,McGraw-Hill/Irwin
15-11
Customer Departmentalization
Retail
Stores
Order
Government
Contracts
OMB
Company
Institutional
Sales
Copyright ? 2002 by The McGraw-Hill Companies,Inc,All rights reserved,McGraw-Hill/Irwin
15-12
Span of Control
The number of jobs to be included in a specific group
determines the frequency and intensity of interpersonal
relationships required of a manager,
Potentially Creates Three Types of Relationships,
? Direct single
? Between a manager and each subordinate individually
? Direct group
? Between a manager and each possible permutation of
subordinates
? Cross
? Between subordinates and other subordinates
Copyright ? 2002 by The McGraw-Hill Companies,Inc,All rights reserved,McGraw-Hill/Irwin
15-13
Critical Factors Affecting
Span of Control
Required Contact
Degree of Specialization
Ability to Communicate
Copyright ? 2002 by The McGraw-Hill Companies,Inc,All rights reserved,McGraw-Hill/Irwin
15-14
Dimensions of Structure
Formalization
The extent to which
expectations regarding the
means and ends of work are
specified,written,and
enforced,
Centralization
The location of decision-
making authority in the
hierarchy of the
organization,
Complexity
The number of distinctly different job titles,
or occupational groupings,and the number
of distinctly different units,or departments,
Copyright ? 2002 by The McGraw-Hill Companies,Inc,All rights reserved,McGraw-Hill/Irwin
15-15
High
Formalization
Dimensions of Structure
Dimensions Decisions
1,High specialization
2,Delegated authority
3,Functional departments
4,Wide spans of control
High
Centralization
High
Complexity
1,High specialization
2,Centralized authority
3,Functional departments
4,Wide spans of control
1,High specialization
2,Delegated authority
3,Territorial,customer,and
product departments
4,Narrow spans of control
Copyright ? 2002 by The McGraw-Hill Companies,Inc,All rights reserved,McGraw-Hill/Irwin
15-16
Organization Design Models
The
Organic
Model
The
Matrix
Model
The
Mechanistic
Model
Copyright ? 2002 by The McGraw-Hill Companies,Inc,All rights reserved,McGraw-Hill/Irwin
15-17
The Mechanistic Model
Organizations should function in a machinelike
way to accomplish the organization’s goals
in a highly efficient manner,
? It’s highly complex because of its emphasis on
specialization of labor,
? It’s highly centralized because of its emphasis
on authority and accountability,
? It’s highly formalized because of its emphasis on
function as the basis of departments,
Copyright ? 2002 by The McGraw-Hill Companies,Inc,All rights reserved,McGraw-Hill/Irwin
15-18
The Organic Model
? It’s relatively simple because of its de-emphasis on
specialization and its emphasis on increasing job
range,
? It’s relatively decentralized because of its emphasis
on delegation of authority and increasing job depth,
? It’s relatively informal because of its emphasis on
product and customer as bases for departments,
Organizations should seek designs that maximize
satisfaction,flexibility,and development,
Copyright ? 2002 by The McGraw-Hill Companies,Inc,All rights reserved,McGraw-Hill/Irwin
15-19
The Matrix Model
Advantages
? Efficient Use of Resources
? Flexibility in Conditions of Change and Uncertainty
? Technical Excellence
? Freeing Top Management for Long-Range Planning
? Improving Motivation and Commitment
? Providing Opportunities for Personal Development
Organizations should combine functional and
product departmental bases to maximize the
strengths and minimize the weaknesses of each,
Copyright ? 2002 by The McGraw-Hill Companies,Inc,All rights reserved,McGraw-Hill/Irwin
15-20
Multinational Structure and Design
?National boundaries help define organizational environments
?National boundaries are of varying importance for different
elements of organizational structure and processes,
?Subsidiaries of multinational corporations can act as conduits
that introduce changes into the host country’s environment,
?Subsidiaries of multinational corporations can act as conduits
through which features of the host country’s environment are
introduced throughout the organization,
Factors with Important Implications for
Multinational Structure and Design,
Copyright ? 2002 by The McGraw-Hill Companies,Inc,All rights reserved,McGraw-Hill/Irwin
15-21
Virtual Organizations
? One of the fastest developing practices in business
throughout the world,
? Involves firms in cooperative relationships with their
suppliers,distributors,and even competitors,
? Virtual units are assembled and disassembled according to
needs,
? Characteristics flexible enough to accommodate a wide
range of organizations,(See Exhibit 15.7)
A collection of geographically distributed,functionally
and/or culturally diverse aggregations of individuals
linked by electronic forms of communication,
Copyright ? 2002 by The McGraw-Hill Companies,Inc,All rights reserved,McGraw-Hill/Irwin
15-22
“Boundaryless Organizations”
Barrier-Breaking Features,
Creating flatter hierarchies
Increasing participative decision-making
Developing multiple-hierarchy teams
Encouraging team building
Facilitating coordination
Promoting telecommuting or teleworking
Attempts to minimize and,in some cases,
eliminate vertical and horizontal structures,
tightly defined work roles,and top-down control,
