last topics 1-1 1. we looked at business strategies, at the corporate and business level. 2. a quick...

Last Topics Last Topics

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1.1. We looked at business strategies, at the We looked at business strategies, at the corporate and business level.corporate and business level.

2.2. A Quick Overview of Planning Tools:A Quick Overview of Planning Tools: Emphasis on Assessing the Environment and Emphasis on Assessing the Environment and

Allocating Resources with Scheduling & Allocating Resources with Scheduling & Breakeven AnalysisBreakeven Analysis

3.3. We’ve completed the first half of the We’ve completed the first half of the course and covered the first of the four course and covered the first of the four managerial functions managerial functions

This Week’s ObjectivesThis Week’s Objectives

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1.1. Understand why and how we organizeUnderstand why and how we organize

2.2. Look at the six key elements to consider Look at the six key elements to consider in organizational designin organizational design

3.3. Look at the range of theoretical designs Look at the range of theoretical designs (mechanistic vs organic) and what (mechanistic vs organic) and what influences the design decisionsinfluences the design decisions

4.4. Look at the resulting organizational Look at the resulting organizational structures (traditional vs contemporary structures (traditional vs contemporary designs)designs)

Chapter 9Chapter 9

Organizational Structure and Organizational Structure and DesignDesign

Chapter 9, Stephen P. Robbins, Mary Chapter 9, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Coulter, and Nancy Langton, Management, Management,

Ninth Canadian EditionNinth Canadian EditionCopyright © 2009 Pearson Education CanadaCopyright © 2009 Pearson Education Canada

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The Question…The Question…

Who Does What?Who Does What?

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What Is an Organization?What Is an Organization?

Recall from Ch. 1: An Organization DefinedRecall from Ch. 1: An Organization Defined

A deliberate arrangement of people who A deliberate arrangement of people who act together to accomplish some specific act together to accomplish some specific

purposepurpose



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So, organizing…So, organizing…



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1. Divides work to be done into specific jobs and departments

2. Assigns tasks and responsibilities associated with individual jobs

3. Coordinates diverse organizational tasks

4. Clusters jobs into units

5. Establishes relationships among individuals, groups, and departments

6. Establishes formal lines of authority

7. Allocates and deploys organizational resources

The Result is: Organizational StructureThe Result is: Organizational Structure

Organizational StructureOrganizational Structure The formal arrangement of jobs within an organizationThe formal arrangement of jobs within an organization

Achieved through Achieved through Organizational DesignOrganizational Design A process involving decisions about six key elements:A process involving decisions about six key elements:

1.1. Work specializationWork specialization

2.2. DepartmentalizationDepartmentalization

3.3. Chain of commandChain of command

4.4. Span of controlSpan of control

5.5. Centralization and decentralizationCentralization and decentralization

6.6. FormalizationFormalization



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The Six Elements of The Six Elements of Organizational Organizational

StructureStructure

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Work SpecializationWork Specialization

The degree to which tasks in the The degree to which tasks in the organization are divided into separate jobs organization are divided into separate jobs with each step completed by a different with each step completed by a different personperson

Overspecialization can result in human Overspecialization can result in human diseconomies from boredom, fatigue, stress, poor diseconomies from boredom, fatigue, stress, poor quality, increased absenteeism, and higher quality, increased absenteeism, and higher turnoverturnover



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Departmentalization by TypeDepartmentalization by Type

Functional Functional Grouping jobs by Grouping jobs by

functions performedfunctions performed ProductProduct

Grouping jobs by Grouping jobs by product lineproduct line

GeographicalGeographical Grouping jobs on the Grouping jobs on the

basis of territory or basis of territory or geographygeography

Process Process Grouping jobs on the Grouping jobs on the

basis of product or basis of product or customer flowcustomer flow

CustomerCustomer Grouping jobs by type Grouping jobs by type

of customer and of customer and needsneeds

Chapter 9, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Chapter 9, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Management, Ninth Canadian EditionNinth Canadian Edition

Copyright © 2009 Pearson Education CanadaCopyright © 2009 Pearson Education Canada

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Chain of CommandChain of Command

The continuous line of authority that extends from The continuous line of authority that extends from upper levels of an organization to the lowest levels upper levels of an organization to the lowest levels of the organization and clarifies who reports to of the organization and clarifies who reports to whomwhom



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Chain of Command ConceptsChain of Command Concepts AuthorityAuthority

The rights inherent in a managerial position to tell people what to The rights inherent in a managerial position to tell people what to do and to expect them to do itdo and to expect them to do it

ResponsibilityResponsibility The obligation or expectation to perform. Responsibility brings The obligation or expectation to perform. Responsibility brings

with it accountability (the need to report and justify work to with it accountability (the need to report and justify work to manager’s superiors)manager’s superiors)

Unity of CommandUnity of Command The concept that a person should have one boss and should The concept that a person should have one boss and should

report only to that personreport only to that person

DelegationDelegation The assignment of authority to another person to carry out The assignment of authority to another person to carry out

specific dutiesspecific dutiesChapter 9, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Chapter 9, Stephen P. Robbins, Mary Coulter, and Nancy Langton,

Management, Management, Ninth Canadian EditionNinth Canadian EditionCopyright © 2009 Pearson Education CanadaCopyright © 2009 Pearson Education Canada

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Line vs Staff ManagementLine vs Staff Management

Line managersLine managers are responsible for the essential are responsible for the essential activities of the organization, including activities of the organization, including production and sales. Line managers have the production and sales. Line managers have the authority to issue orders to those in the chain of authority to issue orders to those in the chain of commandcommandThe president, the production manager, and the sales The president, the production manager, and the sales

manager are examples of line managersmanager are examples of line managers

Staff managersStaff managers have advisory authority, and have advisory authority, and cannot issue orders to those in the chain of cannot issue orders to those in the chain of command (except those in their own command (except those in their own department)department)



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Span of ControlSpan of ControlThe number of employees who can be The number of employees who can be

effectively and efficiently supervised by a effectively and efficiently supervised by a managermanager

Width of span is affected by:Width of span is affected by: Skills and abilities of the manager and the employeesSkills and abilities of the manager and the employees Characteristics of the work being doneCharacteristics of the work being done Similarity of tasksSimilarity of tasks Complexity of tasksComplexity of tasks Physical proximity of subordinatesPhysical proximity of subordinates Standardization of tasksStandardization of tasks Sophistication of the organization’s information systemSophistication of the organization’s information system Strength of the organization’s cultureStrength of the organization’s culture Preferred style of the managerPreferred style of the manager



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Exhibit 9.3 Contrasting Spans of Exhibit 9.3 Contrasting Spans of ControlControl



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Assuming Span of 4

Span of 4:Employees:Managers (level 1–6)

= 4096= 1365

Span of 8:Employees:Managers (level 1–4)

Assuming Span of 8

1

2

3

4

5

6

7

(Highest)

(Lowest)

Members at Each Level

1

4

16

64

256

1024

4096

1

8

64

512

4096

Org

aniz

ati

onal Le

vel

= 4096 = 585

Centralization vs DecentralizationCentralization vs Decentralization

CentralizationCentralization The degree to which decision making is concentrated at The degree to which decision making is concentrated at

a single point in the organizationa single point in the organization Organizations in which top managers make all the decisions Organizations in which top managers make all the decisions

and lower-level employees simply carry out those ordersand lower-level employees simply carry out those orders

DecentralizationDecentralization The degree to which lower-level employees provide The degree to which lower-level employees provide

input or actually make decisionsinput or actually make decisions Employee EmpowermentEmployee Empowerment

Increasing the decision-making discretion of employeesIncreasing the decision-making discretion of employees



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Figure 9.4 Factors that Influence the Figure 9.4 Factors that Influence the Amount of CentralizationAmount of Centralization

More CentralizationMore Centralization Environment is stableEnvironment is stable Lower-level managers are not as capable or Lower-level managers are not as capable or

experienced at making decisions as upper-level experienced at making decisions as upper-level managersmanagers

Lower-level managers do not want to have a say in Lower-level managers do not want to have a say in decisionsdecisions

Decisions are significantDecisions are significant Organization is facing a crisis or the risk of company Organization is facing a crisis or the risk of company

failurefailure Company is largeCompany is large Effective implementation of company strategies Effective implementation of company strategies

depends on managers retaining say over what happensdepends on managers retaining say over what happens



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Figure 9.4 Factors that Influence the Figure 9.4 Factors that Influence the Amount of DecentralizationAmount of Decentralization

More DecentralizationMore Decentralization Environment is complex, uncertainEnvironment is complex, uncertain Lower-level managers are capable and experienced at Lower-level managers are capable and experienced at

making decisionsmaking decisions Lower-level managers want a voice in decisionsLower-level managers want a voice in decisions Decisions are relatively minorDecisions are relatively minor Corporate culture is open to allowing managers to have Corporate culture is open to allowing managers to have

a say in what happensa say in what happens Company is geographically dispersedCompany is geographically dispersed Effective implementation of company strategies Effective implementation of company strategies

depends on managers having involvement and flexibility depends on managers having involvement and flexibility to make decisionsto make decisions



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FormalizationFormalization

The degree to which jobs within the The degree to which jobs within the organization are standardized and the extent organization are standardized and the extent to which employee behaviour is guided by to which employee behaviour is guided by rules and proceduresrules and proceduresHighly formalized jobs offer little discretion over Highly formalized jobs offer little discretion over

what is to be donewhat is to be doneLow formalization means fewer constraints on how Low formalization means fewer constraints on how

employees do their workemployees do their work



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Organizational Design Organizational Design DecisionsDecisions

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Organizational Design DecisionsOrganizational Design Decisions

Mechanistic OrganizationMechanistic Organization A rigid and tightly A rigid and tightly

controlled structurecontrolled structure High specializationHigh specialization Rigid departmentalizationRigid departmentalization Narrow spans of controlNarrow spans of control High formalizationHigh formalization Limited information Limited information

network (mostly downward network (mostly downward communication)communication)

Low decision participation Low decision participation by lower-level employeesby lower-level employees

Organic OrganizationOrganic Organization Highly flexible and Highly flexible and

adaptable structureadaptable structure Non-standardized jobsNon-standardized jobs Fluid team-based Fluid team-based

structurestructure Little direct supervisionLittle direct supervision Minimal formal rulesMinimal formal rules Open communication Open communication

networknetwork Empowered employeesEmpowered employees



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Mechanistic Vs Organic OrganizationMechanistic Vs Organic Organization



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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

Structural Contingency FactorsStructural Contingency Factors

Structural decisions are influenced by:Structural decisions are influenced by:1.1. Overall Overall strategystrategy of the organization of the organization

Organizational structure follows strategyOrganizational structure follows strategy

2.2. SizeSize of the organization of the organization Firms change from organic to mechanistic organizations as Firms change from organic to mechanistic organizations as

they grow in sizethey grow in size

3.3. TechnologyTechnology use by the organization use by the organization Firms adapt their structure to the technology they useFirms adapt their structure to the technology they use

4.4. Degree of Degree of environmental uncertaintyenvironmental uncertainty Dynamic environments require organic structures; mechanistic Dynamic environments require organic structures; mechanistic

structures need stable environmentsstructures need stable environments



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Strategy and StructureStrategy and Structure

Achievement of strategic goals is Achievement of strategic goals is facilitated by changes in organizational facilitated by changes in organizational structure that accommodate and support structure that accommodate and support changechange



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Different Strategy FrameworksDifferent Strategy Frameworks

InnovationInnovationPursuing competitive advantage through meaningful Pursuing competitive advantage through meaningful

and unique innovations favouring and unique innovations favouring organic structuringorganic structuring

Cost minimizationCost minimizationFocusing on tightly controlling costs requires a Focusing on tightly controlling costs requires a

mechanistic structure for the organizationmechanistic structure for the organization

ImitationImitationMinimizing risks and maximizing profitability by copying Minimizing risks and maximizing profitability by copying

market leaders requires both organic and mechanistic market leaders requires both organic and mechanistic elements in the organization’s structureelements in the organization’s structure



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Size and StructureSize and Structure

As an organization grows larger, its As an organization grows larger, its structure tends to change from organic structure tends to change from organic to mechanistic with increased to mechanistic with increased specialization, departmentalization, specialization, departmentalization, centralization, and rules and regulationscentralization, and rules and regulations



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Technology and StructureTechnology and Structure

Organizations adapt their structures to their Organizations adapt their structures to their technologytechnologyRoutine technology = mechanistic organizationsRoutine technology = mechanistic organizationsNon–routine technology = organic organizationsNon–routine technology = organic organizations

Consider Woodward’s work…Consider Woodward’s work…



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Environmental Uncertainty and StructureEnvironmental Uncertainty and Structure

Mechanistic organizational structures tend to Mechanistic organizational structures tend to be most effective in stable and simple be most effective in stable and simple environmentsenvironments

The flexibility of organic organizational The flexibility of organic organizational structures is better suited for dynamic and structures is better suited for dynamic and complex environmentscomplex environments



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Organizational Organizational StructuresStructures

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Traditional Organizational DesignsTraditional Organizational Designs

Simple StructureSimple Structure Low departmentalization, wide spans of control, Low departmentalization, wide spans of control,

centralized authority, little formalizationcentralized authority, little formalization

Functional StructureFunctional Structure Departmentalization by functionDepartmentalization by function

Operations, finance, human resources, and product Operations, finance, human resources, and product research and developmentresearch and development

Divisional StructureDivisional Structure Composed of separate business units or divisions Composed of separate business units or divisions

with limited autonomy under the coordination and with limited autonomy under the coordination and control of the parent corporationcontrol of the parent corporation



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Strengths/Weaknesses of Common Traditional Strengths/Weaknesses of Common Traditional Organizational DesignsOrganizational Designs



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Contemporary Organizational DesignsContemporary Organizational Designs

Team StructuresTeam Structures The entire organization is made up of work groups or self-The entire organization is made up of work groups or self-

managed teams of empowered employeesmanaged teams of empowered employees

Matrix StructuresMatrix Structures Specialists for different functional departments are Specialists for different functional departments are

assigned to work on projects led by project managersassigned to work on projects led by project managers Matrix participants have two managersMatrix participants have two managers



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Contemporary Organizational Designs (cont.)Contemporary Organizational Designs (cont.)

Project StructuresProject Structures Employees work continuously on projects, moving on to Employees work continuously on projects, moving on to

another project as each project is completedanother project as each project is completed

Learning OrganizationLearning Organization An organization that has developed the capacity to An organization that has developed the capacity to

continuously learn, adapt, and change through the continuously learn, adapt, and change through the practice of knowledge management by employeespractice of knowledge management by employees



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Boundary-less OrganizationBoundary-less OrganizationA flexible and an unstructured organizational A flexible and an unstructured organizational

design that is intended to break down external design that is intended to break down external barriers between the organization and its barriers between the organization and its customers and supplierscustomers and suppliers

Removes internal (horizontal) boundaries:Removes internal (horizontal) boundaries: Eliminates the chain of commandEliminates the chain of command Has limitless spans of controlHas limitless spans of control Uses empowered teams rather than departmentsUses empowered teams rather than departments

Eliminates external boundaries:Eliminates external boundaries: Uses virtual, network, and modular organizational Uses virtual, network, and modular organizational

structures to get closer to stakeholdersstructures to get closer to stakeholders



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Contemporary Organizational Designs (cont.)Contemporary Organizational Designs (cont.)

Examples of Removing BoundariesExamples of Removing Boundaries

Virtual OrganizationVirtual Organization An organization that consists of a small core of full-time An organization that consists of a small core of full-time

employees and that temporarily hires specialists to work employees and that temporarily hires specialists to work on opportunities that ariseon opportunities that arise

Network OrganizationNetwork Organization A small core organization that A small core organization that outsourcesoutsources its major its major

business functions (e.g., manufacturing) in order to business functions (e.g., manufacturing) in order to concentrate on what it does bestconcentrate on what it does best

Modular OrganizationModular Organization A manufacturing organization that uses outside A manufacturing organization that uses outside

suppliers to provide product components for its final suppliers to provide product components for its final assembly operationsassembly operations



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Contemporary Organizational DesignsContemporary Organizational Designs



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This Week’s Summary This Week’s Summary

1.1. Why do we organize and how is it done?Why do we organize and how is it done?

2.2. Looked at the six key elements to Looked at the six key elements to consider in organizational designconsider in organizational design

3.3. Looked at mechanistic vs organic Looked at mechanistic vs organic designs and structural contingency designs and structural contingency factorsfactors

4.4. Considered the difference between Considered the difference between traditional and contemporary designstraditional and contemporary designs

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Exhibit 9.2 Functional Exhibit 9.2 Functional DepartmentalizationDepartmentalization



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Plant Manager

Manager,Manufacturing

Manager,Human Resources

Manager,Accounting

Manager,Engineering

Manager,Purchasing

+ Efficiencies from putting together similar specialties and people with common skills, knowledge, and orientations

+ Coordination within functional area

+ In-depth specialization

– Poor communication across functional areas

– Limited view of organizational goals

Return

Exhibit 9.2 Geographical Exhibit 9.2 Geographical DepartmentalizationDepartmentalization



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Vice Presidentfor Sales

Sales Director,Central Region

Sales Director,Prairies Region

Sales Director,Western Region

Sales Director,Eastern Region

+ More effective and efficient handling of specific regional issues that arise

+ Serve needs of unique geographic markets better

– Duplication of functions

– Can feel isolated from other organizational areas

Return

Exhibit 9.2 Product DepartmentalizationExhibit 9.2 Product Departmentalization



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+ Allows specialization in particular products and services

+ Managers can become experts in their industry

+ Closer to customers



Source: Bombardier Annual Report.

Bombardier, Ltd.

Industrial Equipment Division

Recreational and Utility Vehicles Sector

Mass Transit Sector Rail Products Sector

Rail and Diesel Products Division

Bombardier–Rotax (Gunskirchen)

Recreational Products Division

Logistic Equipment Division

Mass Transit Division

Bombardier–Rotax (Vienna)

Return

Exhibit 9.2 Process Exhibit 9.2 Process DepartmentalizationDepartmentalization



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+ More efficient flow of work activities

– Can only be used with certain types of products

PlantSuperintendent

Sawing Department Manager

Planing and Milling Department Manager

Assembling Department Manager

Lacquering and Sanding Department Manager

Finishing Department Manager

Inspection and Shipping Department Manager

Return

Exhibit 9.2 Customer Exhibit 9.2 Customer DepartmentalizationDepartmentalization



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+ Customers’ needs and problems can be met by specialists



Directorof Sales

Manager,Wholesale Accounts

Manager,Retail Accounts

Manager,Government Accounts

Return

Exhibit 9.6 Woodward’s Findings on Technology, Structure, and Effectiveness

Return

last topics 1-1 1. we looked at business strategies, at the corporate and business level. 2. a quick...

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organizational design

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