session 5-organizing (nov 13, 2009)

8/3/2019 Session 5-Organizing (Nov 13, 2009)

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What Type of Organization Structure Do I Prefer?What Type of Organization Structure Do I Prefer?

Respond to each of the 15 statements by usingResp

ond to each of the 15 statements by using

one of the following numbersone of the following

numbers

1 = Strongly disagree1 = Strongly disagree

2 = Disagree somewhat2 = Disagree somewhat

3 = Undecided3 = Undecided

4 = Agree somewhat4 = Agree somewhat

5 = Strongly agree5 = Strongly agree



I prefer to work in an organization in whichI prefer to work in an organization in which

1.1. Goals are defined by those at higher levels.Goals are defined by those at higher levels.

2.2. Clear job descriptions exist for every job.Clear job descriptions exist for every job.

3.3. Top management makes important decisions.Top management makes important decisions.

4.4. Promotions and pay increases are based as much onPromotions and pay increases are based as much onlength of service as on level of performance.length of service as on level of performance.

5.5. Clear lines of authority and responsibility are established.Clear lines of authority and responsibility are established.





6.6. My career is pretty well planned out for me.My career is pretty well planned out for me.

7.7. I have a great deal of job security.I have a great deal of job security.

8.8. I can specialize.I can specialize.

9.9. My boss is readily available.My boss is readily available.

10.10. Organization rules and regulations are clearly specified.Organization rules and regulations are clearly specified.





11.11. Information rigidly follows the chain of command.Information rigidly follows the chain of command.

12.12. There is a minimal number of new tasks for me to learn.There is a minimal number of new tasks for me to learn.

13.13. Work groups incur little turnover in members.Work groups incur little turnover in members.

14.14. People accept authority of a leader’s position.People accept authority of a leader’s position.

15.15. I am part of a group whose members’ training and skillsI am part of a group whose members’ training and skillsare similar to mine.are similar to mine.




Analysis and InterpretationAnaly

sis and Interpretation

This instrument measures your preference for This instrument measures your preference for working in aworking in a mechanistic or organicmechanistic or organic organizationorganizationstructure.structure.


Mechanistic structuresMechanistic structures

are characterized byare characterized by

• extensiveextensive

departmentalization,departmentalization,• high formalization,high formalization,• a limited informationa limited information

network, andnetwork, and• centralization.centralization.

Organic structures areOrganic structures are

• flat,flat,• use cross-hierarchical anduse cross-hierarchical and

cross-functional teams,cross-functional teams,• low formalization,low formalization,• a comprehensivea comprehensive

information network, andinformation network, and• participating decision-participating decision-

makingmaking



Analysis and InterpretationAnaly

sis and Interpretation

Scores above 60 suggest a preference for a mechanistic design.Scores above 60 suggest a preference for a mechanistic design.

Scores below 45 indicate a preference for an organic designScores below 45 indicate a preference for an organic design

Scores between 45 and 60 suggest no clear preferenceScores between 45 and 60 suggest no clear preference


• Very low scores may also mean that you’re likely to beVery low scores may also mean that you’re likely to be

frustrated by what you perceive as overly rigid structures of frustrated by what you perceive as overly rigid structures of

rules, regulations, and boss-centered leadership.rules, regulations, and boss-centered leadership.

• Low scores indicate that you prefer small, innovative,Low scores indicate that you prefer small, innovative,flexible, team-oriented organizations.flexible, team-oriented organizations.

• High scores indicate a preference for stable, rule-oriented,High scores indicate a preference for stable, rule-oriented,

more bureaucratic organizations.more bureaucratic organizations.



OrganizingOrganizing

PURPOSEPURPOSE

Divides work to be done into specific jobs andDivides work to be done into specific jobs anddepartments.departments.

Assigns tasks and responsibilities associated with Assigns tasks and responsibilities associated withindividual jobs.individual jobs.

Coordinates diverse organizational tasks.Coordinates diverse organizational tasks.

Clusters jobs into units.Clusters jobs into units.

Establishes relationships among individuals, groups, andEstablishes relationships among individuals, groups, anddepartments.departments.

Establishes formal lines of authority.Establishes formal lines of authority.

Allocates and deploys organizational resources. Allocates and deploys organizational resources.




OrganizingOrganizing is defined as the process of is defined as the process of creating an organization’s structure.creating an organization’s structure.

That process is important and serves manyThat process is important and serves manypurposes.purposes.

The challenge for managers is to design anThe challenge for managers is to design an

organizational structure that allowsorganizational structure that allowsemployees to effectively and efficiently doemployees to effectively and efficiently dotheir work.their work.




Organizational structureOrganizational structure is the formal arrangementis the formal arrangementof jobs within an organization.of jobs within an organization.

When managers develop or change the structure,When managers develop or change the structure,they’re engaged inthey’re engaged in organizational designorganizational design, a, aprocess that involves decisions aboutprocess that involves decisions about six keysix keyelements:elements: Work specializationWork specialization DepartmentalizationDepartmentalization Chain of commandChain of command Span of controlSpan of control Centralization and decentralizationCentralization and decentralization FormalizationFormalization



Key Elements of Organizational StructureKey Elements of Organizational Structure

Work SpecializationWork Specialization

Adam Smith – division of labor that contributes to increased Adam Smith – division of labor that contributes to increasedemployee productivity.employee productivity.

The degree to which activities in an organization are dividedThe degree to which activities in an organization are divided

into separate jobs.into separate jobs.

The essence is that an entire job is not done by one individualThe essence is that an entire job is not done by one individualbut instead is broken down into steps, and each step isbut instead is broken down into steps, and each step iscompleted by different person.completed by different person.

An important organizing mechanism but not a source of ever- An important organizing mechanism but not a source of ever-increasing productivity.increasing productivity.

Example – McDonald’s uses high work specialization toExample – McDonald’s uses high work specialization toefficiently make and sell its products, and most employees inefficiently make and sell its products, and most employees in

health care organizations are specialized.health care organizations are specialized.



DepartmentalizationDepartmentalization

Grouped back together so that common tasks can beGrouped back together so that common tasks can be

coordinated. The basis by which jobs are groupedcoordinated. The basis by which jobs are grouped

together is called departmentalization.together is called departmentalization.

Five common forms of departmentalization:Five common forms of departmentalization:

1.1. Functional departmentalizationFunctional departmentalization groups jobs by functions performed.groups jobs by functions performed. can be used in all types of organizations, although thecan be used in all types of organizations, although the

functions change to reflect the organization’s purpose andfunctions change to reflect the organization’s purpose andwork.work.

1.1. Product departmentalizationProduct departmentalization groups jobs by product line.groups jobs by product line. Each major product area is placed under the authority of aEach major product area is placed under the authority of a

manager who’s responsible for everything having to do withmanager who’s responsible for everything having to do withthat product line.that product line.

Key Elements of Organizational StructureKey Elements of Organizational Structure (contd.)(contd.)




3.3. Geographical departmentalizationGeographical departmentalization • groups jobs on the basis of territory or geography such asgroups jobs on the basis of territory or geography such as

southern, Midwestern, or northwestern regions or maybesouthern, Midwestern, or northwestern regions or maybe

European, Latin American, Asia-Pacific regions.European, Latin American, Asia-Pacific regions.

4.4. Process departmentalizationProcess departmentalization groups jobs on the basis of product or customer flow.groups jobs on the basis of product or customer flow. Work activities follow a natural processing flow of products or Work activities follow a natural processing flow of products or

even of customers.even of customers.

5.5. Customer departmentalizationCustomer departmentalization groups jobs on the basis of customer who have common needsgroups jobs on the basis of customer who have common needs

or problems that can best be met by having specialists for each.or problems that can best be met by having specialists for each.

Large organizations often combine most or all of these forms of Large organizations often combine most or all of these forms of

departmentalizationdepartmentalization





Two popular trendsTwo popular trends the increasing use of customer departmentalizationthe increasing use of customer departmentalization

the use of cross-functional teams.the use of cross-functional teams.

Customer departmentalizationCustomer departmentalization is being usedis being used to monitor customers’ needs, andto monitor customers’ needs, and to respond to changes in those needs.to respond to changes in those needs.

Cross-functional teamsCross-functional teams Groups of individuals who are experts in variousGroups of individuals who are experts in various

specialties and who work together.specialties and who work together. Each other believes in the use of cross-functionalEach other believes in the use of cross-functional

collaboration.collaboration.





Chain of CommandChain of Command

Concept was a cornerstone of organizational design.Concept was a cornerstone of organizational design. Today, less important.Today, less important.

Chain of command is the continuous line of Chain of command is the continuous line of authority that extends from upper authority that extends from upper organizational levels to the lowest levels andorganizational levels to the lowest levels and

clarifies who reports to whom.clarifies who reports to whom.

It helps employees answer questions such asIt helps employees answer questions such as

““Who do I go if I have a problem?”Who do I go if I have a problem?”

““To whom am I responsible?”To whom am I responsible?”




Chain of CommandChain of Command

Three concepts, the main components of commands –Three concepts, the main components of commands –authorityauthority,, responsibilityresponsibility, and, and unity of commandunity of command..

Authority Authority • the rights inherent in a managerial position to tell people what to dothe rights inherent in a managerial position to tell people what to do

and to expect them to do it.and to expect them to do it.• To facilitate decision making and coordinationTo facilitate decision making and coordination• A certain degree of authority to meet responsibilities. A certain degree of authority to meet responsibilities.

ResponsibilityResponsibility • Employees assume an obligation to perform any assigned duties.Employees assume an obligation to perform any assigned duties.

This obligation or expectation to perform is known asThis obligation or expectation to perform is known as responsibilityresponsibility.. Unity of commandUnity of command

• One of Fayol’s 14 principles of managementOne of Fayol’s 14 principles of management• Concept of a continuous line of authority.Concept of a continuous line of authority.• A person should report to only one manager. A person should report to only one manager.• Without unity of command, conflicting demands and priorities fromWithout unity of command, conflicting demands and priorities from

multiple bosses can create problems.multiple bosses can create problems.




Span of ControlSpan of Control

Span of controlSpan of control is the number of employees a manager canis the number of employees a manager canefficiently and effectively manage.efficiently and effectively manage.

Many factors influence the appropriate number of employeesMany factors influence the appropriate number of employees

that a manager canthat a manager can efficientlyefficiently and and effectivelyeffectively manage.manage.

These factors includeThese factors include the skills and abilities of the manager and the employees, andthe skills and abilities of the manager and the employees, and characteristics of the work being done.characteristics of the work being done.

• For instance, the more training and experience employees have, the lessFor instance, the more training and experience employees have, the lessdirect supervision they’ll need.direct supervision they’ll need.

All things being equal, the wider or larger the span, the more All things being equal, the wider or larger the span, the more

efficient the organizationefficient the organization




Span of ControlSpan of Control

Other contingency variables that determine theOther contingency variables that determine theappropriate span include:appropriate span include:

• similarity of employee taskssimilarity of employee tasks

• the complexity of those tasksthe complexity of those tasks• the physical proximity of subordinatesthe physical proximity of subordinates

• the degree to which standardized procedures are in placethe degree to which standardized procedures are in place

• the sophistication of the organization’s information systemthe sophistication of the organization’s information system

• the strength of the organization’s culture,the strength of the organization’s culture,

• the preferred style of the manager the preferred style of the manager



Key Elements of OrganizationalKey Elements of Organizational StructureStructure (contd.)(contd.)

Centralization and DecentralizationCentralization and Decentralization

CentralizationCentralization describes the degree to which decisiondescribes the degree to which decisionmaking is concentrated at a single point in themaking is concentrated at a single point in theorganization – the top-level managersorganization – the top-level managers

DecentralizationDecentralization is the degree to which lower-levelis the degree to which lower-levelemployees provide input or actually make decisions.employees provide input or actually make decisions.

Concept of centralization-decentralization is relativeConcept of centralization-decentralization is relative, not, notabsolute – that is, an organization is never completelyabsolute – that is, an organization is never completely

centralized or decentralized.centralized or decentralized.

Why Decentralization?Why Decentralization?

Lower-level managers areLower-level managers are “closer to the action”“closer to the action” andandtypically have more detailed knowledge about problemstypically have more detailed knowledge about problems

and how best to solve them than do top managers.and how best to solve them than do top managers.




More Centralization More Decentralization

• Environment is stable.• Lower-level managers are

not as capable or experienced at makingdecisions as upper-levelmanagers.

• Lower-level managers donot want to have a say indecisions.

• Decisions are significant.

• Environment is complex,uncertain.

• Lower-level managers arecapable and experienced atmaking decisions.

• Lower-level managers want a

voice in decisions.• Decisions are relatively

minor.

Factors That Influence the Amount of

Centralization and Decentralization




More Centralization More Decentralization

• Organization is facing acrisis or the risk of

company failure.• Company is large.• Effective implementation

of company strategies

depends on managersretaining say over whathappens.

• Corporate culture is open toallowing managers to have a

say in what happens.• Company is geographically

dispersed.• Effective implementation of

company strategies dependson managers havinginvolvement and flexibility tomake decisions.

Factors That Influence the Amount of

Centralization and Decentralization




FormalizationFormalization

The degree to which jobs within the organization areThe degree to which jobs within the organization are

standardized, andstandardized, and

The extent to which employee behaviour is guided by rulesThe extent to which employee behaviour is guided by rules

and procedures.and procedures.

In organizations with high formalization,In organizations with high formalization, • there are explicit job descriptions,there are explicit job descriptions,

• numerous organizational rules, andnumerous organizational rules, and• clearly defined procedures covering work processes.clearly defined procedures covering work processes.

Where formalization is lowWhere formalization is low,,

• job behaviours are relatively unstructured and job behaviours are relatively unstructured and

• employees have a great deal of freedom in how they do their work.employees have a great deal of freedom in how they do their work.



Organizational DesignOrganizational Design

Mechanistic OrganizationMechanistic Organization Organic OrganizationOrganic Organization• High Specialization

• Rigid Departmentalization

• Clear Chain of Command

• Narrow Spans of Control

• Centralization

• High Formalization

• Cross-Functional Teams

• Cross-Hierarchical Teams

• Free Flow of Information

• Wide Spans of Control

• Decentralization

• Low Formalization




The contingency factorsThe contingency factors that influence the decision, whenthat influence the decision, when

is ais a mechanisticmechanistic structure preferable and when is anstructure preferable and when is anorganicorganic one more appropriate:one more appropriate:

1.1. Strategy and StructureStrategy and Structure

• Structure should follow strategy.Structure should follow strategy.

• Most current strategy frameworks tend to focus on threeMost current strategy frameworks tend to focus on three

dimensions:dimensions: innovation; cost minimization; and imitation, (seeking toinnovation; cost minimization; and imitation, (seeking to

minimize risk and maximize profit opportunities byminimize risk and maximize profit opportunities by

copying the market leaders).copying the market leaders).

1.1. Size and StructureSize and Structure

• Beyond a certain point, size becomes a less importantBeyond a certain point, size becomes a less important

influence on structure as an organization grows.influence on structure as an organization grows.

• Size significantly affects its structure.Size significantly affects its structure.




3.3.Technology and StructureTechnology and Structure

• The processes or methods that transform an organization’s inputs intoThe processes or methods that transform an organization’s inputs intooutputs differ by their degree of routineness or standardization.outputs differ by their degree of routineness or standardization. In general, the more routine the technology, the more mechanistic theIn general, the more routine the technology, the more mechanistic the

structure can be.structure can be.

Organizations with more non-routine technology are more likely to haveOrganizations with more non-routine technology are more likely to have

organic structures.organic structures.

3.3.Environmental Uncertainty and StructureEnvironmental Uncertainty and Structure • Stable and simple environments Vs Dynamic and complexStable and simple environments Vs Dynamic and complex

environments.environments.

• Global competition, accelerated product innovation by competitors,Global competition, accelerated product innovation by competitors,

and increased demands from customers for high quality and faster and increased demands from customers for high quality and faster

deliveries are examples of dynamic environmental forces.deliveries are examples of dynamic environmental forces.

• Mechanistic organizations are not equipped to respond to rapidMechanistic organizations are not equipped to respond to rapid

environmental change and environmental uncertainty.environmental change and environmental uncertainty.

• As a result, we’re seeing organizations designed to be more organic. As a result, we’re seeing organizations designed to be more organic.



Common Organizational DesignsCommon Organizational Designs

Two typesTwo types

1.1. Traditional Organizational Designs, andTraditional Organizational Designs, and

2.2. Contemporary Organizational DesignsContemporary Organizational Designs

1. Traditional Organizational Designs1. Traditional Organizational Designs

The designs –The designs –

the simple structure,the simple structure,

functional structure, andfunctional structure, and

divisional structuredivisional structure – tend to be more mechanistic. – tend to be more mechanistic.




1. Traditional Organizational Designs1. Traditional Organizational Designs

a.a. Simple StructureSimple Structure Most organizations start - owners and employees.Most organizations start - owners and employees. Low departmentalization, wide spans of control, authorityLow departmentalization, wide spans of control, authority

centralized in a single person, and little formalization.centralized in a single person, and little formalization.

Commonly used by small businesses in which the owner Commonly used by small businesses in which the owner and manager are one and the same.and manager are one and the same.

As the number of employees rises, the structure tends to As the number of employees rises, the structure tends tobecome more specialized and formalized:become more specialized and formalized:

• rules and regulations are introduced,rules and regulations are introduced,

• work becomes specialized,work becomes specialized,

• departments are created,departments are created,

• levels of management are added, andlevels of management are added, and

• the organization becomes increasingly bureaucratic.the organization becomes increasingly bureaucratic.

At this point, a manager might choose to organize around a At this point, a manager might choose to organize around afunctional structure or a divisional structure.functional structure or a divisional structure.




1.1. Traditional Organizational DesignsTraditional Organizational Designs

b.b. Functional StructureFunctional Structure An organizational design that groups similar or related An organizational design that groups similar or related

occupational specialties together.occupational specialties together. It’s the functional approach to departmentalizationIt’s the functional approach to departmentalization

applied to the entire organization.applied to the entire organization.

b.b. Divisional StructureDivisional Structure An organizational structure made up of separate An organizational structure made up of separate

business units or divisions.business units or divisions. Each unit or division has relatively limited autonomy,Each unit or division has relatively limited autonomy,

with a division manager responsible for performancewith a division manager responsible for performanceand who has strategic and operational authority over hisand who has strategic and operational authority over hisor her unit.or her unit.




Simple Structure•

Strengths: Fast; flexible; inexpensive to maintain; clear accountability•Weaknesses: Not appropriate as organization grows; reliance on one

person is risky.

Functional Structure•Strengths: Cost-saving advantages from specialization (economies of

scale, minimal duplication of people and equipment) and employeesare grouped with others who have similar tasks.

•Weaknesses: Pursuit of functional goals can cause managers to lose

sight of what’s best for overall organization; functional specialists

become insulated and have little understanding of what other units are

doing.

Divisional Structure•Strengths: Focuses on results – division managers are responsible

for what happens to their products and services.

•Weaknesses: Duplication of activities and resources increases costs

and reduces efficiency.




1.1. Contemporary Organizational DesignsContemporary Organizational Designs

Newest Concepts in Organizational DesignNewest Concepts in Organizational Design

a.a. Team StructureTeam Structure

What it is:What it is:

A structure in which the entire organization is A structure in which the entire organization ismade up of work groups of teamsmade up of work groups of teams

Advantages: Advantages:

Employees are more involved and empowered.Employees are more involved and empowered.

Reduced barriers among functional areas.Reduced barriers among functional areas.

Disadvantages:Disadvantages:

No clear chain of command.No clear chain of command.

Pressure on teams to perform.Pressure on teams to perform.




b.b. Matrix-Project StructureMatrix-Project Structure

What it is:What it is:MatrixMatrix is a structure that assigns specialists from differentis a structure that assigns specialists from differentfunctional areas to work on projects but who return to their functional areas to work on projects but who return to their areas when the project is completed.areas when the project is completed.

ProjectProject is a structure in which employees continuously workis a structure in which employees continuously work

on projects. As one project is completed, employees moveon projects. As one project is completed, employees moveon to the next project.on to the next project.

Advantages: Advantages: Fluid and flexible design that can respond to environmentalFluid and flexible design that can respond to environmental

changes.changes. Faster decision making.Faster decision making.

Disadvantages:Disadvantages: Complexity of assigning people to projects.Complexity of assigning people to projects.

Task and personality conflicts.Task and personality conflicts.




d.d. Learning Organization StructureLearning Organization Structure

What it is:What it is: A structure that supports an organization’s A structure that supports an organization’scapacity to continuously adapt and change.capacity to continuously adapt and change.

Advantages: Advantages: Employees are continuously sharing and applyingEmployees are continuously sharing and applying

knowledge.knowledge. Ability to learn can be a source of sustainable Ability to learn can be a source of sustainable

competitive advantage.competitive advantage.

Disadvantages:Disadvantages: Getting employees to share what they know canGetting employees to share what they know can

be difficult.be difficult.

Collaboration conflicts can arise.Collaboration conflicts can arise.



No matter what structural designNo matter what structural design

managers choose for their organizations,managers choose for their organizations,

the design should help employees dothe design should help employees dotheir work in the besttheir work in the best

– – most efficient and effective –most efficient and effective –

way they can.way they can.

The structure shouldThe structure should

aid and facilitate organizational membersaid and facilitate organizational members

as they carry out the organization’s work.as they carry out the organization’s work.

After all,After all,

the structure is simply a means to an end.the structure is simply a means to an end.

session 5-organizing (nov 13, 2009)

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