Chapter 13 Organizational Structure Organizational Behaviour 5 th

Chapter Outline • What Is Organizational Structure? • Mechanistic and Organic Organizations • Traditional Organizational Designs • New Design Options • What Major Forces Shape an Organization’s Structure? Langton, Robbins and Judge, Organizational Behaviour, Fifth Cdn. Ed. Copyright © 2010 Pearson Education Canada 13 -2

Organizational Structure 1. What are the key elements of organizational structure? 2. How flexible can organizational structures be? 3. What are some examples of traditional organizational designs? 4. What do newer organizational structures look like? 5. Why do organizational structures differ? Langton, Robbins and Judge, Organizational Behaviour, Fifth Cdn. Ed. Copyright © 2010 Pearson Education Canada 13 -3

What Is Organizational Structure? • Organizational structure defines how job tasks are formally divided, grouped, and coordinated. – It includes the degree of complexity, formalization, and centralization in the organization. Langton, Robbins and Judge, Organizational Behaviour, Fifth Cdn. Ed. Copyright © 2010 Pearson Education Canada 13 -4

Exhibit 13 -1 Pyramidal Organizational Structure 13 -5

Exhibit 13 -2 Flat Organizational Structure 13 -6

Exhibit 13 -3 Six Key Questions for Organizational Structure 13 -7

Work Specialization • The degree to which tasks in the organization are subdivided into separate jobs. – Also known as division of labour. • Benefits: – Efficiency-less time changing tasks, putting equipment away – Easier to train employees • Downsides: – Boredom, stress, low productivity, high turnover, increased absenteeism Langton, Robbins and Judge, Organizational Behaviour, Fifth Cdn. Ed. Copyright © 2010 Pearson Education Canada 13 -8

Departmentalization • The basis on which jobs are grouped together. • Types: – – – Functional Product Geographic Process Customer Organizational Variety Langton, Robbins and Judge, Organizational Behaviour, Fifth Cdn. Ed. Copyright © 2010 Pearson Education Canada 13 -9

Exhibit 13 -4 Departmentalization by Function 13 -10

Exhibit 13 -5 Departmentalization by Product 13 -11

Exhibit 13 -6 Departmentalization by Geography 13 -12

Exhibit 13 -7 Departmentalization by Customer 13 -13

Chain of Command • Two aspects – Authority • Who has the right to give orders and expect them to be obeyed. – Unity of command • Subordinates should have only one superior. • Delegation – Assignment of authority to another person to carry out specific duties, allowing the employee to make some of the decisions. Langton, Robbins and Judge, Organizational Behaviour, Fifth Cdn. Ed. Copyright © 2010 Pearson Education Canada 13 -14

Span of Control • Number of subordinates that can be efficiently and effectively managed. • Small span – Expensive, more managers. – Makes vertical communication more complicated. – Encourages tight supervision and discourages autonomy. • Larger span – Empowers workers. – Speeds up decisions. 13 -15

Exhibit 13 -8 Contrasting Spans of Control Members at each level (Highest) Organizational Level Assuming span of 4 Assuming span of 8 1 1 1 2 4 8 3 16 64 4 64 512 5 256 4096 6 1024 7 4096 Operatives = 4096 Managers (Levels 1 – 6) = 1365 Operatives = 4096 Managers (Levels 1 – 4) = 585 Langton, Robbins and Judge, Organizational Behaviour, Fifth Cdn. Ed. Copyright © 2010 Pearson Education Canada 13 -16

Centralization and Decentralization • Centralization – The degree to which decision making is concentrated at a single point in the organization. • Decentralization – The degree to which decision making is distributed to lower level employees. • Makes it easier to address customer concerns quickly 13 -17

Formalization • How standardized are the jobs? – High formalization means employees have little discretion. – Low formalization means employees have more freedom. 13 -18

Exhibit 13 -10 Mechanistic vs. Organic Models 13 -19

Simple Structure • Strengths: – Simplicity: fast, flexible, inexpensive. • Weakness: – Works best in small organizations. – Can slow down decision making in larger organization. – Can be risky as it relies on one person to make all decisions. 13 -20

The Family Business • Family businesses represent 70 percent of Canadian employment and more than 30 percent of the gross domestic product. • Family businesses face both family/personal relations and business/management relations. • Family businesses must manage the conflicts found within families as well as the normal business issues that arise for any business. Langton, Robbins and Judge, Organizational Behaviour, Fifth Cdn. Ed. Copyright © 2010 Pearson Education Canada 13 -21

Bureaucracy • Strengths: – Standardizes activities in an efficient manner. • Economies of scale, minimum duplication of personnel and equipment. • Lower quality employees are acceptable, which reduces employment costs. • Weaknesses: – Creates subunit conflicts. – There is an obsessive concern with following rules. 13 -22

Matrix Organization • Breaks the unity of command principle. – Employees have two bosses. • Strengths: – Facilitates coordination when there are many activities. – More communication. – Efficient allocation of specialists. • Disadvantages: – Power struggles, confusion, stress. 13 -23

Exhibit 13 -11 Matrix Structure 13 -24

New Design Options • Breaking the boundaries internally – Team Structure • Breaking the boundaries externally – Modular Organization – Virtual Organization • Breaking the boundaries externally and internally – Boundaryless Organization 13 -25

Exhibit 13 -12 New-Style vs. Old-Style Organizations • New – – – – – Dynamic, learning Information rich Global Small and large Product/customer oriented Skills oriented Team oriented Involvement oriented Lateral/networked Customer oriented • Old – – – – – Stable Information is scarce Local Large Functional oriented Job oriented Individual oriented Command/control oriented Hierarchical Job requirements oriented Source: J. R. Galbraith and E. E. Lawler III, “Effective Organizations: Using the New Logic of Organizing, ” in Organizing for the Future: The New Logic for Managing Complex Organizations, ed. J. R. Galbraith, E. E. Lawler III, and associated (San Francisco: Jossey-Bass, 1993). Copyright © 1993 Jossey-Bass Inc. Publishers. Reprinted with permission of John Wiley & Sons, Inc. Langton, Robbins and Judge, Organizational Behaviour, Fifth Cdn. Ed. Copyright © 2010 Pearson Education Canada 13 -26

Modular Organization • A small core organization that outsources major business functions. • Advantages: – Can devote technical and managerial talent to most critical activities. – Can respond more quickly to environmental changes. – Increased focus on customers and markets. • Disadvantages: – Reduces management’s control over business. – Relies on outsiders to get job done. Langton, Robbins and Judge, Organizational Behaviour, Fifth Cdn. Ed. Copyright © 2010 Pearson Education Canada 13 -27

Exhibit 13 -13 Modular Structure Organizational Infrastructure Human Resource Technology Management Development Procurement Operations Marketing and Sales Service OUTSOURCED 13 -28

Virtual Organization • A continually evolving network of independent companies— suppliers, customers, even competitors—linked together to share skills, costs, and access to one another’s markets. • Advantages: – Organizations can share costs and skills. – Provides access to global markets. – Increases market responsiveness. • Disadvantages: – Companies give up operational and strategic control to work together. – Managers need to be more flexible, acquire new skills. Langton, Robbins and Judge, Organizational Behaviour, Fifth Cdn. Ed. Copyright © 2010 Pearson Education Canada 13 -29

Exhibit 13 -14 Virtual Structure Organizational Infrastructure Human Resource Technology Management Development Marketing Procurement Operations Alliance Alliance Partner A Partner B Partner C Partner D Partner E Langton, Robbins and Judge, Organizational Behaviour, Fifth Cdn. Ed. Copyright © 2010 Pearson Education Canada and Sales Service 13 -30

The Boundaryless Organization • An organization that seeks to eliminate the chain of command, have limitless spans of control, and replaces departments with empowered teams. Langton, Robbins and Judge, Organizational Behaviour, Fifth Cdn. Ed. Copyright © 2010 Pearson Education Canada 13 -31

What Major Forces Shape An Organization’s Structure? • Strategy – Innovation, cost minimization, and imitation. • Organizational Size – An organization’s size significantly affects its structure. – The relationship isn’t linear; rather, size affects structure at a decreasing rate. 13 -32

Exhibit 13 -15 The Strategy-Structure Relationship Strategy Structural Option Innovation Organic: A loose structure; low specialization, low formalization, decentralized Cost minimization Mechanistic: Tight control; extensive work specialization, high formalization, high centralization Imitation Mechanistic and organic: Mix of loose with tight properties; tight controls over current activities and looser controls for new undertakings 13 -33

What Major Forces Shape an Organization’s Structure? • Technology – Every organization has at least one technology for converting financial, human, and physical resources into products or services. – The common theme that differentiates technologies is their degree of routineness. • Environment – Composed of forces outside the organization and the uncertainty associated with them. Langton, Robbins and Judge, Organizational Behaviour, Fifth Cdn. Ed. Copyright © 2010 Pearson Education Canada 13 -34

Key Dimensions of an Organization’s Environment • Capacity – Degree to which environment can support growth. • Volatility – Degree of instability in an environment. • Complexity – Degree of heterogeneity and concentration in environment. Langton, Robbins and Judge, Organizational Behaviour, Fifth Cdn. Ed. Copyright © 2010 Pearson Education Canada 13 -35

Exhibit 13 -16 Model of the Environment Stable Abundant Simple Complex Scarce Dynamic Langton, Robbins and Judge, Organizational Behaviour, Fifth Cdn. Ed. Copyright © 2010 Pearson Education Canada 13 -36

Summary and Implications 1. What are the key elements of organizational structure? – There are six key elements that managers need to address when they design their organization’s structure: work specialization, departmentalization, chain of command, span of control, centralization and decentralization, and formalization. 2. How flexible can organizational structures be? – There are two models that determine how flexible an organizations can be: mechanistic and organic. 13 -37

Summary and Implications 3. What are some examples of traditional organizational designs? – Some of the more common organizational designs found in use are the simple structure, the bureaucracy, and the matrix structure. 4. What do newer organizational structures look like? – The new structural options for organizations involve breaking down the boundaries in some fashion, either internally, externally, or a combination of the two. 5. Why do organizational structures differ? – Strategy, organizational size, technology, and environment determine the type of structure. Langton, Robbins and Judge, Organizational Behaviour, Fifth Cdn. Ed. Copyright © 2010 Pearson Education Canada 13 -38

OB at Work Langton, Robbins and Judge, Organizational Behaviour, Fifth Cdn. Ed. Copyright ©

For Review 1. Why isn’t work specialization an unending source of increased productivity? 2. What are the different forms of departmentalization? 3. All things being equal, which is more efficient, a wide or narrow span of control? Why? 4. What is a matrix structure? When would management use it? 5. How does a family business differ from other organizational structures? Langton, Robbins and Judge, Organizational Behaviour, Fifth Cdn. Ed. Copyright © 2010 Pearson Education Canada 13 -40

For Review 6. Contrast the virtual organization with the boundaryless organization. 7. What type of structure works best with an innovation strategy? A cost-minimization strategy? An imitation strategy? 8. Summarize the size-structure relationship. 9. Define and give an example of what is meant by the term technology. 10. Summarize the environment-structure relationship. Langton, Robbins and Judge, Organizational Behaviour, Fifth Cdn. Ed. Copyright © 2010 Pearson Education Canada 13 -41

For Critical Thinking 1. How is the typical large corporation of today organized, in contrast with how that same organization was probably organized in the 1960 s? 2. Do you think most employees prefer high formalization? Support your position. 3. If you were an employee in a matrix structure, what pluses do you think the structure would provide? What about minuses? Langton, Robbins and Judge, Organizational Behaviour, Fifth Cdn. Ed. Copyright © 2010 Pearson Education Canada 13 -42

For Critical Thinking 4. What could management do to make a bureaucracy more like a boundaryless organization? 5. What behavioural predictions would you make about people who worked in a “pure” boundaryless organization (if such a structure were ever to exist)? Langton, Robbins and Judge, Organizational Behaviour, Fifth Cdn. Ed. Copyright © 2010 Pearson Education Canada 13 -43

Breakout Group Exercises • Form small groups to discuss the following: 1. Describe the structure of an organization in which you worked. Was the structure appropriate for the tasks being done? 2. Have you ever worked in an organization with a structure that seemed inappropriate to the task? What would have improved the structure? 3. You are considering opening up a coffee bar with several of your friends. What kind of structure might you use? After the coffee bar becomes successful, you decide that expanding the number of branches might be a good idea. What changes to the structure might you make? Langton, Robbins and Judge, Organizational Behaviour, Fifth Cdn. Ed. Copyright © 2010 Pearson Education Canada 13 -44

Words-in-Sentences Company • Raw materials – Letters • Product – Words • Packaging – Sentences (words go out the door in sentences rather than boxes) • Production run – All sentences created during a ten minute period. No word repeated in any sentence. 13 -45

Rules to Pass Quality Control • • • A letter may appear only as often in a manufactured word as it appears in the raw material phrase; for example, “organizational behaviour is fun” has one L and one E. Thus “steal” is legitimate, but not “teller”. It has too many l’s and e’s. Raw material letters can be used again in different manufactured words. A manufactured word may be used only once during a production run; once a word (e. g. , “the”) is used in a sentence, it is out of stock for the rest of the production run. No other sentence may use the word “the”. A new word may not be made by adding “s” to form the plural of an already used manufactured word. Sentences must make grammatical and logical sense. All words must be in the English language. Names and places are acceptable. Slang is not acceptable. Writing must be legible. Any illegible sentence will be disqualified. Only sentences that have a minimum of three words and a maximum of six words will be considered. Langton, Robbins and Judge, Organizational Behaviour, Fifth Cdn. Ed. Copyright © 2010 Pearson Education Canada 13 -46

Raw Materials • Outside, the wind teased the palm fronds into rattling conspiracies. 13 -47

Raw Materials • The place had bevelled windowpanes, pecan paneling and traditional furniture in mahogany. 13 -48

Raw Materials • A Connecticut Yankee said “parsley, sage, rosemary and thyme. ” Langton,

Raw Materials • King Arthur’s court feared the wrath of Khan. Langton, Robbins and

Learning Points • What structure did you use at first? • What structure evolved? • How did the task affect structure? 13 -51

Concepts to Skills: Delegating Authority • Clarify the assignment. • Specify the employee’s range of discretion. • Allow the employee to participate. • Inform others that delegation has occurred. • Establish feedback controls. 13 -52