Chapter 6 Organizational Structure and Design Power Point

Organizing and Organizational Structure • Organizing Ø The process of structuring both human and

Determining Organizational Structure • The four major decisions: Ø Specialization of jobs Ø Delegation

Determining Organizational Structure (cont’d) Designing Organization Structure Specialization of jobs High Low Delegation of

Determining Organizational Structure (cont’d) Scientific Management versus Craftsmanship Management Highlight Copyright © 2005 South-Western.

Determining Organizational Structure (cont’d) • Teams and quality circles Ø Problem-solving team: knowledgeable workers

Determining Organizational Structure (cont’d) • Delegation of authority Ø Decentralization: the process of distributing

Determining Organizational Structure (cont’d) • Delegation of authority (cont’d) Ø Chain of command v

Determining Organizational Structure (cont’d) Chain of Command Exhibit 6. 2 Copyright © 2005 South-Western.

Determining Organizational Structure (cont’d) Differentiating between Line and Staff Positions Line position ——— Staff

Determining Organizational Structure (cont’d) • Departmentalization Ø The process of grouping jobs according to

Determining Organizational Structure (cont’d) Functional Departmentalization Exhibit 6. 4 Copyright © 2005 South-Western. All

Determining Organizational Structure (cont’d) Product Departmentalization Exhibit 6. 5 Copyright © 2005 South-Western. All

Determining Organizational Structure (cont’d) Customer Departmentalization Exhibit 6. 6 Copyright © 2005 South-Western. All

Determining Organizational Structure (cont’d) Geographic Departmentalization Exhibit 6. 7 Copyright © 2005 South-Western. All

Determining Organizational Structure (cont’d) Mixed Departmentalization Exhibit 6. 8 Copyright © 2005 South-Western. All

Determining Organizational Structure (cont’d) Matrix Organization Exhibit 6. 9 Copyright © 2005 South-Western. All

Determining Organizational Structure (cont’d) Wide versus Narrow Span of Control A. Wide Span of

Determining Organizational Structure (cont’d) • Factors to consider in determining span of control Ø

Dimensions of Organizational Structure • Formalization Ø The extent to which organizational communications and

Organizational Design • Organizational design Ø The process by which managers develop an organizational

Organizational Design (cont’d) • Mechanistic model Ø Mechanistic organization: a rigid organization that attempts

Organizational Design (cont’d) • Characteristics of a bureaucracy Ø Tasks are divided into highly

Organizational Design (cont’d) • Organic model Ø Organic organization: an organization that is decentralized

Organizational Design (cont’d) • Contingency approach Ø Designing an organization to effectively function in

Organizational Design (cont’d) • Contingencies affecting design Ø Technology v Routine technologies = mechanistic

Other Forms of Organizational Design • Multidivisional organization Ø A high-performance organization whose operating

Other Forms of Design (cont’d) • Network organization (cont’d) Ø Virtual corporation v. A

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Organizing and Organizational Structure • Organizing Ø The process of structuring both human and physical resources to accomplish organizational objectives. • Organizational structure Ø The framework of jobs and departments that directs the behavior of individuals and groups toward achieving the organization’s objectives. Ø Management’s responsibility is to develop a structure that enhances the organization’s overall strategy. Copyright © 2005 South-Western. All rights reserved. 2

Determining Organizational Structure • The four major decisions: Ø Specialization of jobs Ø Delegation of authority Ø Departmentalization Ø Span of control Copyright © 2005 South-Western. All rights reserved. 3

Determining Organizational Structure (cont’d) Designing Organization Structure Specialization of jobs High Low Delegation of authority Centralized Decentralized Departmentalization Homogeneous Heterogeneous Span of control Narrow Wide Exhibit 6. 1 Copyright © 2005 South-Western. All rights reserved. 4

Determining Organizational Structure (cont’d) • Teams and quality circles Ø Problem-solving team: knowledgeable workers who gather to solve a specific problem and then disband. Ø Work team: a group of employees who work closely together to pursue common objectives. Ø Self-managed work teams: workers who become their own managers, which increases reliance on their creative and intellectual capabilities besides their labor. Ø Quality circle: a group of fewer than ten workers who do similar work and meet weekly to discuss their work, identify problems, and present possible solutions. Copyright © 2005 South-Western. All rights reserved. 6

Determining Organizational Structure (cont’d) • Delegation of authority Ø Decentralization: the process of distributing authority throughout the organization. Ø Centralization: the process of retaining authority in the hands of high-level managers, who make all the decisions. Ø Empowerment: giving employees who are responsible for hands-on production or service activities the authority to make decisions or take action without prior approval. Copyright © 2005 South-Western. All rights reserved. 7

Determining Organizational Structure (cont’d) • Delegation of authority (cont’d) Ø Chain of command v Delegation of authority creates a formal channel that defines the lines of authority from the top to the bottom of an organization. Ø Line position: a position in the direct chain of command that contributes directly to achieving the organization’s goals. Ø Staff position: a position not in the direct chain of command that facilitates or provides advice to line positions. Copyright © 2005 South-Western. All rights reserved. 8

Determining Organizational Structure (cont’d) Differentiating between Line and Staff Positions Line position ——— Staff position ---- Exhibit 6. 3 Copyright © 2005 South-Western. All rights reserved. 10

Determining Organizational Structure (cont’d) • Departmentalization Ø The process of grouping jobs according to some logical arrangement. Ø As organizations grow in size and job specialization increases, it becomes necessary to determine how to best to arrange and group jobs. • Common bases for departmentalization Ø Functional Ø Product Ø Customer Copyright © 2005 South-Western. All rights reserved. Ø Geographic Ø Mixed Ø Matrix organization 11

Determining Organizational Structure (cont’d) • Factors to consider in determining span of control Ø Competence of both the manager and the subordinates. Ø Degree of interaction required among the units to be supervised. Ø Extent to which the manager must carry out nonmanagerial tasks. Ø Relative similarity or dissimilarity of the jobs being supervised. Ø Extent of standardized procedures. Ø Degree of physical dispersion of subordinates. Copyright © 2005 South-Western. All rights reserved. 19

Dimensions of Organizational Structure • Formalization Ø The extent to which organizational communications and procedures are written down and filed. • Centralization Ø How much the authority to make decisions is dispersed throughout the organization. • Complexity Ø The number of different job titles and the number of different departments in an organization. Copyright © 2005 South-Western. All rights reserved. 20

Organizational Design • Organizational design Ø The process by which managers develop an organizational structure. • Issues affecting organizational design Ø Specialization of jobs Ø Centralization and delegation of authority Ø Departmentalization Ø Span of control • Models of organization design Ø Mechanistic model Ø Organic model Copyright © 2005 South-Western. All rights reserved. 21

Organizational Design (cont’d) • Mechanistic model Ø Mechanistic organization: a rigid organization that attempts to achieve production and efficiency through rules, specialized jobs, and centralized authority. Ø Max Weber’s bureaucracy: an organization based on a formal system of legitimate authority. Copyright © 2005 South-Western. All rights reserved. 22

Organizational Design (cont’d) • Characteristics of a bureaucracy Ø Tasks are divided into highly specialized jobs. Ø Each task is performed according to a standardized set of rules that ensures uniformity. Ø Each member of the organization is accountable to a single manager. Ø Business is conducted impersonally, and managers maintain a social distance from workers. Ø Employment and advancement are based on merit and technical qualifications, and workers are protected from arbitrary dismissal. Copyright © 2005 South-Western. All rights reserved. 23

Organizational Design (cont’d) • Organic model Ø Organic organization: an organization that is decentralized with communication flows throughout the organization rather than through the chain of command. v Seeks to maximize flexibility and adaptability. v Encourages greater utilization of human potential. v Deemphasizes specialization of jobs, status, and rank to encourage horizontal and lateral relationships. v Provides individuals with a supportive work environment and builds a sense of personal worth and importance. Copyright © 2005 South-Western. All rights reserved. 24

Organizational Design (cont’d) • Contingency approach Ø Designing an organization to effectively function in the face of the unique contingencies or circumstances of its competitive environment. Ø Contingencies that influence this decision include: v Technology used to produce good or service v Environmental stability or instability v Strategy chosen Copyright © 2005 South-Western. All rights reserved. 25

Organizational Design (cont’d) • Contingencies affecting design Ø Technology v Routine technologies = mechanistic organization v Nonroutine technologies = organic organization Ø Environment v Stable environment = mechanistic organization v Unstable environment = organic organization Ø Strategy v Structure follows strategy v Single product/market = organic structure v Diversification = mechanistic structure Copyright © 2005 South-Western. All rights reserved. 26

Other Forms of Organizational Design • Multidivisional organization Ø A high-performance organization whose operating units or divisions are partially interdependent. Ø Each division is different, but all divisions share common technology, skill, and information. • Network organization Ø A flexible, temporary relationship between manufacturers, buyers, suppliers, and customers. Ø The design is dynamic in that the major components can be assembled or reassembled to meet changing competitive conditions. Copyright © 2005 South-Western. All rights reserved. 27

Other Forms of Design (cont’d) • Network organization (cont’d) Ø Virtual corporation v. A temporary series of partnerships of organizations, linked by information technology, that come together quickly to exploit fast-changing opportunities and terminate once an opportunity is met. Ø Modular corporation v. A hub surrounded by a network of the best suppliers in the world. v The hub is the center of activities, such as research and development; the network is made up of outside specialists. Copyright © 2005 South-Western. All rights reserved. 28