Chapter 7 Designing Organizational Structure Mc GrawHillIrwin Copyright

Chapter 7 Designing Organizational Structure Mc. Graw-Hill/Irwin Copyright © 2009 by The Mc. Graw-Hill Companies, Inc. All rights reserved.

Learning Objectives • • Identify the factors that influence managers’ choice of an organizational structure Explain how managers group tasks into jobs that are motivating and satisfying for employees Describe the types of organizational structures managers can design, and explain why they choose one structure over another Explain why managers must coordinate and integrate between jobs, functions, and divisions as an organization grows 7 -2

Question? What is the process managers use to establish the structure of working relationships among employees to achieve goals? A. Leading B. Organizing C. Controlling D. Planning 7 -3

Designing Organizational Structure • Organizing – The process by which managers establish the structure of working relationships among employees to achieve goals 7 -4

Designing Organizational Structure • Organizational Structure – Formal system of task and reporting relationships that coordinates and motivates organizational members so that they work together to achieve organizational goals 7 -5

Designing Organizational Structure • Organizational design – The process by which managers make specific choices that result in a particular kind of organizational structure. 7 -6

Factors Affecting Organizational Structure Figure 7. 1 7 -7

The Organizational Environment • The quicker the environment changes, the more problems face managers. • Structure must be more flexible (i. e. , decentralized authority) when environmental change is rapid. 7 -8

The Organizational Environment Strategy • Different strategies require the use of different structures – A differentiation strategy needs a flexible structure, low cost may need a more formal structure – Increased vertical integration or diversification also requires a more flexible structure 7 -9

The Organizational Environment Technology • The combination of skills, knowledge, tools, equipment, computers and machines used in the organization • More complex technology makes it harder for managers to regulate the organization 7 -10

The Organizational Environment Human Resources • Managers must take into account all four factors (environment, strategy, technology and human resources) when designing the structure of the organization 7 -11

Question? What is increasing the degree of responsibility a worker has over a job? A. Job Design B. Job Simplification C. Job Enlargement D. Job Enrichment 7 -12

Job Design • Job Design – The process by which managers decide how to divide tasks into specific jobs • Job Simplification – The process of reducing the number of tasks that each worker performs 7 -13

Job Design • Job Enlargement – Increasing the number of different tasks in a given job by changing the division of labor • Job Enrichment – Increasing the degree of responsibility a worker has over a job 7 -14

The Job Characteristics Model Figure 7. 2 7 -15

Job Characteristics Model 7 -16

Grouping Jobs into Functions • Functional Structure – An organizational structure composed of all the departments that an organization requires to produce its goods or services 7 -17

Grouping Jobs into Functions • Advantages – Encourages learning from others doing similar jobs – Easy for managers to monitor and evaluate workers • Disadvantages – Difficult for departments to communicate with others – Preoccupation with own department and losing sight of organizational goals 7 -18

The Functional Structure of Pier 1 Imports Figure 7. 3 7 -19

Divisional Structures • Divisional Structure – An organizational structure composed of separate business units within which are the functions that work together to produce a specific product for a specific customer 7 -20

Types of Divisional Structures • Product Structure – Each product line or business is handled by a self-contained division 7 -21

Product Structure Advantages • Allows functional managers to specialize in one product area • Division managers become experts in their area • Removes need for direct supervision of division by corporate managers • Divisional management improves the use of resources 7 -22

Product, Market, and Geographic Structures Figure 7. 4 7 -23

Types of Divisional Structures • Geographic Structure – Each region of a country or area of the world is served by a self-contained division 7 -24

Types of Divisional Structures • Global geographic structure – Managers locate different divisions in each of the world regions where the organization operates – Generally, occurs when managers are pursuing a multi-domestic strategy 7 -25

Types of Divisional Structures • Global Product Structure – Each product division, not the country or regional managers, takes responsibility for deciding where to manufacture its products and how to market them in foreign countries 7 -26

Global Geographic and Global Product Structures Figure 7. 5 7 -27

Types of Divisional Structures • Market Structure – Each kind of customer is served by a selfcontained division – Also called customer structure 7 -28

Matrix Design Structure • Matrix Structure – An organizational structure that simultaneously groups people and resources by function and product 7 -29

Matrix Design Structure • The matrix structure is very flexible and can respond rapidly to the need for change • Each employee has two bosses (functional manager and product manager) and possibly cannot satisfy both 7 -30

Matrix Structure Figure 7. 6 7 -31

Product Team Design Structure • Product Team Structure – Members are permanently assigned to a cross -functional team and report only to the product team manager or to one of his subordinates – Cross-functional team – group of managers brought together from different departments to perform organizational tasks 7 -32

Product Team Structure Figure 7. 6 7 -33

Hybrid Structures • Hybrid Structure – The structure of a large organization that has many divisions an simultaneously uses many different organizational structures 7 -34

Federated’s Hybrid Structure Figure 7. 7 7 -35

Coordinating Functions and Divisions • Authority – The power to hold people accountable for their actions and to make decisions concerning the use of organizational resources • Hierarchy of Authority – An organization’s chain of command, specifying the relative authority of each manager 7 -36

Allocating Authority • Span of Control – The number of subordinates that report directly to a manager • Line Manager – Managers in the direct chain of command who have formal authority over people and resources lower down • Staff Manager – Managers who manage a specialist function 7 -37

The Hierarchy of Authority and Span of Control at Mc. Donald’s Corporation Figure 7. 8 7 -38

Tall and Flat Organizations • Tall structures have many levels of authority and narrow spans of control • Flat structures have fewer levels and wide spans of control 7 -39

Flat Organizations Figure 7. 9 7 -40

Tall Organizations Figure 7. 9 7 -41

Centralization and Decentralization of Authority • Centralization is the degree to which decision-making is concentrated in top management's hands. • Decentralization is the extent to which decision-making authority is pushed down the organization structure and shared with many lower-level employees. 7 -42