Chapter 8 Designing Organizational Structures Prepared by Norm

Learning Outcomes 1 Identify the five structural building blocks that managers use to design organizations. 2 Examine the tools companies use to establish relationships within their organizations. 3 Show the degree of centralization/decentralization can be altered to make an organization more successful. 4 Describe the differences between a mechanistic and organic organization. 5 Discuss the contemporary organizational structures companies are using. 6 Summarize why companies are using team-based organizational structures. Chapter 8 7 Explain how the informal organization affects the performance of the company. 8 List some of the trends that are influencing the way businesses organize. Copyright © 2011 by Nelson Education Ltd. 2

Chapter 8 Organizational Structures Copyright © 2011 by Nelson Education Ltd. 3

Building Organizational Structures Span of Control Chapter 8 Division of Labour Copyright © 2011

Structural Building Blocks 1. 2. 3. 4. Chapter 8 5. Division of Labour – specialization of tasks Departmentalization – creating an organization chart Delegation (formerly: Managerial Hierarchy) – chain of command – delegation of authority Span of Control – narrow span – wide span Centralization of Decision Making – degree of centralization vs. decentralization Copyright © 2008 by Nelson, a division of Thomson Canada Limited 5

Chapter 8 Five Types of Departmentalization Functional Based on the primary functions performed Product Based on the goods/services produced or sold Process Based on the production process used Customer Based on the primary type of customer served Geographic Based on the geographic segmentation of organizational units Copyright © 2011 by Nelson Education Ltd. 6

Chapter 8 Functional Organization Copyright © 2008 by Nelson, a division of Thomson Canada

Chapter 8 Product (or Service) Organization Copyright © 2008 by Nelson, a division of

Chapter 8 Organization by Process Copyright © 2008 by Nelson, a division of Thomson

Chapter 8 Organization by Customer Copyright © 2008 by Nelson, a division of Thomson

Chapter 8 Geographic Organization Copyright © 2008 by Nelson, a division of Thomson Canada

Chapter 8 Organizational Chart Example Copyright © 2011 by Nelson Education Ltd. 12

Managerial Hierarchy Top Management Power Middle Management Chapter 8 Supervisory Management Copyright © 2011

Chain of Command Chapter 8 Chain of Command Copyright © 2011 by Nelson Education Ltd. The line of authority that extends from one level of an organization’s hierarchy to the next, from top to bottom, and makes clear who reports to whom. 14

Span of Control Chapter 8 Span of Control (span of management) Narrow Span: few subordinates Copyright © 2011 by Nelson Education Ltd. The number of employees a manager directly supervises; also called span of management. Wide Span: many subordinates 15

Optimal Span of Control Factors Determining Optimal Span of Control Nature of the task Location of the workers Ability of the manager to delegate responsibility Chapter 8 Amount of interaction and feedback between workers and manager Level of skill and motivation of the workers Copyright © 2008 by Nelson, a division of Thomson Canada Limited 16

Chapter 8 Degree of Centralization The degree to which formal authority is concentrated in one area or level of an organization. Decentralization The process of pushing decision-making authority down the organizational hierarchy. Copyright © 2011 by Nelson Education Ltd. 17

Chapter 8 Mechanistic Versus Organic Organization Copyright © 2011 by Nelson Education Ltd. 18

Chapter 8 Flat Versus Tall Organizational Structures Copyright © 2011 by Nelson Education Ltd.

Chapter 8 Common Organizational Structures Line Organization An organizational structure with direct, clear lines of authority and communication flowing from the top managers downward. Line-and-Staff Organization An organizational structure that includes both line and staff positions. Copyright © 2011 by Nelson Education Ltd. 20

Line versus Staff Positions Line Position Chapter 8 Staff Position Copyright © 2011 by Nelson Education Ltd. All positions in the organization directly concerned with producing goods and services and that are directly connected from top to bottom Positions held by individuals who provide the administrative and support services that the line employees need to achieve the firm’s goals 21

Chapter 8 Common Organizational Structures Matrix Organization An organizational structure that combines functional and product departmentalization by bringing together people from different functional areas to work on a special project. Committee Structure An organizational structure in which authority and responsibility are held by a group rather than an individual. Copyright © 2011 by Nelson Education Ltd. 22

Chapter 8 Matrix Structure Copyright © 2008 by Nelson, a division of Thomson Canada

Teams Work Groups: Groups that share resources and coordinate efforts to help members better perform their individual jobs. Chapter 8 Work Teams: Similar to work groups, but also requires the pooling of knowledge, skills, abilities, and resources to achieve a common goal. Copyright © 2011 by Nelson Education Ltd. 24

Matrix Structure § Advantages § Disadvantages teamwork – power struggles efficient use of resources – confusion among team members flexibility – lack of cohesiveness ability to balance conflicting objectives – higher performance – opportunities for personal and professional growth Chapter 8 – – Copyright © 2008 by Nelson, a division of Thomson Canada Limited 25

Chapter 8 Group Decision Making Copyright © 2011 by Nelson Education Ltd. 26

Chapter 8 Types of Teams 27 Problem-Solving Teams Generate ideas and alternatives and may recommend a course of action Self-Managed Work Teams Manage themselves without formal supervision, take responsibility for goal setting, planning work activities Cross-Functional Teams Made up of employees from same hierarchical level, but different functional areas Copyright © 2011 by Nelson Education Ltd.

Functions of the Informal Organization Source of friendships and social contact Helps employees feel better informed and connected with what is going on Provides informal status and recognition Chapter 8 Aids the socialization of new employees Copyright © 2011 by Nelson Education Ltd. 28

Trends in Organizational Structures Re-engineering Organizational Structure Virtual Corporation Virtual Teams Chapter 8 Outsourcing Structuring for Global Mergers Copyright © 2011 by Nelson Education Ltd. 29