Part 3: Organizing

Basic
Organization
Designs
52
L E A R N I N G O U T C O M E S
After reading this chapter, I will be able to:
1. Identify and define the six elements of
organization structure.
2. Describe the advantages and disadvantages of
work specialization.
3. Contrast authority and power.
4. Identify the five different ways by which
management can departmentalize.
5. Contrast mechanistic and organic organizations.
6. Summarize the effect of strategy, size,
technology, and environment on organization
structures.
53
L E A R N I N G O U T C O M E S (contd)
After reading this chapter, I will be able to:
7. Contrast the divisional and functional
structures.
8. Explain the strengths of the matrix structure.
9. Describe the boundaryless organization and
what elements have contributed to its
development.
10. Explain what is meant by the term learning
organization.
11. Describe what is meant by the term
organization culture.
54
Organization Design and Structure
Organization design
A process in which managers develop or change their
organizations structure
Work specialization
A component of organization structure that involves
having each discrete step of a job done by a different
individual rather than having one individual do the
whole job
55
Economies and Diseconomies of Work
Specialization
EXHIBIT 5.1
56
Organizational Structure: Control
Chain of command
The management principle that no person should
report to more than one boss
Span of control
The number of subordinates a manager can direct
efficiently and effectively
57
Organizational Structure: Control
(contd)
Authority
The rights inherent in a managerial position to give
orders and expect them to be obeyed
Power
An individuals capacity to influence decisions
Responsibility
An obligation to perform assigned activities
58
Types of Organizational Authority
Line authority
The position authority (given and defined by the
organization) that entitles a manager to direct the
work of operative employees
Staff authority
Positions that have some authority (e.g., organization
policy enforcement) but that are created to support,
assist, and advise the holders of line authority
59
Chain of Command
EXHIBIT 5.2
510
Line Versus Staff Authority
EXHIBIT 5.3
511
Authority Versus Power
EXHIBIT 5.4a
512
Authority Versus Power (contd)
EXHIBIT 5.4b
513
Centralization And Decentralization
Centralization
A function of how much decision-making authority is
pushed down to lower levels in an organization; the
more centralized an organization, the higher the level
at which decisions are made
Decentralization
The pushing down of decision-making authority to the
lowest levels of an organization


514
Types of Power
EXHIBIT 5.5
Coercive power Power based on fear.
Reward power Power based on the ability to distribute
something that others value.
Legitimate power Power based on ones position in the
formal hierarchy.
Expert power Power based on ones expertise,
special skill, or knowledge.
Referent power Power based on identification with a
person who has desirable resources or
personal traits.
515
Types of Departmentalization
EXHIBIT 5 .6
Functional
Product
Customer
Geographic
Process
516
Departmentalization
Functional departmentalization
The grouping of activities by functions performed
Product departmentalization
The grouping of activities by product produced
Customer departmentalization
The grouping of activities by common customers
Geographic departmentalization
The grouping of activities by territory
Process departmentalization
The grouping of activities by work or customer flow
517
Mechanistic and Organic Organizations
Mechanistic organization
The bureaucracy; a structure that is high in
specialization, formalization, and centralization
Organic organization
An adhocracy; a structure that is low in specialization,
formalization, and centralization

Structure follows strategy
518
Mechanistic versus Organic Organizations
Rigid hierarchical relationships
Fixed duties
Many rules
Formalized communication
channels
Centralized decision authority
Taller structures
Collaboration (both vertical and
horizontal)
Adaptable duties
Few rules
Informal communication
Decentralized decision authority
Flatter structures


EXHIBIT 5.7
519
Technology and Structure
Unit production
Production in terms of units or small batches
Mass production
Production in terms of large batch manufacturing
Process production
Production in terms of continuous processing
520
Organization Design Applications
Simple structure
An organization that is low in specialization and
formalization but high in centralization
Functional structure
An organization in which similar and related
occupational specialties are grouped together
Divisional structure
An organization made up of self-contained units
521
Functional Structure
EXHIBIT 5.8
522
Divisional Structure
EXHIBIT 5.9
523
Other Organizational Structures
Matrix structure
An organization in which specialists from functional
departments are assigned to work on one or more
projects led by a project manager
Team-based structure
An organization that consists entirely of work groups
or teams
Boundaryless organization
An organization that is not defined or limited by
boundaries or categories imposed by traditional
structures
524
Sample Matrix Structure
EXHIBIT 5.10
525
Learning Organization
An organization that has developed the capacity
to continuously adapt and change because all
members take an active role in identifying and
resolving work-related issues.
Organization design
Information sharing
Leadership
Organizational culture


526
Characteristics of a Learning Organization
EXHIBIT 5.11
Source: Based on P.M. Senge. The Fifth Discipline: The Art and Practice of Learning Organizations (New
York: Doubleday, 1990); and R. M. Hodgetts, F. Luthans and S. M. Lee. New Paradigm Organizations:
From Total Quality to Learning to World Class, Organizational Dynamics (Winter 1994) pp. 419
527
Organization Culture
Organization culture
A system of shared meaning within an organization
that determines, to a large degree, how employees
act
Shared values are shown in cultural elements:
Stories, rituals, material symbols, and language unique
to the organization
Results from the interaction between:
The founders biases and assumptions
What the first employees learn subsequently from their
own experiences.
528
Ten Characteristics of Organization Culture
Member identity
Group emphasis
People focus
Unit integration
Control
Risk tolerance
Reward criteria
Conflict tolerance
Means-end orientation
Open-systems focus

EXHIBIT 5.12