Chapter 15 Organizational Structure and Design

John M. Ivancevich Michael T. Matteson

Slides Prepared by Bruce R. Barringer University of Central Florida

McGraw-Hill Companies, Inc., 1999

Learning Objectives
Slide 1 of 3

Identify the choices which must be made in designing an organization structure. Define what is meant by the term division of labor. Discuss the role of delegation of authority in design decisions. Describe several forms of departmentalization.
McGraw-Hill Companies, Inc., 1999

Learning Objectives
Slide 2 of 3

Explain the importance of span of control. Define three important dimensions of structure. Compare mechanistic and organic organizational design. Identify the major advantages of matrix organizational design.
McGraw-Hill Companies, Inc., 1999

Learning Objectives
Slide 3 of 3

Discuss multinational organizational structure and design issues. Explain the meaning of the term virtual organization.

McGraw-Hill Companies, Inc., 1999

Organizational Structure and Design

Organizational Structure
The formal pattern of how people and jobs are grouped in an organization.

Organizational Design
The decisions and actions that result in organizational structure.

McGraw-Hill Companies, Inc., 1999

Designing an Organization Structure

Slide 1 of 2
Basic Steps 1. Managers must decide how to divide the overall tasks of the organization into successively smaller jobs. 2. Managers must decide the basis by which to group the individual jobs. 3. Managers must decide the appropriate size of the group reporting to each supervisor 4. Managers must distribute authority among the jobs.

McGraw-Hill Companies, Inc., 1999

Designing an Organization Structure

Slide 2 of 2
Components of the Four Design Decisions
Division of Labor High Specialization Low

Delegation
Authority High Basis Departmentalization Low

Homogenous
Number

Heterogeneous

Span of Control

Few
McGraw-Hill Companies, Inc., 1999

Many
7

Division of Labor
Slide 1 of 2

Division of Labor Defined

Refers to the extent to which jobs are specialized in an organization.

Ways that Division of Labor can Occur

Work can be divided into different personal specialties. Work can be divided into different activities necessitated by the natural sequence of the work the organization does.
McGraw-Hill Companies, Inc., 1999

Division of Labor
Slide 2 of 2

Ways that Division of Labor can Occur (continued)

Finally, work can be divided along the vertical plane of an organization.

McGraw-Hill Companies, Inc., 1999

Delegation of Authority
The process by which authority is distributed downward in an organization.

McGraw-Hill Companies, Inc., 1999

10

Exhibit 15.1: Functional Departmentalization Structure

OMB Company

Engineering

Manufacturing

Marketing

Finance

Personnel

McGraw-Hill Companies, Inc., 1999

11

Exhibit 15.2: Territorial Departmentalization Structure

OMB Company

Eastern

Midwestern

Southern

Rocky Mountain

Pacific

McGraw-Hill Companies, Inc., 1999

12

Exhibit 15.3: Product Departmentalization Structure

OMB Company

Small Household Appliances

Large Household Appliances

Commercial Appliances

McGraw-Hill Companies, Inc., 1999

13

Exhibit 15.4: Customer Departmentalization Structure

OMB Company

Retail Stores

Mail Order

Institutional Sales

Government Contracts

McGraw-Hill Companies, Inc., 1999

14

Span of Control
Span of Control Defined
The number of subordinates reporting to a superior. The span is a factor that affects the shape and height of an organizational structure.

Critical Considerations in Determining a Managers Span of Control

Required contact Degree of specialization Ability to communicate
McGraw-Hill Companies, Inc., 1999

15

Dimensions of Structure
Slide 1 of 2

Formalization

Centralization

Refers to the extent to which expectations regarding the means and ends of work are specified, written, and enforced.

Refers to the location of decision-making authority in the hierarchy of the organization.,

McGraw-Hill Companies, Inc., 1999

16

Dimensions of Structure
Slide 2 of 2

Complexity
Refers to the number of distinctly different job titles, or occupational groupings, and the number of distinctly different units, or departments.

McGraw-Hill Companies, Inc., 1999

17

Exhibit 15.5: Organization Dimensions and Organizational Decisions

Slide 1 of 2
Dimensions
High formalization

Decisions
1. High specialization 2. Delegated authority

3. Functional departments
4. Wide spans of control High Centralization 1. High specialization 2. Centralized authority 3. Functional departments 4. Wide spans of control
McGraw-Hill Companies, Inc., 1999

18

Exhibit 15.5: Organization Dimensions and Organizational Decisions

Slide 2 of 2
Dimensions
High complexity

Decisions
1. High specialization 2. Delegated authority 3. Territorial, customer, and product departments 4. Narrow spans of control

McGraw-Hill Companies, Inc., 1999

19

Organizational Design Models

The Mechanistic Model

The Organic Model

The Matrix Model

McGraw-Hill Companies, Inc., 1999

20

The Mechanistic Model

The type of organizational design that emphasizes the importance of production and efficiency. It is highly formalized, centralized, and complex.

McGraw-Hill Companies, Inc., 1999

21

The Organic Model

The organizational design that emphasizes the importance of adaptability and development. It is relatively informed, decentralized, and simple.

McGraw-Hill Companies, Inc., 1999

22

The Matrix Model

An organizational design that superimposes a product- or project-based design on an existing function-based design.

McGraw-Hill Companies, Inc., 1999

23

Exhibit 15.6: Matrix Organization

Functions Project, Products Project or product A Manufacturing Marketing Engineering Finance

Project or product B
Project or product C

Project or product D
Project or product E
McGraw-Hill Companies, Inc., 1999

24

A Look to the Future: Virtual Organizations

One of the fastest developing practices in business throughout the world involves firms in cooperative relationships with their suppliers, distributors, and even competitors.

McGraw-Hill Companies, Inc., 1999

25