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Copyright 2013 Pearson Education, Inc. Publishing as Prentice Hall 5-1

DesigningOrganizational

Structure: Authorityand Control


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Explain why a hierarchy of authorityemerges in an organization and theprocess of vertical dierentiation

Discuss the issues involved in designing ahierarchy to coordinate and motivateorganizational behavior most eectively

Copyright !"1# $earson Education% &nc' $ublishing as $rentice (all

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,ppreciate the principles of bureaucraticstructure and explain their implications forthe design of eective organizational

hierarchies Explain why organizations are attening

their hierarchies and ma.ing more use ofempowered teams of employees% both

inside and across dierent functions


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/he hierarchy begins to emerge when theorganization experiences problems incoordinating and motivating employees

eectively Division of labor and specialization ma.e it

hard to determine how well an individualperforms

&mpossible to assess individualcontributions to performance whenemployees cooperate


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/o deal with coordination and motivationproblems% the organization can0 &ncrease the number of managers it uses to

monitor% evaluate% and reward employees

&ncrease the number of levels in its managerialhierarchy


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2ize and height limitations/all organization0 /he hierarchy has many levels

relative to the size of the organization

3lat organization0 (as few levels in its hierarchyrelative to its size


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6y the time an organization has 1%"""members% it has * levels in its hierarchy

,t #%""" members% it li.ely has 4 levels

6etween 1"%""" to 1""%"""% organizationshave 7 or 1" levels

&ncrease in size of the managerialcomponent is less than proportional to the

increase in size of the organization as itgrows


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$roblems with tall hierarchies0 Communication problems

8otivation problems

6ureaucratic costs


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$ar.inson9s :aw $roblem ,rgues that the number of managers and

hierarchies are based on two principles , manager wants to multiply subordinates% not

rivals 8anagers ma.e wor. for one another


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&deal number of hierarchical levelsdetermined by0 $rinciple of minimum chain of command0 ,n

organization should choose the minimumnumber of hierarchical levels consistent with itsgoals and the environment in which it operates

2pan of control0 /he number of subordinates amanager directly manages


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/here is a limit to how wide a manager9sspan of control should be &f the span is too wide% the manager loses

control over subordinates and cannot hold them

accountable for their actions Dependent on the complexity and

interrelatedness of the subordinates9 tas.s Complex and dissimilar tas.s ; small span of control

; largespan of control


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(orizontal dierentiation0 ,n organizationthat is divided into subunits has manydierent hierarchies% not ?ust one Each function or division has its own hierarchy

(orizontal dierentiation is the principalway an organization retains control overemployees without increasing the number

of hierarchical levels


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Centralization ,s the hierarchy becomes taller and the number

of managers increases% communication andcoordination problems grow

2olution to this is decentralization /he authority to ma.e signi@cant decisions is

delegated to people throughout the hierarchy% notconcentrated at the top


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2tandardization 8anagers can gain control over employees by

standardizing their behavior to ma.e theiractions predictable

/he use of standardization reduces the need0 3or personal control by managers /o add levels in the hierarchy


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6ureaucracy0 , form of organizationalstructure in which people can be heldaccountable for their actions because theyare reAuired to act in accordance withrules and standard operating procedures


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&t lays out the ground rules for designingan organizational hierarchy that eBcientlycontrols interactions betweenorganizational members

Each person9s role in the organization isclearly spelled out and they can be heldaccountable


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ritten rules regarding the reward andpunishment of employees reduce the costsof enforcement and evaluating employeeperformance


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8anagement by ob?ectives =86>0 , systemof evaluating subordinates on their ability toachieve speci@c organizational goals or

performance standards and to meet

operating budgets


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2tep 1 - 2peci@c goals and ob?ectives areestablished at each level of theorganization

2tep ! - 8anagers and their subordinatestogether determine the subordinates9goals

2tep # - 8anagers and their subordinates

periodically review the subordinates9progress toward meeting goals


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Decision ma.ing and coordinationfreAuently ta.e place outside the formallydesigned channels as people interact


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8anagers need to consider the informalstructure when they ma.e changes as itmay disrupt informal norms that wor.

&nformal organization can actuallyenhance organizational performance


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/he use of information technology =&/> isma.ing it easier to cost eectively designstructures to control subordinates

&/ provides people with the informationthey need at all levels

&/ is encouraging decentralization and useof teams


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Cross-functional teams0 roups ofemployees from across an organization9sdierent functions who are empowered todirect and coordinate the value-creationactivities

Contingent wor.ers0 or.ers who areemployed temporarily by an organization

and who receive no indirect bene@ts suchas health insurance or pensions


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Copyright !"1# $earson Education% &nc'$ublishing as $rentice (all

613 chapter 5 slides

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