commerce 2ba3 organizational structure week 12 dr. t. mcateer degroote school of business mcmaster...
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Commerce 2BA3Organizational Structure
Week 12
Dr. T. McAteer
DeGroote School of BusinessMcMaster University
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What is Org Structure?
• The manner in which an organization divides its labour into specific tasks and achieves coordination among these tasks
• To achieve its goals, an organization has to:– Divide labour among its members– Coordinate what has been divided
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Division of Labour
• Labour must be divided because everyone cannot do everything
• Two dimensions: Horizontal and Vertical
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Vertical Division of Labour
• Assigning authority for planning and decision making
• “Who gets to tell whom what to do?”
• Autonomy– Domain of authority is decreased as the number of
levels in the hierarchy increases
• Communication– With more levels, communication and coordination
are harder to achieve
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Horizontal Division of Labour
• Groups the basic tasks that must be performed into jobs and then into departments so that the organization can achieve its goals
• Implications for job design and degree of coordination
• Differentiation– As horizontal division increases, so does differentiation– Tendency for managers in separate functions or
departments to differ in terms of goals, styles, time etc.
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Departmentation
Functional departmentation– Ees with closely related skills and responsibilities are
assigned to the same department (e.g. Marketing, Finance)
– Works best in medium-sized firms with few product lines
– Advantages?• Efficiency• Resources can be allocated more efficiently• Enhanced communication• Easier to measure and evaluate performance
– Disadvantages?• High degree of differentiation between departments• Leads to poor coordination, conflict
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Departmentation
Product departmentation– Departments are formed on the basis of a particular
product, product line or service (e.g. shampoo division)
– Advantages?• Better coordination• Fewer barriers to communication• Can be evaluated as profit centres• Can serve the customer better
– Disadvantages?• Economies of scale are threatened
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Departmentation
Matrix Departmentation– Ees remain members of a functional department while
also reporting to a product or project manager– Attempt to capitalize on strengths of other forms
– Advantages?• Provides a degree of balance• Flexible• Better communication
– Disadvantages?• Managers may not see eye to eye• Can create conflict
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Departmentation
Other forms– Geographic Departmentation– Customer Departmentation– Hybrid Departmentation
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Coordinating Divided Labour
• Direct supervision– Chain of command
• Standardization of work processes– Routinization of tasks– Rules and regulations
• Standardization of outputs– Physical or economic standards– Budgets
• Standardization of Skills– Technicians and professionals
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Other forms of coordination
• Liaison Roles– A person in one department is assigned to achieve
coordination with another department
• Task Forces– Temporary groups set up to solve coordination
problems across several departments
• Integrators– Org members permanently assigned to facilitate
coordination between departments
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Traditional Structural Characteristics
• Span of control– # of subordinates supervised by a manager
• Flat vs. Tall– Flat (few levels)– Tall (many levels in hierarchy)
• Formalization– Extent to which work roles are highly defined by
an organization
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Traditional Structural Characteristics
• Centralization– Extent to which decision making power is
localized in a particular part of an organization– Decentralized – decision making power is
dispersed down the hierarchy and across departments
• Complexity– Extent to which an organization divides labour
vertically, horizontally and geographically
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Organic vs Mechanistic Structure
• Mechanistic– Org structures characterized by tallness,
specialization, centralization and formalization
• Organic– Org structures characterized by flatness, low
specialization, low formalization and decentralization
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Organic vs Mechanistic Structure
ORGANIC MECHANISTIC
Span of control
# of levels
Centralization
Formalization
Range of compensation
Wide Narrow
Few Many
Wide
High
Narrow
Low
Low High
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Contemporary Structures
• Virtual organization– A network of continually evolving independent
organizations that share skills, costs, and access to one another’s markets (e.g. broker)
• Modular organization– An organization that performs a few core
functions and outsources non-core functions to specialists
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Case
• How do McDonald’s and the Ritz Carlton differ in their structural characteristics?
• Would each organization be organic or mechanistic and why?
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Exercise: Organizational Structure Preference Scale