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Organizational Structure And Design
Organization structurethe pattern ofjobs and groups of jobs in an
organization.
It is an important cause of individual andgroup behavior.
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The Concept of Organization Structure
Structure as an
influence on
behavior
Structure as
recurring activities
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Organization designmanagement
decisions and actions that result in a
specific organization structure.
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Division of Labor:
Departmentalization:
Span of Control:
High Low
Homogeneous Heterogeneous
ManyFew
Authority:LowHigh
Specialization
Basis
Number
Delegation
The Four Key Design Decisions
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Division of Labor
Div is ion of labo r concerns the extentto which jobs are specialized
It is the process of dividing work into
relatively specialized jobs to achieve
advantages of specialization
D f L b O Th
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16-6Division of Labor Occurs in ThreeDifferent Ways:
1. Personal specialties e.g., accountants, software engineers, graphic
designers, scientists, etc.
2. Natural sequence of work e.g., dividing work in a manufacturing plant into
fabricating and assembly (horizontal specialization)
3. Vertical plane
e.g., hierarchy of authority from lowest-level manager
to highest-level manager
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Delegation of Authority
Managers decide how much authorityshould be delegated to each job and to
each jobholder
Delegat ion o f au thor i ty process of
distributing authority downward in an
organization
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Reasons to Decentralize Authority
1. Relatively high delegation of authorityencourages the development of professional
managers
2. High delegation of authority can lead to acompetitive climate within the organization
3. Managers who have relatively high authority
can exercise more autonomy, and thus satisfy
their desires to participate in problem solving
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Reasons to Centralize Authority (1 of 2)
1. Managers must be trained to make thedecisions that go with delegated authority
2. Many managers are accustomed to makingdecisions and resist delegating authority totheir subordinates
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Reasons to Centralize Authority (2 of 2)
3. Administrative costs are incurred because newcontrol systems must be developed to providetop management with information about the
effects of subordinates decisions
4. Decentralization means duplication of
functions
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Delegation Decision Guidelines(1 of 2)
How routine and straightforward are the jobs orunits required decisions?
The authority for routine decisions can becentralized
Are individuals competent to make the decision?
Even if the decision is non-routine, if the localmanager is not capable, then the decision should be
centralized
Delegation of authority can differ among individualsdepending upon each ones ability to make the
decision
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Departmentalizationprocess in
which an organization is
structurally divided by combiningjobs in departments according to
some shared characteristic or
basis.
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Functional Geographic
Product Customer
Departmentalization Bases
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Departmental Bases:
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16 15Departmental Bases:
Functional Departmentalization
Jobs are combined according to the functionsof the organization
The principal advantage is efficiency
By having departments of specialists,management creates efficient units
A major disadvantage is that organizational
goals may be sacrificed in favor of
departmental goals
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Departmental Bases:
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16 16Departmental Bases:
Geographic Departmentalization
Establish groups according to geographicarea
The logic is that all activities in a given
region should be assigned to a manager Advantageous in large organizations
because physical separation of activities
makes centralized coordination difficult Provides a training ground for managerial
personnel
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Northeast Midwest Southeast Pacific
OBMCompany
Southwest
Geographic Departmentalization Structure
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Departmental Bases:
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Departmental Bases:
Product Departmentalization
All jobs associated with producing and selling aproduct or product line will be placed under thedirection of one manager
Product becomes the preferred basis as a firmgrows by increasing the number of products itmarkets
Concentrating authority, responsibility, andaccountability in a specific product departmentallows top management to coordinate actions
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OBM Company
Small
HouseholdAppliances
Large
HouseholdAppliances
CommercialAppliances
Building
Materials andProducts
Lawn and
GardenProducts
AutomotiveProducts
Product Departmentalization Structure
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Departmental Bases:
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Departmental Bases:
Customer Departmentalization
The importance of customer satisfaction hasstimulated firms to search for creative ways to
serve people better
Organizations with customer-based departments
are better able to satisfy customer-identified
needs than organizations that base departments
on non-customer factors
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RetailStores
Mail Order On-LineSales
GovernmentContracts
OBMCompany
InstitutionalSales
Customer Departmentalization Structure
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S f C l
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Span of Control (1 of 2)
Number of individuals who report to aspecific manager
Narrow span
Wide span
The frequency and intensity of actual
relationships is the critical considerationin determining the managers span ofcontrol
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Di i f S
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Dimensions of Structure
Formalization the extent to which expectationsregarding the means and ends of work are
specified, written, and enforced
Centralization the location of decision-makingauthority in the hierarchy
Complexity the direct outgrowth of dividing
work and creating departments
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Comparison of Mechanistic and Organic
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Comparison of Mechanistic and OrganicStructures (1 of 3)
Process Mechanistic Structure Organic Structure
1. Leadership Includes no perceived
confidence and trust between
superiors and subordinates.
Includes perceived confidence
and trust between superiors
and subordinates.
2. Motivation Taps only physical, security,
and economic motives,
through use of fear and
sanctions.
Taps a full range of motives
through participatory methods.
3. Communication Information flows downwardand tends to be distorted,
inaccurate, and viewed with
suspicion by subordinates.
Information flows freely:upward, downward, and
laterally. The information is
accurate and undistorted.
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Comparison of Mechanistic and Organic
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Comparison of Mechanistic and OrganicStructures (2 of 3)
Process Mechanistic Structure Organic Structure
4. Interaction Closed and restricted.
Subordinates have little effect
on departmental goals,
methods, and activities.
Open and extensive. Both
superiors and subordinates are
able to affect departmental
goals, methods, and activities.
5. Decision Relatively centralized.
Occurs only at the top of the
organization.
Relatively decentralized.
Occurs at all levels through
group processes.
6. Goal setting Located at the top of the
organization, discouraging
group participation.
Encourages group
participation in setting high,
realistic objectives.
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Comparison of Mechanistic and Organic
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Comparison of Mechanistic and OrganicStructures (3 of 3)
Process Mechanistic Structure Organic Structure
7. Control Centralized. Emphasizes
fixing blame for mistakes.
Dispersed throughout the
organization. Emphasizes
self-control and problem
solving.
8. Performance
goals
Low and passively sought
by managers, who make no
commitment to developing
the organizations humanresources.
High and actively sought by
superiors, who recognize the
need for full commitment to
developing, through training,the organizations human
resources.
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Organization Design Models:
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g g
The Matrix Model
Matr ix organizat ion
attempts to maximizethe strengths and minimize the weaknesses
of both the functional and product bases
Superimpose a horizontal structure of
authority, influence, and communication on
the vertical structure
Facilitates the utilization of highly specialized
staff and equipment
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E l f th M t i O i ti M d l
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Project or product A
Project or product B
Project or product C
Project or product D
Project or product E
Manufacturing Marketing Engineering FinanceFunctions
Projects, products
Example of the Matrix Organization Model
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Advantages of Matrix Organization
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Advantages of Matrix Organization
Efficient use of resources Flexibility in conditions of change and uncertainty
Technical excellence
Freeing top management for long-range planning
Improving motivation and commitment
Providing opportunities for personaldevelopment
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Evolutionary Steps to the Matrix Model
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Task Force
Teams
Product
Managers
Product
Management Depts.
(1)
(2)
(3)
(4)
Evolutionary Steps to the Matrix Model
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Virtual Organizations
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Virtual Organizations
Virtual o rgan izat ion a collection ofgeographically distributed, functionally
and/or culturally diverse aggregations of
individuals that is linked by electronicforms of communication
Assembled and disassembled accordingto needs
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Virtual Organizations:C
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gConsequences
Increase in overall communication and messages Relationships are tenuous
Continual surety of roles, tasks, and assignments
Caution needed in managing feedback,discussion, performance review, and reward
systems
Greater equity of participation
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Boundaryless Organizations
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M G Hill/I i 2005 Th M G Hill C i I All i ht d
Boundaryless Organizations
Organizations in which: the hierarchy and chain of command are
minimized
rigidly structured departments areeliminated
Implemented to reduce barriers betweenpeople and constituencies