ORGANIZATIONAL BEHAVIOR

After studying chapter 15 and listening to class lecture,you should be able to:

1. Identify the six key elements that define an organization’s structure.

2. Explain the characteristics of a bureaucracy.

3. Describe a matrix organization.

4. Explain the characteristics of a virtual organization.

5. Summarize why managers want to create boundaryless organizations.

6. Contrast mechanistic and organic structural models.

7. List the factors that favor different organizational structures.

8. Why do structures differ?

L E

A R

N I

N G

O

B J

E C

T I

V E

S

What Is Organizational Structure?What Is Organizational Structure?

Key Elements:

• Work specialization

• Departmentalization

• Chain of command

• Span of control

• Centralization and decentralization

• Formalization

Key Elements:

• Work specialization

• Departmentalization

• Chain of command

• Span of control

• Centralization and decentralization

• Formalization

What Determines What Determines Organizational Structure?Organizational Structure?

To what degree are tasks subdivided into separate jobs?

On what basis will jobs be grouped together?

To whom do individuals and groups report?

How many individuals can a manager efficiently and effectively direct?

Where does decision-making authority lie?

To what degree will there be rules and regulations to direct employees and managers?

Key Design Questions and Answers for Designing the Proper Organization Structure

Key Design Questions and Answers for Designing the Proper Organization Structure

StrategyStrategy StrategyStrategy

Why DoWhy DoStructuresStructures

Differ?Differ?

Why DoWhy DoStructuresStructures

Differ?Differ?

OrganizationOrganizationSizeSize

OrganizationOrganizationSizeSize

TechnologyTechnology TechnologyTechnology EnvironmentEnvironment EnvironmentEnvironment

Common Organization DesignsCommon Organization Designs

A Simple Structure:Jack Gold’s Men’s Store

A Simple Structure:Jack Gold’s Men’s Store

Organizational Chart of a Manufacturing Firm

BoardmemberBoard

memberBoard

memberBoard

memberBoard

memberBoard

memberBoard

memberBoard

member

ChiefExecutive

Officer

ChiefExecutive

OfficerLegal

counselLegal

counsel

PresidentPresident

IndustrialProductsDirector-Human

Resources

IndustrialProductsDirector-Human

Resources

ConsumerProductsDirector-Human

Resources

ConsumerProductsDirector-Human

Resources

WesternRegion

IndustrialProducts

SalesManager

WesternRegion

IndustrialProducts

SalesManager

EasternRegion

IndustrialProducts

SalesManager

EasternRegion

IndustrialProducts

SalesManager

WesternRegion

ConsumerProducts

SalesManager

WesternRegion

ConsumerProducts

SalesManager

EasternRegion

ConsumerProducts

SalesManager

EasternRegion

ConsumerProducts

SalesManager

etc.etc. etc.etc. etc.etc. etc.etc. etc.etc. etc.etc. etc.etc. etc.etc. etc.etc. etc.etc.

IndustrialProductsDirector-

Production

IndustrialProductsDirector-

Production

ConsumerProductsDirector-

Production

ConsumerProductsDirector-

Production

IndustrialProductsDirector-

R&D

IndustrialProductsDirector-

R&D

ConsumerProductsDirector-

R&D

ConsumerProductsDirector-

R&D

V.P Researchand Development

V.P Researchand Development

V.P Sales/Marketing

V.P Sales/Marketing

V.P HumanResources

V.P HumanResources

V.P Production

V.P Production

IndustrialProductsDirector-

Sales

IndustrialProductsDirector-

Sales

ConsumerProductsDirector-

Sales

ConsumerProductsDirector-

Sales

Tall versus Flat OrganizationsChief

ExecutiveChief

Executive

ChiefExecutive

ChiefExecutive

Tal

l h

iera

rch

yT

all

hie

rarc

hy

Fla

t h

iera

rch

yF

lat

hie

rarc

hy

Relatively widespan of control

Relatively narrowspan of control

Tall Organization

Flat Organization

A Product Organization

Pro-duction

Pro-duction Acctg.Acctg.SalesSales R&DR&D Pro-

duction

Pro-duction Acctg.Acctg.SalesSales R&DR&DPro-

duction

Pro-duction AcctgAcctgSalesSales R&DR&D

ProductGroup 2

ProductGroup 2

ProductGroup 1

ProductGroup 1

ProductGroup 3

ProductGroup 3

PresidentPresident

ChiefExecutive

Officer

ChiefExecutive

Officer

A Horizontal Organization

Team responsible for core process(e.g., generating and fulfilling orders)

Team responsible for core process(e.g., product development)

Team responsible for core process(e.g., flow of materials)

Adviser

Adviser

Adviser

Overall Manager

Objective:Reducedcycle time

Objective:More new products

Objective:Enhancedproductquality

Common Organization Designs Common Organization Designs

The BureaucracyThe Bureaucracy

Strengths– Functional

economies of scale

– Minimum duplication of personnel and equipment

– Enhanced communication

– Centralized decision making

Weaknesses– Subunit conflicts

with organizational goals

– Obsessive concern with rules and regulations

– Lack of employee discretion to deal with problems

Decentralization: Benefits When Low and When High

Low Decentralization(High Centralization)

Eliminates the additional responsibility not desired by people performing routine jobs

Permits crucial decisions to be made by individuals who have the “big picture”

High Decentralization(Low Centralization)

Can eliminate levels of management, making a leaner organization

Promotes greater opportunities for decisions to be made be people closest to problems

Table 12-1

The Matrix StructureThe Matrix Structure

Cross-FunctionalCross-FunctionalCoordinationCoordination

ClearClearAccountabilityAccountability

Allocation Allocation of Specialistsof Specialists

Dual ChainDual Chainof Commandof Command

Matrix Structure (College of Business Administration)Matrix Structure (College of Business Administration)

(Dean)

(Director)

Employee

A Matrix Organization

ProjectGammamanager

ProjectGammamanager

Productionsupportgroup

Productionsupportgroup

Legalsupportgroup

Legalsupportgroup

Accountingsupportgroup

Accountingsupportgroup

Engineeringsupportgroup

Engineeringsupportgroup

ProjectBeta

manager

ProjectBeta

manager

Productionsupportgroup

Productionsupportgroup

Legalsupportgroup

Legalsupportgroup

Accountingsupportgroup

Accountingsupportgroup

Engineeringsupportgroup

Engineeringsupportgroup

ProjectAlpha

manager

ProjectAlpha

manager

Productionsupportgroup

Productionsupportgroup

Legalsupportgroup

Legalsupportgroup

Accountingsupportgroup

Accountingsupportgroup

Engineeringsupportgroup

Engineeringsupportgroup

Productiondepartment

Productiondepartment

Legaldepartment

Legaldepartment

Accountingdepartment

Accountingdepartment

Engineeringdepartment

Engineeringdepartment

Farm MachineryDivision

Farm MachineryDivision

PresidentPresident

Functionalauthority

Projectauthority

Mechanistic vs. Organic Designs

Dimension

Stability

Specialization

Formal rules

Authority

Mechanistic

Change unlikely

Many specialists

Rigid rules

Centralized in a few top people

Organic

Change likely

Many generalists

Considerable flexibility

Decentralized, diffused throughout the organization

Structure

Table 12-2

Mechanistic Versus Organic ModelsMechanistic Versus Organic Models

A Virtual OrganizationA Virtual Organization

Organization Structure: Its Determinants and Outcomes

Organization Structure: Its Determinants and Outcomes

New Design Options New Design Options

Concepts:

Provides maximum flexibility while concentrating on what the organization does best.

Disadvantage is reduced control over key parts of the business.

Concepts:

Provides maximum flexibility while concentrating on what the organization does best.

Disadvantage is reduced control over key parts of the business.

What Is Organizational Structure? (cont’d)What Is Organizational Structure? (cont’d)

Division of labor:

• Makes efficient use of employee skills

• Increases employee skills through repetition

• Less between-job downtime increases productivity

• Specialized training is more efficient

• Allows use of specialized equipment

Division of labor:

• Makes efficient use of employee skills

• Increases employee skills through repetition

• Less between-job downtime increases productivity

• Specialized training is more efficient

• Allows use of specialized equipment

Economies and Diseconomies of Work Specialization

Economies and Diseconomies of Work Specialization

E X H I B I T 15-2

What Is Organizational Structure? (cont’d)What Is Organizational Structure? (cont’d)

Grouping Activities By:

• Function

• Product

• Geography

• Process

• Customer

Grouping Activities By:

• Function

• Product

• Geography

• Process

• Customer

What Is Organizational Structure? (cont’d)What Is Organizational Structure? (cont’d)

Narrow Span Drawbacks:

• Expense of additional layers of management.

• Increased complexity of vertical communication.

• Encouragement of overly tight supervision and discouragement of employee autonomy.

Narrow Span Drawbacks:

• Expense of additional layers of management.

• Increased complexity of vertical communication.

• Encouragement of overly tight supervision and discouragement of employee autonomy.

Concept:Concept:

Wider spans of Wider spans of management increase management increase organizational efficiency.organizational efficiency.

Concept:Concept:

Wider spans of Wider spans of management increase management increase organizational efficiency.organizational efficiency.

Contrasting Spans of ControlContrasting Spans of Control

E X H I B I T 15-3

What Is Organizational Structure? (cont’d)What Is Organizational Structure? (cont’d)

Common Organization Designs (cont’d)Common Organization Designs (cont’d)

Key Elements:

+ Gains advantages of functional and product departmentalization while avoiding their weaknesses.

+ Facilitates coordination of complex and interdependent activities.

– Breaks down unity-of-command concept.

Key Elements:

+ Gains advantages of functional and product departmentalization while avoiding their weaknesses.

+ Facilitates coordination of complex and interdependent activities.

– Breaks down unity-of-command concept.

New Design OptionsNew Design Options

Characteristics:

• Breaks down departmental barriers.

• Decentralizes decision making to the team level.

• Requires employees to be generalists as well as specialists.

• Creates a “flexible bureaucracy.”

Characteristics:

• Breaks down departmental barriers.

• Decentralizes decision making to the team level.

• Requires employees to be generalists as well as specialists.

• Creates a “flexible bureaucracy.”

New Design Options (cont’d)New Design Options (cont’d)

T-form Concepts:

Eliminate vertical (hierarchical) and horizontal (departmental) internal boundaries.

Breakdown external barriers to customers and suppliers.

T-form Concepts:

Eliminate vertical (hierarchical) and horizontal (departmental) internal boundaries.

Breakdown external barriers to customers and suppliers.

Why Do Structures Differ?Why Do Structures Differ?

Why Do Structures Differ?Why Do Structures Differ?

Why Do Structures Differ? – StrategyWhy Do Structures Differ? – Strategy

The Strategy-Structure RelationshipThe Strategy-Structure Relationship

E X H I B I T 15-9

Why Do Structures Differ? – TechnologyWhy Do Structures Differ? – Technology

Characteristics of routineness (standardized or customized) in activities:

• Routine technologies are associated with tall, departmentalized structures and formalization in organizations.

• Routine technologies lead to centralization when formalization is low.

• Nonroutine technologies are associated with delegated decision authority.

Characteristics of routineness (standardized or customized) in activities:

• Routine technologies are associated with tall, departmentalized structures and formalization in organizations.

• Routine technologies lead to centralization when formalization is low.

• Nonroutine technologies are associated with delegated decision authority.

Why Do Structures Differ? – EnvironmentWhy Do Structures Differ? – Environment

Key Dimensions:

• Capacity: the degree to which an environment can support growth.

• Volatility: the degree of instability in the environment.

• Complexity: the degree of heterogeneity and concentration among environmental elements.

Key Dimensions:

• Capacity: the degree to which an environment can support growth.

• Volatility: the degree of instability in the environment.

• Complexity: the degree of heterogeneity and concentration among environmental elements.

What Is Organizational Structure? (cont’d)What Is Organizational Structure? (cont’d)

The Three Dimensional Model of the Environment

The Three Dimensional Model of the Environment

E X H I B I T 15-10

Complexity

Volatility

Capacity

Organizational Designs and Employee Behavior

Organizational Designs and Employee Behavior

Research Findings:

• Work specialization contributes to higher employee productivity, but it reduces job satisfaction.

• The benefits of specialization have decreased rapidly as employees seek more intrinsically rewarding jobs.

• The effect of span of control on employee performance is contingent upon individual differences and abilities, task structures, and other organizational factors.

• Participative decision making in decentralized organizations is positively related to job satisfaction.

Research Findings:

• Work specialization contributes to higher employee productivity, but it reduces job satisfaction.

• The benefits of specialization have decreased rapidly as employees seek more intrinsically rewarding jobs.

• The effect of span of control on employee performance is contingent upon individual differences and abilities, task structures, and other organizational factors.

• Participative decision making in decentralized organizations is positively related to job satisfaction.