Dimensions of Organization StructureCOMPLEXITY: Degree of differentiation within

organization Horizontal differentiation: Degree of horizontal

separation between units Vertical differentiation: Depth of the organization

hierarchy Spatial differentiation: Degree to which location

of facilities and personnel are dispersed geographically

HORIZONTAL DIFFERENTIATION: Degree of differentiation between units based on

orientation of members, nature of tasks they perform, their education and training

Larger the number of occupations (specialized knowledge, skills), more complex the organization

Diverse orientations lead to communication/coordination difficulty

Different goal emphases, time orientations, different work vocabulary: chemical engineer vs, personnel recruitment interviewer

Most visible evidence: Specialization and Departmentation

Specialization: The particular grouping of activities performed by an individual

Can be achieved in two ways: functional specialization and social specialization

Functional specialization: Division of labour: jobs are broken down into simple and repetitive tasks – creates high substitutability among employees, easy replacement by management

Social specialization: Individuals are specialized, rather than their work – professionals whose skills can not be routinized – civil engineers, nuclear physicists, nurses etc

WHY DIVISION OF LABOR STILL WORK? In highly sophisticated, complex jobs, no

one person can perform all the tasks wing to physical limitations

Efficiency: One’s skill at performing a task increases through repetition

Training for functional specialization more efficient from organization’s perspective

Encourages creation of special inventions and machinery

It creates groups of specialists

DEPARTMENTATION: The way in which specialists are grouped together Helps coordinate activities Created on the basis of: simple numbers, function,

product, service, client, geography, process Most large organizations use all sixVERTICAL DIFFERENTIATION: Refers to depth in the structure – complexity

increases with the number of hierarchical levels1. Greater communication distortion – coordination of

decision difficult – overseeing of activities of operatives by top management difficult

Vertical differentiation best understood as a response to increase in horizontal differentiation – Need for supervision and coordination with increased units of specialists – to make units see how their tasks fit into greater whole

Tall: Many layers; Flat: few levelsSPAN OF CONTROL: The number of subordinates that a manager can

direct effectively Wide span: large number of subordinates;

Narrow span: few underlings Smaller the span, the taller the organization

Tall structures: closer supervision – tighter “boss-oriented” controls – coordination/communication complicated

Flat structures: shorter/simpler communication chain – less opportunity for supervision – reduced promotion opportunities

Recent studies: no support for flat organizations to be preferable – larger the organization, less effective the flat organization – tall structures reduce manager’s routine supervisory responsibilities – spends more time with boss – type of job/individual characteristics of job holder moderate span-organizational effectiveness

Spatial differentiation: Degree to which location of offices, plants,

personnel dispersed geographically An extended dimension to horizontal and vertical

differentiation – possible to separate tasks and power centres geographically – dispersion by both number and distance

Production and marketing functions from same location vs. marketing in six different locations – Two banks with same asset size: unit banking vs. branch banking – regional offices nearby vs. away from each other - increased communication, coordination, control problems

Relationship between three elements: At extreme ranges of organization size:

Most diversified industrial organizations and Government organizations have high intercorrelation

Colleges: low degree of vertical differentiation – little or no spatial differentiation – but high degree of horizontal differentiation

Army battalion: high vertical differentiation and little horizontal differentiaion

Why is complexity important: Higher complexity: Greater need for effective

communication, coordination and control devices Economies that complexity creates may be

counterbalanced by increased burden of keeping organization together

FORMALIZATION Refers to the degree to which jobs within organization

are standardized Highly formalized jobs: incumbent minimum discretion

over what is to be done, when to be done, how he should do it

Explicit job descriptions – lots of organizational rules – clearly defined procedures covering work processes

Low formalization: employees behavior relatively nonprogrammed

Formalization applies to both written and unwritten regulations – employees attitude important

Range of formalization: Simplest and most repetitive jobs: amenable to

high degree of formalization Professional jobs ( lawyers, engineers, social

workers, librarians, public accountants ); low on formalization

Level in the organization: Higher mployees do jobs less repetitive, require unique solutions – formalization inversely related to level in organization

Functional department ( kind of work ): Production – stable, repetitive activities - high formalization vs. low formalization in sales and research ( flexible/innovative )

Why formalization important: Benefits that accrue from regulating employees’

behavior – reduces variability – Big Mac looks/tastes the same

Standardization promotes coordination – highly standardized set of repetitive activities – Football team, paramedic team, medical staff in operating room

Economics of formalization: greater the formalization, lesser the discretion from job incumbent – discretion costs money – managers in charge of critical decision making need judgement ability, they come expensive

The “Make or Buy” Decision: Formalization can take place on the job or off When done on the job: externalized behavior –

external to employee – rules, procedures specifically defined, codified, enforced through direct supervision – applies to unskilled employees

Professionalization other alternative – creates internalized behavior through social specialization (e.g. Engineers, MBAs)

Management to decide: Standardization to be “msde” in house or “bought” outside

As the level of professionalization increases, the degree of formalization reduces

Formalization Techniques: Selection: Organization’s personality and

culture and then screening applicants for compatibility – finding a “fit”

Role Requirements: Job analysis -> Job descriptions -> Role expectations( by loosening or tightening degree of formalization is determined)

Rules, Procedures, Policies:1. Rules: Explicit statements that tell an

employee what she ought or ought not to do – no room for judgement/dicretion – particular/specific required behavior pattern ( Middle managers prior approval for expenditure> $500; TA bill in 7 days in duplicate )

2. Procedures: Series of interrelated sequential steps that employees follow in the accomplishment of job tasks – ensure standardization of work processes – same input processed same way for same output each day – E.g. accounts-payable clerk

3. Policies: Guidelines that set constraints on decisions that employees make – provide greater leeway than rules – allow use of discretion within limited boundaries – may be written or implied( giving preferences to applicants related to existing employees ) – E.g. Personnel manual in hospital: “pay competitive wages”

Training: On-the-job: understudy assignments, coaching,

apprentice methods Off-the job: classroom lectures, movies,

demonstrations, simulation exercises, programmed instruction

Intent: teach preferred job skills, knowledge, attitudes, preferred work behaviors

Orientation program for new recruits: Organization objectives, history, philosophy, rules, relevant personnel policies( hours of work, pay procedures, OT requirements, benefit programs) – often followed by specific job training ( e.g. computer programmers in banks, McDonald’s counter help )

Rituals: Used as a formalization technique with members

who will have a strong and enduring impact on the organization

Includes individuals who aspire to senior level management positions

Members must prove that they can be trusted and are loyal to the organization before thy can be ‘knighted’

‘The proving process’ being the ritual Managers “the guardians of organization

ideology” – senior managers ‘primary gatekeepers’ – Top positions usually rewards for loyalty, lengths of service, commitment to goals, norms of firm

CENTRALIZATION: Where are decisions made: up on top by

senior management or down low (decision makers closest to action)

The degree to which decision making is concentrated at a single point in the organization – High centralization vs. low centralization or decentralization

Centralization concerned with dispersion of authority to make decisions within organization, not geographic dispersion

Problematic issues with Centralization:1. Do we look only at formal authority? Authority

formal rights to give orders, get orders obeyed – What about informal authority (VP’s son-in-law)?

2. Can policies override decentralization? Lower level decisions often programmed by organizational policies

3. What does “concentration at a single point” mean? Individual, unit, or a level? Non-participation of operatives in decision about their work, isn’t decision making centralized?

4. Does an information-processing system that closely monitors decentralized decisions maintain centralized control?

5. Does the control of information by lower-level members result in the decentralization of what appears to be centralized decisions?

6. The more information input to decision is filtered through others, the less concentrated and controlled the decision is

Interpretationadvice Choice Authorization Execution

InfoInput

SituationAction

What can be done

Whatshould be done

What isintendedto be done

What isauthorizedto be done

What isactuallydone

Organization Decision-Making Process

•Managers make decisions – choices about goals, budget allocations, personnel,Ways work to be done, ways to improve unit’s effectiveness•Like knowledge of authority, chain of command, awareness of decision-making process critical to understanding of centralization•Decision-making most centralized when decision maker controls all steps•Process decentralized when others control these steps

Why is Centralization Important? Decision making and information processing

central for coordination Information not the scarce resource Processing capacity to attend to information the

scarce resource Limit to process information – beyond this

information overload – dispersion of concentration at single point is decentralization

Also decentralization facilitates speedy action at the point where change is taking place (Decentralization of marketing activities)

Decentralization provides more detailed input into the decision( sales people deciding on pricing of product than sales executive 3000 kms away )

Decentralization provides motivation to employees through participation in decision-making ( Humanistic vs autocratic values )

Decentralization creates training opportunities for low-level managers – decision practice with potential for minimum damage – preparation for greater authority in future

However, centralization preferred when comprehensive perspective needed in decision – affects whole organization than some special interest groups – some activities like finance, legal better done when centralized

Centralization, Complexity and Formalization: Centralization and Complexity: 1. An inverse - relationship between the two 2. Decentralization associated with high complexity 3. More number of specialties->need for more

expertise/ability -> more professional training -> likely to participate in decision making

4. Conversely greater the centralization, the less the professional training exhibited by employees

Centralization and Formalization: 1. Relationship ambiguous2. Recent support for high formalization-decentralization

hypothesis 3. Large unskilled workers: high

centralization/formalization4. Large number of professionals: low

formalization/centralization