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Foundations of Organization Structure
Foundations of Organization Structure
FOUNDATIONS OF ORGANIZATION
STRUCTURE
Course instructors:
Prof. Marjan I. Bojadjiev, PhD
Prof. Makedonka Dimitrova, MPPM
Prof. Miodraga Stefanovska, PhD
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Organization is a consciously coordinated social unit, composed of two or more people that
functions on a relatively continuous basis to achieve goal; or set of goals.
• Definitions:
• Organization is a group (collection) of people who work together and coordinate
their actions to achieve its goals.
• . Organizing=Determining what tasks are to be done, who is to do them, how the
tasks are to be grouped, who reports to whom and where decisions are made.
Organizing is the process that managers use to establish a structure of working
relationships that allow organizational members to interact and cooperate to
achieve organizational goals.
• The outcome of this process is the creation of organizational structure, as a
formal system of task and reporting relationships that coordinates and motivates
members so that they work together to achieve organizational goals.Fixed /
relatively fixed
• O.S. defines how job tasks are formally divided, grouped and coordinated.
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The six key elements
• Work specialization
• Departmentalization
• Chain of command
• Span of control
• Centralization and decentralization
• Formalization
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1.Work Specialization=the degree to which tasks are subdivided into separate
jobs
• Job design is the process by which managers group tasks into jobs.
• Mac Donalds= chefs and servers / Subway sandwich=no division
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• Job Description
• Job Holder:
• Job Title:
• Department or Branch:
• Division:
• Reporting to:
• Brief Description of Job:
• Key Responsibilities:
• Other Responsibilities:
• Committee Membership:
• Scope of Job (Location, Number of Subordinates, Budget Available):
• Required Experience:
• Measures of Performance Success:
• Signed (Employee)………………. Signed (Employee’s Manager)……………….
• Date:………………
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2.Departmentalization-the basis by which jobs are grouped together
• Once the tasks are being allocated into jobs, the managers have to choose the next
organizing decision:
• How to group jobs together to best match the needs of the organization's
environment, strategy, technology and human resources.
• The result is organizational structure.
• At the beginning most of the managers choose to group the function together in a
functional organisational structure .
• Functional Departmentalization /
• Process Departmentalisation
• Other forms are:
• geography,
• product,
• market
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Functional OS /Divisional OS
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FUNCTIONAL OS
Clark Johnson
CEO
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Divisional types of structure
Product structure
CEO
Corporation
Corporate
Managers
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Divisional types of structure
Geographic structure
CEO
Corporation
Corporate
Managers
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Divisional types of structure
Market structure
CEO
Corporation
Corporate
Managers
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3.CHAIN OF COMMAND –UNBROKEN LINE OF AUTHORITY CLARIFING WHO REPORTS
TO WHOM
Hierarchy of authority =chain of command, specifying the relative authority of each
manager.
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4. Span ( width) of control
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5. CENTRALIZATION / DECENTRALIZATION
• :
Centralization and decentralization of authority The degree to which decision
making is concentrated at a single point in the organization, or pushed down to
lower – level employees.
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ORGANIZATIONAL DESIGN
SIMPLE STRUCTURE, BUREAUCRACY AND MATRIX
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Matrix Structure
Figure 8.7a
CEO
Func.
Managers
Product
Team Managers
team A
Product
team B
Product Team
Product
team C
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Product Team Structure
CEO
Func.
Managers
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NEW DESIGN OPTIONS III
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SBU – ORGANIZATIONAL STRUCTURE
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Why do structures differ?
• Contingency theory=The idea that the organisational structure is dependent
( contingent) on the features of the environment in which the organization
operates.
• Mechanistic structure
• Centralized authority;
• Tasks are Clearly specified
• Organic structure
• Decentralized;
• Freedom for the employees to respond quickly to unexpected
FACTORS
1. External environment;
2. Strategy;
3. Technology;
4. Human resources and organization size.
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Environment
• Complexity
• Task environment: suppliers, distributors, competitors,
customers
• General Environment: Economic, Technological, Sociocultural,
demographic, Political and legal and Global Forces
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STRATEGY 1 A cluster of decisions about what goals to pursues, what actions to take,
and how to use resources to achieve goals.
•
• Strategies on the corporate level:
• Concentration on a single business
• Diversification=expanding into a new business or industry, and producing
new goods and services
•
• Business ( divisional ) level strategies
• Michael Porter: 2 basic strategies
• Low cost
• Differentiation strategy
• ( Stuck in the middle)
• It can be:
•
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• Types of organisational structure according to strategies applied
• Corporate level
– Differentiation strategy (Corporate) works the best in a flexible
structure
– Concentration-(mechanic)
– Integration –Both Vertical and Horizontal integration
(Corporate)=flexible
– Diversification (Corporate) -flexible
– International expansion Multidomestic ( Corporate)=flexible
– International Expansion- Global=mechanic structure
• Business level
• Differentiation ( flexible)
• Low Cost ( mechanic)
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STRATEGY 2
• Innovation Strategy
A strategy that emphasizes the introduction of major new products and
services
• Cost minimization
• A strategy that emphasizes tight cost controls, avoidance of unnecessary
innovation or marketing expenses, and price cutting
• Imitation
• A strategy that seeks to move into new products or new markets only after
their viability has already been proven
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STRATEGY 3 –OTHER STRATEGIES
• Market penetration
• Market skimming
• Retention
• Niche markets strategy
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Human resources and organization size
• Human Resources
• The more skilled and experienced=the more flexible structure
• Example of Clinical centre – skilled labour force
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Strategic alliances and Networks
• Strategic alliance: a formal agreement committing two
or more firms to exchange resources to produce a
good.
• Network Structure: a whole series of strategic
alliances.
– Created between suppliers, manufacturers, and distributors.
• Toyota and Honda use many such alliances.
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