Organization

al Structure
and Design
Defining Organizational Structure
Organizational Structure
The formal arrangement of jobs within an organization
Organizational Design
A process involving decisions about six key elements:
 Work specialization
 Departmentalization

 Chain of command

 Span of control

 Centralization and decentralization

 Formalization
Purposes of Organizing
Divides work to be done into specific jobs
and departments
Assigns tasks and responsibilities
associated with individual jobs
Coordinates diverse organizational tasks
Establishes relationships among
individuals, groups, and departments
Establishes formal lines of authority
Allocates organizational resources
Designing Organizational Structure
Work Specialization
The degree to which tasks in the
organization are divided into separate jobs
with each step completed by a different
person
Departmentalization by Type
Functional Process
Grouping jobs by Grouping jobs on the
functions performed basis of product or
Product customer flow
Grouping jobs by Customer
product line Grouping jobs by type
Geographical of customer and
Grouping jobs on the needs
basis of territory or
geography
Functional
Departmentalization

Plant Manager

Manager, Manager, Manager, Manager, Manager,

Engineering Accounting Manufacturing Human Resources Purchasing

+ Efficiencies from putting together similar specialties and

people with common skills, knowledge, and orientations
+ Coordination within functional area
+ In-depth specialization
– Poor communication across functional areas
– Limited view of organizational goals
Geographical
Departmentalization

Vice President
for Sales

Sales Director, Sales Director, Sales Director, Sales Director,

Western Region Southern Region Central Region Eastern Region

+ More effective and efficient handling of specific

regional issues that arise
+ Serve needs of unique geographic markets better
– Duplication of functions
– Can feel isolated from other organizational areas
Product Departmentalization

CEO.

Car Truck Bus

Division Division Division

+ Allows specialization in particular products and services

+ Managers can become experts in their industry
+ Closer to customers
– Duplication of functions
– Limited view of organizational goals Source: Bombardier Annual Report.
Process
Departmentalization
Manager
Plant

Spinnin Dyeing Weaving Fininshi

g ng

+ More efficient flow of work activities

– Can only be used with certain types of products
Customer
Departmentalization

Director
of Sales

Manager, Manager, Manager,

Retail Accounts Wholesale Accounts Government Accounts

+ Customers’ needs and problems can be met by specialists

– Duplication of functions
– Limited view of organizational goals
Organizational Structure (cont’d)

Chain of Command
The continuous line of authority that
extends from upper levels of an
organization to the lowest levels of the
organization and clarifies who reports
to whom
Organizational Structure (cont’d)
 Authority
 The rights inherent in a managerial position to tell people
what to do and to expect them to do it
 Responsibility
 The obligation or expectation to perform. Responsibility
brings with it accountability (the need to report and
justify work to manager’s superiors)
 Unity of Command
 The concept that a person should have one boss and
should report only to that person
 Delegation
 The assignment of authority to another person to carry
out specific duties
Organizational Structure (cont’d)
Line and Staff Authority
Line managers are responsible for the essential
activities of the organization, including production
and sales. Line managers have the authority to
issue orders to those in the chain of command
 Thepresident, the production manager, and the sales
manager are examples of line managers
Staff managers have advisory authority, and
cannot issue orders to those in the chain of
command (except those in their own department)
Organizational Structure (cont’d)
Span of Control
The number of employees who can be effectively and
efficiently supervised by a manager
Width of span is affected by:
 Skills and abilities of the manager and the employees
 Characteristics of the work being done
 Similarity of tasks
 Complexity of tasks
 Physical proximity of subordinates
 Standardization of tasks
 Sophistication of the organization’s information system
 Strength of the organization’s culture
 Preferred style of the manager
 Contrasting Spans of Control
Members at Each Level
(Highest) Assuming Span of 4 Assuming Span of 8

1 1 1
Organizational Level

2 4 8
3 16 64
4 64 512
5 256 4096
6 1024
7 4096

(Lowest)
Span of 4: Span of 8:
Employees: = 4096 Employees: = 4096
Managers (level 1–6)= 1365 Managers (level 1–4) = 585
Organizational Structure (cont’d)
Centralization
The degree to which decision making is
concentrated at a single point in the organization
 Organizationsin which top managers make all the
decisions and lower-level employees simply carry out
those orders
Decentralization
The degree to which lower-level employees
provide input or actually make decisions
Employee Empowerment
 Increasing the decision-making discretion of employees
Factors that Influence the Amount of
Centralization
More Centralization
Environment is stable
Lower-level managers are not as capable or
experienced at making decisions as upper-level
managers
Lower-level managers do not want to have a say
in decisions
Decisions are significant
Organization is facing a crisis or the risk of
company failure
Company is large
Effective implementation of company strategies
depends on managers retaining say over what
happens
Factors that Influence the Amount of
Decentralization
More Decentralization
Environment is complex, uncertain
Lower-level managers are capable and
experienced at making decisions
Lower-level managers want a voice in
decisions
Decisions are relatively minor
Corporate culture is open to allowing
managers to have a say in what happens
Company is geographically dispersed
Effective implementation of company
strategies depends on managers having
involvement and flexibility to make decisions
Organizational Structure (cont’d)
Formalization
The degree to which jobs within the
organization are standardized and the
extent to which employee behaviour is
guided by rules and procedures
 Highly formalized jobs offer little discretion over
what is to be done
 Low formalization means fewer constraints on how
employees do their work
Organizational Design Decisions
Mechanistic Organization Organic Organization
A rigid and tightly Highly flexible and
controlled structure adaptable structure
 High specialization  Nonstandardized jobs
 Rigid  Fluid team-based
departmentalization structure
 Narrow spans of control  Little direct supervision
 High formalization  Minimal formal rules
 Limited information  Open communication
network (mostly network
downward  Empowered employees
communication)
 Low decision
participation by lower-
level employees
Mechanistic Versus Organic
Organization

Mechanistic Organic

High
• Specialization Cross-Functional
• Teams
Rigid
• Departmentalization Cross-Hierarchical
• Teams
Clear
• Chain of Command Free
• Flow of Information
Narrow
• Spans of Control Wide
• Spans of Control
•
Centralization Decentralization
•
High
• Formalization Low
• Formalization
Structural Contingency Factors
(cont’d)
Strategy and Structure
Achievement of strategic goals is facilitated
by changes in organizational structure that
accommodate and support change
Size and Structure
As an organization grows larger, its structure
tends to change from organic to mechanistic
with increased specialization,
departmentalization, centralization, and
rules and regulations
Structural Contingency Factors
(cont’d)
Technology and Structure
Organizations adapt their structures to
their technology
Routine technology = mechanistic
organizations
Non–routine technology = organic
organizations
Structural Contingency Factors
(cont’d)
Environmental Uncertainty and Structure
Mechanistic organizational structures tend to be
most effective in stable and simple environments
The flexibility of organic organizational structures
is better suited for dynamic and complex
environments
Organizational Designs
Common Organizational Designs
Traditional Designs
Simple Structure
 Low departmentalization, wide spans of control,
centralized authority, little formalization
Functional Structure
 Departmentalization by function
 Operations, finance, human resources, and product
research and development
Divisional Structure
 Composed of separate business units or divisions
with limited autonomy under the coordination and
control of the parent corporation
Organizational Designs (cont’d)
Contemporary Organizational Designs
Team Structures
 The entire organization is made up of work groups or
self-managed teams of empowered employees
Matrix Structures
 Specialists for different functional departments are
assigned to work on projects led by project managers
 Matrix participants have two managers

Project Structures
 Employees work continuously on projects, moving on
to another project as each project is completed
A Matrix Organization in
an Aerospace Firm

Design Contract Human

Manufacturing Purchasing Accounting
Engineering Administration Resources (HR)

Alpha Design Manufacturing Contract Purchasing Accounting HR

Project Group Group Group Group Group Group

Beta Design Manufacturing Contract Purchasing Accounting HR

Project Group Group Group Group Group Group

Gamma Design Manufacturing Contract Purchasing Accounting HR

Project Group Group Group Group Group Group

Omega Design Manufacturing Contract Purchasing Accounting HR

Project Group Group Group Group Group Group
Organizational Designs (cont’d)
Contemporary Organizational
Designs (cont’d)
Boundaryless Organization
 A flexible and an unstructured organizational
design that is intended to break down external
barriers between the organization and its
customers and suppliers
 Removes internal (horizontal) boundaries
 Eliminates external boundaries
Organizational Designs
(cont’d)
Learning Organization
An organization that has developed the capacity to
continuously learn, adapt, and change through the
practice of knowledge management by employees
Characteristics of a learning organization:
 An open team-based organization design that empowers
employees
 Extensive and open information sharing
 Leadership that provides a shared vision of the
organization’s future; support; and encouragement
 A strong culture of shared values, trust, openness, and a
sense of community
Co-ordination
Linking of two or more organizational
members and/or work units so that they
function well together
Two main types of co-ordination are:
Vertical coordination
Horizontal Coordination
Vertical Coordination:
Linking work units (individual, team,
departments) separated by hierarchical level
Horizontal Coordination:
Linking work units (individual, team,
departments) at the same hierarchical level
Techniques for effective
coordination
Coordination by chain of command
Coordination by leadership
Coordination by committees
Staff meetings
Special Coordinators
Self- coordination
Power
A capacity that A has to
influence the behavior of B so
that B acts in accordance with B
A
A’s wishes.
Dependency
B’s relationship to A
when A possesses
something that B
requires.
Contrasting Leadership and
Power
Leadership Power
Focuses on goal Used as a means for
achievement. achieving goals.
Requires goal Requires follower
compatibility with dependency.
followers.
Formal Power
Is established by an individual’s position in an
organization; conveys the ability to coerce or
reward, from formal authority, or from control
of information.

Coercive Power
A power base dependent on
fear.
Reward Power
Compliance achieved based
on the ability to distribute
rewards that others view as
valuable
Legitimate Power
The power a person receives as a
result of his or her position in the
formal hierarchy of an
organization.
Information Power
Power that comes
from access to and
control over
information.
Expert Power
Influence based on
special skills or
knowledge.
Referent Power
Influence based on
possession by an individual
of desirable resources or
personal traits.
Charismatic Power
An extension of referent power stemming
from an individual’s personality and
interpersonal style.
Dependency: The Key To
Power
The General Dependency Postulate
 The greater B’s dependency on A, the greater the
power A has over B.
 Possession/control of scarce organizational
resources that others need makes a manager
powerful.
 Access to optional resources (e.g., multiple
suppliers) reduces the resource holder’s power.
What Creates Dependency
 Importance of the resource to the organization
 Scarcity of the resource
 Nonsubstitutability of the resource
Authority (mainly) derives
from role
Authority is “the right to make an ultimate
decision, and in an organisation it refers to the
right to make decisions which are binding on
others” (Obholzer, 1994).
Line, Staff, and Functional Authority
Line authority is the relationship in which a
superior exercises direct supervision over a
subordinate
Staff relationship is advisory
Functional authority is the right that is
delegated to an individual or a department to
control specified processes, practices,
policies, or other matters relating to activities
undertaken by persons in other departments
 Difference between
Authority & Power
Power Authority
 It is a ability to command & influence
behavior of another  It is institutional right to
 It rests with persons, in their individual command
capacities
 It lies in managerial position
 It doesnot follow any heirarchy
 Power, being personalised attribute, can  It is heirarchial in nature
not be delegated  It can be delegated
 There is no such legitimized
 Emerges because of personal factors
 It is legitimized by certain
 May exist between any 2 persons rules, regulations, laws &
practices etc.
 Institutional & originates from
structural relationship
 Superior-subordinate
relationship
Delegation
Transfering formal authority from one position
to another is known as delegation
 Assign Tasks

Transfer task responsibility Reject

Acceptan
ce
Condition
Accept

Creation of responsibility
Blocks to effective
delegation
Factors in delegator:
Love for authority
Maintenance of tight control
Fear of subordinates growth
Fear of exposure
Attitude towards subordinates
Personality of superior
Blocks to effective
delegation contd…
Factors in delegant (subordinate):
Lack of confidence
Lack of resources
Inadequate positive incentives
Superior is easily available
Organizational factors
Management philosophy
Policy towards centralisation & decentralisation
Availability of managerial personnel
Control techniques
Guides for Overcoming Weak
Delegation
1. Define assignments and delegate
authority in light of results expected
2. Select the person in light of the job to be
done
3. Maintain open lines of communication
4. situations
4. Establish proper controls
5. Reward effective delegation and
successful assumption of authority
Definition of Staffing
Staffing is filling, and keeping filled, positions
in the organization structure
SITUATIONAL FACTORS AFFECTING
STAFFING
External factors include the level of
education, the prevailing attitudes in society
(such as the attitude toward work), the many
laws and regulations that directly affect
staffing, the economic conditions, and the
supply of and demand for managers outside
the enterprise
SITUATIONAL FACTORS
AFFECTING STAFFING – cont.
Internal factors that affect staffing include,
for example, organizational goals, tasks,
technology, organization structure, the
kinds of people employed by the
enterprise, the demand for and the supply
of managers within the enterprise, the
reward system, and various kinds of
policies
 Environment

Human
Identification and Selection
Resource Recruitment Selection
of Competent Employees
Planning

Decruitment

Adapted and competent

Orientation Training employees with up-to-date
skills and knowledge

Compensation Competent and high-performing employees who

Performance Career are capable of sustaining high performance over
and
Management Development
Benefits the long term

Environment