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Foundations of Organisational Structure
Foundations of Organisational Structure
Foundations of Organisational Structure
Foundations of
of Organisational
Organisational Structure
Structure
Learning
Learning Objectives
Objectives
After studying this chapter, you should be able to:
– Identify the six elements of an organization’s structure.
– Identify the characteristics of a bureaucracy.
– Describe a matrix organization.
– Identify the characteristics of a virtual organization.
– Show why managers want to create boundaryless
organizations.
– Demonstrate how organizational structures differ, and
contrast mechanistic and organic structural models.
– Analyze the behavioral implications of different
organizational designs.
– Show how globalization affects organizational structure.
What
What IsIs Organizational
Organizational Structure?
Structure?
Organizational Structure
– How job tasks are formally divided, grouped, and
coordinated
– Key Elements:
1. Work specialization
2. Departmentalization
3. Chain of command
4. Span of control
5. Centralization and decentralization
6. Formalization
1.
1. Work
Work Specialization
Specialization
The degree to which tasks in the organization are
subdivided into separate jobs
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
Can create greater economies and efficiencies – but not
always…
Work
WorkSpecialization
SpecializationEconomies
Economiesand
andDiseconomies
Diseconomies
Strengths Weaknesses
– Functional economies of – Subunit conflicts with
scale organizational goals
– Minimum duplication of – Obsessive concern with
personnel and equipment rules and regulations
– Enhanced communication – Lack of employee
– Centralized decision discretion to deal with
making problems
Common
Common Organizational
Organizational Designs:
Designs: Matrix
Matrix
Matrix Structure
– A structure that creates dual lines of authority and combines
functional and product departmentalization
Key Elements
– Gains the advantages of functional and product
departmentalization while avoiding their weaknesses
– Facilitates coordination of complex and interdependent
activities
– Breaks down unity-of-command concept
New
New Design
Design Options:
Options: Virtual
Virtual Organization
Organization
– A small, core organization
that outsources its major
business functions
– Highly centralized with
little or no
departmentalization
• Provides maximum
flexibility while
concentrating on what
the organization does
best
• Reduced control over
key parts of the business
New
NewDesign
DesignOptions:
Options:Boundaryless
BoundarylessOrganization
Organization
– An organization that seeks to eliminate the chain of
command, have limitless spans of control, and replace
departments with empowered teams
– T-form Concepts
• Eliminate vertical (hierarchical) and horizontal (departmental)
internal boundaries
• Breakdown external barriers to customers and suppliers
Two
TwoExtreme
ExtremeModels
Modelsof
ofOrganizational
OrganizationalDesign
Design
Four
Four Reasons
Reasons Structures
Structures Differ
Differ
1. Strategy
– Innovation Strategy
• A strategy that emphasizes the introduction of major new
products and services
• Organic structure best
– Cost-minimization Strategy
• A strategy that emphasizes tight cost controls, avoidance of
unnecessary innovation or marketing expenses, and price
cutting
• Mechanistic model best
– Imitation Strategy
• A strategy that seeks to move into new products or new
markets only after their viability has already been proven
• Mixture of the two types of structure
Why
Why Structures
Structures Differ
Differ
2. Organizational Size
– As organizations grow, they become more mechanistic,
more specialized, with more rules and regulations
3. Technology
– How an organization transfers its inputs into outputs
• The more routine the activities, the more mechanistic the
structure with greater formalization
• Custom activities need an organic structure
4. Environment
– Institutions or forces outside the organization that
potentially affect the organization’s performance
– Three key dimensions: capacity, volatility, and complexity
Three-Dimensional
Three-Dimensional Environment
Environment Model
Model
Volatility
Complexity Capacity
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
Organizational
OrganizationalDesigns
Designsand
andEmployee
EmployeeBehavior
Behavior
Impossible to generalize due to individual differences
in the employees
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.
People seek and stay at organizations that match their
needs.
Global
Global Implications
Implications
Culture and Organizational Structure
– Many countries follow the U.S. model
– U.S. management may be too individualistic
Culture and Employee Structure Preferences
– Cultures with high-power distance may prefer mechanistic
structures
Culture and the Boundaryless Organization
– May be a solution to regional differences in global firms
– Breaks down cultural barriers, especially in strategic alliances
– Telecommuting also blurs organizational boundaries
Summary
Summary and
and Managerial
Managerial Implications
Implications
Structure impacts both the attitudes and behaviors of
the people within it
Associated
with
Impact of Technology
– Makes it easier to change structure to fit employee and
organizational needs