MONTGOMERY, JERALD JAMES G.

Masters in Business Administration – 1

Organizational Behavior
Self-Test Questions Set No. 2

A. Consider the organizational structure of your organization. Present your analysis

in terms of its complexity, formalization and centralization. Does your

organizational structure facilities the attainment of your organizational

objectives? Present your comments and suggestions and recommendations to

further strengthen your organizational structure.

I will be citing in this answer the organizational structure of the organization in

which I was once belonged into before I was hired to Northwestern University

since I personally believe the organizational structure in NU is in par or even

above par standards as the school had been reviewed by international and

domestic accrediting bodies. However, I believe that the previous organization I

have belonged to could be a better example.

The organizational structure presents a two-domineering figure at the top of NCO

General Merchandise, Mr. Ocampo, the CEO and President, and his wife, Mrs.

Ocampo, the General Manager or Vice President for Operations. Then below

them is Mr. Florentino, the Supervisor and the Operations Manager for Luzon

and the Visayas. He also heads the Marketing Department, which includes one

marketing assistant. Mrs. Alojado, Mrs. Ocampo’s sister, heads the Purchasing

Department. She oversights 2 assistant purchasing officers. Mr. Agno heads the
Technical department, which also supervises 8 technicians. Lastly, Mrs. Albano

heads the Finance Department, which in turn a de facto Human Resource and

payroll department. He is helped by one administrative aide and a junior

accountant.

In my stay there, it is obvious that there are peculiarities in the organizational

chart. Though I have seen that it is a very important document to be presented

on the public bidding proposals, it seems that the in addition to its not so

complete form, therefore simple, the practice has been informal and powers are

centralized with the owners.

All orders must be approved by the owners and the directive is passed down

through the supervisor. The administrative aide and the junior accountant, which

I believe should not be called junior accountant but rather formally be called just

accountant, is outsourced to help the marketing department when needed. Paper

audit trails, communications and documentations are sometimes a problem since

there is not clear line of authority as the Purchasing head, being the sister of the

Vice President, exaggerates his authority over the supervisor. In which case, a

conflict most likely arises.

In spite of all these, organizational objectives are most often met. Sometimes,

conflicts and misinformation create a flawed proposal or worse, back lags and

setbacks in bids, which results in excessive bids and lost proposals. Generally,

the organizational chart provides it purpose and use best when the President and
 Vice President speak, as their directives are the standard operating protocol.

Nevertheless, I have seen their efficiency in making decisions although

sometimes I have doubts myself.

Overall, I think NCO General Merchandise should put a line between and among

heads and that authority should be given with each head as well as demarcation

between them. I think centralized structure is still best suited for it since it is still a

small entity but it should not hamper them in creating a more relaxed, employee-

friendly environment that encourages everyone to exert effort and creativity as

well as freedom to do their job on their own.

B. 1. Describe the factors that determine how complex an organization is.

Obviously, describing complex environments requires complex answers. But in

here, I will try to dissect how an organization could be complex enough in its

foundations i.e. structure and its characteristics, which prescribe behavior.

There are general and key questions that are answered directly. To what degree

are activities subdivided into separate jobs? Work specialization. On what basis

will jobs be grouped together? Departmentalization. To whom do individuals and

groups report? Chain of command. How many individuals can a manager

efficiently and effectively direct? Span of control. Where does decision-making

authority lie? Centralization and decentralization. To what degree will there be

rules and regulations to direct employees and managers? Formalization. With

these, we could easily follow how organizations grow bigger and more complex

at reach the answers of each question.

The first question tells us about work specialization or division of labor, which

describe the degree to which activities in the organization are divided into

separate jobs. This is essential in dividing jobs into a number of steps, each

completed by a separate individual. More importantly, individuals specialize in

doing part of an activity rather than the entirety.

This work specialization affects the organizational structure’s height and span of

control. Height refers to the number of levels in the organization, from the CEO to

the lower-level associates. Tall hierarchies often create communication

problems, as information moving up and down the hierarchy can be slowed and

distorted as it passes through many different levels. Managers and associates

can be unclear on appropriate actions and behaviors as decisions are delayed

and faulty information is disseminated, causing lower satisfaction and

commitment. Tall hierarchies also are more expensive, as they have more levels

of managers.1 A manager’s span of control is to the number of individuals who

report directly to her. A broad span of control is possible when a manager can

effectively handle many individuals, as is the case when associates have the

skills and motivation, they need to complete their tasks autonomously. Broad

spans have advantages for an organization. 2 First, they result in shorter

hierarchies, thereby avoiding communication and expense problems. Second,

they promote high-involvement management because managers have difficulty

micromanaging people when there are larger numbers of them. Broad spans

allow for structural characteristics and the tangible or physical properties that

determine the basic shape and appearance of an organization’s hierarchy.

To visualize, we must see over time that FedEx had to adopt a new structure in

order to manage its diversified portfolio of services and geographical markets.

The new divisional structure granted significant autonomy to each operating

business (division) with corporate coordination across the divisions to achieve

synergy in offering customers integrated services. FedEx was careful in its

acquisitions to ensure that the acquired firms fit well with its positive customer-

oriented culture. Both organizational structure and culture influence the behavior

of managers and associates and therefore play a critical role in the success of an

organization’s strategy and its overall organizational performance.

After which work specialization had properly done its part in distributing and

dividing labor, they must be grouped so common tasks can be coordinated. The

basis by which jobs are grouped is called departmentalization. If an organization

has multiple products or services or operates in multiple geographical areas, it

can group its resources into divisions. The divisional form offers several benefits,

such as better coordination among individuals in functional areas. Functional

resources have been divided among the divisions, and associates and managers
in the smaller functional departments within each division tend to coordinate with

one another relatively easily. With smaller departments, people tend to be closer

to one another, and there are fewer barriers, either formal or informal, to direct

communication.

It is worth noting that as tasks have become more complex and more diverse

skills have been needed to accomplish those tasks, management has turned to

cross-functional teams. In essence, developed and complex type of

organizational structure that combines both the function and product forms of

departmentalization. These include a complex and uncertain environment (one

with frequent changes), and the need for economies of scale in the use of

internal resources. In relation with this, the organization might have the need to

increase the number of organizational members, which increases the size of the

organization. Most likely, more levels of management as well as departments or

units are being created, therefore, transforming the organization into a more

complex one.

It is said that although the chain of command was once a basic cornerstone in

the design of organizations, it has far less importance today. 3 However,

contemporary managers should still consider its implications. This concept

confers an unbroken line of authority that extends from the top of the

organization to the lowest echelon and clarifies who reports to whom. This also

covers two important aspects: authority and unity of command. Authority refers to
the rights inherent in a managerial position to give orders and expect them to be

obeyed. To facilitate coordination, each managerial position is given a place in

the chain of command, and each manager is given a degree of authority in order

to meet her responsibilities. The principle of unity of command helps preserve

the concept of an unbroken line of authority. It says a person should

have one and only one superior to whom he is directly responsible. If the unity of

command is broken, an employee might have to cope with conflicting

demands or priorities from several superiors, as is often the case in organization

chart dotted-line reporting relationships.

Another thing to consider in describing a complex organization is about

centralization, which refers to the amount of decision-making authority that is

held at the top of the organization. 4 In centralized organizations, top-level

managers retain most authority, leaving less for mid- and lower-level managers

and very little for associates. This is not consistent with high-involvement

management, and research suggests that centralized organizations generally

perform less well.5 On the other hand, the decentralized model of management

and open lines of communication, which has become an essential part of

Google’s organizational culture. And the organizational structure and culture

have helped the firm attract and retain the most talented individuals in the field.

Further, organizations that resemble a bureaucracy tend to also be highly

formalized and centralized. Flexible and decentralized structures with low levels

of formalization where communication lines are more fluid and flexible.

A dynamic and complex organizational environment faces constant change, so

the level of uncertainty increases. The more uncertainty an organization faces,

the more organic the structure should be. Therefore, the practical applications of

our behavioral knowledge in centralization and formalization, line-staff conflicts,

specialization, including role ambiguity and conflict, untrusting behaviors and

among other should be used to reduce job stress and more importantly to help

the organization in a well-ordered and fashionable style that conforms to its

corporate policies and philosophy that deals with perplexing corporate situations.

Setting decision-making authorities also relates to two essential aspects:

standardization and formalization. Standardization refers to the existence of rules

and standard operating procedures. When standardization is high, managers and

associates are expected to follow prearranged approaches to their work. Under

these circumstances, their behavior is very predictable. Formalization is a closely

related phenomenon; it is the degree to which rules and procedures are

documented. Specialization is the degree to which managers and associates

have narrow jobs that use focused skills; usually these jobs offer little variety.

Anyhow, globalization, strategic alliances, customer organization links, and

telecommuting are all examples of practices that reduce external boundaries,

which in turn, if properly managed, transforms a simple organization into a

complex one. Anent with such development, the management must determine an
appropriate organizational form, managers will need to consider scarcity,

dynamism, and complexity of the environment and balance the organic and

mechanistic elements appropriate to their organization’s environment.

Managers must also understand how cultural differences influence organizational

behavior no matter how simple or complex they are in different countries. It is of

great importance that management functions become more complex as the

organization’s activities expand globally, and coordination of decision-making

and organizational issues becomes a necessity. Bear in mind that group behavior

in organizations, particularly in formal and complex organizations, are very

essential in the attainment of its corporate goals and sustaining it. With all these

presuppositions and concepts, we can clearly see and distinguish what a

complex organization must look like in its core.

2. Under what conditions would management likely choose (a) mechanistic

structure (b) an organic structure?

Management has always on the move in making up organizational structures in

the form of formalization, centralization, number of levels in the hierarchy, and

departmentalization that often coexist. As a result, two configurations of

organizational structures, depending on how these elements are presented and

arranged: mechanistic or organic.

To start, mechanistic structures are similar to bureaucracies, as they are highly

formalized and centralized. Communication tends to follow formal channels, and

employees are given specific job descriptions delineating their roles and

responsibilities. Organizations with this structure are often rigid and resist

change, making them unsuitable for being innovative and taking quick action.

These forms have the downside of inhibiting entrepreneurial action and

discouraging the use of individual initiative on the part of employees. Not only do

mechanistic structures have disadvantages for innovativeness, they also limit

individual autonomy and self-determination, which will likely lead to lower levels

of intrinsic motivation on the job.6

Management who opt a centralized mechanistic structure would not allow

managers and associates the freedom to be creative and take the risks

necessary to identify market opportunities and develop innovative products.

Similarly, the culture of the organization must allow for the use of intuition and

risk-taking behaviors because associates and managers should not be afraid of

making errors or failing. To be successful over time, most organizations must be

ambidextrous.

Despite these downsides, mechanistic structures have advantages when the

environment is more stable. When the management focuses its operations to

efficiency, this structure would best suit.

Therefore, in organizations that are trying to maximize efficiency and minimize

costs, mechanistic structures provide advantages. For example, McDonald’s

Corporation has a famously bureaucratic, centralized mechanistic structure in

which employee jobs are highly formalized, with clear lines of communication and

very specific job descriptions. This structure is an advantage for them, because it

allows McDonald’s to produce a uniform product around the world at minimum

cost. Moreover, mechanistic structures tend to be advantageous for new

ventures. New businesses often suffer from a lack of structure, role ambiguity,

and uncertainty. The presence of a mechanistic structure has been shown to be

related to firm performance in new ventures.7

Organic structures, on the other hand, are flexible, decentralized structures with

low levels of formalization or in other term, adhocratic structure. Communication

lines are more fluid and flexible. Employee job descriptions are broader, and

employees are asked to perform duties based on the specific needs of the

organization at the time as well as their own expertise levels. Organizations

structured to this tend to be related to higher levels of job satisfaction on the part

of employees, which is conducive to entrepreneurial behavior and

innovativeness.8 An example of a company that has an organic structure is 3M, a

global science company. The company is strongly committed to decentralization.

At 3M, there are close to 100 profit centers, with each division feeling like a small

company. Each division manager acts autonomously and is accountable for his

or her actions. As operations within each division get too big and a product
created by a division becomes profitable, the operation is spun off to create a

separate business unit. This is done to protect the agility of the company and the

small-company atmosphere.9

In summary, mechanic organizational structure is generally adopted by those

organizations which are not influenced by technological, product or market

changes and generally maintain a constant pattern. It is like bureaucratic model

of organizational structure. However, organic structure is flexible and prone to

frequent changes due to technological, market or product change. Delegation of

authority to various levels, autonomy in work environment and decentralization

are the hallmarks of such organizational structure. When an organization is

planned to be started a micro level, centralized organizational structure is

recommended.

Over time, however, the value of unleashing human capital throughout an

organization became widely recognized. Today, senior leaders in modern

organizations tend to favor organic structures. Although this is positive, given that

organic structures are closely aligned with high-involvement management, there

are situations in which some aspects of this approach are not appropriate.

3. “Employees prefer to work in flat, decentralized organization.” Do you agree or

disagree? Discuss.
It is philosophically said that human beings are condemned to be free. At the

same way, I believe such is imperative in creating a more harmonious and

positive community within a complex organization. To accomplish such, I must

agree that employees must work in an environment that is decentralized and flat.

When we say that the organization is decentralized, what it means is that the

authority for the decision making has been vested in appropriate levels,

depending upon the ability of the individual. In decentralized organizations,

individuals at lower levels are authorized to make decisions pertaining to their

jobs that give them autonomy. Authority does not flow with the same rate to each

of the levels of the organization.

Therefore, a flat organizational structure is ideal to have a decentralized

command and control especially in the present environment where specialization,

information technology, competencies, work teams, work group culture and

systems prevail. This arrangement contributes to their feelings of satisfaction

because it leads them to believe that they can have some important effects on

their organizations. It develops sense of responsibility among employees, cuts

down time, improves productivity, team spirit, motivation and bring ‘we’ feeling

among work groups.

In addition to its flat organization structure or having few layers of management

between associates and top managers and decentralized decision making such
as selection of new associates, the company believes that each employee should

feel a stake in the success of the company.

This approach would make decisions reside in several people, as opposed to

one or just a handful. When power is decentralized, people are allowed to

participate freely in the process of decision making. By contrast, when the power

to make decisions is concentrated in the hands of just a few, employees are

likely to feel powerless and ineffective, thereby contributing to their feelings of

dissatisfaction

To encapsulate, greater decentralization offers employees higher level of job

satisfaction as they feel that they have work autonomy. They can respond to a

particular situation quickly.

This is supported by a research showing that successful organizations have a

number of things in common, one of them being decentralized. 10 This approach is

best suited in people working in research and development positions are likely to

enjoy the autonomy to make decisions that decentralization allows. With this in

mind, many companies heavily involved in research and development—including

parts of Google, Hewlett-Packard (HP), Intel Corporation, and Philips Electronics

— have shifted to more decentralized designs.

Decentralized networks are suitable to the organizations where jobs are complex

and members have to interact with various departments. It is seen that there is

an increasing trend towards decentralization. As a result, organizational charts

might show fewer staff positions, as decision-making authority is pushed farther

down the hierarchy. Many organizations have moved toward decentralization to

promote managerial efficiency and to improve employee satisfaction, which came

from the result of giving people greater opportunities to take responsibility for

their own actions.

FOOTNOTES & CITATIONS:
1
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E.W., & King, J.B. 1996. The systematic distortion of information: An ongoing challenge to management.
Organizational Dynamics, 24 (3): 49–61; Nahm, A.Y., Vonderembse, M.A., & Koufteros, X.A. 2003. The impact
of organizational structure on time-based manufacturing and plant performance. Journal of Operations
Management, 21: 281–306

2
Bohte, J., & Meier, K.J. 2001. Structure and the performance of public organizations: Task difficulty and span of
control. Public Organization Review, 1: 341–354; Worthy, J.C. 1950. Organizational structure and employee
morale. American Sociological Review, 15: 169–179.
3

C. Hymowitz, “Managers Suddenly Have to Answer to a Crowd of Bosses,” Wall Street Journal (August 12,
2003),
p. B1.
4

Mintzberg, H. 1993. Structuring in fi ves: Designing effective organizations. Englewood Cliffs, NJ: Prentice Hall;
Zabojnik, J. 2002. Centralized and decentralized decision making in organizations. Journal of Labor Economics,
20: 1–21.
5

Huber, G.P., Miller, C.C., & Glick, W.H. 1990. Developing more encompassing theories about organizations:
The centralization-effectiveness relationship as an example. Organization Science, 1: 11–40; Tata, J., & Prasad,
S. 2004. Journal of Managerial Issues, 16: 248–265.
6

Burns, T., & Stalker, M. G. (1961).The management of innovation. London: Tavistock; Covin, J. G., & Slevin, D.
P. (1988). The influence of organizational structure. Journal of Management Studies,25, 217–234;
Schollhammer, H. (1982). Internal corporate entrepreneurship. Englewood, NJ: Prentice Hall; Sherman, J. D., &
Smith, H. L. (1984). The influence of organizational structure on intrinsic versus extrinsic motivation. Academy of
Management Journal,27, 877–885; Slevin, D. P., & Covin, J. G. (1990). Juggling entrepreneurial style and
organizational structure—how to get your act together. Sloan Management Review,31(2), 43–53.
7

Sine, W. D., Mitsuhashi, H., & Kirsch, D. A. (2006). Revisiting Burns and Stalker: Formal structure and new
venture performance in emerging economic sectors. Academy of Management Journal,49, 121–132.

8
Burns, T., & Stalker, M. G. (1961). The management of innovation. London: Tavistock; Covin, J. G., & Slevin,
D. P. (1988). The influence of organizational structure. Journal of Management Studies,25, 217–234.
9

Adair, J. (2007). Leadership for innovation: How to organize team creativity and harvest ideas. London: Kogan
Page.
10

Pfeffer, J., & Veiga, J. F. (1999). Putting people first for organizational success. Academy of Management
Executive,13, 37–48.