16

C H A P T E R
S I X T E E N

Organizational
Structure and Design
McGraw-Hill Ryerson 1 © The McGraw-Hill Companies, Inc. 2001
St. Luke’s Organizational Structure

St. Luke’s, the British

advertising agency, is fashioned
after a medieval guild. It has a
very flat, team-based
organizational structure -- just
apprentices and practitioners.
Most employees are company
owners. Committees make
decisions and monitor the firm’s
J. Player, New York Times
performance.

McGraw-Hill Ryerson 2 © The McGraw-Hill Companies, Inc. 2001

Division of Labour & Coordination

Division of labour
– Subdivision of work into
separate jobs assigned to
different people

Coordination of work
– Informal communication
– Formal hierarchy
– Standardization
• Formalization
J. Player, New York Times
• Goals/outputs
• Training/skills

McGraw-Hill Ryerson 3 © The McGraw-Hill Companies, Inc. 2001

Elements of Organizational Structure

Department- Span of
alization Control

Organizational
Structure
Elements

Formalization Centralization

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Span of Control

• Number of people directly

reporting to the next level
• Assumes coordination through
direct supervision
• Wider span of control possible
when:
– with other coordinating methods
– employees perform similar tasks
– tasks are routine

• Flatter structures require narrow

span (if same # of people)

McGraw-Hill Ryerson 5 © The McGraw-Hill Companies, Inc. 2001

Span of Control at Ducks Unlimited
Ducks Unlimited/Darin Langhorst
McGraw-Hill Ryerson
Ducks Unlimited Canada
recently flattened its
organizational structure by
removing layers of
management. The Winnipeg-
based environmental
conservation group wanted
the flatter structure to
empower employees, and let
them make decisions quickly
without having to go up the
hierarchy.
6 © The McGraw-Hill Companies, Inc. 2001
Forces for (De)centralization
(De)centralization

Centralization
• Organizational crises
• Management desire for control
• Increase consistency, reduce costs

• Complexity -- size, diversity

• Desire for empowerment

Decentralization
McGraw-Hill Ryerson 7 © The McGraw-Hill Companies, Inc. 2001
Mechanistic vs
vs.. Organic Structures

Mechanistic Organic

• High formalization • Low formalization

• Narrow span of control • Wide span of control

• High centralization • Low centralization

McGraw-Hill Ryerson 8 © The McGraw-Hill Companies, Inc. 2001

Levy’s Leathers’ Organizational Structure

Thirty years ago, Levy’s

Leathers was the ultimate
simple structure. Dennis Levy
and Jerome MacPherson (left)
made the leather accessories
themselves, then peddled their
wares out of the back of a
truck. Now, as the world’s
largest manufacturer of guitar S. Cameron

straps, the Nova Scotia firm

has a functional structure.

McGraw-Hill Ryerson 9 © The McGraw-Hill Companies, Inc. 2001

Effects of Departmentalization

• Establishes work teams

and supervision structure
• Creates common
resources, measures of
performance, etc
• Encourages informal
communication among
people and subunits S. Cameron

McGraw-Hill Ryerson 10 © The McGraw-Hill Companies, Inc. 2001

Functional Organizational Structure
Organizes employees around skills or
other resources (marketing, production)

President

Finance Production Marketing

McGraw-Hill Ryerson 11 © The McGraw-Hill Companies, Inc. 2001

Divisionalized Structure

Organizes employees around outputs,

clients, or geographic areas

President

Enterprise Laserjet Consumer

Systems Solutions Products

McGraw-Hill Ryerson 12 © The McGraw-Hill Companies, Inc. 2001

Project-Based Matrix Structure
Employees are temporarily assigned to a specific
project team and have a permanent functional unit

President

Engineering Marketing Software

Manager Manager Manager

Project A
Manager

Project B
Manager

Project C
Manager

McGraw-Hill Ryerson 13 © The McGraw-Hill Companies, Inc. 2001

Features of Team-Based Structures

• Self-directed work teams

• Teams organized around work
processes
• Very flat span of control
• Very little formalization
• Usually found within divisionalized
structure

McGraw-Hill Ryerson 14 © The McGraw-Hill Companies, Inc. 2001

Network Organizational Structure

Product Marketing
Development Firm
Firm (U.K.)
(France)
Core
Firm
(Canada)
Customer
Production
Service
Firm
Firm
(China)
(U.S.A.)
Accounting
Firm
(Canada)

McGraw-Hill Ryerson 15 © The McGraw-Hill Companies, Inc. 2001

Types of Organizational Technology

High
Analyzability Assembly Engineering
Line Projects

Low
Analyzability Skilled Scientific
Trades Research

Low High
Variety Variety

McGraw-Hill Ryerson 16 © The McGraw-Hill Companies, Inc. 2001

Org. Environment & Structure

Dynamic Stable
• High rate of change • Steady conditions,
• Use team-based, network, predictable change
or other organic structure • Use mechanistic structure

Complex Simple
• Many elements (such as • Few environmental
stakeholders) elements
• Decentralize • Less need to decentralize

McGraw-Hill Ryerson 17 © The McGraw-Hill Companies, Inc. 2001

Org. Environment & Structure ((con’t)
con’t)

Diverse Integrated
• Variety of products,
• Single product, client,
clients, locations location
• Divisional form aligned
• Don’t need divisional form
with the diversity

Hostile Munificant
• Competition and resource • Plenty of resources and
scarcity product demand
• Use organic structure for • Less need for organic
responsiveness structure

McGraw-Hill Ryerson 18 © The McGraw-Hill Companies, Inc. 2001

 16
C H A P T E R
S I X T E E N

Organizational
Structure and Design
McGraw-Hill Ryerson 19 © The McGraw-Hill Companies, Inc. 2001