Human Behavior in the Organization

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CHAPTER 11: Designing Effective Organizations

Learning Objectives:
 Define organizational structure.
 Distinguish between five aspects of organizational
structure that are represented in an organization chart.
 Distinguish between functional organizations, product
organizations, and matrix organizations.
 Describe the new form of organization known as the
horizontal organization.
 Define organizational design.
 Distinguish between classical and neoclassical
approaches to organizational design.
 Describe the contingency approach to organizational
design.
 Describe the boundary less organization.
 Explain the differences between the five organizational
forms identified by Mintzterg.
 Identify two different types of interorganizational
designs.

STRUCTURAL DIMENSIONS OF ORGANIZATIONS

- One cannot directly see the structure of an organization; it is an abstract
concept. However, the connections between various clusters of functions of
which an organization is composed can be represented in the form of a
diagram known as an organization chart. Specifically, an organization chart
may be considered a representation of an organization's internal structure.
Organization charts are useful tools for specifying how various tasks or
functions are interrelated within organizations.
- Strictly speaking, one cannot directly see the structure of an organization; it is
an abstract concept. However, the connections between various clusters of
functions of which an organization is composed can be represented in the
form of a diagram known as an organization chart. Specifically, an
organization chart may be considered a representation of an organization's
internal structure. Organization charts are useful tools for specifying how
various tasks or functions are interrelated within organizations.

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A.) Hierarchy of Authority - Organization charts provide information about who
reports to whom – what is known as hierarchy of authority. Such diagrams reveal
which particular lower-level employees are required to report to which particular
individuals immediately above them in the organizational hierarchy
B.) Division of Labor - The standard organization chart reflects the fact that the
many tasks to be performed within an organization are divided into specialized
jobs, a process known as division of labor. The more tasks are divided into
separate jobs, the more those jobs are specialized and the narrower the range of
activities incumbents are required to perform.
C.) Span of Control - Exactly how many individuals should a manager be
responsible for? The earliest management theorists and practitioners alike,
dating back to the Roman legions, addressed this question. When you examine
an organization chart, the number of people formally required to report to each
individual manager is immediately clear. This number constitutes what is known
as a manager's span of control. Those responsible for many individuals are said
to have a wide span of control, whereas those responsible for fewer are said to
have a narrow span of control.
D.) Line Versus Staff Positions - The organization chart shown in Exhibit 1
reveals an additional distinction that should be highlighted – that between line
positions and staff positions. People occupying line positions (e.g., the various
vice presidents and managers) have decision-making power. In contrast, the
individual shown in the dotted box—the legal counsel—cannot make decisions,
but provides advice and recommendations to be used by the line managers.
E.) Comparing Span of Control in Organizational Charts - One of the easiest
things to determine about a company by looking at its organization chart is its
span of control.
F.) Decentralization - This process of delegating power from higher to lower levels
within organizations is known as decentralization. It is the opposite of
centralization, the tendency toward allowing only a few powerful individuals or
groups to hold most of the decision-making power. Recent years have seen a
marked trend toward increasing decentralization. As a result, organization charts

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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 (the result of
giving people greater opportunities to take responsibility for their own actions).

DEPARTMENTALIZATIONS: WAYS OF STRUCTURING ORGANIZATIONS

- Organizations can be divided up not only by function, but also by product or
market, or by a combination of both. We will now take a closer look at these
various ways of breaking up organizations into coherent units—that is, the
process of departmentalization.
A.) Functional Organizations: Departmentalization by Task - Because it is the
form organizations usually take when they are first created, and because it is
how we usually think of organizations, the functional organization can be
considered the most basic approach to departmentalization. Essentially,
functional organizations departmentalize individuals according to the functions
they perform, with people who perform similar functions assigned to the same
department.
B.) Product Organizations: Departmentalization by Type of Output -
Organizations – at least successful ones – do not stand still; they constantly
change in size and scope. As they develop new products and seek new
customers, they might find that a functional structure doesn't work as well as it
once did.
C.) Matrix Organization: Departmentalization by Both Function and Product -
the type of organization in which an employee is required to report to both a
functional (or division) manager and the manager of a specific project (or
product). In essence, they developed a complex type of organizational structure
that combines both the function and product forms of departmentalization.
D.) The Horizontal Organization: Structuring by Process - If the experts are right,
we are in store for a new way of structuring work in tomorrow's organizations –
one that means more than just tinkering with the boxes on an organization chart.
Enter the horizontal organization—an approach advocated by many

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organizational experts, and touted by consultants, as "the first real, fundamentally
different, robust alternative" to the functional organization.

ORGANIZATIONAL DESIGN: COMBINING THE STRUCTURAL ELEMENTS OF

ORGANIZATIONS
- We began this chapter by likening the structure of an organization to the
structure of a house. Now we are prepared to extend that analogy for
purposes of introducing the concept of organizational design. Just as a house
is designed in a particular fashion by combining its structural elements in
various ways, so too can an organization be designed by combining its basic
elements in certain ways. Accordingly, organizational design refers to the
process of coordinating the structural elements of organizations in the most
appropriate manner.
A.) Classical and Neoclassical Approaches: The Quest for the One Best Design
- It is not difficult to realize that for organizations to function effectively, their
designs must not be static, but dynamic—changing in response to various
conditions (e.g., governmental regulations, competition, and so on.). As obvious
as this may be to us today, the earliest theorists interested in organizational
design paid little attention to the need for organizations to be flexible. Instead,
they approached the task of designing organizations as a search for "the one
best way," seeking to establish the ideal form for all organizations under all
conditions – the universal design.
B.) The Contingency Approach: Design Based on Environmental Conditions -
The Contingency Approach: Design Based on Environmental Conditions
Today, it is widely believed that the best design for an organization depends on
the nature of the environment (e.g., the economy, geography, labor markets) in
which the organization is operating. This is known as the contingency approach
to organizational design. Although many features of the environment may be
taken into account when considering how an organization should be designed, a
key determinant appears to be how stable (unchanging) or unstable (turbulent)
the environment is.

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C.) Designs for Stable Versus Turbulent Conditions - If you've ever worked at a
McDonald's restaurant, you probably know how highly standardized each step of
the most basic operations must be. Boxes of fries are to be stored two inches
from the wall in stacks one inch apart. Making those fries is another matter – one
that requires nineteen distinct steps, each of which is clearly laid out in a training
film shown to new employees.
D.) Testing the Contingency Approach - Research supports the idea that
organizational effectiveness is related to the degree to which an organization's
structure (mechanistic or organic) is matched to its environment (stable or
turbulent). Rather than specifying which structure is best, the contingency
approach specifies when each type of organizational design is most effective.
(Although it has not yet been tested, it is an intriguing idea that the effectiveness
of each form also is related to people's feelings about that type of organization.
E.) Mintzberg’s Framework: Five Organizational Forms - Although the distinction
between mechanistic and organic designs is important, it is not terribly specific
with respect to exactly how organizations should be designed. Filling this void,
however, is the work of contemporary organizational theorist, Henry Mintzberg.
Specifically, Mintzberg claims that organizations are composed of five basic
elements, or groups of individuals, any of which may predominate in an
organization. The one that does will determine the most effective design in that
situation.
a. Five Basic Elements
i. Operating core: Employees who perform the basic work related to
the organization's product or service. Examples include teachers (in
schools) and chefs and waiters (in restaurants).
ii. Strategic apex: Top-level executives responsible for running the
entire organization. Examples include the entrepreneur who runs
her own small business, and the general manager of an automobile
dealership.
iii. Middle line: Managers who transfer information between the
strategic apex and the operating core. Examples include middle

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managers, such as regional sales managers (who connect top
executives with the sales force) and the chair of an academic
department in a college or university (an intermediary between the
dean and the faculty).
iv. Technostructure: Those specialists responsible for standardizing
various aspects of the organization's activities. Examples include
accountants and auditors, and computer systems analysts.
v. Support staff: Individuals who provide indirect support services to
the organization. Examples include consultants on technical
matters, and corporate attorneys.
F.) Simple Structure - Imagine that you open up an antique shop and hire a few
people to help you out around the store. You have a small, informal organization
in which there is a single individual with the ultimate power. There is little in the
way of specialization or formalization, and the overall structure is organic in
nature. The hierarchy is quite flat, and all decision-making power is vested in a
single individual – you. An organization so described, simple in nature, with the
power residing at the strategic apex, is referred to by Mintzberg as having a
simple structure.
G.) Machine Bureaucracy - If you've ever worked for your state's department of
motor vehicles, you probably found it to be a very large place, with numerous
rules and procedures for employees to follow. The work is highly specialized
(e.g., one person gives the vision tests, and another completes the registration
forms), and decision-making is concentrated at the top (e.g., you need to get
permission from your supervisor to do anything other than exactly what's
expected). This type of work environment is highly stable, and does not have to
change. An organization so characterized, where power resides with the
technostructure, is referred to as a machine bureaucracy. Although machine
bureaucracies can be highly efficient at performing standardized tasks, they tend
to be dehumanizing and very boring for the employees.
H.) Professional Bureaucracy - Suppose you are a doctor working at a large city
hospital. You are a highly trained specialist with considerable expertise in your

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field. You don't need to check with anyone else before authorizing a certain
medical test or treatment for your patient; you make the decisions as they are
needed, when they are needed. At the same time, the environment is highly
formal (e.g., there are lots of rules and regulations for you to follow). Of course,
you do not work alone; you also require the services of other highly qualified
professionals, such as nurses and laboratory technicians.
I.) Divisional Structure - When you think of large organizations, such as General
Motors, DuPont, Xerox, and IBM, the image that comes to mind is probably
closest to what Mintzberg describes as divisional structure. Such organizations
consist of a set of autonomous units coordinated by a central headquarter (i.e.,
they rely on departmental structure based on products).
J.) Adhocracy - After graduating from college, where you spent years learning how
to program computers, you take a job at a small software company. Compared to
your friends who found positions at large accounting firms, your professional life
is much less formal. You work as a member of a team developing a new time-
management software product. There are no rules, and schedules are made to
be broken. You all work together, and although there is someone who is
"officially" in charge, you'd never know it. Using Mintzberg's framework, you work
for an adhocracy – an organization in which power resides with the support staff.
K.) The Boundaryless Organization: A New Corporate Architecture - You hear it
all the time: Someone is asked to do something, but responds defiantly, saying,
"It's not my job." As uncooperative as this may seem, such a comment may make
a great deal of sense when it comes to the traditional kind of organizational
structures we've been describing – ones with layers of carefully connected boxes
neatly stacked atop each other in hierarchical fashion. The advantage of these
types of organizations is that they clearly define the roles of managers and
employees. Everyone knows precisely what he or she is supposed to do. The
problem with such arrangements, however, is that they are inflexible. As a result,
they do not lend themselves to the rapidly changing conditions in which today's
organizations operate.

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L.) Modular Organizations - Many of today's organizations outsource noncore
functions to other companies while retaining full strategic control over their core
business. Such companies may be thought of as having a central hub
surrounded by networks of outside specialists that can be added or subtracted as
needed. As such, they are referred to as modular organizations.
M.) Virtual Organizations - Another approach to the boundaryless organization is
the virtual organization. Such an organization is composed of a continually
evolving network of companies (e.g., suppliers and customers) that are linked
together to share skills, costs, and access to markets. They form a partnership to
capitalize on their existing skills, pursuing common objectives. Then, after these
objectives have been met, they disband. Unlike modular organizations, which
maintain close control over the companies with which they do outsourcing, virtual
organizations give up some control and become part of a new organization, at
least for a while.

INTERORGANIZATIONAL DESIGNS: GOING BEYOND THE SINGLE

ORGANIZATION
- All the organizational designs we have examined thus far have concentrated
on the arrangement of units within an organization – what may be termed
interorganizational designs. However, sometimes parts of different
organizations must operate jointly. To coordinate their efforts on such
projects, organizations must create interorganizational designs, plans by
which two or more organizations come together. Two such designs are
commonly found: conglomerates and strategic alliances.
A.) Conglomerates: Diversified “Megacorporation” - When an organization
diversifies by adding an entirely unrelated business or product to its
organizational design, it may be said to have formed a conglomerate. Some of
the world's largest conglomerates may be found in the Asia.
B.) Strategic Alliances: Joining Forces for Mutual Benefit - A strategic alliance is
a type of organizational design in which two or more separate firms join their
competitive capabilities to operate a specific business. The goal of a strategic
alliance is to provide benefits to each individual organization that could not be

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attained if they operated separately. They are low-risk ways of diversifying
(adding new business operations) and entering new markets. Some companies,
such as GE and Microsoft have strategic alliances with many others. Some
alliances last only a brief time, whereas others have remained in existence for
well over twenty years, and are still going strong. Three major types of strategic
alliances may be identified.

REFERENCES:

Jones, G.R. and Gorge, J.M. Understanding and Managing

Organizational Behavior, McGraw Hill, 2016. https://g.co/kgs/3u5fqv

Griffin, Ricky W. and Gregory Moorehead, Organizational Behavior,

Managing People and Organizations. South-Western Cengage
Learning. 2014

Newstrom, John W., Organizational Behavior, Human Behavior at Work;

McGraw Hill Companies Inc., 2011.

LINKS
TOPICS LINKS FOR VIDEO
Structural Dimensions of Organizations https://youtu.be/wO_-MtWejRM

Departmentalizations: Ways of Structuring https://youtu.be/MPRyJ0HKW60

Organizations
Organizational Design: Combining the https://youtu.be/dXHPqYGWIkg
Structural Elements of Organizations
Interorganizational Designs: Going Beyond https://youtu.be/VfeyMh3K4oE
the Single Organization

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