Contemporary Management.

CH: 11

Eslsca School of Business - Dr. Marwan El Messiry Contemporary Management 2020 1

What are the Differences between
Organizing, Organizational Structure,
and Organizational Design?

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Designing Organizational Structure
Organizational Design
Is a step-by-step methodology which identifies
dysfunctional aspects of workflow, procedures,
structures and systems, realigns them to fit current
business realities/goals and then develops plans to
implement the new changes

Organizing Org. Structure

Arranging and structuring The formal arrangement

work to accomplish an of jobs within an
organization’s goals. organization.

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 Purposes of Organizing

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 Designing Organizational Structure
▪Organizational chart – the visual representation of an
organization’s structure.
▪Organizational Design – a process involving decisions about
six key elements:

• Work specialization
• Departmentalization
• Chain of command
• Span of control
• Centralization & decentralization
• Formalization
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 Organizational Structure
Work Specialization – dividing work activities into separate job tasks.
o Early proponents of work specialization believed it could lead to great
increases in productivity.
o Overspecialization can result in human diseconomies such as boredom,
fatigue, stress, poor quality, increased absenteeism, and higher
turnover.

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Economies & Diseconomies of Work Specialization

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 Departmentalization
Departmentalization – the basis by which jobs are grouped together.

Type Description
Process Grouping jobs based on product or customer flow
Customer Grouping jobs by type of customer and needs.
Product Grouping jobs by product line
Functional Grouping jobs by functions performed
Geographical Grouping jobs based on territory or geography

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 The Five Common
Forms of Departmentalization

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 The Five Common
Forms of Departmentalization (CONT.)

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 The Five Common
Forms of Departmentalization (CONT.)

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 Departmentalization Trends

❑ Increasing use of customer

departmentalization

❑ Cross-functional team
a work team composed of individuals
from various functional specialties.

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 Chain of Command
Chain of Command – the continuous line of authority that extends
from upper levels of an organization to the lowest levels of the
organization—clarifies who reports to whom.

Authority
Authority – the rights inherent in a managerial position to tell people
what to do and to expect them to do it.
oAcceptance theory of authority – the view that authority
comes from the willingness of subordinates to accept it.

▪Line authority – authority that entitles a manager to direct the work

of an employee.
▪Staff authority – positions with some authority that have been
created to support, assist, and advise those holding line authority.

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Chain of Command and Line Authority

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Line Versus Staff Authority

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 Responsibility and Unity of Command
Responsibility – the
obligation or expectation to
perform.

Span Of Control – the number of

employees who can be effectively
and efficiently supervised by a
manager

Unity of command – the

management principle that each person
should report to only one manager.
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Contrasting Spans of Control

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 Centralization & Decentralization
▪ Centralization
the degree to which decision-making is concentrated at
the upper levels of the organization. ▪ Employee empowerment
giving employees more authority (power) to make
▪ Decentralization decisions.
the degree to which lower-level employees provide
input or make decisions.

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 Centralization or Decentralization

FACTORS
• Environment
• Lower level
managers
capability
• Decision making
• Crisis or risk
• Company size
• Implementation

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 Formalization

Formalization
the degree to which jobs within the organization are
standardized and the extent to which employee
behavior is guided by rules and procedures.
o Highly formalized jobs offer little discretion over what
is to be done.
o Low formalization means fewer constraints on how
employees do their work.

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 Mechanistic & Organic Structures

Mechanistic Organization

an organizational design
that’s rigid and tightly
controlled.

Organic Organization

an organizational design
that’s highly adaptive and
flexible.

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Contingency Factors Affecting Structural Choice

A contingency factor is

▪ anything that cannot be

accurately predicted or
forecast in the future.

A contingency is the
unexpected, or things that
are out of your control.
Natural disasters, economic
crisis and other major events
all fall into this category.

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Contingency Factors Affecting Structural Choice

VS.
Strategy Structure

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Contingency Factors Affecting Structural Choice

Strategy & Structure

o Changes in corporate strategy should lead to changes in an
organization’s structure that support the strategy.
o Certain structural designs work best with different
organizational strategies.
• The organic structure works well for organizations pursuing
meaningful and unique innovations.
• The mechanistic organization works best for companies wanting
to tightly control costs.

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 Contingency Factors (cont.)
Size & Structure
as an organization grows larger, its structure tends to change from organic to
More control and
mechanistic with increased specialization, departmentalization, efficiency needed
centralization, and rules/regulations.
Technology & Structure
o Organizations adapt their structures to their technology.
o Woodward’s classification of firms based on the complexity of the
technology employed:
• Unit production of single units or small batches.
• Mass production of large batches of output.
• Process production in continuous process of outputs.

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Woodward’s Findings on Technology and
Joan Woodward Structure

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 Contingency Factors (cont.)

Environmental Uncertainty & Structure

o Mechanistic organizational structures tend to be most effective in stable and simple
environments.
o The flexibility of organic organizational structures is better suited for dynamic and
complex environments.

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 Traditional Organizational Designs

Simple Structure Functional Structure Divisional Structure

an organizational design with
low departmentalization,
wide spans of control,
centralized authority, and
little formalization.
an organizational design that an organizational structure made
groups together similar or up of separate, semiautonomous
related occupational units or divisions.
specialties.

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Traditional Organizational Designs

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