Principles of Management

Management Process: P-O-L-C

Topic 5
ORGANIZATIONALCULTURE,
STRUCTURE AND DESIGN

MSc. Giang Nguyen

Learning Programme
Topic Session topic Indicative reading (core text)

1 Topic 1. An introduction to management concepts and theories Ch1 & 2

2 Topic 2. Organization and environment Ch3, Ch4 & Ch8
3 Topic 3. Planning Ch5 & Ch6
4 Topic 4. Decision making Ch7
5 Topic 5. Organizational Structure and design Ch8
6 Topic 6. Human Resource Management Ch9
7 Topic 9. Motivating employees Ch12
8 Topic 11. Power, Influence and Leadership Ch14
9 Topic 12. Organizational communication Ch15
10 Topic 13. Controlling Ch16

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Core text: Kinicki, Angelo & Williams, Brian K. (2013). Management, a practical introduction. (6th Ed.). McGraw-Hill

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 LEARNING OUTCOMES
▰ To define different organizational structures and designs

▰ To understand about basic types of Organizational Structures and

the contingency approach to organization design

▰ To justify the application of organization design

1.6. The Process of Cultural

Change (cont.)
9. Measurable & controllable activities: pay attention to, measure and
control activities, processes or outcomes that can foster a certain culture
10. Organizational structure: The hierarchical structure is more likely to
reinforce a culture oriented toward control and authority.
11. Organizational systems & procedures: increasingly using electronic
networks to increase collaboration among employees along with
innovation, quality, and efficiency.

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PART 2
ORGANIZATIONAL STRUCTURE
AND DESIGN
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CONTENTS

2.1. What is Organizing?

2.2. Purposes of Organizing

2.3. What is Organizational Structure?

2.4. Basic Types of Organizational Structure

2.5. Contingency design

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 2.1. WHAT IS ORGANIZING?
“The management function that determines how the firm’s resources are
arranged and coordinated; the deployment of resources to achieve
strategic goals”

2.1. WHAT IS ORGANIZING?

Organizing includes:
▻ Arranging and structuring work to accomplish organizational goals
▻ Designing an organization’s structure.

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 2.2. PURPOSES OF ORGANIZING

•Divides work to be done into specific jobs and departments.

•Assigns tasks and responsibilities associated with individual jobs.
•Coordinates diverse organizational tasks.
•Clusters jobs into units.
•Establishes relationships among individuals, groups, and departments.
•Establishes formal lines of authority.
•Allocates and deploys organizational resources.

2.3. WHAT IS ORGANIZATIONAL

STRUCTURE?
“The formal system of relationship that determines lines of authority and
the tasks assigned to individuals and units”
An organization chart is a box-and-lines illustration showing the formal
lines of authority and the organization's official positions or work
specializations.

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 2.3. WHAT IS ORGANIZATIONAL
STRUCTURE?
Vertical dimension: who has the authority to make decisions, who is
expected to supervise which subordinates
▰ the chain of command.
▰ the official communication network-who talks to whom.
Horizontal dimension: dividing work into specific jobs and tasks;
assigning jobs into units (departments/teams..)

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Chart—Example for a Hospital

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 2.4. BASIC TYPES OF
ORGANIZATIONAL STRUCTURES
1 The simple structure

2 The functional structure

3 The divisional structure

4 The matrix structure

5 The team-based structure

6 The network structure

7 The conglomerate structure
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8 The hybrid structure

2.4. BASIC TYPES OF

ORGANIZATIONAL STRUCTURES
2.4.1. The simple structure: For the small firm
▰ No formal departments and layers of management
▰ Centralized authority in a single person
▰ A flat hierarchy
▰ Few rules
▰ Low work specialization

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 2.4. BASIC TYPES OF
ORGANIZATIONAL STRUCTURES
2.4.1. The simple structure: For the small firm

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2.4. BASIC TYPES OF

ORGANIZATIONAL STRUCTURES
2.4.1. The simple structure:

Advantages Disadvantages

ü fast ü not appropriate as

ü inexpensive to organization grows
maintain ü risky
ü clear accountability

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 2.4. BASIC TYPES OF
ORGANIZATIONAL STRUCTURES
2.4.2. The functional structure: grouping by similar work specialties
People with similar occupational specialties are put together in formal
groups Chairman

Production Director Sales HR Finance

Director Director Director

Manufacturing Purchasing Retail Sales Wholesale Recruitment Training Finance

Manager Manager Manager Sales Manager Manager Manager
Manager

Supervisor Supervisor Asst North South Wholesale Operative Management Cashier

1 2 Purchaser Rep Rep Rep Trainer Development

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2.4. BASIC TYPES OF

ORGANIZATIONAL STRUCTURES
2.4.2. The functional structure: grouping by similar work
specialties
Advantages Disadvantages
ü efficient ü a lack of
ü similar people communication and
grouped coordination across
ü career structure functions
ü economies of scale ü losing the total
system perspective

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 2.4. BASIC TYPES OF
ORGANIZATIONAL STRUCTURES
2.4.3. The divisional structure: grouping by similarity of purpose

Customer/
Clients

Products/ Geographic
Services regions

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2.4. BASIC TYPES OF

ORGANIZATIONAL STRUCTURES
2.4.3. The divisional structure
2.4.3.1. Product Divisional structure
Group activities around similar products or services

A
magazines movies Movies & Retail
broadcast
TV stores
network
Amuseme
Cable Music Theaters
recordings nt parks
television

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 Product Divisional structure

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2.4. BASIC TYPES OF

ORGANIZATIONAL STRUCTURES
2.4.3. The divisional structure
2.4.3.2. Customer Divisional structure
Group activities around common customers or clients

Large
Passenger-car
trucking
dealers
customers

Farm products
customers

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 Customer Divisions

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2.4. BASIC TYPES OF

ORGANIZATIONAL STRUCTURES
2.4.3. The divisional structure
2.4.3.3. Geographic Divisional structure
Group activities around defined regional locations

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 Geographical Divisions

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2.4. BASIC TYPES OF

ORGANIZATIONAL STRUCTURES
2.4.3. The divisional structure

Advantages Disadvantages
ü Focuses on results – ü duplication
division managers
are responsible for
what happens to their
products and services
ü clear costs

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 2.4. BASIC TYPES OF
ORGANIZATIONAL STRUCTURE
2.4.4. The matrix structure: combines functional and divisional chains
of commands in a grid so that there are two command structures –
vertical and horizontal

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2.4. BASIC TYPES OF

ORGANIZATIONAL STRUCTURES
2.4.4. The matrix structure

Advantages Disadvantages
ü functions & divisions ü confusion two bosses
coordinated without
ü time to plan & coordinate
duplication
ü varied work - wide experience
ü high worker participation
ü rich contacts - flexible

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 2.4. BASIC TYPES OF
ORGANIZATIONAL STRUCTURES
2.4.5. The team-based structure (horizontal design): eliminating
functional barriers to solve problems
✓ Teams or workgroups, either temporary or permanent, are used
to improve collaboration and work on shared tasks by breaking
down internal boundaries
✓ To improve horizontal relations

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Functional
President
structure
Vice
Vice Vice Vice
President,
President, President, President,
Research &
Design Engineering Marketing
Development

Project Product Team Product Team Product Team

Manager, Manager, Manager,
teams Manufacturing Manufacturing Manufacturing
Light Trucks Sedans Sport Cars

Project
team
members 30

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 2.4. BASIC TYPES OF
ORGANIZATIONAL STRUCTURES
2.4.5. The team-based structure

Advantages Disadvantages
ü weakening of ü many meetings
functional ü disorient senior
boundaries managers
ü understanding of
other functions

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2.4. BASIC TYPES OF

ORGANIZATIONAL STRUCTURES
2.4.6. The network structure/hollow structure: connecting a central
core to outside firms by computer connections

▰ the organization has a central core of key functions and outsources

other functions to vendors who can do them cheaper or faster

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 2.4. BASIC TYPES OF
ORGANIZATIONAL STRUCTURES
2.4.6. The network structure

Advantages Disadvantages
ü Highly flexible and responsive. ü Lack of control.
ü Utilizes talent wherever it’s ü Communication difficulties
found

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2.4. BASIC TYPES OF

ORGANIZATIONAL STRUCTURES
2.4.7. The conglomerate structure: grouping by industry
Large-scale variant on the divisional structure
Large company doing business in different, quite unrelated areas

Retails Telecom Education

Cable Real estate

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 2.4. BASIC TYPES OF
ORGANIZATIONAL STRUCTURES
2.4.7. The conglomerate structure

Advantages Disadvantages
ü a reduction of investment risk ü extra layers of management
ü an internal capital market increase costs
ü culture clashes

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2.4. BASIC TYPES OF

ORGANIZATIONAL STRUCTURES
2.4.8. The hybrid structure: uses functional and divisional structures in
different parts of the same organization

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2.5. CONTINGENCY DESIGN: FACTORS
IN CREATING THE BEST STRUCTURE
“What factors affect the design of an organization’s structure?”
▰ Environment—mechanistic versus organic
▰ Environment—differentiation versus integration
▰ Size
▰ Technology
▰ The process of fitting the organization to its environment is called
contingency design

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2.5.1. THE ENVIRONMENT: MECHANISTIC

VS ORGANIC ORGANIZATION
▰ Mechanistic Organizations (or bureaucracy): when Rigidity &
Uniformity work best
➢ Centralized authority
➢ Tasks & rules clearly specified
➢ Employees closely supervised
➢ Bureaucratic (rigid rules, top-down communication)
➢ Work best in Stable environment

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2.5.1 THE ENVIRONMENT: MECHANISTIC
VS ORGANIC ORGANIZATION
▰ Organic Organizations: when Looseness & Flexibility work
best
➢ Decentralized authority
➢ Fewer rules & procedures
➢ Networks of employees are encouraged to cooperate and
respond quickly to unexpected tasks

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2.5.2. THE ENVIRONMENT:

DIFFERENTIATION VS INTEGRATION
▰Differentiation: when Forces Push the Organization apart
▻The tendency of the parts of an organization to disperse and
fragment.
▻The more subunits into which an organization breaks down, the
more highly differentiated it is.
▰Integration: when Forces Pull the Organization together
▻The tendency of the parts of an organization to draw together to
achieve a common purpose.
▻The means for achieving integration: a formal chain of command,
standardization of rules and procedures, and use of cross-functional
teams and computer networks 42

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 2.5.3. SIZE

▰ Is measured by the number of full-time employees

▰ the larger the organization, the more mechanistic
▰ small firms tend to be more organic

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2.5.4. TECHNOLOGY

▰ Consists of all tools and ideas for transforming materials, data,

or labor (inputs) into goods or services (outputs)
▰ 3 forms in increasing level of complexity:
▻ Small-batch technology: the least complex technology, custom-
made products, organic organizations
▻Large-batch technology: mass production, assembly-line
technology, mechanized organizations
▻ Continuous-process technology: highly routinized technology,
organic organizations

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 2.5.5. LIFE CYCLE

▰ Life Cycle:
▻ The Birth Stage: nonbureaucratic
▻ The Youth Stage: prebureaucratic
▻ The Midlife Stage: bureaucratic
▻ The Maturity Stage: very bureaucratic

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2.5.5. LIFE CYCLE

Stage 1: The Birth Stage-Nonbureaucratic

▰ the stage in which the organization is created.
▰ No written rules and little if any supporting staff beyond
perhaps a secretary.
Stage 2: The Youth Stage-Prebureaucratic
▰ a stage of growth and expansion
▰ some division of labor and setting of rules are being instituted.
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2.5.5. LIFE CYCLE

Stage 3. The Mid life Stage-Bureaucratic

▰ a period of growth evolving into stability
▰ formalized bureaucratic structure, staffs of specialists,
decentralization of functional divisions, and many rules.
Stage 4. The Maturity Stage-Very Bureaucratic
▰ very bureaucratic, large, and mechanistic
▰ lack of flexibility and innovation.
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Question
In the Mary Kay Cosmetics Co., the best salespeople receive pink
Cadillacs in special awards ceremonies. This is an example of a:
A. Symbol
B. Value
C. Rite or ritual
D. Both A and C

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 Question
The United Way, a charitable organization, is considered a ______
organization.
A. For-profit
B. Nonprofit
C. Mutual-benefit
D. May be any one of the above

Question
XYZ Hospital has a Chief of Medical Services, a Director of
Administrative Services, and a Director of Outpatient Services. XYZ
has a ___________ structure.
A. Functional
B. Simple
C. Divisional
D. Matrix

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 EXERCISE

▰ Name the organization that interests you. Draw a structure

diagram of the organization? Identify the strengths and
weaknesses of the above structure
▰ Hints: It is recommended to name the organization, function,
field of activity, strategic objectives of that organization.
Attributes to be analyzed: specialization; the division of labor;
powers and responsibilities; levels of management; centralization
- decentralization; coordination

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Terms to Know

▰organizing ▰customer division ▰simple structure

▰organizational ▰cross-functional teams ▰functional structure
structure ▰Duplication ▰divisional structure
▰organizational design ▰Internal capital ▰team structure
▰work specialization ▰Investment risk ▰matrix structure
▰Deployment ▰employee ▰Hierachical structure
▰Diverse tasks empowerment
▰functional ▰mechanistic
▰product division organization
▰geographical division ▰organic organization 52

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