Because learning changes everything.

Chapter 10
Managing Organizational
Structure and Culture

© 2022 McGraw Hill. All rights reserved. Authorized only for instructor use in the classroom. No
reproduction or further distribution permitted without the prior written consent of McGraw Hill.
 Learning Objectives
1. Identify the factors that influence managers’ choice of an
organizational structure.
2. Explain how managers group tasks into jobs that are motivating
and satisfying for employees.
3. Describe the types of organizational structures managers can
design, and explain why they choose one structure over
another.
4. Explain why managers must coordinate jobs, functions, and
divisions using the hierarchy of authority and integrating
mechanisms.
5. List the four sources of organizational culture, and explain why
and how a company’s culture can lead to competitive
advantage.

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 Organizational Structure
Organizational architecture:
• The organizational structure, control systems,
culture, and human resource management
systems that together determine how efficiently
and effectively organizational resources are used.

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 Designing Organizational Structure 1

Organizing:
• Process by which managers establish the structure of
working relationships among employees to allow them to
achieve an organization’s goals efficiently and effectively.

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 Designing Organizational
Structure 2

Organizational
structure:
• Formal system of task
and reporting
relationships that
coordinates and
motivates organizational
members so they work
together to achieve
organizational goals.
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 Designing Organizational
Structure 3

Organizational design:
• The process by which managers create a specific
type of organizational structure and culture so that
a company can operate in the most efficient and
effective way.

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 Figure 10.1 Factors Affecting
Organizational Structure

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 Designing Organizational
Structure 4

The way an organization’s structure works

depends on the choices managers make
about:
1. How to group tasks into individual jobs.
2. How to group jobs into functions and
divisions.
3. How to allocate authority and coordinate
functions and divisions.

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 Grouping Tasks into Jobs:
Job Design
Job design:
• Job design is the process by which managers
decide how to divide tasks into specific jobs
(division of labor).
• The appropriate division of labor results in an
effective and efficient workforce.

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 Job Design
Job simplification:
• The process of reducing the number of tasks that
each worker performs.
Job enlargement:
• Increasing the number of different tasks in a given
job by changing the division of labor.
Job enrichment:
• Increasing the degree of responsibility a worker
has over a job.

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 Job Enrichment
1. Empowering workers to experiment to find
new or better ways of doing the job.
2. Encouraging workers to develop new skills.
3. Allowing workers to decide how to do the
work.
4. Allowing workers to monitor and measure
their own performance.

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 The Job Characteristics Model 1

Skill variety:
• Employee uses a wide range of skills.
Task identity:
• Worker is involved in all tasks of the job from
beginning to end of the production process.
Task significance:
• Worker feels the task is meaningful to the
organization.

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 The Job Characteristics Model 2

Autonomy:
• Employee has freedom to schedule tasks and
carry them out.
Feedback:
• Worker gets direct information about how well the
job is done.

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 Grouping Jobs into Functions
Functional structure:
• Organizational structure composed of all the
departments that an organization requires to to
produce its goods or services.

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 Figure 10.2 The Functional
Structure of the Home Depot

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 Functional Structure 1

Advantages:
• Encourages learning from others doing similar
jobs.
• Easy for managers to monitor and evaluate
workers.
• Allows managers to create the set of functions
they need in order to scan and monitor the
competitive environment.

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 Functional Structure 2

Disadvantages:
• Difficult for departments to communicate with
others.
• Preoccupation with own department and losing
sight of organizational goals.

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 Divisional Structures: Product,
Market, and Geographic
Divisional structure:
• An organizational structure composed of separate
business units within which are the functions that
work together to produce a specific product for a
specific customer.

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 Figure 10.3 Product, Geographic,
and Market Structures

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 Types of Divisional Structures 1

Product structure:
• Managers place each distinct product line or
business in its own self-contained division.
• Divisional managers have the responsibility for
devising an appropriate business-level strategy to
allow the division to compete effectively in its
industry or market.
• GlaxoSmithKline groups research into 8 product
divisions to focus on particular clusters of
diseases.

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 Product Structure
Advantages:
• Allows functional managers to specialize in one product
area.
• Allows division managers to become experts in their area.
• Removes need for direct supervision of division by
corporate managers.
• Allows divisional management to improve the use of
resources.
• Puts divisional managers close to customers for a quick
and appropriate response.

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 Types of Divisional Structures 2

Geographic structure:
• Divisions are broken down by geographic location.

Global geographic structure:

• Managers locate different divisions in each of the
world regions where the organization operates.
• This generally occurs when managers are
pursuing a multidomestic strategy.

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 Figure 10.4 Global Geographic
and Global Product Structures

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 Types of Divisional Structures 3

Market structure
• Groups divisions according to the particular kinds
of customers they serve.
• Allows managers to be responsive to the needs of
their customers and act flexibly in making
decisions in response to customers’ changing
needs.

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 Matrix Structure
• A matrix structure is an organizational structure
that simultaneously groups people and resources
by function and product.
• The structure is very flexible.
• Each employee has two bosses.

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 Figure 10.5 Matrix Structure
Figure 10.5
Matrix and Product Team Structures

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 Product Team Structure 1

Product team structure:

• Structure in which employees are permanently
assigned to a cross-functional team and report
only to the product team manager or to one of the
manager’s direct subordinates.
• Does away with dual reporting relationships and
two-boss managers.

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 Product Team Structure 2

Cross-functional team:
• A group of managers brought together from
different departments to perform organizational
tasks.
• Example: Northwestern Mutual’s work on
redesigning visuals for customers.

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 Figure 10.5 Product Team Structure

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 Allocating Authority 1

Authority:
• Power to hold people accountable for their actions
and to make decisions concerning the use of
organizational resources.
Hierarchy of authority:
• An organization’s chain of command, specifying
the relative authority of each manager.

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 Allocating Authority 2

Span of control:
• The number of subordinates who report directly to
a manager.

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 Allocating Authority 3

Line manager:
• Someone in the direct line or chain of command
who has formal authority over people and
resources at lower levels.
Staff manager:
• Someone responsible for managing a specialist
function, such as finance or marketing.

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 Tall and Flat Organizations 1

Tall structures have many levels of authority

and narrow spans of control.
• As hierarchy levels increase, communication gets
difficult, creating delays in the time being taken to
implement decisions.
• Communications can also become distorted as
they are repeated through the firm.
• Tall structures can become expensive.

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 Tall Organizations

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 Tall and Flat Organizations 2

Flat structures have fewer levels and wide

spans of control.
• Results in quick communications but can lead to
overworked managers.

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 The Minimum Chain of Command
The organizing principle:
• Top managers should always construct a
hierarchy with the fewest levels of authority
necessary to efficiently and effectively use
organizational resources.
• David Novak of Yum Brands: aGOLead.
• Plexus Corp.: Empowered work teams.

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 Centralization and
Decentralization of Authority
Decentralizing authority:
• Giving lower-level managers and non-managerial
employees the right to make important decisions
about how to use organizational resources.
• Flexible and responsive.

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 Figure 10.8 Types and Examples
of Integrating Mechanisms

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 Organizational Culture 1

Organizational culture:
• The shared set of beliefs, expectations, values,
and norms that influence how members of an
organization relate to one another and cooperate
to achieve organizational goals.
• Organizational values: The shared standards that
its members use to evaluate whether they have
helped the company achieve its vision and goals

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 Organizational Culture 2

Organizational culture:
• Organizational norms: Specify or prescribe the
kinds of shared beliefs, attitudes, and behaviors
that its members should observe and follow.
• Informal, but powerful, rules about how employees
should behave or conduct themselves.

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 Figure 10.9 Sources of an
Organization’s Culture

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 Organizational Culture 3

Organizational ethics:
• The moral values, beliefs, and rules that establish
the appropriate way for an organization and its
members to deal with each other and with people
outside the organization.

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 Employment Relationship
Human resource policies:
• Can influence how hard employees will work to
achieve the organization’s goals.
• How attached they will be to the organization.
• Whether or not they will buy into its values and
norms.

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 Organizational Culture
Different kinds of structure give rise to
different kinds of culture.
Tall organizations have little personal
autonomy, perhaps a focus on authority.
Flat organizations might have more freedom
with a focus on creativity.
Centralized or decentralized might lead to
difference values.

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 Strong, Adaptive Cultures versus
Weak, Inert Cultures
Adaptive cultures:
• Values and norms help an organization to build
momentum and to grow and change as needed to
achieve its goals and be effective.
Inert cultures:
• Those that lead to values and norms that fail to
motivate or inspire employees.
• Lead to stagnation and often failure over time.

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 Example: A.C. Moore Arts & Crafts
A.C. Moore is organized with a functional
structure.
Examples of divisions are marketing and
merchandising, stores and loss prevention,
store operations, merchandise administration,
real estate, and legal.

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© 2022 McGraw Hill. All rights reserved. Authorized only for instructor use in the classroom.
No reproduction or further distribution permitted without the prior written consent of McGraw Hill.