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Ch14: Organization structure and design


True / False

1. The purpose of organizational structure is to appeal to external competitors.


a. True
b. False
ANSWER: False

2. An organizational chart illustrates the chain of command and reporting relationships in a company.
a. True
b. False
ANSWER: True

3. Efficient use of labor is one of the advantages of division of labor.


a. True
b. False
ANSWER: True

4. One downside of a high division of labor is that it tends to isolate employees.


a. True
b. False
ANSWER: True

5. Span of control refers to the number of people reporting to an individual.


a. True
b. False
ANSWER: True

6. When a manager has a large span of control, he or she can maintain close control over workers and stay in contact with
daily operations.
a. True
b. False
ANSWER: False

7. Division of labor is the separation of work into different jobs to be done by different people.
a. True
b. False
ANSWER: True

8. Centralization is the system of reporting relationships in the organization.


a. True
b. False
ANSWER: False

9. A centralized organization concentrates decision making at the top of its hierarchy.


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a. True
b. False
ANSWER: True

10. If there is a lot of employee participation in the decision-making process, the organization structure is decentralized,
regardless of the nature of the decisions being made.
a. True
b. False
ANSWER: True

11. Formalization tends to delineate rules and procedures for employees’ jobs.
a. True
b. False
ANSWER: True

12. An example of formalization is writing down job descriptions and procedures.


a. True
b. False
ANSWER: True

13. Span of control is the degree to which rules and procedures shape employees’ jobs and activities.
a. True
b. False
ANSWER: False

14. Authority cannot be delegated to others.


a. True
b. False
ANSWER: False

15. Businesses should strive to determine an optimal organizational size.


a. True
b. False
ANSWER: False

16. Firms tend to start with an organic structure and then they retain elements of that structure as they grow.
a. True
b. False
ANSWER: False

17. A company’s characteristics are determined largely by the founder’s personality and values, often stay with the
company even after it grows.
a. True
b. False
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ANSWER: True

18. A virtual organization may not even have a permanent office.


a. True
b. False
ANSWER: True

19. It’s impossible for managers to create effective communities of practice, only the conditions necessary for them to
exist.
a. True
b. False
ANSWER: True

20. Most organizational problems can be fixed with restructuring.


a. True
b. False
ANSWER: False

21. Communities of practice are not an official part of organizational structure, but they can make money for the
organization.
a. True
b. False
ANSWER: True

Multiple Choice

22. The structure of an organization is defined as


a. the basic purpose of the organization.
b. the sum of the individual working arrangements in place in an organization.
c. a system of task, reporting, and authority relationships.
d. a system of relationships that provides a framework of people.
e. the basis through which individual activities are monitored.
ANSWER: c

23. The organizational ________ is defined as the system of task, reporting, and authority relationships within which the
work of the organization is done.
a. goal system
b. management
c. structure
d. community
e. matrix
ANSWER: c

24. Organizational structure can be analyzed by examining all of the following EXCEPT
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a. division of labor.
b. span of control.
c. hierarchy.
d. centralization.
e. All of these can be examined.
ANSWER: e

25. The ________ shows all people, positions, reporting relationships, and lines of formal communication in the
organization.
a. objectives chart
b. organizational chart
c. position chart
d. PERT chart
e. activities chart
ANSWER: b

26. Division of labor is often referred to as


a. departmentalization.
b. the organizational chart.
c. specialization.
d. configuration.
e. the administrative hierarchy.
ANSWER: c

27. _________ is the extent to which workers in an organization specialize as opposed to performing a variety of tasks as
generalists.
a. Segregation
b. Departmentalization
c. Differentiation
d. Administrative component
e. Division of labor
ANSWER: e

28. The main advantage of division of labor is that it promotes


a. worker satisfaction.
b. worker autonomy.
c. the creation of stimulating jobs.
d. efficient use of labor.
e. increased employee motivation.
ANSWER: d

29. Which of the following is a potential disadvantage of division of labor?


a. Slower response to environmental changes
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b. Organizational flexibility
c. Decreased potential for conflict, both constructive and destructive
d. Greater isolation of employees
e. All of these are potential disadvantages of division of labor.
ANSWER: d

30. Jobs grouped according to traditional business tasks such as marketing and human resources are grouped by
a. work process.
b. employee knowledge and skills.
c. business function.
d. client.
e. location.
ANSWER: c

31. Dividing an organization’s manufacturing jobs into drill press, milling, heat treat, and assembly areas is an example of
grouping employees by
a. work process.
b. employee knowledge and skills.
c. business function.
d. client.
e. location.
ANSWER: a

32. Grouping employees by ___________ is similar to grouping them by output, except that the focus is on specific job
tasks rather than on what the final product is.
a. work process
b. employee knowledge and skills
c. business function
d. client
e. location
ANSWER: d

33. Grouping employees by ___________ means that groups are organized according to a region of the country or world.
a. business function
b. location
c. output
d. work process
e. client
ANSWER: b

34. ____ is the number of people reporting to a manager.


a. Administrative intensity
b. Span of control
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c. Work group size
d. Organizational control
e. Organizational management
ANSWER: b

35. When there is a small span of control, there is likely to be


a. an increase in the number of workers.
b. less control over production workers.
c. more administrative levels.
d. less bureaucracy.
e. looser managerial control.
ANSWER: c

36. The system of reporting relationships in the organization, from the first level up through the president or CEO is
known as
a. informal communication channels.
b. hierarchy.
c. bureaucracy.
d. administrative interdependence.
e. formal communication channels.
ANSWER: b

37. In Jack’s organization, the span of control is very wide. In Pam’s organization, the span of control is rather narrow.
The number of levels of managers in Jack’s organization is likely to be _______ in Pam’s organization.
a. greater than
b. smaller than
c. the same as that
d. narrower than
e. wider than
ANSWER: b

38. When individuals or groups throughout the hierarchy are not given an opportunity to participate in decision making,
authority is
a. centralized.
b. efficient.
c. specialized.
d. flexible.
e. decentralized.
ANSWER: a

39. In Tom’s company, employees are given an opportunity to participate in decision making related to policy
development, which is known as
a. formalized centralization.

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b. formalized concentration.
c. decentralization.
d. formalization.
e. centralization.
ANSWER: c

40. Formalization reflects the extent to which organizational rules, procedures, and communications are
a. ethical.
b. fair.
c. written down.
d. comprehensive.
e. top-down.
ANSWER: c

41. Delegation is the transfer of ____ to make decisions and use organizational resources.
a. responsibility
b. authority
c. leadership
d. operational control
e. None of these are correct.
ANSWER: b

42. All of the following elements increase as an organization’s size increases, EXCEPT
a. centralization.
b. the number of rules.
c. the number of levels in the hierarchy.
d. flexibility.
e. specialization of labor.
ANSWER: d

43. A mechanistic structure can be characterized by all of the following EXCEPT


a. it is primarily hierarchical.
b. communication is typically vertical.
c. knowledge is concentrated at the top.
d. instructions come from the boss.
e. a high focus on adaptability.
ANSWER: e

44. The benefits of a matrix organizational structure include all of the following EXCEPT
a. it is flexible.
b. it can provide coordinated responses to pressures.
c. it is cheaper.

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d. it improves project coordination.
e. it improves communication.
ANSWER: c

45. _________ organizations are flexible and decentralized, have open communication channels, and focus on adaptability
in helping employees accomplish their goals.
a. Organic
b. Mechanistic
c. Matrix
d. Simple
e. Bureaucratic
ANSWER: a

46. Organizational structure is NOT impacted by which of the following factors?


a. External environment
b. Organization’s production technology
c. Organizational age
d. Organizational size
e. Business strategy
ANSWER: c

47. An innovation business strategy would best support firms with which type of organizational structure?
a. Centralization
b. Decentralization
c. Low specialization
d. High formalization
e. None of these are correct.
ANSWER: b

48. An organization with _________ structure is likely to succeed in a rapidly changing environment.
a. less flexible
b. more formalized
c. more bureaucratic
d. more mechanistic
e. more flexible
ANSWER: e

49. Large organizations tend to have a _________ hierarchy and more specialization than small organizations.
a. relaxed
b. smaller
c. greater
d. shorter
e. None of these are correct.
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ANSWER: c

50. The structure of small organizations tends to be _________ than the structure found in large organizations.
a. less flexible
b. more centralized
c. more bureaucratic
d. less bureaucratic
e. None of these are correct.
ANSWER: d

51. Employees are typically encouraged to make decisions and work collaboratively when the organizational structure is
_________
a. centralized.
b. flat.
c. narrow.
d. decentralized.
e. None of these are correct.
ANSWER: d

52. Organizational structure is impacted by the organization’s technology, which is also called its
a. hours of operation.
b. business strategy.
c. organizational chart.
d. primary production system.
e. secondary production system.
ANSWER: d

53. When a firm uses _________, typically small batches or one-of-a-kind custom products are produced.
a. unit production
b. mass production
c. continuous production
d. a primary production system
e. a matrix structure
ANSWER: a

54. When a firm uses _________, typically large volumes of identical products are produced, often using assembly lines
and machines.
a. unit production
b. mass production
c. continuous production
d. a primary production system
e. a matrix structure
ANSWER: b
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55. When a firm uses _________, products are created on machines, and employees monitor those machines and
implement changes.
a. unit production
b. mass production
c. continuous production
d. a primary production system
e. a matrix structure
ANSWER: c

56. Little supervision is required with which type of production?


a. Unit production
b. Mass production
c. Continuous production
d. A primary production system
e. A matrix structure
ANSWER: c

57. Employee talent is relied on most in which type of production?


a. Unit production
b. Mass production
c. Continuous production
d. A primary production system
e. A matrix structure
ANSWER: a

58. A firm using unit production and making custom products would typically have a _________ structure with a smaller
managerial span of control.
a. flatter
b. larger
c. taller
d. complex
e. None of these are correct.
ANSWER: a

59. A flatter, team-based structure is usually most appropriate when firms rely primarily on
a. unskilled workers.
b. highly skilled workers.
c. mass production.
d. continuous production.
e. None of these are correct.
ANSWER: b

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60. Smaller organizations with low standardization, total centralization, and mostly one-on-one communication have a
a. matrix structure.
b. functional structure.
c. bureaucratic structure.
d. prebureaucratic structure.
e. lattice structure.
ANSWER: d

61. In organizations with a _________, cross-functional and cross-level subteams are formed and dissolved as necessary
to complete specific projects and tasks.
a. matrix structure
b. functional structure
c. bureaucratic structure
d. prebureaucratic structure
e. lattice structure
ANSWER: e

62. In organizations with a _________, employees report to both a project or product team and to a functional manager.
a. matrix structure
b. functional structure
c. bureaucratic structure
d. prebureaucratic structure
e. lattice structure
ANSWER: a

63. Organizations with a _________ are characterized by formal division of labor, hierarchy, and standardization of work
procedures.
a. matrix structure
b. functional structure
c. bureaucratic structure
d. prebureaucratic structure
e. lattice structure
ANSWER: c

64. _________ is an organizational structure that groups people with the same skills, or who use similar tools or work
processes, together into departments.
a. Matrix structure
b. Functional structure
c. Bureaucratic structure
d. Prebureaucratic structure
e. Lattice structure
ANSWER: b

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65. Organizations with a _________ create horizontal or vertical teams that can define part or all of the organization.
a. division structure
b. team-based structure
c. network structure
d. virtual structure
e. centralized structure
ANSWER: b

66. A ________ is a collection of functions organized around a particular geographic area, product or service, or market.
a. division
b. lattice
c. network organization
d. matrix
e. bureaucracy
ANSWER: a

67. A _________ is a collection of autonomous units or firms that act as a single larger entity, using social mechanisms
for coordination and control.
a. division
b. lattice
c. network organization
d. matrix
e. bureaucracy
ANSWER: c

68. Which type of structure do new or young organizations typically have?


a. Matrix structure
b. Functional structure
c. Bureaucratic structure
d. Prebureaucratic structure
e. Lattice structure
ANSWER: d

69. A large organization’s legal department is staffed solely with lawyers. This illustrates
a. matrix structure.
b. functional structure.
c. bureaucratic structure.
d. prebureaucratic structure.
e. lattice structure.
ANSWER: d

70. In a ____________, all functional activities are controlled by a product group at headquarters; local managers do not
usually provide input into product decisions and are involved only in local administrative, legal, and financial affairs.
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a. global area division structure
b. regional lattice structure
c. regional headquarters structure
d. global product division structure
e. global transnational division structure
ANSWER: d

71. A ____________ has a balanced, matrixed relationship between local managers and headquarters with a two-way flow
of ideas, resources, and employees between the two locations.
a. global area division structure
b. regional lattice structure
c. regional headquarters structure
d. global product division structure
e. global transnational division structure
ANSWER: e

72. In a ____________, a headquarters is established in major geographical areas that work collaboratively with the
product divisions to give the local units clearer operational goals and directions.
a. global area division structure
b. regional lattice structure
c. regional headquarters structure
d. global product division structure
e. global transnational division structure
ANSWER: c

73. In a ____________, regional and/or country managers are given substantial autonomy to adapt strategies to fit local
situations.
a. global area division structure
b. regional lattice structure
c. regional headquarters structure
d. global product division structure
e. global transnational division structure
ANSWER: a

74. Which type of multinational organizational structure is appropriate when local differences are large and the benefits of
global integration are small?
a. Global area division structure
b. Regional lattice structure
c. Regional headquarters structure
d. Global product division structure
e. Global transnational division structure
ANSWER: a

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75. Which type of multinational organizational structure is appropriate when the benefits of global integration are large
and local differences are small?
a. Global area division structure
b. Regional lattice structure
c. Regional headquarters structure
d. Global product division structure
e. Global transnational division structure
ANSWER: d

76. Which type of multinational organizational structure works best when both global integration and local responsiveness
are needed?
a. Global area division structure
b. Regional lattice structure
c. Regional headquarters structure
d. Global product division structure
e. Global transnational division structure
ANSWER: e

77. Which type of multinational organizational structure is best when a balance of global integration and local
responsiveness is needed?
a. Global area division structure
b. Regional lattice structure
c. Regional headquarters structure
d. Global product division structure
e. Global transnational division structure
ANSWER: c

78. Which type of structure is characterized by employees having two bosses at the same time?
a. Matrix structure
b. Functional structure
c. Bureaucratic structure
d. Prebureaucratic structure
e. Lattice structure
ANSWER: a

79. Which type of organizational structure places a greater importance on employees higher in the structure, as reflected
by centralized decision making and a strict chain of command?
a. Matrix structure
b. Functional structure
c. Bureaucratic structure
d. Prebureaucratic structure
e. Lattice structure
ANSWER: c
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80. In which type of organization do managers spend a lot of time coordinating and controlling the network of contractors
and strategic alliances?
a. Multinational organization
b. Lattice organization
c. Network organization
d. Matrix organization
e. Bureaucratic organization
ANSWER: c

81. In which type of structure do costs tend to be higher due to the presence of program managers in addition to the
functional managers?
a. Bureaucratic structure
b. Prebureaucratic structure
c. Network structure
d. Matrix structure
e. Team-based structure
ANSWER: d

82. Which type of organizational structure provides the founder the most control over the organization’s decisions and
growth?
a. Matrix structure
b. Functional structure
c. Bureaucratic structure
d. Prebureaucratic structure
e. Lattice structure
ANSWER: d

83. A _________ contracts out almost all of its functions except for the company name and managing the coordination
among the contractors.
a. lattice organization
b. virtual organization
c. network organization
d. matrix organization
e. community of practice
ANSWER: b

84. In which integrating mechanism do managers from different units informally work together to coordinate or to
identify and solve shared problems?
a. Community of practice
b. Task force
c. Liaison role
d. Direct contact

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e. Cross-functional team
ANSWER: d

85. In which integrating mechanism is a manager or team member held formally accountable for communicating and
coordinating with other groups?
a. Community of practice
b. Task force
c. Liaison role
d. Direct contact
e. Cross-functional team
ANSWER: c

86. Which term refers to a temporary committee formed to address a specific project or problem?
a. Community of practice
b. Task force
c. Liaison role
d. Direct contact
e. Cross-functional team
ANSWER: b

87. Which term refers to a permanent committee formed to address specific problems or recurring needs?
a. Community of practice
b. Task force
c. Liaison role
d. Direct contact
e. Cross-functional team
ANSWER: e

88. Which term refers to a group of people whose shared expertise and interest in a joint enterprise informally binds them
together?
a. Community of practice
b. Task force
c. Liaison role
d. Direct contact
e. Cross-functional team
ANSWER: a

89. The difference between direct contact and a liaison role is that direct contact is _________ whereas a liaison role is
formal.
a. informal
b. permanent
c. temporary
d. ineffective
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e. effective
ANSWER: b

90. The difference between a task force and a cross-functional team is that a task force is _________ whereas a cross-
functional team is permanent.
a. formal
b. informal
c. temporary
d. ineffective
e. effective
ANSWER: c

91. A group of civil engineers who share their knowledge and insights with other civil engineers is an example of a
a. structured organization.
b. virtual organization.
c. community of practice.
d. task force.
e. cross-functional team.
ANSWER: c

92. Which of the following is NOT a good suggestion for creating the conditions that enable communities of practice to
flourish?
a. Start with a clear area of business need.
b. Recruit management involvement.
c. Don’t start timidly.
d. Build on informal employee initiatives already underway.
e. Celebrate contributions.
ANSWER: c

93. When an organizational restructuring results in fewer employees, which of the following is NOT a common effect on
the employees who remain?
a. Increased turnover intention
b. Increased stress
c. Increased motivation
d. Decreased commitment
e. All of these are common effects.
ANSWER: c

94. Organizations that have an organic structure typically


a. have many levels in their organizational hierarchy.
b. concentrate decision-making powers among few managers.
c. require obedience without questioning the organization’s goals.
d. require their members to be committed to the organization’s tasks.
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e. None of these are correct.
ANSWER: d

95. Larger organizations tend to have ________ specialization and more rules, compared to smaller firms.
a. less overall
b. more overall
c. less complicated
d. more complicated
e. None of these are correct.
ANSWER: b

96. Halo runs a tattoo parlor. Customers often make requests for unique words, phrases, or images to be inked
permanently into their skin. This is an example of
a. mass production.
b. unit production.
c. continuous production.
d. matrix structure.
e. lattice structure.
ANSWER: b

97. Which of the following is true about communities of practice?


a. They provide only qualitative, rather than quantitative, value.
b. They can span multiple companies.
c. They meet regularly.
d. They meet in person.
e. None of these are correct.
ANSWER: b

98. Compared to wider spans of control, narrow spans of control are _________ and provide more supervision.
a. more structured
b. less structured
c. less costly
d. more costly
e. of equal cost
ANSWER: d

99. Which of the following is NOT likely to increase when an organization creates smaller units within a larger
organization?
a. Flexibility
b. Adaptability
c. Decision-making speed
d. Bureaucracy
e. All of these are correct.
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ANSWER: d

100. Which of the following is NOT true about communities of practice?


a. They must be recognized by executive leadership.
b. They usually do not show up on organizational charts.
c. They can use the company intranet to develop a sense of community.
d. They share knowledge and experience openly and creatively.
e. All of these are true of communities of practice.
ANSWER: a

Completion

101. An organizational ___________ shows all the people, positions, reporting relationships, and lines of formal
communication in the organization.
ANSWER: chart

102. ____________________ refers to the way the organization’s work is separated into different jobs to be done by
different people.
ANSWER: Division of labor

103. ____________________ means decision making occurs throughout the organizational hierarchy.
ANSWER: Decentralization

104. ____________________ is the transfer to others of authority to make decisions and use organizational resources.
ANSWER: Delegation

105. A ___________ is a permanent task force created to address specific problems or recurring needs.
ANSWER: cross-functional team

106. When a firm uses _________ production, the organization typically produces small batches or makes one-of-a-kind
custom products.
ANSWER: unit

107. _________ structure groups people with the same skills, or who use similar tools or work processes, together into
departments.
ANSWER: Functional

108. A ____________ is a group of people whose shared expertise and interest in a joint enterprise informally binds them
together.
ANSWER: community of practice

109. When a firm uses _________ production, the organization typically uses machines to make the products while
employees monitor the machines and implement changes.
ANSWER: continuous

110. _________ structure refers to smaller organizations with low standardization, total centralization, and mostly one-on-
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one communication.
ANSWER: Prebureaucratic

Matching

Match each scenario with the type of structure that it most clearly illustrates.
a. Jack’s organization consists entirely of permanent project groups that report only to their project leader.
b. In Jacob’s organization, when a project comes up, a cross-level and cross-functional team is formed to tackle it.
Once the project ends, the team dissolves.
c. One of the most stressful things about Edi’s job is that her two bosses—her functional manager and her project
manager—often give her conflicting instructions. When she points this out, they engage in bitter power struggles.
d. Miranda’s organization is actually a collection of autonomous firms. She spends a lot of her time coordinating the
activities of the various firms to which she contracts out her organizational functions.
e. Shepard just founded a new organization and does most of the tasks himself, along with a few friends. He also
makes nearly all of the decisions for the firm.
f. The company Samara works for is made up of departments consisting of people who do similar activities.
g. As Talia’s company grows, she increases the division of labor, standardization of work procedures, and written
rules in order to more effectively manage the increasing number of employees.

111. Lattice structure


ANSWER: b

112. Bureaucratic structure


ANSWER: g

113. Functional structure


ANSWER: f

114. Prebureaucratic structure


ANSWER: e

115. Team-based structure


ANSWER: a

116. Network organization


ANSWER: d

117. Matrix structure


ANSWER: c

Match each scenario with the type of production that it most clearly illustrates.
a. Workers in an assembly line put pickles in cans.
b. A power station produces electricity for a city.
c. A craftsman makes custom jewelry to order.

118. Unit
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ANSWER: c

119. Mass
ANSWER: a

120. Continuous
ANSWER: b

Essay

121. Explain the difference between organic and mechanistic structures. Describe the advantages and disadvantages of
each.
ANSWER: Mechanistic organizations are rigid, traditional bureaucracies with centralized power and hierarchical
communications. Job descriptions are uniform, and formal rules and regulations guide decision making.
More mechanistic organizations may minimize costs, but fit best with a relatively stable or slow-changing
environment. When new opportunities present themselves, mechanistic organizations usually move too
slowly to capitalize on them. An example could be a large manufacturing assembly line that adheres to
protocol and predictable set tasks to capitalize on efficiency. In contrast, organic organizations are flexible,
decentralized organizations with unclear lines of authority; they have decentralized power, open
communication channels, and a focus on adaptability in helping employees accomplish their goals. Organic
organizations benefit from faster awareness of and response to market and competitive changes, better
customer service, and faster decision making. Organic forms have typically been associated with increased
job satisfaction, affective commitment, and learning. An organic organization might be a local pet groomer
who caters and adapts their routine grooming process to meet special needs of the pet or requests of the
owner.

122. Describe unit, mass, and continuous production. Provide examples of companies that use each type of production.
ANSWER: When a firm uses unit production, it produces in small batches or makes one-of-a-kind custom products.
Employees’ talents are more important than the machines being used, and it is difficult to specify rules and
procedures in advance. Advertising agencies and consulting firms typically use unit production.
When a firm uses mass production, it makes large volumes of identical products, typically using assembly
lines and machines. In this case, a tall, bureaucratic structure with a large managerial span of control would
be appropriate. A beer bottling plant would be an example of a company that uses mass production.
When a firm uses continuous production, machines constantly make the product and employees monitor the
machines and plan changes. At the bottom of the organization, continuous production requires a mechanistic
structure and low levels of supervision because machines do most of the work. The structure of a firm using
continuous production is often tall and thin, or even an inverted pyramid. Exxon Mobil uses continuous
production.

123. Describe the characteristics of a matrix organizational structure. Explain the advantages and disadvantages of this
structure.
ANSWER: Employees reporting to both a project or product team and to a functional manager are working in a matrix
structure. Employees represent their function in their work team, which allows the team to house all of the
skills and expertise it needs to perform effectively and make good decisions. Project managers coordinate the
different functional contributions to the project and are held accountable for the team’s performance. Matrix
structures generate complex reporting relationships because a matrixed employee essentially has two bosses:
the project or product boss and his or her functional manager. Adjusting to a dual reporting relationship can
be challenging, but as long as communication is open and expectations and goals are shared, the problems

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can be minimized. Costs tend to be higher due to the addition of program managers in addition to the
functional managers, and power struggles may result from the two-boss system. Matrix organizations are
good at providing quality customer service, are very flexible, and can respond quickly to changes because the
work units contain all of the needed functional expertise to make decisions. The lattice structure, on the other
hand, is where cross-functional and cross-level subteams are formed and dissolved as necessary to complete
specific projects and tasks. A consulting organization would use this structure versus the matrix structure so
they can brainstorm freely and not be confined to traditional rules.

124. Describe the characteristics of communities of practice. Explain how managers can foster their creation and
development.
ANSWER: Communities of practice are groups of people whose shared expertise and interest in a joint enterprise
informally binds them together. Examples include consultants who specialize in designing training systems
or environmental engineers willing to share their knowledge and insights with other environmental engineers.
A community of practice may or may not meet regularly or even in person, and can be located in a single
company or span companies. The people involved in a community of practice share their knowledge and
experiences in open, creative ways that can create new solutions and approaches to problems. In this way, the
company intranet can cultivate a sense of community and employee loyalty. Successful managers cultivate
communities of practice by identifying and bringing the right people together, building trust, and providing
an appropriate infrastructure. Dictating goals and applying individual performance metrics can disintegrate
communities of practice, and indiscriminately throwing money (or collaboration software) at them without a
clear set of priorities can be equally wasteful.

125. Define centralized and decentralized organizational structures. Describe the circumstances under which each is most
desirable.
ANSWER: When organizations are first formed, they are typically centralized organizations concentrating power and
decision-making authority at high levels of the organization. The two subcomponents of centralization are
participation in decision making and hierarchy of authority. Whereas centralized organizations concentrate
authority at high levels of the organization, flatter, decentralized organizations give lower levels more
authority and autonomy for making decisions. Decentralized organizations tend to have flatter structures than
centralized organizations because employees’ greater autonomy decreases the need for middle management.
Flatter structures promote innovation and increase the speed of decision making, and can save money as a
result of fewer management layers. Decentralization is best when the organization performs nonroutine tasks
in complex environments because it empowers the managers closest to the environment to make decisions
and quickly implement them.

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