Week 8 Organizing

Management
Fourteenth Edition
Chapter 11
Designing Organizational
Structure
Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved
Learning Objectives
11.1 Describe six key elements in organizational design.
11.2 Contrast mechanistic and organic structures.
11.3 Discuss the contingency factors that favor either the
mechanistic model or the organic model of
organizational design.
11.4 Describe traditional organizational design options.
11.5 Discuss organizing flexibility in the twenty-first century.
Develop your skill at acquiring and using power.
Know how to stay connected and “in the loop” when
working remotely.
Figure 11.1 Organizing viewed in relationship
with the other management functions
Copyright ©2015 John Wiley & Sons, Inc.
Exhibit 11-1
Purposes of Organizing
Purposes
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.
Introduction
• Few topics in management have undergone as
much change in the past few years as that of
organizing and organizational structure.
• Managers are reevaluating traditional approaches
to find new structural designs that best support
and facilitate employees doing the organization’s
work—designs that can achieve efficiency but are
also flexible
Elements of Organizational Design
• Organizing: management function that involves
arranging and structuring work to accomplish the
organization’s goals
• Organizational structure: the formal
arrangement of jobs within an organization
• Organizational chart: the visual representation of
an organization’s structure
• Organizational design: creating or changing an
organization’s structure
• There is no one best way to do things; no one
organizational form can meet the needs of all
circumstancesCopyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved
Organizing as a Management Function
• An organization chart is a diagram describing reporting
relationships and the formal arrangement of work
positions within an organization. It includes:
The division of Supervisory Communication Levels of

work relationships channels Major subunits management
6 Keys to Organizational Design
Decision about:
1. Work Specialization
2. Departmentalization
3. Chain of Command
4. Span of Control
5. Centralization and Decentralization
6. Formalization
Work Specialization
• Work specialization: dividing work activities into
separate job tasks
• Individual employees “specialize” in doing part of
an activity rather than the entire activity in order to
increase work output and quality.
• It’s also known as division of labor, a concept we
introduced in the management history module.
Exhibit 11-2
Economies and Diseconomies of Work
Specialization
Exhibit 11-2 shows the economies and diseconomies of work specialization.

Today’s View
• Most managers today continue to see work
specialization as important because it helps
employees be more efficient.
• At some point, however, work specialization no
longer leads to productivity.
• That’s why companies such as Avery Dennison,
Ford Australia, Hallmark, and American Express
use minimal work specialization and instead give
employees a broad range of tasks to do.
Departmentalization
• Departmentalization: the basis by which jobs are
grouped together
Exhibit 11-3
The Five Common Forms of Departmentalization (1 of 3)
Exhibit 11-3
Exhibit 11-3
Today’s View
• Most large organizations continue to use
combinations of most or all of these types of
departmentalization
•One popular departmentalization trend is the
increasing use of customer departmentalization.
– Because getting and keeping customers is essential for
success, this approach works well because it
emphasizes monitoring and responding to changes in
customers’ needs
Cross-Functional Team
• Cross-functional team: a work team composed
of individuals from various functional specialties
• For instance, Harley-Davidson relies on cross-
functional teams at all levels of the company to
conceptualize and design new products.
• Former CEO Richard Teerlink instituted a process
called “creative friction,” which was designed to
ensure that multiple, sometimes conflicting
perspectives are considered throughout product
development.
Chain of Command
• Chain of command: the line of authority
extending from upper organizational levels to the
lowest levels, which clarifies who reports to whom
Authority
• Authority: the line of authority extending from upper
organizational levels to the lowest levels, which clarifies
who reports to whom
• Line authority: authority that entitles a manager to direct
the work of an employee
– It is the employer–employee authority relationship that extends
from the top of the organization to the lowest echelon
– A manager with line authority has the right to direct the work of
employees and to make certain decisions without consulting
anyone.
• Staff authority: positions with some authority that have
been created to support, assist, and advise those holding
line authority
– For instance, a human resource management director creates a
recruitment department, performance management department,
and compensation and rewards department, which are staff
functions.
Responsibility
• Responsibility: the obligation or expectation to perform
any assigned duties
– Employees should be held accountable for their performance!
– Assigning work authority without responsibility and accountability
can create opportunities for abuse.
– Likewise, no one should be held responsible or accountable for
work tasks over which he or she has no authority to complete.
• Finally, the unity of command principle (one of Fayol’s 14

management principles) states that a person should report
to only one manager. Without unity of command,
conflicting demands from multiple bosses may create
problems.
Today’s view
• Those elements are far less important today.
• Information technology has made such concepts less
relevant today.
• Employees can access information that used to be
available only to managers in a matter of a few seconds.
• It also means that employees can communicate with
anyone else in the organization without going through the
chain of command.
• Also, many employees, especially in organizations where
work revolves around projects, find themselves reporting
to more than one boss, thus violating the unity of
command principle.
Span of Control
• Span of control: the number of employees a
manager can efficiently and effectively manage
• The traditional view was that managers could
not—and should not—directly supervise more
than five or six subordinates.
• Determining the span of control is important
because, to a large degree, it determines the
number of levels and managers in an
organization—an important consideration in how
efficient an organization will be.
Contrasting Spans of Controls
Today’s View
• Factors include the skills and abilities of the manager and
the employees and the characteristics of the work being
done.
• Other contingency variables that determine the
appropriate span include similarity and complexity of
employee tasks; the physical proximity of subordinates;
the degree to which standardized procedures are in
place; the sophistication of the organization’s information
system; the strength of the organization’s culture; and the
preferred style of the manager.
• The trend in recent years has been toward larger spans of
control, which is consistent with managers’ effort to speed
up decision making, increase flexibility, get closer to
customers, empower employees, and reduce costs.
Centralization and Decentralization
• Centralization: the degree to which decision
making is concentrated at upper levels of the
organization
• Decentralization: the degree to which lower-level
employees provide input or actually make
decisions
Today’s View
• As organizations have become more flexible and
responsive to environmental trends, there’s been a distinct
shift toward decentralized decision making.
• This trend, also known as employee empowerment,
gives employees more authority (power) to make
decisions.
• In large companies especially, lower-level managers are
“closer to the action” and typically have more detailed
knowledge about problems and how best to solve them
than top managers.
– For instance, decentralized management is the
cornerstone of Johnson & Johnson’s business model.
Exhibit 11-5
Centralization or Decentralization
More Centralization More Decentralization
Environment is stable. Environment is complex, uncertain.
Lower-level managers are not as capable Lower-level managers are capable and
or experienced at making decisions as experienced at making decisions.
upper-level managers.
Lower-level managers do not want a say Lower-level managers want a voice in
in decisions. decisions.
Decisions are relatively minor. Decisions are significant.
Organization is facing a crisis or the risk of Corporate culture is open to allowing
company failure. managers a say in what happens.
Company is large. Company is geographically dispersed.
Effective implementation of company Effective implementation of company
strategies depends on managers retaining strategies depends on managers having
say over what happens. involvement and flexibility to make
decisions.
Employee Empowerment
• Employee empowerment: giving employees
more authority (power) to make decisions
Formalization
• Formalization: how standardized an
organization’s jobs are and the extent to which
employee behavior is guided by rules and
procedures
– In highly formalized organizations, there are explicit job
descriptions, numerous organizational rules, and
clearly defined procedures covering work processes.
– Where there is less formalization, employees have
more discretion in how they do their work.
Today’s View
• Some formalization is necessary for consistency and
control, but many organizations today rely less on strict
rules and standardization to guide and regulate employee
behavior.
• Considering there are numerous situations where rules
may be too restrictive, many organizations have allowed
employees some latitude, giving them sufficient autonomy
to make those decisions that they feel are best under the
circumstances.
• It doesn’t mean throwing out all organizational rules
because there will be rules that are important for
employees to follow
Basic Organizational Design
• Mechanistic organization (bureaucracy): an
organizational design that’s rigid and tightly
controlled
• Organic organization: an organizational design
that’s highly adaptive and flexible
Exhibit 11-6
Mechanistic Versus Organic Organizations
Mechanistic Organic
High specialization Cross-functional teams
Rigid departmentalization Cross-hierarchical teams
Clear chain of command Free flow of information
Narrow spans of control Wide spans of control
Centralization Decentralization
High formalization Low formalization
A continuum of organizational design alternatives:
from bureaucratic to adaptive organizations
Contingency Factors: Strategy and Structure
• An organization’s structure should facilitate goal
achievement. Because goals are an important part of the
organization’s strategies, it’s only logical that strategy and
structure are closely linked.
• Alfred Chandler initially studied several large U.S.
companies and concluded that changes in corporate
strategy led to changes in an organization’s structure that
support the strategy.
• Research has shown that certain structural designs work
best with different organizational strategies.
• For instance, the flexibility and free-flowing information of
the organic structure works well when an organization is
pursuing meaningful and unique innovations.
• The mechanistic organization with its efficiency, stability, and
tight controls works best for companies wanting to tightly
control costs. Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved
Contingency Factors: Size and Structure
• There’s considerable evidence that an
organization’s size affects its structure, but once
an organization grows past a certain size, size has
less influence on structure.
Contingency Factors: Technology and
Structure
• The initial research on technology’s effect on structure can
be traced to Joan Woodward, who studied small
manufacturing firms in southern England to determine the
extent to which structural design elements were related to
organizational success.
• She couldn’t find any consistent pattern until she divided
the firms into three distinct technologies that had
increasing levels of complexity and sophistication
• Unit production: the production of items in units or small
batches
• Mass production: the production of items in large batches
• Process production: the production of items in
continuous processes
Exhibit 11-7
Mechanistic Versus Organic Organizations
blank Unit Production Mass Production Process
Production
Structural Low vertical Moderate vertical High vertical

characteristics: differentiation differentiation differentiation
blank Low horizontal High horizontal Low horizontal

differentiation differentiation differentiation
blank Low formalization High formalization Low formalization
Most effective Organic Mechanistic Organic

structure:
Contingency Factors: Environmental
Uncertainty and Structure
• In stable and simple environments, mechanistic
designs can be more effective.
• The greater the uncertainty, the more an
organization needs the flexibility of an organic
design.
Traditional Organizational Design Options
• Simple structure: an organizational design with
little departmentalization, wide spans of control,
centralized authority, and little formalization
• Functional structure: an organizational design
that groups together similar or related
occupational specialties
• Divisional structure: an organizational structure
made up of separate, semiautonomous units or
divisions
Exhibit 11-8
Traditional Organizational Designs
A summary of the strengths and weaknesses of each type of organizational design can be
found in Exhibit 11-8.
Contemporary Structure: Team Structures
• Team structure: an organizational structure in
which the entire organization is made up of work
teams
• Extensively use permanent and temporary teams
to solve problems, complete special projects, and
accomplish day-to-day tasks
• Often use cross-functional teams composed of
members from different functional departments
• Project teams are convened for a specific task or
project and disbanded once completed
Figure 11.5 How a team structure uses cross-
functional teams for improved lateral relations
Contemporary Structure: Matrix and
Project Structures
• Matrix structure: an organizational structure that
assigns specialists from different functional
departments to work on one or more projects
• Project structure: an organizational structure in
which employees continuously work on projects
Exhibit 11-9
Example of a Matrix Organization
Exhibit 11-9 shows an example of a matrix organization.

Figure 11.4 Matrix structure in a small, multi-
project business firm
Contemporary Structure: The Boundaryless
Organization
• Boundaryless organization: an organization whose design
is not defined by, or limited to, the horizontal, vertical, or
external boundaries imposed by a predefined structure
– Eliminate internal boundaries among subsystems and
external boundaries with the external environment
– A combination of team and network structures, with the
addition of “temporariness”
– Key requirements:
§ Absence of hierarchy
§ Empowerment of team members
§ Technology utilization
§ Acceptance of impermanence
– Encourage creativity, quality, timeliness, flexibility, and
efficiency
– Knowledge sharing is both a goal and essential
component Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved
The Boundaryless Organization
• Virtual organization: an organization that
consists of a small core of full-time employees and
outside specialists temporarily hired as needed to
work on projects
– A special form of boundaryless organization
– Operates in a shifting network of external
alliances that are engaged as needed, using IT
and the Internet
The boundaryless organization eliminates
internal and external barriers
Contemporary Structure: Task Forces
• Task force (or ad hoc committee): a temporary
committee or team formed to tackle a specific
short-term problem affecting several departments
• Open innovation: opening up the search for new
ideas beyond the organization’s boundaries and
allowing innovations to easily transfer inward and
outward
– The days may be numbered when businesses
generate their own product development ideas and
develop, manufacture, market, and deliver those
products to customers.
Exhibit 11-10
Benefits and Drawbacks of Open Innovation
Benefits Drawbacks
Gives customers what they want—a voice High demands of managing the
process
Allows organizations to respond to Extensive support needed
complex problems
Nurtures internal and external relationships Cultural challenges
Brings focus back to marketplace Greater need for flexibility
Provides way to cope with rising costs and Crucial changes required in how
uncertainties of product development knowledge is controlled and shared
Telecommuting
• Telecommuting: a work arrangement in which
employees work at home and are linked to the
workplace by computer
• Now, many businesses view telecommuting as a
business necessity.
Compressed Workweeks, Flextime, and Job
Sharing
• Compressed workweek: a workweek where
employees work longer hours per day but fewer
days per week
• Flextime (or flexible work hours): a scheduling
system in which employees are required to work a
specific number of hours a week but are free to
vary those hours within certain limits
• Job sharing: the practice of having two or more
people split a full-time job
The Contingent Workforce
• Contingent workers: temporary, freelance, or
contract workers whose employment is contingent
on demand for their services
• One of the main issues businesses face with their
contingent workers, especially those who are
independent contractors or freelancers, is
classifying who actually qualifies as one.
• The decision on who is and who isn’t an
independent contractor isn’t as easy or as
unimportant as it may seem.
• Companies don’t have to pay Social Security,
Medicare, or unemployment insurance taxes on
workers classified as independent contractors.
Review Learning Objective 11.1
• Describe six key elements in organizational
design.
1. Work specialization
2. Departmentalization
3. Chain of command
4. Span of control
5. Centralization/decentralization
6. Formalization
• Contrast mechanistic and organic structures.
– Mechanistic structure: rigid, tightly controlled
– Organic structure: highly adaptable, flexible
• Discuss the contingency factors that favor either
the mechanistic model or the organic model of
organizational design.
– An organization’s structure should support the strategy.
– Structure can be affected by size and technology.
– Organic structure is most effective with unit production
and process production technology.
– Mechanistic structure is most effective with mass
production technology.
• Describe traditional organizational design
options.
– Simple structure: little departmentalization, wide spans
of control, authority centralized in one person, and little
formalization.
– Functional structure
– Divisional structure
• Discuss organizing for flexibility in the twenty-first
century.
– Structures:
§ Team
§ Matrix
§ Project
– Boundaryless organization
– Virtual organization
– Compressed workweeks, flextime, job sharing
– Contingent workforce
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Management

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.

The division of Supervisory Communication Levels of

Exhibit 11-2 shows the economies and diseconomies of work specialization.

• Finally, the unity of command principle (one of Fayol’s 14

Structural Low vertical Moderate vertical High vertical

blank Low horizontal High horizontal Low horizontal

blank Low formalization High formalization Low formalization

Most effective Organic Mechanistic Organic

Exhibit 11-9 shows an example of a matrix organization.

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