ORGANIZATIONAL DESIGNS

Organization Structure
The framework for dividing, assigning, and coordinating work

Organization Design
Developments in or changes to the structure of an organization

Key Elements of Organization Structure

Work W k Specialization Chain of Command Span of Control Authority d A th it and Responsibility Centralization vs. Decentralization Departmentalization

WorkSpecialization
High Low P Productiv vity

Jobisbrokendownintoanumberofsteps Eachstepiscompletedbyaseparate individual Makesefficientuseofthediversityofskills thatworkershave

Low

Work Specialization

High

TheChainofCommand Th Ch i fC d
Chief E Chi f Executive ti Officer

Executive Vice President Vice President Vice President

President

Executive Vice President Vice President Vice President

Vice President

Region 1 District A District B

Region 2 District C

Region 3 District D

Region 4 District E

Region 5 District F District G

SpanofControl S fC t l
Numberofemployeesthatanmanagercan manageeffectively Increasedoverthelastseveralyears Contingencyvariablesimpactnumber

Authorityvs.Responsibility A th it R ibilit
Rightsinherentin managerialpositionto giveordersandexpect t e to be o o ed themtobefollowed Relatedtoones positionnotthe characteristicsof person Obligationtoperform Goeshandinhand withauthority

TheConceptofAuthority
Chief Executive Officer

Finance

Accounting

Marketing

Production

Research and p Development

Human Resources

LineAuthority Li A th it
Levelofauthoritythatentitlesmanagerto directtheworkofanemployee Contributesdirectlytotheachievementof organizationalobjectives i ti l bj ti

The Concept of Power

The Power Core

Authority Level

Accounting

Finance

Human Resources Research and Development

Marketing

Production Function F ti

Coercive Referent Reward

Power
Expert E Legitimate ii

TheDegreeofCentralization g
Lower Top Ma anagement Con ntrol Higher Employ Emp yee powerm ment Lower

Decentralization

Centralization
Higher

FiveWaystoDepartmentalize Fi W t D t t li
Functional Product Customer Geographic Process

ContingencyVariablesAffecting Structure
MECHANISTIC Rigidhierarchical relationships Fixedduties Fi dd ti Formalcommunication channels Centralizedauthority y ORGANIC Collaboration(both verticalandhorizontal) Adaptableduties Information communication Decentralized authorized

Strategy

Contingency g y Factors and Organization O i ti Design

Size

Technology Environmental E i t l Uncertainty

Few F Departments p

Wide S Wid Spans of Control

The Simple Structure

Little Formalization Centralized Authority

The Th Bureaucracy
Functional Structure Divisional Structure

Cross-Functional Coordination

Clear Accountability y

The Matrix Structure

Dual Chain of Command Allocation of Specialists

MatrixStructureSample M t i St t S l

The Team-Based Structure

Empower Employees Emplo ees to Make Decisions Hold Teams Accountable Acco ntable for Results of Work

BoundarylessOrganization
Globalizationofmarketsandcompetitors Rapidlychangingtechnology Needforrapidinnovation

TheLearningOrganization
Organizational Design g g Boundaryless Teams Empowerment p Organizational Culture Strong mutual relationships Sense of community S f it Caring Trust

LEARNING ORGANIZATION

Information Sharing Open Timely Ti l Accurate

Leadership Shared vision Collaboration

Source: Management, Seventh Canadian Edition, by Stephen P. Robbins, Mary Coulter, and Robin Stuart-Kotze, page 231. Copyright 2003. Reprinted by permission of Pearson Education Canada Inc.

WHATISORGANIZATIONAL CULTURE?

Systemofsharedmeaningwithinanorganizationthat determinestoalargeextenthowemployeesbehaveand act

DimensionsofOrganizational i i f i i l Culture
Memberidentity Groupemphasis Peoplefocus Unitintegration g Control Risktolerance

Reward Conflicttolerance Meansend orientation Opensystems focus f

CulturalAffectsonManagers
Constrainswhatmanagerscanandcannotdo Constraintsarerarelyexplicit Culturehasalinkbetweenvaluesand managerialbehaviourwhatisacceptable andnot

Strongvs.WeakCultures Strongvs WeakCultures

Predictability Orderliness Consistency Internalguidelines

ARECAP

ORGANIZINGTHEBUSINESS ENTERPRISE

WhatisOrganizational Structure?
Specificationofthejobstobedone p j withinanorganizationandthewaysin whichtheyrelatetooneanother.This whichtheyrelatetooneanother This allowstheorganizationtoachieveits goals.Atsomeorganizationsthe structureisrigid,atotheritismore g , flexible.

DeterminantsofOrganization
Everybusinessneedsstructuretooperate. Everybusinessneedsstructuretooperate Organizationalstructurevariesaccordingtoa firmsmission purpose,andstrategy. firm smission firmsmission,purpose,andstrategy smission,purpose andstrategy. andstrategy Size,technology,andchangesinenvironmental Size,technology,andchangesinenvironmental circumstances alsoinfluencestructure. i t l i fl t t
Although all organizations have the same basic elements, elements each develops the structure that contributes to the most efficient operations.

FormalOrganizationexpressed throughan
OrganizationChart
Diagramdepictingacompany sstructureandshowingemployeeswhere Diagramdepictingacompanysstructureandshowingemployeeswhere theyfitintoitsoperations TheformalOrganizationchartalsoreflectsthe

ChainofCommand
Reportingrelationshipswithinacompany

TheOrganizationalChart
Contemporary Landscape Services, Inc.
President/Owner Mark Ferguson

Retail Shop
Manager

Nursery
Manager

Landscape Operations
Manager

Buyer

Office g Manager

Buyer

Supervisor

Residential g Manager

Commercial g Manager

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TheBuildingBlocksof g OrganizationalStructure
Thefirststepindevelopingthestructureofany business,largeorsmall,involvestwoactivities: Specialization
Determiningwhowilldowhat h ll d h

Departmentalization
Determininghowpeopleperformingcertaintasks canbestbegroupedtogether g g

SpecializationandGrowth
Inaverysmallorganization,theownermay performeveryjob. Asthefirmgrows,however,sodoestheneedto specializejobssothatotherscanperformthem. AdamSmithin1776discoveredifeachoften Ad S ithi 6di dif h ft workersdidallthestepsofmakingpinseach couldmake200aday.Byspecializationthe groupcouldmake48,000aday. Rememberalsothatorganizationscanoverdo g specialization.Why?

Departmentalization
Departmentalization
Processofgroupingjobsintologicalunits

ProfitCenter
Separatecompanyunitresponsibleforitsowncosts andprofits

CostCenter
Somecompanyoperationsdonotgenerate profits

Differentmethodof Departmentalization
CustomerDepartmentalization
Departmentalizationaccordingtotypesofcustomers likelytobuyagivenproduct

ProductDepartmentalization
Departmentalizationaccordingtospecificproducts beingcreated

ProcessDepartmentalization
Departmentalizationaccordingtoproductionprocesses usedtocreateagoodorservice

Departmentalization
GeographicDepartmentalization
Departmentalizationaccordingtoareasservedbya business

FunctionalDepartmentalization
Departmentalizationaccordingtogroupsfunctionsor activities

MultipleFormsofDepartmentalization
President

Functional Departmentalization
Vice President Marketing Vice President Production Vice President Finance

Geographical Departmentalization
Texas Plant T Pl t Manager Oregon Pl t O Plant Manager Florida Plant Fl id Pl t Manager

Product Departmentalization
Consumer C Products Industrial I d ti l Products Consumer C Products Industrial I d ti l Products Consumer C Products Industrial I d ti l Products
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Establishingthe g DecisionMakingHierarchy
Whomakeswhichdecisions?
The answer almost never focuses on an h l individual or even on a small group. The more accurate answer usually refers to the decision making decision-making hierarchy.

DevelopingaDecisionMaking Hierarchy
AssignTasks: Determinewhocanmake g decisionsandspecifyhowtheyshouldbe made. Givetheauthority tomakedecisionsandthe responsibility orobligationtomakethem. responsibilit orobligationtomakethem Authorityandresponsibilitygohandinhand.

PerformingTasks
PerformTasks: Implementingdecisionsthat havebeenmade.Thisinvolves Delegation
Assignmentofatask,responsibility,orauthorityby amanagertoasubordinate

Accountability y
Liabilityofsubordinatesforaccomplishingtasks assignedbymanagers

FearofDelegating
Manymanagersactuallyhavetrouble delegatingtaskstoothers. Thisisespeciallytrueinsmallbusinesses wheretheownermanagerstartedout doingeverything. doingeverything

Whydosomesmallbusinessmanagers havetroubledelegatingeffectively?
Theyfeelthatemployeescanneverdoanythingas wellastheycan. Theyfearthatsomethingwillgowrongifsomeone elsetakesoverajob. elsetakesoverajob Theylacktimeforlong rangeplanningbecausethey Theylacktimeforlongrangeplanningbecausethey areboggeddownindaytodayoperations. Theysensetheywillbeinthedarkaboutindustry trendsandcompetitiveproductsbecauseofthetime theydevotetodaytodayoperations. theydevotetoday to dayoperations

Whatcansmallbusinessmanagersdo todelegateeffectively?
Admitthattheycannevergobacktorunning theentireshowandthattheycaninfact prosperwiththehelpoftheiremployees.

Theymustlearntoletgo.

Fourreasonssomemanagersinbig companiesdontdelegateasmuchor aswellastheyshould:

Theyfearthatsubordinatesdontreallyknowhowto dothejob Theyfearthatasubordinatemight showthe Theyfearthatasubordinatemightshowthe managerupinfrontofothersbydoingasuperbjob Theydesiretokeepasmuchcontrolaspossibleover howthingsaredone Theysimplylacktheabilitytoeffectivelydelegateto others th

Howcanmanagersinbigcompanies learntodelegatemoreeffectively?
Allmanagersshouldrecognizethattheycantdo everythingthemselves. everythingthemselves Ifsubordinatescan tdoajob,theyshouldbetrainedso Ifsubordinatescantdoajob,theyshouldbetrainedso thattheycanassumemoreresponsibilityinthefuture. Managersshouldrecognizethatifasubordinate performswellitalsoreflectsfavorablyonthemanager. Amanagerwhosimplydoesntknowhowtodelegate shouldseekspecializedtraininginhowtodivideupand h ld k i li d i i i h di id d assigntaskstoothers.

DistributeAuthority: Determinewhetherthe y organizationistobecentralizedor decentralized.

CentralizedOrganization
Organizationinwhichmostdecisionmaking h h d k authorityisheldbyupperlevelmanagement

DecentralizedOrganization D t li dO i ti
Organizationinwhichagreatdealofdecisionmaking authorityisdelegatedtolevelsofmanagementat pointsbelowthetopThisisthecurrenttrend.

SpanofControl S fC l
Numberofpeoplesupervisedbyonemanager p p p y g

FlatOrganizationalStructure Vertical Structure. Structure

Characteristicofdecentralizedcompanieswithrelativelyfew layersofmanagementandrelativelywidespansofcontrol

Typical Law Firm

Chief Partner

Partners

Associates Relatively wide span of control

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Tall Organizational Structure Vertical

Characteristicofcentralized companieswithmultiple layersofmanagementand relativelynarrowspansof control Relatively R l ti l narrow span of f control. At lower levels, where tasks are similar and simpler, span of control widens.

United States Army

Generall G Colonels Majors Captains & Lieutenants Warrant Officers Sergeants Corporals Privates
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LineandStaffOrganizationLinedothe LineandStaffOrganization mainlinefunctions/Staffassist

Clark Equipment Corp.
Human Resources Department

Staff Managers

Engineering Department

Line Managers

Trucks Division

Forks & Small Earthmovers Division

Tools Division

Purchasing

Materials Handling

Fabrication

Painting

Assembly

Sales

Distribution

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Committee&TeamAuthority HorizontalOrganizationalso becomingmorepopular.

Authoritygrantedtocommitteesorwork yg teamsinvolvedinafirmsdailyoperations

BasicFormsof OrganizationalStructure
Organizationscanstructurethemselvesinalmostan infinitenumberofwaysbasedonthespecialization, y p departmentalization,ordecisionmakinghierarchies. Thefourbasicformsoforganizationalstructurethat reflectthegeneraltrendsfollowedbymostfirmsare: Functional Divisional Matrix International

FunctionalOrganization
Formofbusinessorganizationinwhichauthority isdeterminedbytherelationshipsbetweengroup i d i db h l i hi b functionsandactivities
Company Structured Around Basic Business Functions p y Marketing Department D t t Operations Department D t t Finance Department D t t

DivisionalOrganization
Organizationalstructureinwhichcorporate divisionsoperateasautonomousbusinesses underthelargercorporateumbrella

Food Service Division Star-Kist Tuna Division

Infant Foods Division

Condiments Division Misc. Products Division

Pet Foods Division

Frozen-Foods Division

Division: Department that resembles a separate business in producing and marketing its own products

MatrixOrganization
Organizationalstructureinwhichteamsareformed andteammembersreporttotwoormoremanagers dt b tt t A matrix is a highly flexible form that is readily adaptable to changing circumstances. Matrix structures rely heavily on committee and team authority. y Some companies use the matrix organization as a temporary measure to complete a specific project. The end of the project usually means the end of the matrix.

Matrix Organization at Martha Stewart

Area Specialists p
Magazine es Books

Media Group
Radio/ Newspap per Network k/ Cable TV V Internet t

Merchandising Group
Sears Paint K-mart Line Specialty y/ Retailing g Catalog g Line

Cooking Entertainment Weddings Crafts Gardening Home Holidays Children

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InternationalOrganization
Approachestoorganizationalstructuredeveloped inresponsetotheneedtomanufacture,purchase, inresponsetotheneedtomanufacture purchase andsellinglobalmarkets CEO

Retail Division A

Retail Division B

International Division

Latin America

Europe p

Asia

OrganizationalDesignforthe 21st Century

BoundarylessOrganizations minimizeoreliminate traditionalboundariesandstructures. TeamOrganizationshaving littleornounderlying functionalhierarchyandrelyalmostexclusivelyon y y y projecttypeteams. VirtualOrganizations havelittleornoformal g structure.Theytypicallyhaveonlyahandfulof permanentemployees,averysmallstaff,anda modestadministrativefacility. d t d i i t ti f ilit

VirtualOrganization
Contracted Manufacturing in Asia Contracted Administrative Services

Core Organization g
Finance Operations Management

Accounting Human Resources

Contracted Sales & Marketing

Contracted Distribution & Logistics

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InformalOrganization
Theformalorganization ofabusinessisthepart thatcanbeseenandrepresentedinchartform. Theinformalorganization withinwhichpeople Th i f l i ti ithi hi h l dotheirjobsindifferentwaysandinteractwith otherpeopleinwaysthatdonotfollowformal th l i th td tf ll f l linesofcommunication. The informal organization is sometimes just as g j powerful, if not more powerful, than the formal structure.

FormalversusInformal OrganizationalSystems
InformalGroups
Groupsofpeoplewhodecidetointeractamong themselves h l

Grapevine G i
Informalcommunicationnetworkthatrunsthrough anorganization

RestructuringStrategies
RestructuringanOrganization Restructuring referstotheprocessbywhich managerschangetaskandauthority g g y relationshipstoimproveorganizational effectiveness. Onetypeofrestructuringthathasbecome yp g commoninrecentyearsisdownsizing.

RestructuringStrategies
Downsizing istheprocessbywhichmanagers streamlinetheorganizationalhierarchy andlayoffmanagersandworkerstoreduce bureaucraticcosts. Otherimportanttrendsthatgohandinhand withrestructuringanddownsizingarethe useofempoweredworkers,selfmanaged f d k lf d teams,andcontingentworkers.

RestructuringStrategies
Empowerment istheprocessofgiving employeesthroughouttheorganizationthe authoritytomakeimportantdecisions. Selfmanagedteams areworkgroupsthat consistofpeoplewhoarejointlyresponsible i t f l h j i tl ibl forensuringthattheteamaccomplishes itsgoalsandwholeadthemselves.

RestructuringStrategies
Contingentworkers areemployedfor temporaryperiodsbyanorganizationand whoreceivenoindirectbenefitssuchas healthinsuranceorpensions. h lthi i

TheNetworkBasedForm
Advantages
Enableshighlyflexibleand adaptiveresponses Createsabestofthebest firmtofocusresourceson customerandmarketneeds Eachorganizationcan leverageadistinctive competency Permitsrapidglobal response Canproducesynergistic results
Cummings & Worley, 8e

Disadvantages
Difficulty managing lateral relationships across i i autonomous organizations Difficulty motivating members to relinquish b t li ih autonomy to join network Sustaining membership and benefits can be problematic May give partners access to proprietary knowledge and technology
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TheDownsizingProcess g

Clarifytheorganizationsstrategy Assessdownsizingoptionsandmakerelevantchoices ssess do s g opt o s a d a e e e a t c o ces Implementthechanges Addresstheneedsofsurvivorsandthosewholeave Followthroughwithgrowthplans

Cummings & Worley, 8e

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Downsizewillresponseto 1.Itisassociatedwithmergersandacquisitionsi.e 1 Itisassociatedwithmergersandacquisitionsi e integrationoftwoorganisatoins 2.Itcanresultfromorganisationdeclinecausedbylossof 2 Itcanresultfromorganisationdeclinecausedbylossof revenues. 3.Itcanoccurwhenorganisationimplementoneofthenew 3 Itcanoccurwhenorganisationimplementoneofthenew structuredescribeabove 4.Itcanresultfromstrongconvictionthatorganisation shouldbeleanerandmoreflexible.

Cummings & Worley, 8e

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TheReengineeringProcess
Preparetheorganization p g Specifytheorganizationsstrategyandobjectives Fundamentallyrethinkthewayworkgetsdone Identifyandanalyzecorebusinessprocesses Defineperformanceobjectives p j Designnewprocesses Restructuretheorganizationaroundthenewbusiness g processes.

Cummings & Worley, 8e

(c)2005 Thomson/South-Western

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Characteristicsof ReengineeredOrganizations
Workunitschangefromfunctionaldepartmentstoprocess

teams
Jobschangefromsimpletaskstomultidimensionalwork P Peoplesroleschangefromcontrolledtoempowered l l h f t ll dt d Thefocusofperformancemeasuresandcompensationshifts

fromactivitiestoresults. fromactivitiestoresults
Organizationstructureschangefromhierarchicaltoflat Managerschangefromsupervisorstocoaches;executives

changefromscorekeeperstoleaders
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ThankYou h k