BMGT200 - Chapter 11 - PDF

School of Business
Department of Management and International Management
Introduction to Business Management

Chapter 11
Fundamentals of Organizing
Fall 2020 - 2021
Course code - Chapter 11

Objective 11.1: Traditional Organizational Structure
Key Takeaways:
Describe organizing as a management function and the difference between
formal and informal organization structures. (P270 to P272 )
a) What is organization structure?

b) Formal structures
c) Informal structures
Copyright ©2015 John Wiley & Sons, Inc.

Organizing as a Management Function
Organizing as a management function

◦ Organizing
◦ Arranges people and resources to work together to accomplish a goal
◦ Organization structure
◦ The system of tasks, reporting relationships, and communication linkages
COPYRIGHT ©2015 JOHN WILEY & SONS, INC.

Figure 11.1 Organizing viewed in relationship with the other management
functions

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

Major subunits
work relationships channels management


Informal structures 
◦ The set of unofficial relationships between
organization members
◦ Social network analysis
◦ Identifies informal structures and social relationships in the
organization

Informal structures and social networks

◦ Potential advantages of informal structures:
◦ Allow people to make contacts with others who can help
them get things done
◦ Stimulate learning as people work and interact together
◦ Sources of emotional support and friendship that satisfy
members’ social needs
Potential disadvantages of informal structures:
Diversion of
Presence of May carry May breed work efforts Feeling of
Susceptibility
“In and out inaccurate resistance to from alienation by
to rumor
groups” information change important outsiders
objectives

s;lsdka;dlk;dlk
Summary of Objective 11.1
• Organizing is the process of arranging people and resources to work
toward a common goal.
• Organizing decisions divide up the work that needs to be done, allocate
people and resources to do it, and coordinate results to achieve productivity.
• Structure is the system of tasks, reporting relationships, and
communication that links people and positions within an organization.
• The formal structure, such as that shown on an organization chart,
describes how an organization is supposed to work.
• The informal structure of an organization consists of the unofficial
relationships that develop among members.

Objective 11.2: Traditional Organizational Structure
Key Takeaways:
Identify the traditional organizational structures, and the strengths and
weaknesses of each. (P272 to P 278)
◦ Functional structures
◦ Divisional structures
◦ Matrix structures

Traditional Organization Structures
Traditional organization structures
Functional Divisional Matrix

Functional structures
◦ People with similar skills and performing similar tasks are grouped
together into formal work units
◦ Members work in their functional areas of expertise
◦ Are not limited to businesses
◦ Work well for small organizations producing few products or services

Figure 11.2 Functional structures in a business, branch bank, and community hospital

Potential advantages of functional structures:

◦ Economies of scale
◦ Task assignments consistent with expertise and training
◦ High-quality technical problem solving
◦ In-depth training and skill development
◦ Clear career paths within functions

Potential disadvantages of functional structures:

Functional chimneys problem
Difficulties in pinpointing • Sense of cooperation and common
purpose break down
responsibilities
• Narrow view of performance
objectives

Divisional structures
◦ Group together people who work on the same product or process, serve
similar customers, and/or are located in the same area or geographical
region
◦ Common in complex organizations
◦ Avoid problems associated with functional structures

Figure 11.3 Divisional structures based on product, geography, customer, and process

Potential advantages of divisional structures:

◦ More flexibility in responding to environmental changes
◦ Improved coordination
◦ Clear points of responsibility
◦ Expertise focused on specific customers, products, and regions
◦ Greater ease in restructuring

Potential disadvantages of divisional structures:

Emphasis on
Duplication of
Competition and divisional goals at
resources and
poor coordination expense of
efforts across
across divisions organizational
divisions
goals

Matrix structure
◦ Combines functional and divisional structures to gain advantages and
minimize disadvantages of each
◦ Used in:
Service Professional Non-profit Multi-national

Manufacturing
industries fields sector corporations

Figure 11.4 Matrix structure in a small, multi-project business firm

Potential advantages of matrix structures:

◦ Better cooperation across functions
◦ Improved decision making
◦ Increased flexibility in restructuring
◦ Better customer service
◦ Better performance accountability
◦ Improved strategic management

Potential disadvantages of matrix structures:

Two-boss
Two-boss
system can Increased costs
system is Team meetings Team may
create task due to adding
susceptible to are time develop
confusion and team leaders
power consuming “groupitis ”
conflict in work to structure
struggles
priorities

Summary of Objective
s;lsdka;dlk;dlk 11.2
• In functional structures, people with similar skills who perform

similar activities are grouped together under a common manager.
• In divisional structures, people who work on a similar product, work
in the same geographical region, serve the same customers, or
participate in the same work process are grouped together under
common managers.
• A matrix structure combines the functional and divisional
approaches to create permanent cross-functional project teams.

Objective 11.3: Horizontal Organizational Structure
Key Takeaways:
Identify newer horizontal organizational structures, and the strengths and
weaknesses of each. (P278 to P283)
◦ Team structures
◦ Network structures
◦ Boundary-less structures
Horizontal Organization Structures
Team structures
◦ 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

Potential advantages of team structures:

◦ Eliminates barriers between operating departments
◦ Improved morale
◦ Greater sense of involvement and identification
◦ Increased enthusiasm for work
◦ Improved quality and speed of decision making

Potential disadvantages of team structures:

Effective use of time
depends on quality of
Conflicting loyalties Excessive time spent in
interpersonal relations,
among members meetings
group dynamics, and
team management

Network structures
◦ Uses information technologies to link with networks of
outside suppliers and service contractors
◦ Own only core components and use strategic
alliances or outsourcing to provide other components

Figure 11.6 A network structure for a Web-based retail business

Potential advantages of network structures:

◦ Firms can operate with fewer full-time employees and less complex
internal systems
◦ Reduced overhead costs and increased operating efficiency
◦ Permits operations across great distances

Potential disadvantages of network structures:

Control and
coordination Potential loss of Potential lack of Excessively
problems may control over loyalty among aggressive
arise from outsourced infrequently outsourcing can
network activities used contractors be dangerous
complexity

Boundary-less organizations
◦ 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

Virtual organization
◦ A special form of boundary less organization
◦ Operates in a shifting network of external alliances that are engaged as
needed, using IT and the Internet

Figure 11.7 The boundary-less organization eliminates internal and external
barriers

Summary of Objective
s;lsdka;dlk;dlk 11.3
• Team structures use cross-functional teams and task forces to improve lateral
relations and problem solving at all levels.
• Network structures use contracted services and strategic alliances to support a
core organizational center.
• Boundary-less structures or boundary-less organizations combine team and
network structures with the advantages of technology to accomplish tasks and
projects.
• Virtual organizations utilize information technology to mobilize a shifting mix
of strategic alliances to accomplish tasks and projects.
Objective 11.4: Organizational Design
Key Takeaways:
Explain how organizational designs are changing in the modern workplace.
(P283 to P289 )
◦ Contingency in organizational design

◦ Mechanistic and organic organization designs
◦ Trends in organizational designs

Organizational Designs
Organizational design
◦ Process of creating structures that accomplish mission and objectives
◦ A problem-solving activity that should be approached from a contingency
perspective

Bureaucracy
◦ A form of organization based on logic, order, and the legitimate use of
formal authority
◦ Bureaucratic designs feature …
◦ Clear-cut division of labor
◦ Strict hierarchy of authority
◦ Formal rules and procedures
◦ Promotion based on competency

Contingency perspective on bureaucracy asks the questions:

◦ When is bureaucracy a good choice for an organization?
◦ When it isn’t, what alternatives are available?

Environment determines the most appropriate design

◦ Mechanistic designs work in a stable environment
◦ Organic designs work in a rapidly changing and uncertain environment
◦ Adaptive organizations operate with a minimum of bureaucratic feature and
encourage worker empowerment and teamwork

Mechanistic Designs Organic Designs

• Predictable goals • Adaptable goals
• Centralized authority • Decentralized authority
• Many rules and • Few rules and
procedures procedures
• Narrow spans of control • Wide spans of control
• Specialized tasks • Shared tasks
• Few teams and task • Many teams and task
forces forces
• Formal and impersonal • Informal and personal
means of coordination means of coordination

Figure 11.8 A continuum of organizational design alternatives: from bureaucratic to
adaptive organizations

Contemporary organizing trends include:

◦ Fewer levels of management
◦ Shorter chains of command
◦ Less unity of command
◦ Wider spans of control
◦ More delegation and empowerment
◦ Decentralization with centralization
◦ Reduced use of staff

Trends in Organizational Designs
Chain of command
• Links all employees with successively higher levels of
authority
Span of control
• The number of persons directly reporting to a manager
Organizing trend:
• Organizations are being “streamlined” by cutting
unnecessary levels of management
• Flatter structures are viewed as a competitive advantage
More delegation and empowerment

• A common management failure is unwillingness to
delegate
• Delegation leads to empowerment
Organizing trend:
• Managers are delegating more and finding more
ways to empower people at all levels

More delegation and empowerment

◦ Delegation is the process of distributing and entrusting work to other
persons
◦ The manager assigns responsibility, grants authority to act, and creates
accountability
◦ Authority should be commensurate with responsibility

Three Steps in Delegation:
Create accountability
Assign responsibility Grant authority –
– require others to
– explain task and allow others to make
report back on
expectations decisions and act
results

Decentralization with centralization
Centralization is the
concentration of
authority for making Decentralization is the
most decisions at the top dispersion of authority to
levels of the organization make decisions throughout all
levels of the organization

Decentralization with centralization

• Centralization and decentralization not an
“either/or” choice
Organizing trend:
• Delegation, empowerment, and horizontal
structures contribute to more decentralization in
organizations
• Advances in information technology allow for the
retention of centralized control
Reduced use of staff
• Staff positions provide technical expertise for other

parts of the organization
• No one best solution for dividing line-staff responsibilities
Organizing trend:
• Organizations are downsizing
• Organizations are lowering costs and increasing
efficiency by employing fewer staff personnel and
using smaller staff units

s;lsdka;dlk;dlk
Summary of Objective 11.4
• Contingency in organizational design basically means finding a design
that best fits situational features.
• Mechanistic designs are bureaucratic and vertical, performing best for
routine and predictable tasks.
• Organic designs are adaptive and horizontal, performing best in
conditions requiring change and flexibility.
• Key organizing trends include fewer levels of management, more
delegation and empowerment, decentralization with centralization, and
fewer staff positions.

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School of Business

Department of Management and International Management

Introduction to Business Management

Fall 2020 - 2021

Course code - Chapter 11

a) What is organization structure?

Copyright ©2015 John Wiley & Sons, Inc.

Organizing as a management function

COPYRIGHT ©2015 JOHN WILEY & SONS, INC.

COPYRIGHT ©2015 JOHN WILEY & SONS, INC.

An organization chart is a diagram describing reporting relationships and

The division of Supervisory Communication Levels of

COPYRIGHT ©2015 JOHN WILEY & SONS, INC.

COPYRIGHT ©2015 JOHN WILEY & SONS, INC.

Copyright ©2015 John Wiley & Sons, Inc.

Informal structures and social networks

Potential disadvantages of informal structures:

COPYRIGHT ©2015 JOHN WILEY & SONS, INC.

COPYRIGHT ©2015 JOHN WILEY & SONS, INC.

Copyright ©2015 John Wiley & Sons, Inc.

Traditional organization structures

Functional Divisional Matrix

COPYRIGHT ©2015 JOHN WILEY & SONS, INC.

COPYRIGHT ©2015 JOHN WILEY & SONS, INC.

COPYRIGHT ©2015 JOHN WILEY & SONS, INC.

Potential advantages of functional structures:

COPYRIGHT ©2015 JOHN WILEY & SONS, INC.

Potential disadvantages of functional structures:

COPYRIGHT ©2015 JOHN WILEY & SONS, INC.

COPYRIGHT ©2015 JOHN WILEY & SONS, INC.

COPYRIGHT ©2015 JOHN WILEY & SONS, INC.

Potential advantages of divisional structures:

COPYRIGHT ©2015 JOHN WILEY & SONS, INC.

Potential disadvantages of divisional structures:

COPYRIGHT ©2015 JOHN WILEY & SONS, INC.

Service Professional Non-profit Multi-national

COPYRIGHT ©2015 JOHN WILEY & SONS, INC.

COPYRIGHT ©2015 JOHN WILEY & SONS, INC.

Potential advantages of matrix structures:

COPYRIGHT ©2015 JOHN WILEY & SONS, INC.

Potential disadvantages of matrix structures:

COPYRIGHT ©2015 JOHN WILEY & SONS, INC.

• In functional structures, people with similar skills who perform

COPYRIGHT ©2015 JOHN WILEY & SONS, INC.

COPYRIGHT ©2015 JOHN WILEY & SONS, INC.

COPYRIGHT ©2015 JOHN WILEY & SONS, INC.

Potential advantages of team structures:

COPYRIGHT ©2015 JOHN WILEY & SONS, INC.

Potential disadvantages of team structures:

COPYRIGHT ©2015 JOHN WILEY & SONS, INC.

COPYRIGHT ©2015 JOHN WILEY & SONS, INC.

COPYRIGHT ©2015 JOHN WILEY & SONS, INC.

Potential advantages of network structures:

COPYRIGHT ©2015 JOHN WILEY & SONS, INC.

Potential disadvantages of network structures:

COPYRIGHT ©2015 JOHN WILEY & SONS, INC.

COPYRIGHT ©2015 JOHN WILEY & SONS, INC.

COPYRIGHT ©2015 JOHN WILEY & SONS, INC.

COPYRIGHT ©2015 JOHN WILEY & SONS, INC.

COPYRIGHT ©2015 JOHN WILEY & SONS, INC.

COPYRIGHT ©2015 JOHN WILEY & SONS, INC.

◦ Contingency in organizational design

Copyright ©2015 John Wiley & Sons, Inc.