4

Organizational
Structures
 Learning Outcomes

After studying this chapter, you should be able

to:
 Define the concept of organizing, and explain the
importance of the organizing function.
 Describe the process of organizing.
 Describe the types of organizing structures and
organizational relationships.
 Explain the types of organizational structures or
designs.
 Introduction

 This chapter will explore organizing as one of

the management functions.
 It will also explore the division of work between
people and groups, the work carried out by
managers at different levels, and the
coordination of work produced by these people
and groups to enable the achievement of
organizational aims and objectives.
 Organizing and Its
Importance
 Identification of organizational activities
 Departmentalization of organizational activities
 Classifying authority
 Coordination between authority and
responsibility
 4.1 Organizing Process

1.Determining
task and define
jobs

2. Determining
5.Monitoring the locus of
and feedback decision
making.

3.Grouping
4.Coordinating
organizational
resources
members
 4.2 Organizational Structure
and Relationships

 Understanding organizing structure helps us to

understand the different types of organizational
relationships.
 Organizational or working relationships that
exist within an organization affect how its
activities are accomplished and coordinated.
 Formal and Informal
Organizations

 Formal organization
– A formal organization has a structure comprising
of well-defined jobs; each of which bears a
measure of authority and responsibility.
 Informal organization
– An informal organization, has a network of both
personal and social relationships that
spontaneously originates within the formal set up.
 4.2 Element of Structures

 Chart and chain of command

 Span of control
 Delegation
 Centralization and Decentralization
 4.1 Element of Structures
(cont.)

 Chart and Chain Command

 4.1 Element of Structures
(cont.)

 Span of Control
 4.1 Element of Structures
(cont.)

 Delegation
• Line Authority
• Staff Authority
• Functional Authority
 4.1 Element of Structures
(cont.)

 Centralization and Decentralization

• Centralization is a process where the focal point of
approval for decisions made are subjected to the
approval of the top management.
• But when the authority in the making decision is
delegated from one unit of organization to another
(usually lower-level manager), a decentralized
organization appears. Decentralized decision poses
several implications:
 Types of Organizational
Structures

 The types of organizational structures chosen are

influenced by certain factors—nature of an
organization, its specialization and its decision-
making hierarchy.
 A successful organization tends to follow a pattern
of structural development as it grows and expands.
 Types of Departmentalization

 Functional departmentalization
– the grouping of related work activities according to
functions
 Types of
Departmentalization (cont.)

 Divisional Departmentalization
• Product departmentalization
-done according to products or services available
• Customer departmentalization
-groups related work activities according to what
customers are likely to buy in terms of an
organization’s products or services
• -Process departmentalization
groups related work activities according to production
processes
 Types of
Departmentalization (cont.)

• Process departmentalization
 Types of Departmentalization
(cont.)

 Geographical departmentalization
– the grouping of related work activities according to
areas that are served by a business
 Matrix departmentalization
– teams are formed in which individuals report to two
or more managers, usually the functional manager
and project manager
– brings together personnel from several specialties
to complete limited-life tasks
 Types of Departmentalization
(cont.)

 Matrix departmentalization
 4.2 Contigency Variables

 Business strategy
 The external environment
 Company Size
 Company type
 4.3 Organizational Cultures

 Culture is vital. It is a way of life, affecting not

only how an organization creates values but also
how the organization is perceived.
 An organization will develop its own unique
culture
 4.3.1 Organizational Culture
and Management
 Organizational culture is the specific collection of
values and norms that are shared by people and
groups in an organization.
 Enables an organization to adapt to environmental
changes, and coordinate and integrate its internal
operations.
 Presented as a factor which influences performance,
the integration process of mergers, knowledge
transfer, shareholder values, competitive advantage
and the adoption of the marketing concept by
organizations.
 4.3.2 Evolution of Culture

 The founder of an organization is usually the

main influence on its culture.
 The founder’s assumptions about success form
the foundation of the organization’s culture.
– A set of beliefs about the organization’s
distinctive competence will differentiate the
organization from others in new organizations.
– These beliefs will directly affect organizational
strategies and operations.
 4.3.3 Impact of Culture on
Strategy

 Organizational culture can either facilitate or

hinder an organization’s strategic actions.
 Successful organizations developed cultures
that emphasized three key groups of
stakeholders — customers, stakeholders and
employees.
 4.3.4 Building a Strategy
Supportive of Culture

 Organization intending to create a fit between

organizational strategy and culture has to
consider the following elements:
– Symbolic actions and substantive actions
– Building a culture or spirit of high performance
– Fostering a strategy supportive of climate and
culture
 4.3.4 Building a Strategy
Supportive of Culture (cont.)

– Maintaining internal responsiveness and

innovativeness
– Dealing with organization politics
– Enforcing ethical behaviour
– Leading the process of making corrective
adjustments
 4.4 Communicating
Organizational Culture

 Organizational culture usually tends to influence

an organization’s philosophy, style and behavior.
Managers must, thus, carefully consider the
type of culture they want for their organization
and strive to foster it via communicating with
every organizational member.
 To use culture to an organization’s advantage,
managers must accomplish several tasks which
depend on effective communication:
 4.4 Communicating
Organizational Culture (cont.)

– They must clearly understand the culture.

– They must transmit that culture to others in the
organization.
– They must sustain that culture by rewarding and
promoting those who understand it and work
towards maintaining it.
 4.4.1 Elements of
Organizational Culture

Organizational culture includes:

 Values
 Symbols
 Stories
 Heroes
 Rituals and ceremonies
 Functions of
Organizational Culture

 Cooperation
 Decision-making
 Control
 Communication
 Commitment
 Perception
 Justification of behaviour
 Organizational Culture and
Leadership

 How leaders shape culture

– Transactional leadership
• Refers to the capacity to motivate followers by
exchanging rewards for performance
• Works within the organizational culture as it exists
– Transformational leadership
• Refers to the capacity to motivate followers by
inspiring involvement in a mission
• Changes the organizational culture
 Organizational Culture and
Leadership (cont.)

 How leaders shape culture

– Charismatic leader
• Refers to one who has the ability to influence the
behaviour of others through his/her personal
qualities, enthusiasm, beliefs and charm
 Organizational Culture and
Environment
 Adaptive cultures
– Innovative cultures that encourage and reward
initiative taken by middle and lower level managers
 Inert cultures
– Conservative cultures that caution and do not
value middle and lower level managers who take
such initiative or actions
 Organizational Culture and
Environment
Environmentally Adaptive vs Unadaptive Organizational Cultures

Adaptive Unadaptive
Managers pay close attention to
Managers typically behave somewhat
all constituencies, especially
politically and bureaucratically. Thus,
customers. Changes are initiated
Visible they do not change strategies quickly or
when needed for legitimate
behaviour take advantage of changes in their
interests, even if it entails taking
business environments.
some risks.

Managers care deeply about Managers care about themselves, their

customers, stakeholders and
Expressed employees. They strongly value
values people and processes that create
useful changes.
immediate work group or products, and
technology associated with the work
group. They strongly value a systematic,
risk-reducing management process to
leadership initiatives.
 Geert Hofstede’s
Four-dimensional Model
of National Culture
 Power distance
– The extent to which less powerful members of
institutions and organizations accept that power is
distributed unequally.
Uncertainty avoidance
– The extent to which people feel threatened by
ambiguous situations and have created beliefs and
institutions that try to avoid these.
 Geert Hofstede’s
Four-dimensional Model
of National Culture (cont.)
 Individualism
– The tendency of people to look after themselves
and their immediate family, valuing independence
and autonomy.
Masculinity
– In this context, it focuses on a culture in which the
dominant values in society are success, money
and material things.
These four dimensions when integrated assist in
explaining the differences in culture between
countries.