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CHAPTER 7
DESIGNING ADAPTIVE ORGANIZATIONS
CHAPTER OUTLINE
New Manager Self-Test: What Are Your Leadership Beliefs?
I. Organizing the Vertical Structure
A. Work Specialization
B. Chain of Command
New Manager Self-Test: Delegation
C. Span of Management
D. Centralization and Decentralization
II. Departmentalization
A. Vertical Functional Approach
B. Divisional Approach
C. Matrix Approach
D. Team Approach
E. The Virtual Network Approach
III. Organizing for Horizontal Coordination
A. The Need for Coordination
B. Task Forces, Teams, and Project Management
C. Relational Coordination
IV. Factors Shaping Structure
A. Structure Follows Strategy
B. Structure Fits the Technology
ANNOTATED LEARNING OUTCOMES

After studying this chapter, students should be able to:
1. Discuss the fundamental characteristics of organizing, including such concepts as work

specialization, chain of command, span of management, and centralization versus
decentralization.
Organizing is the deployment of organizational resources to achieve strategic goals. Organizing

is important because it follows the management function of planning. Planning and strategy
define what to do; organizing defines how to do it. Organization structure is a tool that managers
use to harness resources for getting things accomplished. The deployment of resources is
reflected in the organization's division of labor into specific departments and jobs, formal lines of
authority, and mechanisms for coordinating diverse organization tasks.
Work specialization, sometimes called division of labor, is the degree to which organizational
tasks are subdivided into separate jobs. When work specialization is extensive, employees
specialize in a single task. Jobs tend to be small, but they can be performed efficiently.
© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Designing Adaptive Organizations •
The chain of command is an unbroken line of authority that links all employees in an
organization and shows who reports to whom.
The span of management is the number of employees reporting to a supervisor. Sometimes

called the span of control, this characteristic of structure determines how closely a supervisor can
monitor subordinates. The average span of control used in an organization determines whether
the structure is tall or flat. A tall structure has an overall narrow span and more hierarchical
levels. A flat structure has a wide span, is horizontally dispersed, and has fewer hierarchical
levels.
Centralization and decentralization pertain to the hierarchical level at which decisions are made.
Centralization means that decision authority is located near the top of the organization. With
decentralization, decision authority is pushed downward to lower organization levels.
2. Describe functional and divisional approaches to structure.
Functional structure is the grouping of positions into departments based on similar skills,
expertise, work activities, and resource use. A functional structure can be thought of as
departmentalization by organizational resources because each type of functional activity such as
accounting, human resources, engineering, and manufacturing, represent specific resources for
performing the organization's task. People and facilities representing a common organizational
resource are grouped together into a single department.
Divisional structure occurs when departments are grouped together based on similar
organizational outputs. In the divisional structure, divisions are created as self-contained units
for producing a single product. Each functional department resource needed to produce the
product is assigned to one division. In a functional structure, all engineers are grouped together
and work on all products whereas, in a divisional structure, separate engineering departments are
established within each division. Each department is smaller and focuses on a single product
line. Departments are duplicated across product lines.
3. Explain the matrix approach to structure and its application to both domestic and
international organizations.
The matrix structure uses functional and divisional structures simultaneously in the same part of
the organization. The matrix structure has dual lines of authority. The functional hierarchy of
authority runs vertically, and the divisional hierarchy of authority runs horizontally. The matrix
approach to structure provides a formal chain of command for both the functional and divisional
relationships. The matrix structure is typically used when the organization experiences
environmental pressure for both a strong functional departmentalization and a divisional
departmentalization. Global corporations often use the matrix structure. The problem for global
companies is to achieve simultaneous coordination of various products within each country or
region and for each product line. The two lines of authority typically are geographic and
product, and the matrix provides excellent simultaneous coordination. It is an organizational
structure that deliberately violates Fayol’s principle of unity of command.
© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part .
4. Describe the contemporary team and virtual network structures and why they are being
adopted by organizations.
The implementation of team concepts has been a widespread trend in departmentalization. The
vertical chain of command is a powerful means of control, but moving decisions through the
hierarchy takes much time and keeps responsibility at the top. The trend is to delegate authority,
push responsibility to the lowest possible levels, and create participative teams that engage the
commitment of workers. This approach enables organizations to be more flexible and responsive
in a competitive global environment. The dynamic network organization is another approach to
departmentalization. Using the network structure, the organization divides major functions into
separate companies that are brokered by a small headquarters organization. The network
approach is revolutionary because it is difficult to answer the question, “Where is the
organization?” This organizational approach is especially powerful for international operations.
5. Explain why organizations need coordination across departments and hierarchical levels,
and describe mechanisms for achieving coordination.
Coordination refers to the quality of collaboration across departments. It is required whether

there is a functional, divisional, or team structure. Coordination problems are amplified in the
global arena, because units differ not only by goals and work activities but by distance, time,
culture, and language. Coordination is the outcome of information and cooperation; managers
can design systems and structures to promote horizontal coordination. The vertical structure is
flattened, with perhaps only a few senior executives in traditional support functions such as
finance or human resources. A task force is a temporary team or committee designed to solve a
short-term problem involving several departments. Task force members represent their
departments and share information that enables coordination. Companies also set up cross-
functional teams for coordination. Companies also use project managers, responsible for
coordinating the activities of several departments on a full-time basis for the completion of a
specific project. Reengineering is the radical redesign of business processes to achieve dramatic
improvements in cost, quality, service, and speed. Because the focus of reengineering is on
process rather than function, reengineering generally leads to a shift away from a strong vertical
structure.
6. Identify how structure can be used to achieve an organization’s strategic goals.
Structure depends on a variety of contingencies. The right structure is “designed to fit” the
contingency factors of strategy, environment, and technology. These three areas are changing
for organizations, creating a need for stronger horizontal coordination. Two strategies proposed
by Porter are differentiation and cost leadership; these strategies require different structural
approaches. The pure functional structure is appropriate for achieving internal efficiency goals.
The vertical functional structure uses task specialization and a chain of command. It does not
enable the organization to be flexible or innovative. Horizontal teams are appropriate when the
primary goal is innovation and flexibility. The firm can differentiate itself and respond quickly
to change. Other forms of structure represent intermediate steps on the firm’s path to efficiency
or innovation. The functional structure with cross-functional teams and project teams provides
greater coordination and flexibility than the pure functional structure. The divisional structure
promotes differentiation because each division can focus on specific products and customers.
7. Define production technology and explain how it influences organization structure.
Technology includes the knowledge, tools, techniques, and activities used to transform
organizational inputs into outputs. Joan Woodward described three types of manufacturing
technology.
a. Small-batch and unit production. Small-batch production firms produce goods in
batches of one or a few products designed to customer specification. Examples include
custom clothing, special-order machine tools, space capsules, satellites, and submarines.
b. Large-batch and mass production. Mass production technology is distinguished by
standardized production runs in which a large volume of products is produced and all
customers receive identical products. This technology makes greater use of machines
than does small-batch production. Examples include automobiles, tobacco products, and
textiles.
c. Continuous process production. In continuous process production, the entire workflow
is mechanized in a sophisticated and complex form of production technology. The
process runs continuously and therefore has no starting or stopping. Human operators are
not part of actual production because machinery does all the work. Examples include
chemical plants, distilleries, petroleum refineries, and nuclear power plants.
Service organizations include consulting companies, law firms, brokerage houses, airlines,
hotels, advertising companies, amusement parks, and educational organizations. Service
technology also characterizes departments such as legal, human resources, finance, and market
research in large corporations. Service technology involves:
• intangible output—services are perishable and, unlike physical products, cannot be stored
in inventory; and
• direct contact with customers—employees and customers interact directly to provide and
purchase the service. Production and consumption are simultaneous.
LECTURE OUTLINE
NEW MANAGER SELF-TEST: WHAT ARE YOUR LEADERSHIP BELIEFS?
The fit between a new manager and the organization is often based on personal beliefs about the
role of leaders. Things work best when organization design matches a new manager’s beliefs
about his or her leadership role. This exercise helps students identify whether their leadership
beliefs are primarily position based or nonhierarchical.
I. ORGANIZING THE VERTICAL STRUCTURE Exhibit 7.1
Organizing is the deployment of organizational resources to achieve strategic goals.

It is important because it follows from strategy. Strategy defines what to do, and organizing
defines how to do it. The organizing process leads to the creation of organization structure,
which defines how tasks are divided, resources are deployed, and departments are coordinated.
Organization structure refers to:

• Formal tasks assigned to individuals and departments;

• Formal reporting relationships including lines of authority, decision responsibility, number of
hierarchical levels, and span of managers' control; and
• Design of systems for coordination of employees across departments.
The organization chart is the visual representation of an organization's structure that portrays
the characteristics of vertical structure. It delineates the chain of command, indicates
departmental tasks and how they fit together, and provides order and logic for the organization.
There are several important features of the vertical structure
A. Work Specialization
1. A fundamental principle is that work can be performed more efficiently if employees

are allowed to specialize. Work specialization, sometimes called division of labor, is
the degree to which organizational tasks are subdivided into separate jobs.
Production is efficient because employees perform small, well-defined tasks.
2. Organizations are moving away from this principle because too much specialization
leads to employees being isolated and doing only a single boring job. Many
companies are enlarging jobs to provide greater challenges or assigning teams to tasks
so employees can rotate among the jobs performed by the team.
B. Chain of Command
1. The chain of command is an unbroken line of authority that links all persons in an
organization and shows who reports to whom. It is associated with two underlying
principles. Unity of command means that each employee is held accountable to only
one supervisor. The scalar principle refers to a clearly defined line of authority in the
organization that includes all employees.
2. Authority, Responsibility, and Delegation
a. The chain of command illustrates the authority structure of the organization.

Authority is the formal and legitimate right of a manager to make decisions, issue
orders, and allocate resources to achieve organizational outcomes. Authority is
distinguished by three characteristics.
• Authority is vested in organizational positions, not people. People in the same

position have the same authority because of the position they hold.
• Authority flows down the vertical hierarchy. Positions at the top have more
formal authority than those at the bottom.
• Authority is accepted by subordinates. The acceptance theory of authority
argues that a manager has authority only if subordinates choose to accept the
commands.
b. Responsibility is the duty to perform the task or activity an employee has been
assigned. Managers are assigned the authority commensurate with responsibility.
Accountability is the mechanism through which authority and responsibility are

brought into alignment. Those with authority and responsibility are subject to
justifying task outcomes to those above them in the chain of command.
c. Delegation is another concept related to authority; it is the process managers use

to transfer authority and responsibility to positions below them in the hierarchy.
Organizations encourage managers to delegate authority to the lowest possible
level to gain flexibility to meet customer needs and adapt to the environment.
Discussion Question #1: Sandra Holt, manager of Electronics Assembly, asked Hector Cruz, her
senior technician, to handle things in the department while Sandra worked on the budget. She
needed peace and quiet for at least a week to complete her figures. After ten days, Sandra
discovered that Hector had hired a senior secretary, not realizing that Sandra had promised
interviews to two other people. Evaluate Sandra’s approach to delegation.
NOTES________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
3. Line and Staff Authority
a. Line departments perform tasks that reflect the organization's primary goal and
mission. In a software company, line departments make and sell the product.
Line authority means that managers have formal authority to direct and control
immediate subordinates.
b. Staff departments include all those who provide specialized skills in support of
line departments. The finance department of software firm has staff authority.
Staff authority is narrower than line authority and includes the right to advise,
recommend, and counsel in the staff specialists' area of expertise.
C. Span of Management
1. The span of management, or span of control, is the number of employees reporting

to a supervisor. This characteristic of structure determines how closely a supervisor
can monitor subordinates.
2. Factors that determine the span of management include:
a. Work performed by subordinates is stable and routine.
b. Subordinates perform similar work tasks.
c. Subordinates are concentrated in a single location.
d. Subordinates are trained and need little direction in performing tasks.
e. Rules and procedures defining task activities are available.

f. Support systems and personnel are available for the manager.
g. Little time is required in nonsupervisory activities such as coordination with other

departments or planning.
h. Managers' personal preferences favor a large span.
3. The average span of control used in an organization determines whether the structure
is tall or flat. A tall structure has an overall narrow span of management and more
levels in the hierarchy. A flat structure has a wide span, is horizontally dispersed,
and has fewer hierarchical levels. The trend is toward wider spans of control as a
way to facilitate delegation.
D. Centralization and Decentralization Exhibit 7.2
1. Centralization and decentralization pertain to the hierarchical level at which decisions

are made. Centralization means that decision authority is located near the top of the
organization. With decentralization, decision authority is pushed down the chain of
command to lower organization levels. The trend is toward decentralization, which
uses workers' skills, relieves top managers, has well-informed people make decisions,
and permit rapid response. Factors that influence centralization versus
decentralization include:
a. Greater change and uncertainty in the environment are usually associated with
decentralization.
b. The amount of centralization or decentralization should fit the firm’s strategy.
c. In times of crisis or risk of company failure, authority may be centralized at the

top.
Discussion Question #8: Experts say that organizations are becoming increasingly
decentralized, with authority, decision-making responsibility, and accountability being pushed
farther down into the organization. How will this trend affect what will be asked of you as a new
manager?
NOTES________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
II. DEPARTMENTALIZATION Exhibit 7.3
Departmentalization is the basis for grouping individuals into departments and departments
into the total organization. Managers make choices about how to use the chain of command to
group people together to perform their work. Five approaches to structural design reflect
different uses of the chain of command in departmentalization.
A. Vertical Functional Approach
1. What It Is
a. Functional structure is the grouping of positions into departments based on

similar skills, expertise, work activities, and resource use. People, facilities, and
other resources representing a common organizational resource are grouped
together into a single department.
2. How It Works
a. The major departments under the president are groupings of similar expertise and
resources, such as accounting, human resources, production, and marketing. Each
of the functional departments is concerned with the organization as a whole. The
functional structure is a strong vertical design. Information flows up and down
the vertical hierarchy, and the chain of command converges at the top of the
organization.
b. People in a department communicate primarily with others in the same

department to coordinate work and accomplish tasks or implement decisions.
Managers and employees are compatible because of similar training and
expertise.
Discussion Question #3: An organizational consultant was heard to say, “Some aspect of
functional structure appears in every organization.” Do you agree? Explain.
NOTES________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
B. Divisional Approach Exhibit 7.4
1. What It Is
a. The divisional structure occurs when departments are grouped together based on
organizational outputs. Diverse departments are brought together to produce a
single organizational output. The divisional structure is sometimes called a
product structure, program structure, or self-contained unit structure. Most large
corporations have separate divisions that perform different tasks, use different
technologies or serve different customers.
2. How It Works
a. Divisions are created as self-contained units with separate functional departments

for each division. For example, separate engineering departments are created
within each division, and each department is similar and focuses on a single
product. The primary difference between divisional and functional structures is
that in divisional structures, the chain of command from each function converges
lower in the hierarchy and differences of opinion would be resolved at the

divisional level rather than by the president.
3. Geographic- or Customer-Based Divisions Exhibit 7.5
a. Grouping company activities by geographic region or customer group is an

alternative for assigning divisional responsibility. In this structure, all functions
in a specific country or region report to the same division manager. The structure
focuses company activities on local market conditions; competitive advantage
comes from the selling a product adapted to a given country.
Discussion Question #4: Some people argue that the matrix structure should be adopted only as
a last resort because the dual chains of command can create more problems than they solve.
Discuss. Do you agree or disagree? Why?
NOTES________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
C. Matrix Approach Exhibit 7.6, Exhibit 7.7
1. What It Is
a. The matrix approach combines aspects of both functional and divisional

structures simultaneously in the same part of the organization. The matrix has
dual lines of authority. The functional hierarchy of authority runs vertically,
providing traditional control within functional departments. The divisional
hierarchy runs horizontally, providing coordination across departments. The
matrix structure supports a formal chain of command for both the functional
(vertical) and divisional (horizontal) relationships.
2. How It Works
a. The dual lines of authority make the matrix structure unique. The success of the
matrix structure depends on the abilities of people in key matrix roles.
• Two-boss employees report to two supervisors simultaneously and must

resolve conflicting demands from the matrix bosses.
• The matrix boss is the product or functional boss who is responsible for one
side of the matrix.
• The top leader oversees both the product and functional chains of command
and is responsible for the entire matrix.
Discussion Question #4: Some people argue that the matrix structure should be adopted only as
a last resort because the dual chains of command can create more problems than they solve.
Discuss. Do you agree or disagree? Why?
NOTES________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
D. Team Approach
1. What It Is
a. The team approach is probably the most widespread trend in

departmentalization. The vertical chain of command is a powerful means of
control, but passing all decisions up the hierarchy takes too long and keeps
responsibility at the top. Managers can delegate authority, push responsibility to
lower levels, and be more flexible and responsive in the competitive global
environment.
2. How It Works
a. Cross-functional teams consist of employees from various functional

departments, responsible to meet as a team and resolve mutual problems. Team
members report to their functional departments, but also to the team. These teams
provide needed horizontal coordination to complement existing functional or
divisional structures.
b. Permanent teams are groups of employees brought together in a way similar to a

formal department. Emphasis is on horizontal communication and information
sharing because representatives from all functions coordinate to complete a
specific task. Authority is pushed down to lower levels, and front-line employees
are given the freedom to make decisions and take action on their own.
c. With a team-based structure, the entire organization is made up of horizontal

teams that coordinate their work with customers to accomplish the organization’s
goals.
Discussion Question #2: How does relational coordination differ from teams and task forces?
Do you think relational coordination seems more valuable for a service technology or a
manufacturing technology? Explain your answer.
NOTES________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
E. The Virtual Network Approach
1. What It Is
a. The most recent approach to departmentalization extends the idea of horizontal

coordination beyond the boundaries of the organization. Outsourcing, which
means farming out certain activities, has become a significant trend. Partnerships,
alliances, and other collaborative forms are now a leading approach to

accomplishing strategic goals.
b. Some organizations take this networking approach to the extreme to create a new
kind of structure. The virtual network structure disaggregates major functions
to separate companies that are brokered by a small headquarters organization.
2. How It Works Exhibit 7.8
a. The organization may be viewed as a central hub surrounded by a network of

outsider specialists. Services such as accounting are outsourced to separate
organizations that are connected electronically to the central office. Networked
computer systems, collaborative software, and the Internet enable organizations to
exchange data and information rapidly and seamlessly. Networks allow a
company to concentrate on what it does best and contract out other activities to
companies with distinctive competence in those areas.
b. In similar networking approach called the modular approach, a manufacturing

firm uses outside suppliers to provide large chunks of a product, which are then
assembled into a final product by a few workers.
Discussion Question #5: What is the virtual network approach to structure? Is the use of
authority and responsibility different compared with other forms of departmentalization?
Explain.
NOTES________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
F. Advantages and Disadvantages of Each Structure Exhibit 7.9
1. Functional Approach
a. Grouping employees by common task permits efficient resource use and

economies of scale. Departments enhance in-depth skill specialization and
development, and centralized decision making at the top provides unified
direction.
b. Disadvantages include barriers that exist across departments resulting in poor

communication and coordination and slow response to changes. Innovation and
change require involvement of several departments, and decisions pile up at the
top of the hierarchy creating delay.
2. Divisional Approach
a. The organization is flexible and responsive to change because each unit is small
and tuned in to its environment. Concern for customer's needs is high and
coordination across functional departments is better because employees are
grouped and committed to a product.
b. Coordination across divisions is often poor. Duplication of resources and the high
cost of running separate divisions is a major disadvantage. The organization loses
efficiency and economies of scale, and there may be a lack of technical depth and
specialization.
3. Matrix Approach
a. The matrix can by highly effective in a complex, rapidly changing environment in

which flexibility and adaptability are important. Conflict and frequent meetings
allow new issues to be raised and resolved. The matrix makes efficient use of
human resources because specialists can be transferred from one division to
another.
b. Frustration and confusion arising from the dual chain of command can be a
significant problem, as can high conflict between the two sides of the matrix, and
time lost in meetings. Managers spend a great deal of time coordinating
meetings, taking time away from core work activities.
4. Team Approach
a. The team approach eliminates barriers across departments, increases cooperation

and compromise, and enables the firm to quickly adapt to requests and
environmental changes which speeds up decision making. Another advantage is
better morale and enthusiasm as a result of increased employee involvement.
b. Disadvantages include dual loyalties and conflict, time and resources spent on
meetings, and too much decentralization. Team members can often lose sight of
the big picture of the organization.
5. Virtual Network Approach
a. The biggest advantages are flexibility and competitiveness on a global scale,

drawing on resources and expertise worldwide. The virtual network structure is
the leanest of all because little supervision is required. There may only be two or
three levels of hierarchy, if that many, compared to ten or more in traditional
firms.
b. Lack of hands-on control is a significant disadvantage. Each partner in the

network acts in its own self-interest. Weak and ambiguous boundaries create
higher uncertainty and greater demands on managers for defining shared goals,
coordinating activities, managing relationships, and keeping people focused.
Employee loyalty can weaken and employees may feel concerned that they can be
replaced by contract services.
III. ORGANIZING FOR HORIZONTAL COORDINATION
A. The Need for Coordination Exhibit 7. 10
1. As organizations grow and evolve, new positions and departments are added, and
senior managers have to find a way to tie all of these departments together.
Coordination refers to the task of collaborating across departments. It is required
whether there is a functional, divisional, or team structure.
2. Coordination problems are amplified in the global arena because units differ not only
by goals and work activities but by distance, time, culture, and language.
Coordination is the outcome of information and cooperation. Managers can design
systems and structures to promote horizontal coordination and collaboration.
B. Task Forces, Teams, and Project Management Exhibit 7. 11
1. A task force is a temporary team or committee designed to solve a problem involving

several departments. Task force members represent their departments and share
information that enables coordination. Companies also set up cross-functional teams
for coordination which work with continuing rather than temporary problems that
might exist for several years.
2. A project manager is responsible for coordinating the activities of several

departments for the completion of a specific project. A distinctive feature of a project
manager is that the person is not a member of one of the departments being
coordinated. Project managers need excellent people skills. They use expertise and
persuasion to achieve coordination among various departments.
C. Relational Coordination
1. Relational coordination refers to frequent, timely, problem-solving communication

carried out through employee relationships of shared goals, knowledge, and mutual
respect. It is not based on formal coordination roles or mechanisms.
IV. FACTORS SHAPING STRUCTURE
A. Structure Follows Strategy Exhibit 7. 12, Exhibit 7. 13
1. Porter’s strategies of differentiation and cost leadership typically require different

structural approaches. A simplified continuum illustrates how structural approaches
are associated with strategic and environmental goals. The terms mechanistic and
organic refer to organizations where efficiency is the goal in a stable environment
and organizations where innovation is the goal in a rapidly-changing environment,
respectively.
2. The pure functional structure is appropriate for achieving internal efficiency goals,
but it does not enable the organization to be flexible or innovative. A horizontal team
structure is appropriate when the primary goal is innovation and flexibility. The firm
can differentiate itself and respond quickly to change.
3. Other forms of structure represent intermediate steps on the firm’s path to efficiency
or innovation. The functional structure with cross-functional teams and project teams
provides greater coordination and flexibility than the pure functional structure. The
divisional structure promotes differentiation because each division can focus on
specific products and customers.
B. Structure Fits the Technology
Technology includes the knowledge, tools, techniques, and activities used to transform
organizational inputs into outputs.
1. Woodward’s Manufacturing Technology Exhibit 7. 14
a. Small-batch and unit production. Small-batch production firms produce goods

in batches of one or a few products designed to customer specification. Examples
include custom clothing, special-order machine tools, space capsules, satellites,
and submarines.
b. Large-batch and mass production. Mass production technology is distinguished

by standardized production runs in which a large volume of products is produced
and all customers receive identical products. Examples include automobiles,
tobacco products, and textiles.
c. Continuous process production. In continuous process production, the entire

work flow is mechanized in a sophisticated and complex form of production
technology. The process runs continuously and therefore has no starting or
stopping. Examples include chemical plants, distilleries, petroleum refineries,
and nuclear power plants.
2. Service Technology
a. Service organizations include consulting companies, law firms, brokerage houses,

airlines, hotels, advertising companies, amusement parks, and educational
organizations. Service technology also characterizes departments such as legal,
human resources, finance, and market research in large corporations. Service
technology involves:
• Intangible output. Services are perishable and, unlike physical products,

cannot be stored in inventory.
• Direct contact with customers. Employees and customers interact directly to

provide and purchase the service. Production and consumption are
simultaneous. Service firm employees have direct contact with customers.
Answers to End-of-Chapter Discussion Questions

1. Sandra Holt, manager of Electronics Assembly, asked Hector Cruz, her senior technician, to
handle things in the department while Sandra worked on the budget. She needed peace and
quiet for at least a week to complete her figures. After ten days, Sandra discovered that
Hector had hired a senior secretary, not realizing that Sandra had promised interviews to
two other people. Evaluate Sandra’s approach to delegation.
An evaluation of Sandra’s approach to delegation can be made by using the manager’s Shoptalk
box entitled “How to Delegate.” The guidelines provided there include delegating the whole
task. It appears that Sandra did not want to delegate the hiring of the senior secretary, which
violates this guideline. The second guideline of selecting the right person seems to have been
complied with, since Sandra chose her senior technician who was apparently capable and not
afraid of making decisions. Delegating responsibility and authority seems to have been complied
with also, since Hector had no problem in completing the hiring process. Giving thorough
instructions seems to be lacking in this situation. If Sandra wanted the other two people
interviewed before the decision was made, she should have told Hector. Feedback seemingly has
not been maintained, since Sandra did not find out about the hiring until some time later. There
is no mention of how well Sandra evaluated and rewarded Hector’s performance.
2. How does relational coordination differ from teams and task forces? Do you think relational
coordination seems more valuable for a service technology or a manufacturing technology?
Explain your answer.
Relational coordination refers to frequent, timely, problem-solving communication carried out

through employee relationships of shared goals, knowledge, and mutual respect.
Teams, which are the most widespread trend in departmentalization, consist of the vertical chain
of command as the powerful means of control; however, passing all decisions up the hierarchy
takes too long and keeps responsibility at the top. A task force is a temporary team or committee
designed to solve a problem involving several departments. Task force members represent their
departments and share information that enables coordination. Companies also set up cross-
functional teams for coordination which work with continuing rather than temporary problems
that might exist for several years.
As an organization grows and evolves, new positions and departments are added to meet the
changing needs, and it grows more complex performing incredibly diverse activities. This leads
to a need for coordination among these departments.
Relational coordination, which is the highest level of horizontal coordination, seems more
valuable for a service technology than for a manufacturing technology. Service technology
characterizes departments such as legal, human resources, finance, and market research in large
corporations. Service technology involves intangible output—services are perishable and, unlike
physical products, cannot be stored in inventory; and direct contact with customers—employees
and customers interact directly to provide and purchase the service. And also, production and
consumption are simultaneous. Therefore, relational coordination would prove to be more
valuable in such an organization as it is not based on formal coordination roles or mechanisms;
rather it is part of the very fabric and culture of the organization. People can share information
freely across departmental boundaries, and interact on a continuous basis to share knowledge and
solve problems.
3. An organizational consultant was heard to say, “Some aspect of functional structure appears
in every organization.” Do you agree? Explain.
The consultant is probably correct. In all organizations, people who do similar jobs are grouped
together in functional departments. For example, functional departments exist in a divisional
structure, although they are smaller than if the organization had a functional structure. The
hybrid structure and the matrix structure also take advantage of functional departments. Thus, at
the lowest levels in all organizations, there are functional groupings. These functional
departments, however, may be grouped together into a divisional, matrix, hybrid, or functional
structure for the organization as a whole.
4. Some people argue that the matrix structure should be adopted only as a last resort because
the dual chains of command can create more problems than they solve. Discuss. Do you
agree or disagree? Why?
Many experts would agree that the matrix structure should be adopted only after other structures
have been tried. If the organization is in a functional structure and that doesn’t work, and then
reorganizes into a divisional structure and that doesn’t work either, a matrix structure may be
appropriate. The matrix structure requires extensive training to help people understand the dual
hierarchies, and it may take one or two years to complete the implementation. Often, after the
matrix structure has been implemented, it evolves back into either a functional or divisional
structure if one side of the matrix becomes more powerful than the other. Dual chains of
command create more problems than they solve if the matrix structure is not suited to the
situation. The situation must demand equality along the two lines of authority, the sharing of
functional resources across divisions, and a rapid response to a changing environment. Recent
thinking on organization structure suggests that the matrix is appropriate in only a few situations.
Most organizations can get by with other forms, such as a functional structure with lateral
relationships, to meet the needs for coordination.
5. What is the virtual network approach to structure? Is the use of authority and responsibility
different compared with other forms of departmentalization? Explain.
In the virtual network approach, the organization becomes a small central broker, electronically
connected to other organizations that perform vital functions. Each department is an independent
contracting service to the broker for a profit and can be located anywhere. The central broker, or
headquarters, has only contractual arrangements with the departments and, therefore, very little
authority. Total responsibility for the component of the product or service is given to each
department, and each has complete authority over its own operation. The major difference is that
the headquarters has very little control over the departments and cannot exercise authority over
them very well.
6. The Hay Group published a report that some managers have personalities suited to
horizontal relationships such as project management that achieve results with little formal
authority. Other managers are more suited to operating roles with much formal authority in
a vertical structure. What type of structure—functional, matrix, team, or virtual network—do
you believe your personality would best fit? Which structure would be the most challenging
for you? Give your reasons.
Students should demonstrate a clear understanding of the structures they select, and how those
structures work, as they explain why they would feel more comfortable or more challenged
operating within those structures. Students who seek more formal authority should be more
comfortable with a functional or matrix structure and more challenged by a team or virtual
network structure. Students who seek more flexibility and autonomy should be more
comfortable with a team or virtual network structure and more challenged by a functional or
matrix structure.
7. Describe the primary differences between manufacturing and service technology. How do
these differences influence the type of structure that will be most effective?
Joan Woodward described the following three types of manufacturing technology:

• Small-batch and unit production.
• Large-batch and mass production.
• Continuous process production.
The difference among these manufacturing technologies is technical complexity which is the
degree to which machinery is involved in the production to the exclusion of people. With a
complex technology, employees are hardly needed except to monitor the machines. Woodward
found that the relationship between the structure and technology was directly related to company
performance. Low-performing firms tend to deviate from the preferred structural form, often
adopting a structure appropriate for another type of technology.
Service organizations include consulting companies, law firms, brokerage houses, airlines,
hotels, advertising companies, amusement parks, and educational organizations. Service
technology also characterizes departments such as legal, human resources, finance, and market
research in large corporations. Service technology involves:
• Intangible output—services are perishable and, unlike physical products, cannot be stored in
inventory; and
• Direct contact with customers—employees and customers interact directly to provide and
purchase the service. Production and consumption are simultaneous.
One distinct feature of service technology that directly influences structure is the need for
employees to be close to customers.
8. Experts say that organizations are becoming increasingly decentralized, with authority,
decision-making responsibility, and accountability being pushed farther down into the
organization. How will this trend affect what will be asked of you as a new manager?
The trend toward increased decentralization, with authority, decision-making responsibility, and
accountability being pushed farther down into the organization will require new managers to
have good delegating skills and very strong interpersonal skills. They must be able to work
effectively in a flexible environment in which they rely on subordinates to make a wide variety
of important decisions. New managers in such an environment must be able to work through
cooperation and influence rather than by telling others what to do.
9. The chapter suggested that structure should be designed to fit strategy. Some theorists argue
that strategy should be designed to fit the organization’s structure. With which theory do you
agree? Explain.
If the company is an already existing company, the argument for adapting strategy to structure is
stronger simply because the structure may be very difficult to change. It does not make much
sense for a local, bricks-and-mortar “mom and pop” store to have a multidomestic strategy; a
small company like that will not have the resources to pursue such a strategy. If the company is
new, the argument for adapting structure to strategy is stronger. The major point to understand is
that structure and strategy must be compatible, regardless of which comes first.
10. Would you expect the structure of a company such as Facebook that operates almost entirely
online to differ from the structure of a bricks-and-mortar company such as AT&T that uses
the Internet for some things, such as customer service and business-to-business transactions?
Why or why not?
Both companies are service organizations, but because AT&T provides Internet, television, and
telephone services to its customers, all of which require installation and/or repair work, it must
operate a “field” service component to meet these requirements. Facebook doesn’t need a field
operation. AT&T also operates bricks-and-mortar stores across the country to sell their services
and mobile phone products. The field service and stores components of AT&T’s structure not
only require the inclusion of entirely different categories of employees from Facebook, but also
involve the operation and maintenance of equipment and vehicles, which Facebook also does not
require. As a result, the structures of the two companies will be quite different.
Apply Your Skills: Small Group Breakout

Family Business
In this exercise, students assume the role of consultant to a family business and rank the priority
of departmental functions in order of importance for assigning additional resources to improve
business in the future. Students rank functions individually first, then discuss their individual
rankings in groups and develop a group ranking. Finally, they analyze what they learned about
organizational structure and design from the exercise.
Apply Your Skills: Ethical Dilemma

A Matter of Delegation
1. Prepare a memo to Golopolus, summarizing the new safety guidelines that affect the
Rockingham product line and requesting his authorization for implementation.
This course of action would probably have no effect. Golopolus is already aware of the
guidelines and hasn’t done anything about them yet.
2. Mind your own business. Golopolus hasn’t said anything about the new guidelines and you
don’t want to overstep your authority. You’ve been unemployed and need this job.
Tom Harrington is in a tough position. He feels loyalty to his boss, but he is also concerned
about product safety as well as the company’s reputation. This option would clearly be
unethical. Harrington is aware of the safety guidelines, which have been devised to ensure the
safety of children, so he cannot just “look the other way.”
3. Send copies of the reports anonymously to the operations manager, who is Golopolus’s boss.
The operations manager is ultimately responsible for whether Rockingham’s toys meet federal
guidelines and he or she needs to be aware of what those guidelines are. By sending the reports
to the operations manager anonymously, Harrington does not have to criticize his boss or accuse
him of wrong-doing; but he is making sure that higher-level managers are aware of the new
safety standards. Tom is right that he does not have the authority to monitor the federal
regulations, but the operations manager does have that authority.
Apply Your Skills: Case for Critical Analysis

Abraham’s Grocery
1. Based on the information available in the case, sketch a picture of the original structure
within an Abraham’s store and the store managers’ relationship with district specialist
managers. What type of structure is this? Explain.
The original structure within the store was a functional structure which can be represented as
below:
PRESIDENT
Meat Grocery Produce

Department Department Department
District Meat District Store District Produce

Manager Supervisor Manger
Specialist Specialist
Store Meat Store/Grocery Produce

Department Department Department
Manager Manager Manager
Functional structure is the grouping of positions into departments based on similar skills,
expertise, work activities, and resource use. The major departments under the president are
groupings of similar expertise and resources, such as the meat, grocery, and produce
departments. Each of the functional departments is concerned with the organization as a whole.
This functional structure is a strong vertical design. Information flows up and down the vertical
hierarchy, and the chain of command converges at the top of the organization. It does not enable
the organization to be flexible or innovative and reflects barriers across the departments.
2. Based on the information available in the case, sketch a picture of the consultant’s
recommended structure within the store and the relationship of store department managers
with district specialist managers. What type of structure is this? Explain.
The consultant’s recommended structure within the store is a divisional structure. Divisional
structure occurs when departments are grouped together based on similar organizational outputs.
In the divisional structure, divisions are created as self-contained units for producing a single
product. The new divisional structure recommended by the consultant within the store and the
relationship of store department managers with district specialist managers are represented as
below:
PRESIDENT
District Store Supervisor
Store Manager
District Meat District Produce
Specialist Specialist
Meat Department Grocery Department Produce Department

Manager Manager Manager
3. What are some of the advantages and disadvantages you see for the two types of structures?
Which structure do you think will work best for Abraham’s? Why?
Advantages of functional structure:

• Grouping employees by common task permits economies of scale and efficient resource
use.
• Functional structure enhances development of in-depth skills because people work on a
variety of related problems and are associated with other experts within the department.
• The convergence of the chain of command at the top offers a way to centralize decision
making and provide unified direction from top managers.
Disadvantages of functional structure:

• Barriers exist across departments.
• Communication and coordination are poor as people are separated into distinct
departments, causing a slow response to environmental change.
• Innovation and change require involvement of several departments.
• Decisions involving more than one department may pile up at the top of the organization
and be delayed.
Advantages of divisional structure:

• Organization will be more flexible and responsive to change.
• Coordination across functional departments is better because employees are grouped
together in a single location and committed to one product line
Disadvantages of divisional structure:

• Poor coordination across division
• Duplication of resources and the high cost of running separate divisions
• Loss of efficiency and economies of scale
• Small size of departments within each division may result in a lack of technical
specialization, expertise, and training.
Divisional structure will work best for Abraham’s as it will ensure more coordination across the
departments and also be more flexible and responsive to change.
On the Job Video Case Answers

Modern Shed
1. Which of the five approaches to structural design is used at Modern Shed, and how are the
company’s departments organized and coordinated?
Modern Shed uses the virtual network approach to departmentalization. The Seattle shed builder
has a core hub of just 12 to 14 employees (mostly designers and managers). These top managers
outsource most aspects of business operations to outside specialists. As discussed in the video,
Modern Shed’s marketing and sales activities are outsourced to independent marketing
consultants. The company’s manufacturing process involves close collaboration with dozens of
outside vendors who specialize in the creation and delivery of components used in the sheds—
everything from paneling and electric to hardware and transport. The contractors coordinate
through monthly conference calls, and they come together to build projects and product lines
planned by Modern Shed’s Seattle office.
2. What are the advantages and disadvantages of Modern Shed’s organizational structure?
The advantages of operating as a virtual network include fast response to market needs; access to
marketing, manufacturing, and sales personnel, without the overhead costs; and the capacity to
serve a rapidly changing niche market. Disadvantages of a virtual network include lack of
control over outside supply chain partners, high demands on managers in the company’s core
hub, and tenuous loyalty from independent contractors.
Solution Manual for Understanding Management, 9th Edition
3. How did Ryan Smith determine whether his company needed a mechanistic structure with a
formal vertical hierarchy or an organic one involving free-flowing partnerships?
A firm’s organizational structure is determined largely by the company’s business strategy.

Modern Shed designs innovative and customizable studio dwellings for a rapidly changing niche
market. The company’s virtual network structure allows for greater innovation, flexibility, and
differentiation. Company size is another factor in Smith’s choice of organizational design.
Whereas large manufacturers have the equipment and personnel to create and assemble products
in house, Modern Shed is a small start up company with few resources. The company’s small
size and limited resources force owner Ryan Smith to outsource many business processes.
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APPENDIX III
Kishlak, a village of sedentary Turcomans, as opposed to Aoul, the
nomad village.
Mekteb, the lower-class Mussulman elementary school.
Medresse, university of a theological order.
Arik, canal or channel diverted from river for irrigation purposes.
TABLE OF MEASUREMENTS
1 sagene = 7 ft.
1 dessiatine (= 2400 sq. sagenes) = 432 sq. roods (2.70 acres)
1 square sagene = 49 sq. ft.
1 arshine = .77 yard (2.33 ft.)
1 vershok = 1.75 in.
A dessiatine (land measure) is a parallelogram having a

length of 80 sagenes and a breadth of 30 sagenes, or it
may be 40 by 60 sagenes, therefore the dessiatine is 2400
square sagenes, or 21,600 square arshines.
1 verst = ⅔ of an English mile.
APPENDIX IV
the treaty of gandamak
Treaty between the British Government and his Highness
Mahommed Yakub Khan, Amir of Afghanistan and its dependencies,
concluded at Gandamak on the 26th May, 1879, by his Highness the
Amir Mahommed Yakub Khan on his own part and on the part of the
British Government by Major (afterwards Sir Louis) P. L. N.
Cavagnari, C.S.I.
(1) From the day of the exchange of the ratifications of the
present Treaty there shall be perpetual peace and friendship
between the British Government on the one part and his
Highness the Amir of Afghanistan and its dependencies, and
his successors, on the other.
(2) His Highness the Amir of Afghanistan and its
dependencies engages, on the exchange of the ratifications
of this Treaty, to publish a full and complete amnesty,
absolving all his subjects from any responsibility for
intercourse with the British forces during the war, and to
guarantee and protect all persons of whatever degree from
any punishment or molestation on that account.
dependencies agrees to conduct his relations with Foreign
States in accordance with the advice and wishes of the British
Government. His Highness the Amir will enter into no
engagements with Foreign States, and will not take up arms
against any Foreign State, except with the concurrence of the
British Government. On these conditions the British
Government will support the Amir against any foreign
aggression with money, arms, or troops, to be employed in
whatsoever manner the British Government may judge best
for this purpose. Should British troops at any time enter
Afghanistan for the purpose of repelling foreign aggression,
they will return to their stations in British territory as soon as
the object for which they entered has been accomplished.
(4) With a view to the maintenance of the direct and
intimate relations now established between the British
Government and his Highness the Amir of Afghanistan, and
for the better protection of the frontiers of his Highness’s
dominion, it is agreed that a British Representative shall
reside at Kabul, with a suitable escort, in a place of residence
appropriate to his rank and dignity. It is also agreed that the
British Government shall have the right to depute British
Agents with suitable escorts to the Afghan frontiers,
whensoever this may be considered necessary by the British
Government in the interests of both States, on the occurrence
of any important external fact. His Highness the Amir of
Afghanistan may on his part depute an Agent to reside at the
Court of his Excellency the Viceroy and Governor-General of
India, and at such other places in British India as may be
similarly agreed upon.
dependencies guarantees the personal safety and honourable
treatment of British Agents within his jurisdiction; and the
British Government on its part undertakes that its Agents shall
never in any way interfere with the internal administration of
his Highness’s dominions.
dependencies undertakes, on behalf of himself and his
successors, to offer no impediment to British subjects
peacefully trading within his dominions so long as they do so
with the permission of the British Government, and in
accordance with such arrangements as may be mutually
agreed upon from time to time between the two Governments.
(7) In order that the passage of trade between the
territories of the British Government and of his Highness the
Amir of Afghanistan may be open and uninterrupted, his
Highness the Amir of Afghanistan agrees to use his best
endeavours to ensure the protection of traders and to
facilitate the transit of goods along the well-known customary
roads of Afghanistan. These roads shall be improved and
maintained in such manner as the two Governments may
decide to be most expedient for the general convenience of
traffic, and under such financial arrangements as may be
mutually determined upon between them. The arrangements
made for the maintenance and security of the aforesaid
roads, for the settlement of the duties to be levied upon
merchandise carried over these roads, and for the general
protection and development of trade with and through the
dominions of his Highness, will be stated in a separate
Commercial Treaty, to be concluded within one year, due
regard being given to the state of the country.
(8) With a view to facilitate communications between the
allied Governments and to aid and develop intercourse and
commercial relations between the two countries, it is hereby
agreed that a line of telegraph from Kurram to Kabul shall be
constructed by and at the cost of the British Government, and
the Amir of Afghanistan hereby undertakes to provide for the
protection of this telegraph line.
(9) In consideration of the renewal of a friendly alliance
between the two States which has been attested and secured
by the foregoing Articles, the British Government restores to
his Highness the Amir of Afghanistan and its dependencies
the towns of Kandahar and Jelalabad with all the territory now
in possession of the British armies, excepting the districts of
Kurram, Pishin, and Sibi. His Highness the Amir of
Afghanistan and its dependencies agrees on his part that the
districts of Kurram and Pishin and Sibi, according to the limits
defined in the schedule annexed, shall remain under the
protection and administrative control of the British
Government: that is to say, the aforesaid districts shall be
treated as assigned districts, and shall not be considered as
permanently severed from the limits of the Afghan kingdom.
The revenues of these districts, after deducting the charges of
civil administration, shall be paid to his Highness the Amir.
The British Government will retain in its own hands the
control of the Khyber and Michni Passes, which lie between
the Peshawar and Jelalabad districts, and of all relations with
the independent tribes of the territory directly connected with
these passes.
(10) For the further support of his Highness the Amir in the
recovery and maintenance of his legitimate authority, and in
consideration of the efficient fulfilment in their entirety of the
engagements stipulated by the foregoing Articles, the British
Government agrees to pay to his Highness the Amir and to
his successors an annual subsidy of six lakhs of Rupees.
Done at Gandamak, this 26th day of May 1879,
corresponding with the 4th day of the month of Jamadi-us-
sani, 1296 A.H.
AMIR MAHOMMED YAKUB KHAN.
N. CAVAGNARI, Major .
Letter, dated June 14, 1880, from Mr. (afterwards Sir Lepel)
Griffin to Abdur Rahman Khan.
(After compliments.)
“I am commanded to convey to you the replies of the
Government of India to the questions you have asked.
“First, with regard to the position of the ruler of Kabul in
relation to Foreign Powers. Since the British Government
admit no right of interference by Foreign Powers in
Afghanistan, and since both Russia and Persia are pledged to
abstain from all political interference with Afghan affairs, it is
plain that the Kabul ruler can have no political relations with
any Foreign Power except the English: and if any such
Foreign Power should attempt to interfere in Afghanistan, and
if such interference should lead to unprovoked aggression on
the Kabul ruler, then the British Government will be prepared
to aid him, if necessary, to repel it, provided that he follows
the advice of the British Government in regard to his external
relations.
“Secondly, with regard to limits of territory, I am directed to
say that the whole province of Kandahar has been placed
under a separate ruler, except Pishin and Sibi, which are
retained in British possession. Consequently, the Government
is not able to enter into any negotiations with you on these
points, nor in respect to arrangements with regard to the
north-west frontier, which were concluded with the ex-Amir
Mahommed Yakub Khan. With these reservations, the British
Government are willing that you should establish over
Afghanistan (including Herat, the possession of which cannot
be guaranteed to you, though the Government are not
disposed to hinder measures which you may take to obtain
possession of it) as complete and extensive authority as has
hitherto been exercised by any Amir of your family. The British
Government desires to exercise no interference in the internal
affairs of these territories, nor will you be required to admit an
English Resident anywhere; although, for convenience of
ordinary and friendly intercourse between two adjoining
States, it may be advisable to station by agreement a
Mahommedan agent of the British Government at Kabul.”
From Amir Abdur Rahman Khan to Mr. Griffin, dated June 22,
1880.
“Regarding the boundaries of Afghanistan which were
settled by treaty with my most noble and respected
grandfather, Amir Dost Muhammad, these you have granted
to me. And the Envoy which you have appointed in
Afghanistan you have dispensed with, but what you have left
to (be settled according to) my wish is, that I may keep a
Mussulman Ambassador, if I please. This was my desire and
that of my people, and this you have kindly granted.
“About my friendly relations and communication with
Foreign Powers, you have written that I should not have any
without advice and consultation with you (the British). You
should consider well that if I have the friendship of a great
Government like yours, how can I communicate with another
Power without advice from and consultation with you? I agree
to this also.
“You have also kindly written that should any unwarranted
(improper) attack be made by any other Power on
Afghanistan, you will under all circumstances afford me
assistance; and you will not permit any other person to take
possession of the territory of Afghanistan. This also is my
desire, which you have kindly granted.
“As to what you have written about Herat. Herat is at
present in the possession of my cousin. So long as he does
not oppose me, and remains friendly with me, it is better that I
should leave my cousin in Herat, rather than any other man.
Should he oppose me, and not listen to my words (advice) or
those of my people, I will afterwards let you know. Everything
shall be done as we both deem it expedient and advisable.
“All the kindness you have shown is for my welfare and
that of my people: how should I not accept it? You have
shown very great kindness to me and my people.”
Letter from Mr. Griffin to Amir Abdur Rahman Khan, dated “July
1880.”[45]
“His Excellency the Viceroy and Governor-General in
Council has learnt with pleasure that your Highness has
proceeded toward Kabul, in accordance with the invitation of
the British Government. Therefore, in consideration of the
friendly sentiments by which your Highness is animated, and
of the advantage to be derived by the Sirdars and people from
the establishment of a settled government under your
Highness’s authority, the British Government recognises your
Highness as Amir of Kabul.
“I am further empowered, on the part of the Viceroy and
Governor-General of India, to inform your Highness that the
British Government has no desire to interfere in the internal
government of the territories in the possession of your
Highness, and has no wish that an English Resident should
be stationed anywhere within those territories. For the
convenience of ordinary friendly intercourse, such as is
maintained between two adjoining States, it may be advisable
that a Mahommedan Agent of the British Government should
reside, by agreement, at Kabul.
“Your Highness has requested that the views and
intentions of the British Government with regard to the
position of the ruler at Kabul in relation to Foreign Powers
should be placed on record for your Highness’s information.
The Viceroy and Governor-General in Council authorises me
to declare to you that since the British Government admits no
right of interference by Foreign Powers within Afghanistan,
and since both Russia and Persia are pledged to abstain from
all interference with the affairs of Afghanistan, it is plain that
your Highness can have no political relations with any Foreign
Power except with the British Government. If any Foreign
Power should attempt to interfere in Afghanistan, and if such
interference should lead to unprovoked aggression on the
dominions of your Highness, in that event the British
Government would be prepared to aid you, to such extent and
in such manner as may appear to the British Government
necessary, in repelling it; provided that your Highness follows
unreservedly the advice of the British Government in regard
to your external relations.”
Letter from the Viceroy of India (Marquis of Ripon) to the Amir
Abdur Rahman.
“Simla, June 16, 1883.
“Your Highness will remember that, at Sir Lepel Griffin’s
interview with you at Zimma on July 31, 1880, he said that the
Government of India could only start your administration by
giving you a grant to pay your army and officials and your
immediate expenses; and that, having recognised you as
Amir, it was anxious to see you strong; but after you had
taken possession of Kabul, you must rely on your own
resources.
“I have always interested myself so much in your
Highness’s success, and have felt so great a desire for the
establishment of a strong and friendly Power under your
Highness’s auspices in Afghanistan, that I have on various
occasions gone beyond the determination then
communicated to you, and have from time to time aided your
Highness with sums of money and arms, besides devoting
some lakhs a year to the support of Afghan refugees and
détenus, whose presence in Afghanistan is, I understand,
regarded by your Highness as dangerous to your power. Still,
my view of the relations to each other of the two countries has
throughout been that, in matters of internal policy and finance,
India should not seek to interfere with Afghanistan, but should
confine herself to the part of a friendly neighbour and ally. On
these conditions, it would be in accordance with the practice
of nations that Afghanistan should regulate her own finance
and bear her own burdens, as she has always done
heretofore.
“As regards matters of external policy, your Highness was
informed in the communication from the Foreign Secretary to
the Government of India, dated July 20, 1880, and again in
my letter of February 22, 1883, that if any Foreign Power
should attempt to interfere in Afghanistan, and if such
interference should lead to unprovoked aggression on the
dominions of your Highness, in that event the British
Government would be prepared to aid you to such extent and
in such manner as might appear to the British Government
necessary in repelling it; provided that your Highness follows
unreservedly the advice of the British Government in regard
to your external relations.
“On consideration, however, of your accounts of the
condition of your north-west frontier, I have been satisfied that
your Highness has to contend with exceptional difficulties in
that quarter. I have understood that, owing to various
untoward circumstances, your Highness has not yet been
able to reduce the important frontier province of Herat to the
orderly and secure condition so essential for the protection of
Afghanistan as a whole; and therefore that, for the settlement
of the affairs of that frontier, some friendly assistance may be
needful to you. I further observe, with satisfaction, your
Highness’s assurances of good faith and loyalty to the British
Government; and your Highness’s language convinces me
that you realise how much it is to the interest of Afghanistan
to maintain friendly relations with the Government of India.
“Impressed by these considerations, I have determined to
offer to your Highness personally, as an aid towards meeting
the present difficulties in the management of your State, a
subsidy of twelve lakhs of rupees a year, payable monthly, to
be devoted to the payment of your troops, and to the other
measures required for the defence of your north-western
frontier. I feel that I may safely trust to your Highness’s good
faith and practised skill to devote this addition to your
resources to objects of such vital importance as those which I
have above mentioned.”
The Amir of Afghanistan to the Viceroy of India.
(Extract.)
“6th Ramazan, 1300 H. (July 11, 1883).
“I have announced the glad tidings of your Excellency’s
determination, which is calculated to conduce to the well-
being of the British Government and of the people of
Afghanistan, and to put in order and keep going my affairs, to
the people of Afghanistan at large, who all offered up thanks,
saying, ‘For many years we, the Afghan nation, have been
suffering from innumerable calamities. Thanks be to God that
a glorious Government like this (British Government) has
befriended us.’
“God willing, the people of Afghanistan will never allow
their heads to swerve from the line of friendship to the
illustrious British Government, and so long as I live I will not
think of making friends with any one but with the illustrious
British Government. I have offered my prayers to God for the
(increased) glory of that powerful Government.”
The Amir’s Speech at the Rawal Pindi Durbar.
At the great Durbar held by Lord Dufferin on April 8, 1885, the
Amir Abdur Rahman spoke as follows:
“In return for this kindness and favour I am ready with my
arms and people to render any services that may be required
of me or of the Afghan nation. As the British Government has
declared that it will assist me in repelling any foreign enemy,
so it is right and proper that Afghanistan should unite in the
firmest manner and stand side by side with the British
Government.”
Letter from Sir Mortimer Durand to Abdur Rahman, dated Kabul,
November 11, 1893.
“When your Highness came to the throne of Afghanistan,
Sir Lepel Griffin was instructed to give you the assurance that,
if any Foreign Power should attempt to interfere in
Afghanistan, and if such interference should lead to
unprovoked aggression on the dominions of your Highness, in
that event the British Government would be prepared to aid
you to such extent and in such manner as might appear to the
British Government necessary in repelling it, provided that
your Highness followed unreservedly the advice of the British
Government in regard to your external relations.
“I have the honour to inform your Highness that this
assurance remains in force, and that it is applicable with
regard to any territory which may come into your possession
in consequence of the agreement which you have made with
me to-day in the matter of the Oxus frontier.
“It is the desire of the British Government that such portion
of the northern frontier of Afghanistan as has not yet been
marked out should now be clearly defined; when this has
been done, the whole of your Highness’s frontier towards the
side of Russia will be equally free from doubt and equally
secure.”
Agreement signed at Kabul on November 12, 1893.
Whereas the British Government has represented to his
Highness the Amir that the Russian Government presses for
the literal fulfilment of the Agreement of 1873 between Russia
and England by which it was decided that the river Oxus
should form the northern boundary of Afghanistan from Lake
Victoria (Wood’s Lake) or Sarikul on the east to the junction of
the Kokcha with the Oxus, and whereas the British
Government considers itself bound to abide by the terms of
this Agreement, if the Russian Government equally abides by
them, his Highness Amir Abdur Rahman Khan, G.C.S.I., Amir
of Afghanistan and its dependencies, wishing to show his
friendship to the British Government and his readiness to
accept their advice in matters affecting his relations with
Foreign Powers, hereby agrees that he will evacuate all the
districts held by him to the north of this portion of the Oxus on
the clear understanding that all the districts lying to the south
of this portion of the Oxus, and not now in his possession, be
handed over to him in exchange. And Sir Henry Mortimer
Durand, K.C.I.E., C.S.I., Foreign Secretary to the Government
of India, hereby declares on the part of the British
Government that the transfer to his Highness the Amir of the
said districts lying to the south of the Oxus is an essential part
of this transaction, and undertakes that arrangements will be
made with the Russian Government to carry out the transfer
of the said lands to the north and south of the Oxus.
H. M. Durand.
Amir Abdur Rahman Khan.
Kabul, November 12, 1893.
Agreement between Amir Abdur Rahman Khan, G.C.S.I., and Sir
Henry Mortimer Durand, K.C.I.E., C.S.I.
Whereas certain questions have arisen regarding the
frontier of Afghanistan on the side of India, and whereas both
his Highness the Amir and the Government of India are
desirous of settling these questions by a friendly
understanding, and of fixing the limit of their respective
spheres of influence, so that for the future there may be no
difference of opinion on the subject between the allied
Governments, it is hereby agreed as follows:
(1) The eastern and southern frontier of his Highness’s
dominions, from Wakhan to the Persian border, shall follow
the line shown in the map attached to this agreement.
(2) The Government of India will at no time exercise
interference in the territories lying beyond this line on the side
of Afghanistan, and his Highness the Amir will at no time
exercise interference in the territories lying beyond this line on
the side of India.
(3) The British Government thus agrees to his Highness
the Amir retaining Asmar and the valley above it, as far as
Chanak. His Highness agrees, on the other hand, that he will
at no time exercise interference in Swat, Bajaur, or Chitral,
including the Arnawai or Bashgal valley. The British
Government also agrees to leave to his Highness the Birmal
tract as shown in the detailed map already given to his
Highness, who relinquishes his claim to the rest of the Waziri
country and Dawar. His Highness also relinquishes his claim
to Chageh.
(4) The frontier line will hereafter be laid down in detail and
demarcated, wherever this may be practicable and desirable,
by joint British and Afghan commissioners, whose object will
be to arrive by mutual understanding at a boundary which
shall adhere with the greatest possible exactness to the line
shown in the map attached to this agreement, having due
regard to the existing local rights of villages adjoining the
frontier.
(5) With reference to the question of Chaman, the Amir
withdraws his objection to the new British cantonment and
concedes to the British Government the rights purchased by
him in the Sirkai Tilerai water. At this part of the frontier the
line will be drawn as follows:
From the crest of the Khwaja Amran range near the Psha Kotal,
which remains in British territory, the line will run in such a
direction as to leave Murgha Chaman and the Sharobo spring to
Afghanistan, and to pass half-way between the New Chaman
Fort and the Afghan outpost known locally as Lashkar Dand.
The line will then pass half-way between the railway station and
the hill known as the Mian Baldak, and, turning southwards, will
rejoin the Khwaja Amran range, leaving the Gwasha Post in
British territory, and the road to Shorawak to the west and south
of Gwasha in Afghanistan. The British Government will not
exercise any interference within half a mile of the road.
(6) The above articles of agreement are regarded by the
Government of India and his Highness the Amir of
Afghanistan as a full and satisfactory settlement of all the
principal differences of opinion which have arisen between
them in regard to the frontier; and both the Government of
India and his Highness the Amir undertake that any
differences of detail, such as those which will have to be
considered hereafter by the officers appointed to demarcate
the boundary line, shall be settled in a friendly spirit, so as to
remove for the future as far as possible all causes of doubt
and misunderstanding between the two Governments.
(7) Being fully satisfied of his Highness’s goodwill to the
British Government, and wishing to see Afghanistan
independent and strong, the Government of India will raise no
objection to the purchase and import by his Highness of
munitions of war, and they will themselves grant him some
help in this respect. Further, in order to mark their sense of
the friendly spirit in which his Highness the Amir has entered
into these negotiations, the Government of India undertake to
increase by the sum of six lakhs of rupees a year the subsidy
of twelve lakhs now granted to his Highness.
H. M. Durand.
Amir Abdur Rahman Khan.
Kabul, November 12, 1893.

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DESIGNING ADAPTIVE ORGANIZATIONS

ANNOTATED LEARNING OUTCOMES

1. Discuss the fundamental characteristics of organizing, including such concepts as work

Organizing is the deployment of organizational resources to achieve strategic goals. Organizing

The span of management is the number of employees reporting to a supervisor. Sometimes

2. Describe functional and divisional approaches to structure.

Coordination refers to the quality of collaboration across departments. It is required whether

6. Identify how structure can be used to achieve an organization’s strategic goals.

7. Define production technology and explain how it influences organization structure.

I. ORGANIZING THE VERTICAL STRUCTURE Exhibit 7.1

Organizing is the deployment of organizational resources to achieve strategic goals.

Organization structure refers to:

• Formal tasks assigned to individuals and departments;

1. A fundamental principle is that work can be performed more efficiently if employees

2. Authority, Responsibility, and Delegation

a. The chain of command illustrates the authority structure of the organization.

• Authority is vested in organizational positions, not people. People in the same

Accountability is the mechanism through which authority and responsibility are

c. Delegation is another concept related to authority; it is the process managers use

3. Line and Staff Authority

1. The span of management, or span of control, is the number of employees reporting

2. Factors that determine the span of management include:

a. Work performed by subordinates is stable and routine.

b. Subordinates perform similar work tasks.

c. Subordinates are concentrated in a single location.

d. Subordinates are trained and need little direction in performing tasks.

e. Rules and procedures defining task activities are available.

f. Support systems and personnel are available for the manager.

g. Little time is required in nonsupervisory activities such as coordination with other

h. Managers' personal preferences favor a large span.

D. Centralization and Decentralization Exhibit 7.2

1. Centralization and decentralization pertain to the hierarchical level at which decisions

b. The amount of centralization or decentralization should fit the firm’s strategy.

c. In times of crisis or risk of company failure, authority may be centralized at the

II. DEPARTMENTALIZATION Exhibit 7.3

A. Vertical Functional Approach

a. Functional structure is the grouping of positions into departments based on

b. People in a department communicate primarily with others in the same

B. Divisional Approach Exhibit 7.4

a. Divisions are created as self-contained units with separate functional departments

lower in the hierarchy and differences of opinion would be resolved at the

3. Geographic- or Customer-Based Divisions Exhibit 7.5

a. Grouping company activities by geographic region or customer group is an

C. Matrix Approach Exhibit 7.6, Exhibit 7.7

a. The matrix approach combines aspects of both functional and divisional

• Two-boss employees report to two supervisors simultaneously and must

a. The team approach is probably the most widespread trend in

a. Cross-functional teams consist of employees from various functional

b. Permanent teams are groups of employees brought together in a way similar to a

c. With a team-based structure, the entire organization is made up of horizontal