Organizing is the process of arranging people and other resources such as materials to work

together to accomplish a goal. The purpose is to create a division of labor and then coordinate
results.

The way where various parts of an organization are arranged is called the organization
structure. A good structure is the one that helps manager to allocate tasks through a division of
labor and providing the coordination of performance.

I. Takeaway 1

1. Formal Structures

Organization chart: identifies positions and job titles as well as the lines of authority and
communication between them. It shows the formal structure, or how the organization is
intended to function.

 Division of work—Positions and titles show work responsibilities.

 Supervisory relationships—Lines show who reports to whom.
 Communication channels—Lines show formal communication flows.
 Major subunits—Positions reporting to a common manager are shown.
 Levels of management—Vertical layers of management are shown.

2. Informal Structures

Informal structure: made up of the unofficial, but often critical, working relationships, shows
how work really gets done, in contrast to the formal arrangements shown in the organization
chart. This information can be used to update the organization chart to better reflect the way
things actually work.

II. Takeaway 2 - Traditional Organization Structures

The basic principle of organizing is performance can be improved when tasks are divided and
people are allowed to become experts in specific jobs.

Departmental Groups people with and jobs into work units or formal teams

1. Functional Structures

People with similar skills and performing similar tasks are grouped together into formal work
units. Members share technical expertise, interests, and responsibilities. This structure is used
in any kind of business

Advantages of Functional structures

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

Disadvantages of Functional structures

Potential disadvantages of functional structures:

Sense of
Difficulties in Functional cooperation Narrow view of Excessive
pinpointing chimneys and common performance upward referral
responsibilities problem purpose break objectives of decisions
down

2. Divisional Structures

Divisional structure groups together people who work on the same product or process, serve
similar customers, or are located in the same area or geographical region. Divisional structures
are common in complex organizations with diverse operations that extend across many
products, territories, customers, and work processes

Advantages of Divisional structures

 More flexibility in responding to environmental changes

 Improved coordination
 Clear points of responsibility
 Expertise focused on specific customers, products, and regions
 Greater ease in restructuring

Disadvantages of Divisional structures

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

3. Matrix Structures

The matrix structure combines the functional and divisional structures. It is an attempt to gain
the advantages and minimize the disadvantages of each. This is accomplished by creating
permanent teams that cut across functions to support specific products, projects, or programs.
Matrix structures are also found in multinational corporations, where they offer the flexibility to
deal with regional differences while still handling multiple product, program, or project needs.

Advantages of Matrix structures

 Better cooperation across functions

 Improved decision making
 Increased flexibility in restructuring
 Better customer service
 Better performance accountability
 Improved strategic management

Disadvantages of Matrix structures

Potential disadvantages of matrix

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

III. Takeaway 3 - Horizontal Organization Structures

 1. Team Structures

Team structures extensively use permanent and temporary teams to solve problems, complete
special projects, and accomplish day-to-day tasks. Often use cross-functional teams composed
of members from different functional departments. Project teams are convened for a specific
task or project and disbanded once completed

Advantages of Team structures:

 Eliminates difficulties with communication and decision making

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

Disadvantages of Team structures:

Potential disadvantages of team structures:

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

2. Network Structures

Network structure consist of a core of full-time employees surrounded by “networks” of

outside contractors and partners that supply services. Because the central core is relatively
small and the surrounding networks can be expanded or shrunk as needed, the network
structure helps lower costs and improve flexibility in dealing with changing environments.
Instead of doing everything for itself with full-time employees, the network organization
employs a minimum staff and contracts out as much work as possible. This is done through
strategic alliances, which are agreements with other firms to pursue business activities of
mutual interest. Some are outsourcing strategic alliances in which they contract to purchase
important services from another organization. Others may be supplier strategic alliances that
link businesses in preferred relationships that guarantee a smooth and timely flow of quality
supplies among the partners.
Advantages of Network structures:

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

Disadvantages of Network structures:

Potential disadvantages of network

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

3. Boundaryless Structures

Boundaryless structure eliminates internal boundaries among subsystems and external

boundaries with the external environment. The boundaryless structure is a combination of the
team and network structures, with the added feature of “temporariness.”

Key requirements:

 Spontaneous teamwork and communication replace formal lines of authority

 Meetings and information sharing happen continuously
 Little hierarchy but lots of empowerment and technology utilization
 Impermanence is accepted

The virtual organization calls an alliance into action to meet specific operating needs and
objectives; when the work is complete, the alliance rests until next called into action.

IV. Takeaway 4 - Organizational Designs

Organizational design is the process of choosing and implementing structures to accomplish

the organization’s mission and objectives. Because every organization faces its own set of
unique problems and opportunities, no one design applies in all circumstances.
The best design at any moment is the one that achieves a good match between structure and
situational contingencies—including task, technology, environment, and people.

1. Bureaucratic design

A classic bureaucracy is a form of organization based on logic, order, and the legitimate use of

formal authority. It is a vertical structure, and its distinguishing features include a clear-cut
division of labor, strict hierarchy of authority, formal rules and procedures. Bureaucracies were
supposed to be orderly, fair, and highly efficient.

Contingency perspective in Organizational Design, management theory asks two contingency

questions.

 When is a bureaucratic form a good choice for an organization?

 When it isn’t, what alternatives are available?
2. Mechanistic vs. Organic Designs

Organizations with more mechanistic designs are vertical structures that typically operate with
centralized authority, many rules and procedures, a precise division of labor, narrow spans of
control, and formal means of coordination.

 Mechanistic designs work best for organizations doing routine tasks in stable
environments.

When organizations operate in dynamic and often uncertain environments, their effectiveness
depends on being able to change with the times. This requires the more organic designs,
horizontal structures with decentralized authority, fewer rules and procedures, less precise
division of labor, wider spans of control, and more personal means of coordination

 Perform well in environments that demand flexibility in dealing with changing

conditions.
3. Trends in Organizational Designs
 Less Chain of command: “simple” and “streamlined” in order to “allow employees to
innovate and make quick decisions”
 Wider spans of control run with flat structures that have fewer levels of management.
 More Delegation and Empowerment: when delegating, managers should give
employees sufficient authorities and equally responsibilities

Step 1—The manager assigns responsibility by carefully explaining the work or

duties someone else is expected to do. This responsibility is an expectation for the
other person to perform assigned tasks.
 Step 2—The manager grants authority to act. Along with the assigned task, the
right to take necessary actions ( for example, to spend money, direct the work of
others, or use resources) is given to the other person.

Step 3—The manager creates accountability. By accepting an assignment, the

person takes on a direct obligation to the manager to complete the job as agreed.

 Decentralization with Centralization

High speed computer networks and advanced information systems allow managers at higher
levels to easily stay informed about a wide range of day-to-day performance matters
throughout an organization.

 Because they have information so readily available, they can allow more
decentralization in decision making.
 Reduced Use of Staff: what is best for any organization will be a cost-effective staff
component that satisfies needs for specialized technical assistance to line operations.