John R. Schermerhorn, Jr.

11 Daniel G. Bachrach

Introduction to
Management
13th edition

CHAPTER 11
FUNDAMENTALS OF ORGANIZING
 PLANNING AHEAD — KEY TAKEAWAYS
 Describe organizing as a management function and the difference between
formal and informal organization structures.
 Identify the traditional organizational structures, and the strengths and
weaknesses of each.
 Identify newer horizontal organizational structures, and the strengths and
weaknesses of each.
 Explain how organizational designs are changing in the modern workplace.
 CHAPTER 11 OUTLINE
1. Organizing as a Management Function
a) What is organization structure?
b) Formal structures
c) Informal structures
2. Traditional Organization Structures
a) Functional structures
b) Divisional structures
c) Matrix structures
 CHAPTER 11 OUTLINE
3. Horizontal Organization Structures
a) Team structures
b) Network structures
c) Boundaryless structures
4. Organizational Designs
a) Contingency in organizational design
b) Mechanistic and organic organization designs
c) Trends in organizational designs
 1- ORGANIZING AS A MANAGEMENT FUNCTION

 Organizing as a management function

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

together to accomplish a goal.

Organizing involves dividing up the work to be done (division of labor) and

coordinating results to achieve a common purpose.
 1- ORGANIZING AS A MANAGEMENT FUNCTION
ORGANIZING VIEWED IN RELATIONSHIP WITH THE OTHER
MANAGEMENT FUNCTIONS

• Coordinate results

The implementation process begins with organizing

 1- ORGANIZING AS A MANAGEMENT FUNCTION
WHAT IS ORGANIZATION STRUCTURE?

Organization structure is the system of

• tasks,
• workflows,
• reporting relationships, and
• communication channels

 Organization structure links together the work of individuals and groups.

Organization structure (a) allocates tasks through a division of labor and

(b) coordinate performance results.

Structures should be tailored to fit the situation and environment.

 contingency approach
 1- ORGANIZING AS A MANAGEMENT FUNCTION

FORMAL STRUCTURES

An organization chart is a diagram, which describes and shows the following

basic aspects of an organization’s formal structure:

 The 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 levels of management are shown.
 1- ORGANIZING AS A MANAGEMENT FUNCTION

INFORMAL STRUCTURES

 The informal structure is a “shadow” organization made up of the unofficial, but

often critical, working relationships between organizational members.

Social network analysis

 Identifies informal structures and social relationships in the organization

Copyright ©2015 John Wiley & Sons, Inc.

 1- ORGANIZING AS A MANAGEMENT FUNCTION

Potential advantages of informal structures include:

 allowing people to make contacts with other who can help them get things done.
 stimulating informal learning as people work and interact together.
 providing emotional support and friendship that satisfy social needs.

Potential disadvantages of informal structures include:

 susceptibility (sensitivity) to rumor (myth).
 may carry inaccurate information.
 may breed (create) resistance to change.
 can divert work efforts from important objectives.
 may result in feelings of alienation (estrangement) by “outsiders”
 2- TRADITIONAL ORGANIZATION STRUCTURES

A traditional principle of organizing is that ……

Performance gains are possible when people are allowed to specialize and
become experts in specific jobs or tasks.

To do this we have to put employees together in an appropriate way using an

appropriate organization structure.

 Traditional organization structures

Functional Divisional Matrix

Who will work together?

 2- TRADITIONAL ORGANIZATION STRUCTURES
Functional Structure

 Functional structures exist when …..

 people with similar skills and performing similar tasks are grouped
together into formal work units

 Members work in their functional areas of expertise

 Are not limited to business organization
 Work well for small organizations producing few products or services
 2- TRADITIONAL ORGANIZATION STRUCTURES
FUNCTIONAL STRUCTURES IN A BUSINESS, BRANCH BANK, AND
COMMUNITY HOSPITAL

The figure above illustrates a functional structure for a business firm, a branch
bank, and a community hospital.
 2- TRADITIONAL ORGANIZATION STRUCTURES

Potential advantages of functional structures include:

 Efficient use of resources.
 Tasks match and fit to expertise and training.
 High-quality technical problem solving.
 In-depth training and skill development within functions.
 Clear career paths within functions.

Potential disadvantages of functional structures include:

 Difficulties in pinpointing responsibilities (innovation  who is the
entrepreneur?).
 Lack of communication, coordination, and problem solving across functions.
 The sense of common purpose can getting lost (self-centered ).
 2- TRADITIONAL ORGANIZATION STRUCTURES
Divisional Structure

Divisional structures
Group together employees who
• work on the same product,
• are located in the same area or geographical region (area structures).
• serve similar customers, or
• work on the same process.

Divisional structures are common in complex organizations with diverse

operations that extend across
 2- TRADITIONAL ORGANIZATION STRUCTURES
FIGURE 11.3 DIVISIONAL STRUCTURES BASED ON PRODUCT,
GEOGRAPHY, CUSTOMER, AND PROCESS

The figure above provides examples of divisional structures based on product,

geography, customer, and process.
 2- TRADITIONAL ORGANIZATION STRUCTURES

Potential advantages of divisional structures include:

 More flexibility in responding to environmental changes.
 Improved coordination across functional departments.
 Clear points of responsibility for product or service delivery.
 Expertise focused on specific customers, products, processs and regions.
 The organization’s size is easy changeable by adding or deleting divisions.

Potential disadvantages of divisional structures include:

 Duplication of resources and efforts across divisions.
 Competition and poor coordination across divisions.
 Emphasis on divisional goals at expense of organizational goals
 2- TRADITIONAL ORGANIZATION STRUCTURES

 Matrix structure
 Combines functional and divisional structures to gain advantages and
minimize disadvantages of each
 Used in Manufacturing, Service Industry (University) and others
 2- TRADITIONAL ORGANIZATION STRUCTURES
MATRIX STRUCTURE IN A SMALL, MULTI-PROJECT BUSINESS FIRM

Workers in this structure belong to at least two groups

(a) a functional group and
(b) a product, program, or project team.
They report to two bosses, one within the function and the other within the team.
 2- TRADITIONAL ORGANIZATION STRUCTURES

Potential advantages of matrix structures include:

 Better communication and cooperation across functions.

 Improved decision making;
 Increased flexibility in adding, removing, or changing operations.
 Better customer service; there is always a program, product, or project manager
informed and available to answer questions.
 Better performance accountability through the program, product, or project
managers.
 Improved strategic management; top managers are freed from lower-level
problem solving to focus more time on strategic issues.
 2- TRADITIONAL ORGANIZATION STRUCTURES

Potential disadvantages of matrix structures include:

 The two-boss system can result in power struggles (fight) as functional

supervisors and team leaders compete with each other to exercise authority.
 The two-boss system can create task confusion and conflict in work priorities.
 Team meetings are time consuming.
 Teams may develop a strong team loyalties “groupitis” that cause a loss of focus
on larger organizational goals.
 Increased costs due to adding team leaders to the structure.
 3- HORIZONTAL ORGANIZATION STRUCTURES

 Team structures
 Extensively use permanent and temporary teams to
 Solve problems,

 Complete special projects, and

 Accomplish day-to-day tasks

 Often use cross-functional teams existing of members from different

functional departments

 Project teams are convened for a specific task or project and disbanded once
completed
 3- HORIZONTAL ORGANIZATION STRUCTURES

 Potential advantages of team structures:

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

 Potential disadvantages of team structures include:

 Conflicting loyalties among members regarding both team and functional
assignments.
 Issues of time management and group process.
 Effectiveness of the time that team members spend together depends on the quality
of interpersonal relations, group dynamics, and team management.
 3- HORIZONTAL ORGANIZATION STRUCTURES

Network structures
 A network structure consists of a central core that is linked through networks
of relationships with outside contractors and partners that supply essential
services.

 Network organizations own only the essential or core components of the

business, and use strategic alliances and outsourcing to provide the other
components.

 A strategic alliance is a cooperative strategy through which partners do things

of mutual value for one another.
 3- HORIZONTAL ORGANIZATION STRUCTURES
A NETWORK STRUCTURE FOR A WEB-BASED RETAIL BUSINESS 24

The figure above illustrates how a network structure might work for a mail-order
company selling lawn and deck furniture through a catalog.
 3- HORIZONTAL ORGANIZATION STRUCTURES

Potential advantages of network structures include:

 The development of lean and streamlined organizations.

 A reduction in overhead costs and an increase in operating efficiency.

 Employment of outsourcing strategies along with contacting out

specialized business functions.
 Creation of interesting jobs for those who coordinate the entire system of
relationships.

Potential disadvantages of network structures include:

 Complicated control and coordination of the network due to the complex
business or mission of the organization.
 Network breakdown can affect the entire system  Plan B.

 Potential loss of control over outsourced activities and lack of loyalty

among infrequently used contractors.
 Excessive (to much) outsourcing of critical activities can be dangerous to
the firm.
 3- HORIZONTAL ORGANIZATION STRUCTURES

Boundaryless Structure

Boundaryless organizations eliminate

1- internal boundaries among subsystems and
2- external boundaries with the external environment.
• Boundaryless organizations is a combination of team and network
structures.
• Key requirements of Boundaryless Organization:
Absence of hierarchy
Empowerment of team members
Technology utilization
Acceptance of impermanence (instability)
• Boundaryless organizations encourages creativity, quality, timeliness,
flexibility, and efficiency.

A special form of the boundaryless organization is the virtual organization,

which is an organization that operates in a shifting network of external alliances
that are engaged as needed, using IT and the Internet.
 3- HORIZONTAL ORGANIZATION STRUCTURES
THE BOUNDARYLESS ORGANIZATION ELIMINATES INTERNAL AND
EXTERNAL BARRIERS

The figure above shows how the absence of internal and external barriers helps
people work in ways that bring speed and flexibility to the boundaryless firm.
 4- ORGANIZATIONAL DESIGNS

Organizational design

 Organizational design is the process of choosing and implementing

structures to accomplish an organization’s mission and objectives.

 Because every organization faces its own set of unique problems and
opportunities, the best design at any moment is the one that achieves a
good match between structure and situational contingencies.
 4- ORGANIZATIONAL DESIGNS
CONTINGENCY IN ORGANIZATIONAL DESIGN
Bureaucracy
 A form of organization based on logic, order, and the legitimate use of
formal authority

 Bureaucratic designs feature …

 Clear-cut division of labor

 Strict hierarchy of authority

 Formal rules and procedures

 Promotion based on competency

 Bureaucracy should means “operating efficiency”, but the bureaucracies

that we know today are often associated with “red tape.” …. excessive
bureaucracy … negative  weacken entrepreneurial activities
 4- ORGANIZATIONAL DESIGNS

Contingency perspective on bureaucracy asks the questions:

 When is bureaucracy a good choice for an organization?

 When it isn’t, what alternatives are available?

It is the environment which determines the most appropriate design

 Mechanistic designs work in a stable environment
 Organic designs work in a rapidly changing and uncertain
environment

 Adaptive organizations operate with a minimum of bureaucratic

feature and encourage worker empowerment and teamwork
 4- ORGANIZATIONAL DESIGNS
Mechanistic Designs
• Predictable goals
• Centralized authority
• Many rules and procedures
• Narrow spans of control
• Specialized tasks
• Few teams and task forces
• Formal and impersonal
means of coordination
Organic Designs
• Adaptable goals
• Decentralized authority
• Few rules and procedures
• Wide spans of control
• Shared tasks
• Many teams and task forces
• Informal and personal
means of coordination
 4- ORGANIZATIONAL DESIGNS
A CONTINUUM OF ORGANIZATIONAL DESIGN ALTERNATIVES: FROM
BUREAUCRATIC TO ADAPTIVE ORGANIZATIONS

The figure above portrays these two approaches as opposite extremes on a continuum
of organizational design alternatives.
 4- ORGANIZATIONAL DESIGNS
TRENDS IN ORGANIZATIONAL DESIGNS

Contemporary organizing trends include:

1. Fewer levels of management

2. More delegation and empowerment
3. Decentralization with centralization
4. Reduced use of staff
 4- ORGANIZATIONAL DESIGNS
TRENDS IN ORGANIZATIONAL DESIGNS

1- Fewer levels of management

The chain of command is the line of authority that vertically links each position
with successively higher levels of management.

Span of control is the number of subordinates directly reporting to a manager.

Organizing Trends
Tall structures have narrow spans of control and many levels of management;
Flat structures have wider spans of control and fewer levels of management.

 Flatter structures are viewed as a competitive advantage

Trend: Many organizations are cutting unnecessary levels of management and

shifting to wider spans of control; managers are taking responsibility for larger
numbers of subordinates who operate with less direct supervision.
 4- ORGANIZATIONAL DESIGNS
TRENDS IN ORGANIZATIONAL DESIGNS

2- More delegation and empowerment

Delegation is the process of entrusting work to others by giving them the right to
make decisions and take action.

 The three steps in delegation are:

1- Managers can delegate authority but not responsibility
 By delegating responsibility managers must carefully explaining the work or
duties to employee, who is supposed to do it.
2- The manager grants authority to act.
3- The manager creates accountability.
 4- ORGANIZATIONAL DESIGNS
TRENDS IN ORGANIZATIONAL DESIGNS

2- More delegation and empowerment

A common management failure is unwillingness to delegate.

 It overloads the manager with work and hinder other opportunities to fully
utilize their talents.

Delegation leads to empowerment

 giving others the freedom to contribute ideas and do their jobs in the best
possible ways.

Trend: Managers are delegating more; they are finding more ways to empower
people at all levels to make more decisions affecting themselves and their work.
 4- ORGANIZATIONAL DESIGNS
TRENDS IN ORGANIZATIONAL DESIGNS

3- Decentralization with centralization

Centralization is the concentration of authority for making most decisions at the

top levels of an organization.

Decentralization is the dispersion (spreading) of the authority to make decisions

throughout all levels of the organization.

Centralization and decentralization do not have to be an either/or choice.

Modern organizations can operate with greater decentralization of decision making
without giving up centralized control.

Trend: Managers are delegating more; they are finding more ways to empower
people at all levels to make more decisions affecting themselves and their work
while at the same time using information technology to maintain centralized control.
 4- ORGANIZATIONAL DESIGNS
TRENDS IN ORGANIZATIONAL DESIGNS

4- Reduced use of staff

Staff positions provide technical expertise for other parts of the organization.

Trend: Organizations are reducing the size of staff; they are seeking lower costs
and increased operating efficiency by employing fewer staff personnel and using
smaller staff units.
 Adaptive organization: Anpassungsfähige Organisation:
Authority and responsibility principle: Prinzip der Autorität und Verantwortung:
Boundaryless organization: Grenzenlose Organisation:
Bureaucracy: Bürokratie:
Centralization: Zentralisierung:
Chain of command: Befehlskette:
Cross-functional teams: Funktionsübergreifende Teams:
Customer structure: Kundenstruktur:
Decentralization: Dezentralisierung:
Delegation: Delegation:
Divisional structure: Bereichsstruktur:
Empowerment: Ermächtigung:
Flat structures: Flache Strukturen:
Formal structure: Formale Struktur:
The functional chimney's  Functional chimneys problem: Problem mit funktionellen Schornsteine:
problem is a lack of Functional structure: Funktionelle Struktur:
communication and Geographical structure: Geographische Struktur:
coordination across functions. Informal structure: Informelle Struktur:
Matrix structure: Matrix Struktur:
member of functional groups Mechanistic design: Mechanistisches Design:
develop self-centered and Network structure: Netzwerkstruktur:
narrow viewpoints and become Organic design: Organische Design:
uncooperative with other groups Organization chart: Organisationsdiagramm:
losing the total system Organization structure: Organisationsstruktur:
perspective. Organizing: Organisieren:
Organizational design: Organisationsdesign:
Process structure: Prozessstruktur:
Product structure: Produktstruktur:
Project teams: Projektteams:
Social network analysis: Analyse sozialer Netzwerke:
Span of control: Kontrollspanne:
Staff positions: Personalpositionen:
Strategic alliance: Strategische Allianz:
Tall structures: Hohe Strukturen:
Team structure: Team Struktur:
Virtual organization: Virtuelle Organisation:
Work Process: Arbeitsprozess: