ENGINEERING

MANAGEMENT
Lesson No. 6 – Organizing: Basic
Elements of an Organizational
Structure
 Specific Objectives of the Lesson

 At the end of the lesson, the students should be able to:

 Describe the four elements that make up organization
structure
 Explain the importance of organization charts and the
chain-of-command
 Outline the main approaches to job design, including
the principal alternatives to traditional work schedule
 One reason for the success of 1-800-
FLOWERS is that Jim McCann put
conside-rable effort into the
managerial function of organizing,
the process of allocating and
arranging human and nonhuman
resour-ces so targets can be
achieved.
 Organizing is very important because
it is the means to align work with
resources so plans and decisions can
be made and carried out effectively.
 Organizing is a continuing
management function to keep the
company moving on target.
 NATURE OF AN
ORGANIZATIONAL STRUCTURE

 For example, you experienced running into a

problem in a department store and made you
want to talk to a supervisor or next in
command, but was frustrated to know that no
one knew who the supervisor was or whose
job it was to handle a complain like yours.
 It is expected that existing businesses have to
worked these things to survive in the long run.
 In essence, we expect organizations
to have developed reasonably
effective organizational structure.
Definition of Organizational
Structure
 It is the framework that defines the
boundaries of the formal organization
and within which the organization
operates.
 It is the formal pattern of interaction and
coordination designed by management
to link the tasks of individual and groups
in achieving organizational goals.
 Organizational Chart
One aid of visualizing structure is the
organizational chart.
 It is a line diagram that depicts the
broad outline of the organization’s
structure
 It indicates the way positions are
grouped into specific units, the
reporting relationships and the
channel of communication.
 It is the visual map of the chain of
command
Chain of Command

 It is the unbroken line of authority that

ultimately links each individual in the
organization.
 Basic idea is that everyone should be
able to identify his or her boss.
 It traces the line of authority from
bottom to top
 CHAIRMAN, PRESIDENT
AND CHIEF EXECUTIVE

SECRETARY’S
OFFICE

VICE PRESIDENT GENERAL VICE PRESIDENT VICE PRESIDENT VICE PRESIDENT

FOR COUNSEL FOR HUMAN FOR
MARKETING OPERATIONS RESOURCES FINANCE

INSURANCE HUMAN INTERNAL

COMMUNICATION OPERATIONS RESOURCE AUDIT
DEVELOPMENT

MARKET HEALTH
SUPPORT ACTUARIAL UNIT I NVESTMENT

FIELD INFORMATION TRAINING AND

MANAGEMENT MANAGEMENT CONFERENCE REAL ESTATE
REGION 1 SYSTEMS CENTER

FIELD FINANCIAL
MANAGEMENT ANALYSISI

Example of an
REGION II

Organizational
TAX
Chart
Elements of Organizational
Structure
1. Job Design. The assignment of tasks and
responsibilities that define the jobs of individuals
and units.
2. Departmentalization. The clustering of individual
positions into units and of units into departments
and larger units to form an organizations hierarchy.
3. Vertical Coordination. Top to bottom coordination
such as number of persons reporting to a
supervisor and degree of delegation of authority.
4. Horizontal Coordination. Linkages across
departments, such as taskforces and
interdepartmental teams.
 JOB DESIGN
 Different types of job can involve different activities
 Example: A job as a buyer for the department store chain
may involve keeping in contact with various suppliers in a
certain specialty area (such as shoes), previewing new
offerings, developing sources for in-house brands, and
studying trends in consumer tastes. In contrast, a job of a
salesperson may include learning about new items in
certain departments, keeping merchandize neatly
arranged, helping customers and ringing up sales at the
cash register.
 The different activities of the buyer and the salesperson
reflect work specialization.
 Work Specialization is the degree to
which the work necessary to achieve
organizational goal is broken down
into various jobs.
 Without some specialization, it would
be difficult for most organizations to
function. This is because it is usually
impossible for every organization
member to have the entire range of
skills necessary to run an effective
organization.
 What is included in a given job depends on
job design, the specification of task activities
associated with a particular job.
 Job design is important to the organizing
function for two major reasons:
1. Task activities need to be grouped in logical
way for workers to function effectively
2. Jobs configuration or designation has an
influence on employee motivation to perform.
 Approaches to Job Design
 Job specialization
 breaking jobs into smaller tasks
 simple, easy-to-learn, and economical
 can lead to low job satisfaction, high absenteeism, and
turnover
 Job rotation
 periodically moving workers from one job to another
 Job enlargement
 increasing the number of tasks performed by a worker
 Job enrichment
 adding more tasks and authority to a worker’s job
 A related aspect of designing jobs is
creating alternative work schedule,
based on adjustments in the normal
work schedule rather in the job
content or activities.
 The basic objective of this approach is
to increase worker’s job satisfaction
and motivation by arranging work
schedules that allow a diverse work
force greater flexibility in balancing
both work life ad personal life
 Major Types of Alternative Work
Schedules

 Flextime – it is a work schedule that specifies

certain core hours when individuals are expected to
be on the job (say 8 hours/day) and allow flexibility
in starting and quitting times.
 Compressed Workweek – it is a work schedule
where employees work four 10-hour days or some
similar combinations rather than the usual five 8-
hour days
 Job Sharing - a work practice where two or more
people share a single fulltime job. One person can
work in the morning and the other in the afternoon,
or alternate days.
DEPARTMENTALIZATION

 This is another important aspect of

organizational structure
 It is the clustering of individuals into units
and units into departments and larger
units to facilitate achieving organizational
goals.
 Differing overall patterns of
departmentalization are often referred as
organizational design.
Pattern of
Departmentalization
 Functional
 Product

 Customer

 Geographic

 Matrix
 Functional
Departmentalization

It groups positions into

units on the basis of
similarity of expertise, skills
and work activities

Exhibit 11.1
Functional
Departmentalization
Advantages Disadvantages
 creates highly  cross-department
skilled specialists coordination can
 lowers costs be difficult
through reduced  may lead to slower
duplication
decision making
 communication
and coordination  produces
problems are managers with
lessened narrow
experiences
 Product Departmentalization

Easy Food Market

Cheese Milk Ice cream

Groups positions into units according to similarity

of products.
Product Departmentalization

Advantages Disadvantages
 managers  duplication often
specialize but increases costs
have broader  difficult to
experience coordinate across
 easier to assess departments
work-unit
performance
 decision making is
faster
 Customer
Departmentalization
American Express

Cards Travel Financial Services Business Services

Groups positions into units on the basis of

similarity of markets or customers

Adapted from Exhibit 11.3

Customer
Departmentalization
Advantages Disadvantages
 focuses on  duplication of
customer needs resources
 products and  difficult to achieve
services tailored coordination across
to specific departments
customers
 decisions that
please the
company but may
hurt the company
 Geographic
Departmentalization

Coca-Cola Enterprises

Central North Eastern North Western North

Europe
America America America

Group positions
into units on
the basis of
geographical
location
Geographic
Departmentalization
Advantages Disadvantages
 responsive to  duplication of
demand of resources
different markets  difficult to
 reduce costs by coordinate across
locating resources departments
close to
customers
Matrix Departmentalization

A hybrid structure in which two or more

forms of departmentalization are used
together
 most common forms combine product
and functional
 employees report to two bosses
 increased cross-functional interaction
 significant interaction between functional
and project managers required
Matrix Departmentalization

Advantages Disadvantages
 efficiently manage  requires high
large, complex levels of
tasks coordination
 effectively  increased conflict
manage large, levels
complex tasks  requires high level
of management
skills