6

Chapter

Organization
Design and
Structure

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Learning Outcomes
After studying this chapter, you will be able to:
• Describe six key elements in org design.
• Identify the contingency factors that favor either the
mechanistic model or the organic model of
organizational design.
• Compare and contrast traditional and contemporary
organizational designs.
• Discuss the design challenges faced by today’s
organizations.

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Organizing
Organizing:
•Is the management function that creates the
organization’s structure. When managers develop or
change the organization’s structure, they’re engaging in
organization design:
•which is the process of making decisions about how
specialized jobs should be, the rules to guide
employees’ behaviors, and the level at which decisions
will be made.

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Elements in Organizational Design
Six key elements:
• Work specialization
• Departmentalization
• Authority & responsibility
• Span of control
• Centralization v.
decentralization
• Formalization

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Work Specialization
Work specialization is the division of work
activities into separate job tasks.

Most managers today see work specialization as an important organizing

mechanism because it helps employees to be more efficient.
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Departmentalization

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Types of Authority Relationships

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Line and Staff Authority

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Unity of Command
Unity of command is a
structure in which each
employee reports to
only one manager.

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Authority and Power
• Authority – A right;
legitimacy is based on
authority figure’s
position in the
organization
• Power – An individual’s
capacity to influence
decisions

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Authority and Power: Differences

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Sources of Power

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Span of Control
Span of control – The number of employees a
manager can efficiently and effectively supervise
Examples of contingency variables:
– Employee training and experience
– Similarity of tasks and task complexity
– Location of employees
– Use of standardized procedures
– Sophistication of management information system

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Centralization and Decentralization

Centralization – Decentralization –
Decision making takes Lower-level managers
place at upper levels provide input or
of the organization. actually make
decisions.

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Formalization
Formalization refers to how
standardized an organization’s
jobs are and the extent to
which employee behavior is
guided by rules and
procedures. In highly
formalized organizations, there
are explicit job descriptions,
numerous organizational rules,
and clearly defined procedures
covering work processes.

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Models of Organizational Design

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Strategy and Structure
An organization’s structure should facilitate goal
achievement. Research shows that certain structural
designs work best with different organizational
strategies.
Flexibility and free-flowing the mechanistic organization,
information of the organic with its efficiency, stability,
structure works well when an and tight controls, works best
organization is pursuing for companies that want to
innovation tightly control costs

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Size and Structure
Large organizations tend to have more
specialization, departmentalization, centralization,
and regulations than small organizations.
Large organizations—typically those with more than 2,000
employees—tend to have more specialization,
departmentalization, centralization, and rules and regulations
than smaller organizations do.

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Technology and Structure

• Workers at Whirlpool’s Brazilian facility build microwave

ovens and air conditioners on a standardized assembly
line.
• Employees at FedEx Kinko’s do custom design and
print jobs for individual customers.
• Employees at Bayer’s facility in Pakistan make
pharmaceutical products using a continuous-flow
production line.
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The Environment and Structure
• Mechanistic organizations– Stable enviro.
•Ill equipped to respond to rapid change
• Organic organizations– dynamic and
uncertain.
•Dynamic environmental forces
–Global competition
–Accelerated product innovation by competitors
–Knowledge management
–Increased customer demand for higher quality and faster
deliveries.

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Traditional Organizational Designs

low departmentalization, wide spans of control, centralization, and little formalization

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 Functional Structure
A functional structure is an organizational design that
groups similar or related occupational specialties
Strengths
1.the advantages of economies of scale,
2.minimal duplication of personnel and equipment, and
3.more satisfied employees who speak the same language as
their peers.

Weaknesses
1.the organization frequently loses sight of its best interests in
the pursuit of functional goals.
2.No single function is totally responsible for results, so
members within individual functions become insulated and
have little understanding of what people in other functions are
doing.
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 Divisional Structure
is an organizational structure made up of separate
business units or divisions. Each division has limited
autonomy and has a division manager who has authority
over his or her unit and is responsible for performance.
advantage
1.it focuses on results.
2.Division managers have full responsibility for a product or service. The
divisional structure also frees the headquarters staff from day-to-day
operating details so that they can focus on long-term and strategic
planning.

disadvantage
1. duplication of activities and resources. Each division, for instance, may
have a marketing research department. Because of the duplication of
functions, the organization’s costs increase and efficiency decreases.
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Contemporary Organizational Designs

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Team Structure

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Matrix & Project Structures

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Project Structure

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Boundaryless Organizations
Boundaryless organization – An organization
whose design is not imposed by a predefined
structure
– Internal boundaries
– External boundaries
• Can be minimized or eliminated by using virtual
or network structural designs

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Current Organizational Design
Challenges
1. Keeping employees
connected
2. Managing global
structural issues
3. Building a learning org
4. Designing flexible work
arrangements

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A Learning Organization

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Flexible Work Arrangements

• Telecommuting
• Compressed
workweeks
• Flextime
• Job sharing
• Contingent
workforce

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