Organizational Structure

Chapter 4

Dr. Rasim Serdar Kurdoğlu

MAN 361 Organization Theory
Bilkent University Faculty of Business Administration
Three components of organizational structure
 Vertical aspect of organizing
1. Formal Reporting Relationships including the number of levels and
the span of control.
2. Grouping of Individuals into departments and of departments into
the total organization

 Horizontal aspect of organizing

3. Design of Systems to ensure effective communication, coordination
and integration of efforts
Information-Processing Perspective
on Structure
 Traditional organization vs. Learning organization
- Traditional organization design emphasizes vertical communication and control.
- Learning organization which emphasizes communication and collaboration
 Centralized vs. Decentralized decision making
- Centralized authority focused on top level decision-making
- Decentralized authority focused on shared tasks and decisions
Vertical Information Linkages
 Vertical linkages coordinate activities between the top and the
bottom of the organization
 Hierarchical referral are the vertical lines which identify the chain of
command
 Rules and Plans
- Rules enabling employees to be coordinated
- Plans provides standing information for employees.
 Vertical information systems is a strategy for increasing vertical
information capacity. It includes reports,
computer-based communication and written
information
Horizontal Information Linkages
 Horizontal linkage refers to the amount of communication and
coordinate activities across organizational departments.
 Information Systems enable information exchange throughout the
organization
 Direct Contact is a higher level of horizontal linkage (i.e. liaison role)
 Task Forces is a temporary committee composed of representative
from each department involved.
 Full-Time Integrator responsible for coordination.
 Teams is the strongest horizontal linkage.
Project manager as the
integrator
Three keys indicators of organization design
1. Required work activities
2. Reporting relationships
3. Departmental grouping options
- Functional grouping
- Divisional grouping
- Multifocused grouping
- Horizontal grouping
- Virtual network grouping
Departmental Grouping Options
Matrix Structure
 Conditions for Matrix:
- Condition 1: Share resources across the organization
- Condition 2: Two or more critical outputs required: products and
technical knowledge
- Condition 3: Environment is complex and uncertain
 Two variations of matrix structure
- functional matrix
- product matrix
 A dual-authority structure can help to ensure a
balance between vertical and horizontal aspects of organizations.
Horizontal Structure
 Organization around core processes:
-Structure is created around cross-functional core processes rather than
tasks, functions or geography. Thus, boundaries between departments
are obliterated.

• Self-directed teams are the basis of organization design and

performance
• Process owners are responsible for entire process
• People on the team are given authority for decisions
• Can increase organization’s flexibility
• Customers drive the horizontal corporation.
• The culture promotes openness, trust and collaboration.
Virtual networks
 It extends the concept of horizontal coordination and collaboration
beyond the boundaries of the organization
 Most common strategy is outsourcing
- Contract out certain tasks/functions
 Virtual or modular structures subcontract most of its major functions
to separate companies
 The virtual network organization serves as a central hub with
contracted experts
Hybrid solutions
 Organizations often use a hybrid structure that combines
characteristics of various structure approaches tailored to specific
needs
 One common type is the combination of the functional and divisional
structures.
 Often used in rapidly changing environments
 Greater flexibility
Contingency theory
• Appropriateness of an organizational structure depends on
contingencies in their environment
• Two organizational contingencies: Organizational size and task
contingency
• E.g. small organizations and innovative tasks do not require strong
bureaucracy
• Structure should fit with needs, demands, and objectives.
Application of Structural Design
 Each type of structure is applied in different situations and is intended to meet
different needs.
 Structural alignment aligns structure with organizational goal
 Symptoms of Structural Deficiency:
• Decision making is delayed or lacking quality
• Organization does not respond innovatively to a changing environment
• Employee performance declines, goals are not being meet
• Too much conflict
The Organizational Structure of Innovation: How Toyota, Procter &
Gamble, etc…

• https://die-innovationsmaschine.de/EN/the-organizational-structure-of-inno
vation-how-toyota-procter-gamble-ge-3m-ibm-google-microsoft-sony-hewlet
t-packard-dupont-honeywell-whirlpool/

• Decision-making by innovation teams rather than by top

management
• Integration of R&D into the Business Units
• Co-location of teams and departments
• Central innovation funds
• External interface for open innovation
How Apple Is Organized for Innovation: The
Functional Organization
• https://www.youtube.com/watch?v=5hENFA3CJUY
The problem: Destructive Silo Mentality
• 5 signs your organization is too siloed
https://www.cmswire. com/ leadership/5-signs-your-organization-is-too-siloed/

• How to get rid of the destructive silo mentality in the workplace

https://bechallenged.com.au/get-rid-destructive-silo-mentality-workplace/
Silos
• Isolation and lack of information flow between department.
• Silos cause inefficiencies
• Poor customer experiences
• Internal unfamiliarity
• Us vs them mentality
• Disenfranchised Employees
• Task duplication
How to get rid of silos?
• Unify the business under one vision: Common goals
• Clear plans: Increasing transparency
• Collaborations and train one another
• Incentives: Reward cross-department thinking
• Encourage socialization: Fun activities and playfulness
Reading
• How to successfully scale a flat organization?
• https://hbr.org/2021/06/how-to-successfully-scale-a-flat-organization
How to scale a flat organization?
• Flat organization: Minimal hierarchy, self-management and
empowerment
• Growth and its need of authority stifle flat organization!
• Organic modular design: Autonomous teams
• Coordination through enabling mechanisms: Articulating
objectives
• Transparency: Control by transparency
• Knowledge sharing by AI: Guide by information
• Agile learning: Culture tolerating failure
• The promotion of a living story: Integrate with values