Powerp 06

Fundamentals of
MANAGEMENT
Core Concepts & Applications
Griffin
Third Edition
Chapter 6
Organization Structure and Design
Copyright © 2003 Houghton Mifflin Company. All rights reserved. PowerPoint Presentation by Charlie Cook
Chapter Outline
• The Nature of Organizing
– Job Specialization
– Grouping Jobs: Departmentalization
• The Bureaucratic Model of Organization Design
• Situational Influences on Organization
– Core Technology
– Environment
– Organization Size and Life Cycle
Copyright © by Houghton Mifflin Company. All rights reserved. 6–2

Chapter Outline (cont’d)
• Basic Forms of Organization Design
– Functional (U-Form) Design
– Conglomerate (H-Form) Design
– Divisional (M-Form) Design
– Matrix Design
– Hybrid Design
• Emerging Issues in Organization Design
– The Team Organization
– The Virtual Organization
– The Learning Organization

Learning Objectives
• After studying this chapter, you should be able
to:
– Identify the basic elements of organizations.
– Describe the bureaucratic perspective on organization
design.
– Identify and explain several situational influences on
organization design.
– Describe the basic forms of organization design that
characterize many organizations.
– Describe emerging issues in organization design.

Components of Organization Structure
Barney, Jay B. and Ricky W. Griffin, The Management of Organizations. Copyright © 1992 by Houghton Mifflin Company. Used with permissions.

The Nature of Organizing
• Organization Design
– The overall set of structural elements and the
relationships among those elements used to manage
the total organization.
– A means to implement strategies and plans to achieve
organizational goals.
• Job Specialization
– The degree to which the overall task of the
organization is broken down and divided into smaller
component parts.

Job Specialization
• Benefits of Specialization
– Workers can become proficient at a task.
– Transfer time between tasks is decreased.
– Specialized equipment can be more easily developed.
– Employee replacement becomes easier.
• Limitations of Specialization
– Employee boredom and dissatisfaction with mundane
tasks.
– Anticipated benefits of specialization do not always
occur.

Alternatives to Specialization
• Job Rotation
– Systematically moving employees from one job to
another. Most frequent use today is as a training device
for skills and flexibility.
• Job Enlargement
– An increase in the total number of tasks workers perform.
• Increases training costs, unions contend that workers deserve
more pay for doing more tasks, and the work may still be dull and
routine.
• Job Enrichment
– Increasing both the number of tasks the worker does and
the control the worker has over the job.

Alternatives to Specialization (cont’d)
• Job Characteristics Approach:
– Core Dimensions
• Skill variety—the number of tasks a person does in a job.
• Task identity—the extent to which the worker does a
complete or identifiable portion of the total job.
• Task significance—the perceived importance of the task.
• Autonomy—the degree of control the worker has over how
the work is performed.
• Feedback— the extent to which the worker knows how well
the job is being performed.
– Growth-Need Strength
• The desire for some people to grow, develop, and expand
their capabilities that is their response to the core dimensions.

Critical
Core job Personal and
psychological
dimensions work outcomes
states
• Skill variety Experienced • High internal

• Task identity meaningfulness work motivation
• Task significance of the work
• High-quality work
Experienced performance
• Autonomy responsibility
for outcomes
of the work • High satisfaction
with the work
Knowledge of the
• Feedback actual results of • Low absenteeism
work activities and turnover
Source: J. R. Hackman and G. R. Oldham,
The Job Characteristics Employee “Motivation Through the Design of Work: A Test
of a Theory,“ Organizational Behavior and Human
growth-need Performance, Vol. 6 (1976), pp. 250–279.
Approach strength Copyright © Academic Press, Inc. Reprinted by
permission of Academic Press and the authors.
Figure 6.1
Alternatives to Specialization (cont’d)
• Work Teams
– An alternative to job specialization that allows the
entire group to design the work system it will use to
perform an interrelated set of tasks.

Grouping Jobs: Departmentalization
• Departmentalization
– The process of grouping jobs according to some
logical arrangement.
• Rationale for Departmentalization
– Organizational growth exceeds
the owner-manager’s capacity
to personally supervise all of
the organization.
– Additional managers are
employed and assigned
specific employees to supervise.

Common Bases of Departmentalization
Barney, Jay B. and Ricky W. Griffin, The Management of Organizations. Copyright © 1992 by Houghton Mifflin Company. Used with permission.

(cont’d)
• Functional Departmentalization
– The grouping of jobs
involving the same or
similar activities.

(cont’d)
• Advantages • Disadvantages
– Each department can – Decision making
be staffed by functional- becomes slow and
area experts. bureaucratic.
– Supervision is – Employees narrow their
facilitated in that focus to the department
managers only need be and lose sight of
familiar with a narrow organizational goals/
set of skills. issues.
– Coordination inside – Accountability and
each department is performance are
easier. difficult to monitor.
Product Departmentalization Form
• Product Departmentalization
– The grouping of activities around products or product
groups.

Product Departmentalization Form (cont’d)
– All activities associated – Managers may focus on
with one product can be their product to the
integrated and exclusion of the rest of
coordinated. the organization.
– Speed and effectiveness – Administrative costs
of decision making are may increase due to
enhanced. each department
– Performance of having its own
individual products or functional-area experts.
product groups can be
assessed.

Customer Departmentalization
• Customer Departmentalization
– Grouping activities to respond to and interact with
specific customers and customer groups.
• Advantage
– Skilled specialists can deal
with unique customers or
customer groups.
• Disadvantage
– A large administrative staff
is needed to integrate activities
of various departments.

Location Departmentalization
• Location Departmentalization
– The grouping of jobs on the basis of defined
geographic sites or areas.
• Advantage
– Enables the organization to
respond easily to unique
customer and environmental
characteristics.
• Disadvantage
– Large administrative staff
may be needed to keep track
of units in scattered locations.
Establishing Reporting Relationships
• Chain of Command
– A clear and distinct line of authority among the
positions in an organization.
– Unity of Command
• Each person within an organization must have
a clear reporting relationship to one and
only one boss.
– Scalar Principle
• A clear and unbroken line of authority
must extend from the bottom to the
top of the organization.

Establishing Reporting Relationships
(cont’d)
• Span of Management (or Span of Control)
– The number of people who report to a particular
manager.
– There is no ideal or optimal
span of management.

Establishing Reporting Relationships:
Tall Versus Flat Organizations
• Tall Organizations • Flat Organizations
– Are more expensive – Lead to higher levels of
because of the number of employee morale and
managers involved. productivity.
– Foster more communication – Create more administrative
problems because of the responsibility for the
number of people through relatively few managers.
whom information must – Create more supervisory
pass. responsibility for managers
due to wider spans of
control.

Tall Versus Flat Organizations
Tall Organization
President
Flat Organization
President

Distributing Authority
• Authority
– Power that has been legitimized by the organization.
• Delegation
– The process by which managers assign a portion of
their total workload to others.
• Reasons for Delegation
– To enable the manager to get more work done by
utilizing the skills and talents of subordinates.
– To foster the development of subordinates by having
them participate in decision making and problem solving
that allows them to learn about overall operations and
improve their managerial skills.
Steps in the Delegation Process
Step 1 Step 2 Step 3

Assigning Granting Creating
responsibility authority accountability
Manager Manager
Manager Manager
Manager
Subordinate Subordinate Subordinate

Problems in Delegation
• Manager • Subordinate
– Reluctant to delegate. – Reluctant to accept
– Disorganization delegation for fear of
prevents planning work failure.
in advance. – Perceives no rewards
– Subordinate’s success for accepting additional
threatens superior’s responsibility.
advancement. – Prefers to avoid any
– Lack of trust in the risk and responsibility.
subordinate to do well.

Decentralization and Centralization
• Decentralization
– The process of systematically delegating power and
authority throughout the organization to middle- and
lower-level managers.
• Centralization
– The process of systematically retaining
power and authority in the hands of
higher-level managers.

Decentralization and Centralization (cont’d)
• Factors Determining the Choice of
Centralization
– The complexity and uncertainty of the external
environment.
– The history of the organization.
– The nature (cost and risk)
of the decisions to be made.

Coordinating Activities
• Coordination
– The process of linking the activities of the various
departments of the organization.
• The Need for Coordination
– Departments and work groups are interdependent; the
greater the interdependence, the greater
the need for coordination.

Coordinating Activities:
Three Major Forms of Interdependence
• Pooled interdependence
– When units operate with little interaction; their output
is simply pooled at the organizational level.
• Sequential interdependence
– When the output of one unit becomes the input of
another unit in sequential fashion.
• Reciprocal interdependence
– When activities flow both ways
between units.

Three Major Forms of Interdependence
Sequential Reciprocal
Input Output Input Output Input Output
Pooled
Input
Input Output
Input
Input Output

Structural Coordination Techniques
• The Managerial Hierarchy
– Placing one manager in charge of interdependent
departments or units.
• Rules and Procedures
– Coordinating routine activities
via rules and procedures that
set priorities and guidelines
for actions.
• Liaison Roles
– A manager coordinates interdependent units by acting
as a common point of contact, facilitating the flow of
information.

Structural Coordination Techniques (cont’d)
• Task Forces
– Used with multiple units when coordination is complex
requiring more than one individual and
the need for coordination is acute.
– Disbanded when the need for
coordination has been met.
• Integrating Departments
– Permanent organizational units
that maintain internal integration and coordination on
an ongoing basis.
– May have authority and budgetary controls.

The Bureaucratic Model of
Organization Design
• Bureaucratic Model (Max Weber)
– A logical, rational, and efficient organization design based
on a legitimate and formal system of authority.
– Characteristics
• Adopt a division of labor with each position filled by an expert.
• Create a consistent set of rules to ensure uniformity in task
performance.
• Establish a hierarchy of positions, which creates a chain of
command.
• Engage in impersonal management with appropriate social
distance between superiors and subordinates.
• Employment and advancement to be based on technical expertise
and employees protected from arbitrary dismissal.

Bureaucratic Model
– Efficiency in function – Organizational
due to well-defined inflexibility and rigidity
practices and due to rules and
procedures. procedures.
– Organizational rules – Neglects the social and
prevent favoritism. human processes within
– Recognition of and the organization.
requirement for – Belief in “one best way”
expertise stresses the to design an
value of an organization does not
organization’s apply to all
employees. organizations.
System One Versus System Four
Organization

Situational
Determinants of
Organization
Design
Barney, Jay B. and Ricky W. Griffin, The Management of Organizations. Copyright © 1992 by Houghton Mifflin Company. Used with permissions.

Situational Influences on
Organization Design
• Core Technology
– Technology is the conversion process used to
transform inputs into outputs.
– A core technology is an organization’s most important
technology.
– Joan Woodward initially sought a correlation between
organization size and design; instead she found a
potential relationship between technology and design.
– As the complexity of technology increases, so do the
number of levels of management.

Organization Design (cont’d)
• Woodward’s Basic Forms of Technology
– Unit or Small-Batch Technology
• Produce custom-made products to customer specifications,
or else produce in small quantities.
– Large Batch/Mass Production
• Uses assembly-line production
methods to manufacture large
quantities of products.
– Continuous Process
• Use continuous-flow processes to
convert raw materials by process
or machine into finished products.

• Woodward’s Findings
– Unit or small-batch technology and continuous
process firms tend to be organic—less rigid and more
informal.
– Large batch/mass production firms tend to be
mechanistic—bureaucratic with higher degrees of
labor specialization.
– Successful firms tended to follow the typical pattern
appropriate to their technology (i.e., more organic than
their competitors).

• Burns and Stalker
– Research focused on identifying extreme forms of the
organizational environment:
• Stable environments that remain constant over time.
• Unstable environments subject to uncertainty and rapid
change.
– Organization Designs
• Mechanistic organizations that are similar to bureaucratic
models; found most frequently in stable environments.
• Organic organizations that are flexible and informal models;
usually found in unstable and unpredictable environments.

• Lawrence and Lorsch
– Predicted that environmental factors have differential
effects on the different sub-units of an organization;
affecting the overall design of the organization.
• Differentiation is the extent to which the organization is
broken down into subunits; associated with stable
environments.
• Integration is the degree to which the various subunits must
work together in a coordinated fashion.
– The degree of differentiation and integration needed
by an organization depends on the stability of the
environments that its sub-units face.
• Organizational Size
– Defined as the total number of full-time or full-time
equivalent employees.
– Research findings:
• Small firms tend to focus on their core technology.
• Large firms have more job specialization, standard operating
procedures, more rules and regulations, and are more
decentralized.
• Organizational Life Cycle
– A progression through which organizations evolve as
they grow and mature—birth, youth, midlife, and
maturity.
Basic Forms of Organization Design
• Functional or U-form (Unitary) Design
– Organizational members and units are grouped into
functional departments such as marketing and
production.
– Coordination is required across all departments.
– Design approach resembles functional
departmentalization in its advantages and
disadvantages.

Functional (U-Form) Design for a
Small Manufacturing Company
CEO
Vice president, Vice president, Vice president, Vice president, Vice president,
operations marketing finance human resources R&D
Plant Regional Labor relations Scientific

Controller
managers sales managers director director
Shift District Accounting Plant human

Lab manager
supervisors sales managers supervisor resource manager
Figure 6.2
(cont’d)
• Conglomerate or H-form (Holding) Design

– Organization consists of a set of unrelated
businesses with a general manager for each business.
– Holding-company design is similar to product
departmentalization.
– Coordination is based on the allocation of resources
across companies in the portfolio.
– Design has produced only average to weak financial
performance; has been abandoned for other
approaches.

Conglomerate (H-Form) Design
at Pearson PLC
CEO
Investment
Periodicals Publishing Entertainment Oil services Fine china
banking
operations operations operations operations operations
operations
Figure 6.3
(cont’d)
• Divisional or M-form (Multidivisional) Design

– An organizational arrangement based on multiple
businesses in related areas operating within a larger
organizational framework; following a strategy of
related diversification.
– Activities are decentralized down to the divisional
level; others are centralized at the corporate level.
– The largest advantages of the M-form design are the
opportunities for coordination and sharing of
resources.

Multidivisional (M-form) Design
at The Limited, Inc.
CEO
Bath &
Lerner Victoria’s Other
Structure Body The Limited Express
New York Secret chains
Works
Successful M-form organizations can out-

perform U-form and H-form organizations.
Figure 6.4
(cont’d)
• Matrix Design
– An organizational arrangement based on two
overlapping bases of departmentalization (e.g.,
functional departments and product categories).
– A set of product groups or temporary departments are
superimposed across the functional departments.

(cont’d)
• Matrix Design (cont’d)

– Employees in the resulting matrix are members of
both their departments and a project team under a
project manager.
– The matrix creates a multiple command structure in
which an employee reports to both departmental and
project managers.

(cont’d)
• Matrix design design is useful when:

– There is strong environmental pressure.
– There are large amounts of information to be
processed.
– There is pressure for shared resources.

A Matrix Organization
CEO
Vice president, Vice president, Vice president, Vice president,

engineering production finance marketing
Employees
Project
manager A
Project
manager B
Project
manager C
Figure 6.5
Basic Forms of Organization Design (cont’d)
• Matrix Design Advantages

– Enhances organizational flexibility.
– Involvement creates high motivation and increased
organizational commitment.
– Team members have the opportunity to learn new
skills.
– Provides an efficient way for the organization to use its
human resources.
– Team members serve as bridges to their departments
for the team.
– Useful as a vehicle for decentralization.

Basic Forms of Organization Design (cont’d)
• Matrix Design Disadvantages

– Employees are uncertain about reporting
relationships.
– Managers may view design as an anarchy in which
they have unlimited freedom.
– The dynamics of group behavior may lead to slower
decision making, one-person domination, compromise
decisions, or a loss of focus.
– More time may be required for coordinating task-
related activities.

(cont’d)
• Hybrid Designs
– An organizational arrangement based on two or more
common forms of organization design.
– An organization may have a mixture of related
divisions and a single unrelated division.
– Most organizations use a
modified form of organization
design that permits them to
have sufficient flexibility to
make adjustments for strategic
purposes.
Emerging Issues in Organization Design
• The Team Organization
– An approach to organizational design that relies
almost exclusively on project-type teams with little or
no underlying functional hierarchy.
• The Virtual Organization
– An organizational design that has little or no format
structure with few permanent employees, leased
facilities, and outsourced basic support services.
– It may conduct its business entirely on-line and exist
only to meet a specific and present need.

Emerging Issues in Organization Design
(cont’d)
• The Learning Organization

– An organization that works to facilitate the lifelong
learning and development of its employees while
transforming itself to respond to
changing demands and needs.

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Fundamentals of

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• Skill variety Experienced • High internal

Source: J. R. Hackman and G. R. Oldham,

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Step 1 Step 2 Step 3

Subordinate Subordinate Subordinate

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Input Output Input Output Input Output

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Plant Regional Labor relations Scientific

Shift District Accounting Plant human

• Conglomerate or H-form (Holding) Design

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• Divisional or M-form (Multidivisional) Design

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Successful M-form organizations can out-

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• Matrix Design (cont’d)

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• Matrix design design is useful when:

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Vice president, Vice president, Vice president, Vice president,

• Matrix Design Advantages

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• Matrix Design Disadvantages

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• The Learning Organization

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