MANAGEMENT

Business School
Lecturer ： LUO Qian

1
 Chapter 6 Organizing

6.1 Designing Organizational Structure

6.2 Mechanistic and Organic Structures

6.3 Common organizational structure types

2
 Chapter 6 Organizing
6.1 Designing Organizational Structure

Organizing is arranging and structuring work to accomplish organizational goals.

Organizational structure is the formal arrangement of jobs within an
organization.

(1). Work Specialization

Work Specialization means employees must specialize in doing part of an

activity rather than the entire activity in order to increase work output.

3
(2) Departmentalization

Departmentalization means the basis by which jobs are grouped together.

① Functional departmentalization

Grouping activities by functions performed.

Activities can be grouped according to function to pursue economies of scale by

placing employees with shared skills and knowledge into departments for
example human resources, IT, accounting, manufacturing, logistics, and
engineering.

4
Advantage of work specialization;
Easier to communicate in one specialty;
Departmental selfishness: views the profits of their departments at the
first place

5
② Geographical departmentalization
Grouping activities on the basis of territory.

If an organization's customers are geographically dispersed, it can group jobs

based on geography.

6
The example of Coca-cola
 7
Coca-Cola geographic areas
8
③ Product departmentalization
Grouping activities by product line.

Each major product area in the corporation is under the authority of a

senior manager who is specialist in, and is responsible for, everything
related to the product line.

9
④ Process departmentalization
Grouping activities on the basis of product or service or customer flow.

10
⑤ Customer departmentalization
Grouping activities on the basis of common customers or types of customers.

The assumption is that customers in each department have a common set of

problems and needs that can best be met by specialists.

11
(3)Chain of command
The chain of command is the line of authority extending from upper
organizational levels to lower levels, which clarifies who reports to whom.

① authority

Authority refers to the rights inherent in a managerial position to tell people

what to do and to expect them to do it.
② Responsibility

The obligation or expectation to perform is known as Responsibility.

③ Unity of command

The unity of command principle (one of the Fayol’s 14 management

principles) states that a person should report to only one manager. 12
(4) Span of Control
Span of Control is about the number of employees a manager can efficiently
and effectively manage.

13
（ 5 ） Centralization and Decentralization
Centralization is the degree to which decision making takes place at
upper levels of the organization.
Decentralization is the degree to which decision making takes place
at lower levels of the organization.

14
1. Advantages of decentralization
(1)Faster decision-making
(2)Decision better adapted to local condition
(3)Better management experience for managers that are considere
d for promotion to higher level management

2.Advantages of centralization
(4)Close control of operations
(5)Uniformity of policies, practices, and procedures
(6)Better use of centralized experts

It’s relative, no absolute.

15
（ 6 ） 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.

Standard Operating Procedure (SOP)

☻Today’s view:
Many organizations rely less on strict rules and standardization to guild
employees’ behavior….
Many organizations have allowed employees to make some decisions
that they feel are best under the circumstances…. 16
6.2 Mechanistic and Organic Structures

Mechanistic Organization is an organizational design that’s rigid and

tightly controlled.

Rules and regulations are very important in Mechanistic Organization, because

top managers could not control lower-level activities through direct observation,
they substitute rules and regulations.

Organic Organization is an organizational design that’s highly adaptive and

flexible.

Key words for Organic: loose and flexible; not standardized;

suitable for small firms or start-up stage

17
6.3 Common organizational structure types

(1)Matrix
TOP

Functional 1 Functional 2 Functional 3

Divisional 1

Divisional 2

Divisional 3

The matrix organization structure is a combination of two types of

organizational structures, such as the projectized organization structure and
18
the functional organization structure. This organizational type assigns each
worker two bosses in two different hierarchies.
 (2)Divisional

TOP

Fuctional 1 Functional 2

Divisional1 Divisional2 Divisional3

Fuctional(1) Fuctional (2)

Workshop1 Workshop2 Workshop3

The divisional structure is defined by the grouping of departments and is particular

to larger companies.

The advantage of divisional structure is that it uses delegated authority so the

performance can be directly measured with each group.
19

Profit Center
 (3)Network

research and Advertising

development agencies
consulting

Manager
team

factories
retailers

In a network structure, your organization would rely on other organizations to 20

perform important roles.