Organization structure

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					Organization structure
         Week 12   28/11/2008
   Definition and key elements of organizational
   Common organizational structure
   New organizational structure options
   Factors influencing Organizational structure
                §7.1 Definition

                      How job tasks are
formally divided, grouped & coordinated
Six key elements of structure
   Work specialization
   Departmentalization
   Chain of command
   Span of control
   Centralization & Decentralization
   Formalization
1.Work Specialization(labor division)
To what degree are tasks subdivided into separate jobs?

   Individuals specialize in doing part of an activity
    rather than the entire activity
   1940s: efficient usage of employee’s skills at performing a
    task through repetition
   1960s: the human diseconomies from
    specialization--boredom,fatigue,stress,low productivity,
    poor quality,increased absenteeism,& high turnover.
   Solutions: Enlarge the scope of activities--doing
    whole & complete job, team, etc
Work Specialization

                                                         Impact from

                 Impact from
                 Economies of

                Low               Work Specialization          High
The basis by which jobs are grouped together
 Group by function

 Product Cluster

 Organized around Geography

 Process departmentalization

 Customer departmentalization
2. Departmentalization (cont.)

   large organizations combine most or all forms
    of departmentalization
   trends
         customer departmentalization: customer needs
         Cross-functional teams
               groups of individuals who are experts in various specialties
               involved in all aspects of bringing a new product to market
3.Chain of command
   The unbroken line of authority that extends from
    the top of the organization to the lowest &
    clarifies who reports to whom
   authority:the right inherent in managerial
    position to give orders & expect the orders to be
   Responsibility
   unity of command:a subordinate should have
    only 1 superior to whom he(she) is directly
   Trends: empowering
4.Span of Control
   The number of subordinates a manager can
    efficiently & effectively directed
   Strength of small spans:maintain close control
   drawback: complex vertical communication, slow
    down; overly tight supervision discourage --
   recent efforts to reduce cost,cut overhead,speed
    up D-M,get closer to customer,empower
5.Centralization & Decentralization
     The degree to which D-M is concentrated at a
      single point in the organization

     Decentralization: decision discretion is pushed
      down to lower-level employees
         actions more quickly to solve problems;
         more people provide input into decisions;
         employees are less likely to feel alienated from those who
          make the decisions that affect their work lives

     Trend toward decentralizing D-M: flexible, responsive
Making Decisions in Organizations

        Managerial     Employee
High                                 High
         Control      Empowerment

       Centralized   Decentralized
        Decision       Decision
         Making         Making

        Employee       Managerial
Low                                  Low
       Empowerment      Control
   The degree to which jobs within the organization are
   Policy, procedure, rule--profession
   complexity--division of labor,vertical levels,
    geographically dispersed
The Degree of Formalization
           Lower                                           Higher


                                                                    Employee Freedom



                  Higher                                    Lower
         §7.2 Common
Organizational structure
1.The simple structure
   Characteristics:
       a low degree of departmentalization
       wide span of control
       authority centralized in a single person
       little formalization
   strength--fast,flexible,inexpensive to maintain,&
    accountability is clear
   weakness--difficult to maintain in anything other
    than small organization;risky,depends on 1
2.The Bureaucracy
   A structure with highly routine operating tasks achieved
     Specialization

     very formalized rules & regulations

     A high degree of departmentalization

     centralized authority

     narrow span of control

     the chain of command

   strength: perform in a highly efficient manner
   weakness: subunit conflicts, hinder employee initiative
   the majority of large organization still take on it’s basic
    characteristics-----Specialization & high formalization
2.The Bureaucracy
    Functional Structure
     - groups similar or related occupational
     specialties together
    Divisional Structure
     - composed of separate divisions
          parent corporation acts as an external overseer to
           coordinate and control the divisions
              provides support services
 Functional Structure

                      Chief Executive Officer

          Corporate   Corporate   Strategic   Corporate
            R&D        Finance    Planning    Marketing

                                                      Sales &      Human
Finance     Production   Engineering   Accounting
                                                     Marketing    Resources
 Divisional Organization
Organizational structure in which corporate divisions
operate as autonomous businesses under the larger
corporate umbrella

                  Food Service     Infant Foods     Condiments
                    Division          Division       Division

        Star-Kist Tuna      Pet Foods      Frozen-Foods    Misc. Products
           Division          Division         Division        Division

       Division: Department that resembles a separate business in
       producing and marketing its own products
Strengths and Weaknesses

3. The Matrix Structure
   Characteristics:
       Dual lines of authority (chain of command)
       Combines functional & product departmentalization
   strength: facilitate coordination; facilitate the
    efficient deployment of specialists
   Weakness: confusion & ambiguity foster the seeds
    of conflict,power struggle ;stress on individuals
                                                 CEO                   Matrix Structure

                    Vice President   Vice President   Vice President   Vice President   Vice President
                    Engineering      Sales and        Finance          Research and     Purchasing
                                     Marketing                         Development

   Product A

   Product B                                Product Team

   Product C

   Product D

Two-boss employee
§7.3 New Structure Options
1.The team structure
   The use of teams as the central device to coordinate
    work activities
   breaks down departmental barriers,require
    employees to be generalists as well as specialists
   in large organization,complement bureaucracy,
    achieve the efficiency of bureaucracy’s
    standardization while gaining team’s flexibility
2.The virtual organization
   A small,core organization that outsources major
    business functions
   small executive group oversee activities done in
    house,coordinate the network of relationships with
    outsource firm.
   highly centralized,with little or no departmentalization
   core competency: design, marketing, brand name,etc.
   advantage: allow someone with an innovative idea &
    little money to compete against large company
   drawback:reduce management’s control
Virtual Organization
    Contracted                     Contracted
   Manufacturing                  Administrative
      in Asia                       Services

                                  • Accounting
                                  • Human
                   Organization     Resources
                   • Finance
                   • Operations
                   • Management

    Contracted                     Contracted
     Sales &                      Distribution &
    Marketing                       Logistics

                                                   6 - 27
§7.4 Why do structures differ?
Mechanistic vs. Organic Model
   Mechanistic                  Organic
   high specialization         cross-functional teams
   rigid departmentalization   cross-hierarchical
   clear chain of command      free flow of information
   narrow span of control      wide
   centralization               decentralization
   high formalization          low
Contingency factors
   Structure follow strategy
         strategy focuses on:
             innovation - flexibility and free flow of information of
              the organic structure
             cost minimization - seek efficiency, stability, and
              tight controls of mechanistic structure
             imitation – seeks to move into new products or new
              markets only after their viability has already been
              proven--- organic & mechanistic
Contingency factors
   large organizations tend to have more
    specialization,more departmentalization,more
    vertical levels,& more rules & regulations than do
    small organization
   size affects structure at a decreasing rate.
    Contingency factors
   How an organization transfer its inputs into outputs
   degree of routineness: automated & standardized
   routine tasks--more departmentalized
    structure;formalized documentation
   mechanistic structure supports routine technology
   organic structure supports nonroutine technology
Contingency factors
Environmental Uncertainty and Structure
   one way to reduce environmental uncertainty is to
    adjust the organization’s structure
     with greater stability, mechanistic structures are
      more effective
           mechanistic structures are not equipped to respond to
            rapid environmental change
       the greater the uncertainty, the greater the need
        for an organic structure
         organizations are being designed to be more
          organic nowadays
Organization Structure Determinants
and Outcomes

 • Strategy
 • Size                                                   and
 • Technology                                         Satisfaction
 • Environment

         Determines   • Mechanistic
                      • Organic
                                          Moderated by
                                      individual differences
                                        and cultural norms

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