Organizational Structure and Design _chapter 6_

							Organizational Structure
and Design (chapter 6)
Need to Know & Understand
•   Org structure and design
•   4 Contingency variables
•   6 Elements of Org Structure
•   6 Types of Structure or departmentalization –
    adv. & disadv.
•   Generic structure spectrum: Mechanistic vs.
    Organic
Designing Organizational Structure
    –   Organizational structure: formal system of
        task & reporting relationships showing how
        workers use resources.
    –   Organizational design: managers make
        specific choices resulting in a given
        organizational structure.

•   No best way to design an organization –
    many determinants come into play – we
    take a contingency approach (sound
    familiar) BUT we don’t just “slap”
    organizations together
                  Strategy
Contingency
 factors that       Size
    affect
   how we
                 Technology
    design
organizations
                Environmental
                 Uncertainty
       6 Key Elements
  of Organization Structure
1. Departmentalization – how we structure
   people together – 5 types
2. Chain of Command
3. Span of Control
4. Authority
5. Centralization of Decision-making
6. Work Specialization
Departmentalization

•   Functional
•   Product
•   Customer
•   Geographic
•   Matrix
•   Boundaryless
Functional Departmentalization
Functional Departmentalization
Advantages                   Disadvantages
  – creates highly skilled     – cross-department
    specialists                  coordination can be
  – lowers costs through         difficult
    reduced duplication
                               – may lead to slower
  – communication and            decision making
    coordination
    problems are               – produces managers
    lessened                     with narrow
                                 experiences
Product Departmentalization



                Easy Food Market


       Cheese         Milk         Ice cream
Product Departmentalization
Advantages                Disadvantages
  – managers specialize     – duplication often
    but have broader          increases costs
    experience              – difficult to coordinate
  – easier to assess          across departments
    work-unit
    performance
  – decision making is
    faster
Customer Departmentalization


                       American Express




      Cards   Travel               Financial Services   Business Services
Customer Departmentalization
Advantages                 Disadvantages
  – focuses on customer      – duplication of
    needs                      resources
  – products and             – difficult to achieve
    services tailored to
    specific customers         coordination across
                               departments
                             – decisions that please
                               the company but
                               may hurt the
                               company
Geographic
Departmentalization


                      Coca-Cola Enterprises

  Central North   Eastern North   Western North
                                                  Europe
    America          America        America
Geographic
Departmentalization
Advantages                Disadvantages
  – responsive to           – duplication of
    demand of different       resources
    markets                 – difficult to coordinate
  – reduce costs by           across departments
    locating resources
    close to customers
Matrix Departmentalization
A hybrid structure in which two or more
forms of departmentalization are used
together
  – most common forms combine product and
    functional
  – employees report to two bosses
  – increased cross-functional interaction
  – significant interaction between functional
    and project managers required
Matrix Departmentalization
Advantages                 Disadvantages
  – efficiently manage       – requires high levels
    large, complex tasks       of coordination
  – effectively manage       – increased conflict
    large, complex tasks       levels
                             – requires high level of
                               management skills
Boundaryless Structure
 Uses
  when company wants to focus on its core
  competencies (Nortel) so therefore it
  outsources anything that is not one of its core
  competencies
      - outsourced provider may do their
  accounting
 No boundaries inside or outside the
  organization

 Sometimes referred to modular or virtual
   organization
Organizational Authority & Work
Specialization
•   Chain of command (2nd element)
•   Span of Control (3rd)
•   Line versus staff authority (4th )
•   Degree of centralization (5th )
•   Work specialization (6th )
Chain of Command (2nd)
• The vertical line of authority in
  an organization
   – clarifies who reports to whom
• Unity of command
   – workers report to only one boss
   – violated by matrix structure
• Span of control
   – Number of people reporting to a
     specific supervisor
Span of Control (3rd)
• Number of employees that can be efficiently and effectively
  managed
    – use to be no more than 6 but now MUCH more than that
• Small span
   – Expensive, more managers
   – Makes vertical communication more complicated
   – Encourages tight supervision and discourages autonomy
• Larger span
   – Empowers workers
   – Speeds up decisions
Contrasting Spans of Control
Authority (4th)
• Line authority-function
  – the right to command immediate
    subordinates in the chain of command
  – an activity that contributes directly to
    creating or selling a company’s products
• Staff authority-function
  – the right to advise but not command others
  – an activity that supports line activities
The Degree of Centralization (5th)
                           Lower                                  Higher

                                               Decentralization
  Top Management Control




                                                                           Employee Empowerment
                                   Centralization
  Higher                                                           Lower
Work Specialization (6th)
• number of activities a job requires
  – Burger flipper – only flips burgers all day
    versus the supervisor who helps with
    burgers, cash managing or whatever
          Generic Org Structures

    MECHANISTIC – one         ORGANIC – the other
     side of the spectrum           generic side
•   Rigid hierarchical      • Collaboration (both
    relationships             vertical and horizontal)
•   Fixed duties            • Adaptable duties
•   Formal communication    • Informal communication
    channels
•   Centralized authority   • Decentralized authority

     Military                  Oticon –
     – rigid                   spaghetti
     and                       organization –
     stable                    loose & flexible
Reminders for Week 8
• Strat Planning section due in lab
    – SWOT & Formulation of strategies
    – This section will again require you to research and see what is
      going on in the org environment – Business Source Premier, Euro
      monitor, Globe and Mail, Business in Vancouver & other periodicals
      should be helpful

• Final lab – Project Presentation/Discussion
    – Answer the question “Why would we want to work in either of your
       two firms?” “What did you learn that is interesting about your two
       companies?”
    - 15 minutes maximum per group
    - Presentation/discussion must have value

• Final Exam - TBC