Week 7 - Organizational Structure Design by n1185

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									 Principles of Management


Week 7 - Organizational
Structure & Design
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    Definitions
   Organizational Structure
       The formal arrangement of jobs within an
        organization
   Work specialization
       The degree to which tasks are divided into
        separate jobs (division of labor)
   Departmentalization
       The basis by which jobs are grouped together
            Geographical, functional, product, process, customer
            Cross-functional teams

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    Definitions
   Chain of command
       The continuous line of authority
   Span of control
       Number of employees a manager can effectively manage
   Centralization
       The degree to which decision making is concentrated at a
        single point in the org
       Decentralization - the degree to which lower-level
        employees provide input or actually make decisions
   Formalization
       The degree to which jobs are standardized
       The degree to which employee behavior is guided by rules
        and procedures

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   More Centralization
       Environment is stable.
       Lower-level managers are not as capable or experienced
        at making decisions as upper-level managers.
       Lower-level managers do not want to have a say in
        decisions.
       Decisions are relatively minor.
       Organization is facing a crisis or the risk of company
        failure.
       Company is large.
       Effective implementation of company strategies depends
        on managers retaining say over what happens.

                                                                 4
   More Decentralization
       Environment is complex, uncertain.
       Lower-level managers are capable and experienced
        at making decisions.
       Lower-level managers want a voice in decisions.
       Decisions are significant.
       Corporate culture is open to allowing managers to
        have a say in what happens.
       Company is geographically dispersed.
       Effective implementation of company strategies
        depends on managers having involvement and
        flexibility to make decisions.
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         Mechanistic vs. Organic Org
                                 Organic Org
   Mechanistic Org                  Low work
       High work                     specialization (use of
        specialization                cross-functional teams)
       Rigid                        Low
        departmentalization           departmentalization
       Long chain of                 Short chain of
        command                       command
       Narrow spans of              Wide spans of control
        control                      Decentralization
       Centralization               Low formalization
       High formalization

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When to use the 2 structures
   Strategy
       Cost strategy – mechanistic
       Differentiation strategy – organic
   Size
       Large org – mechanistic
       Small org – organic
   Environmental uncertainty
       Certain – mechanistic
       Uncertain – organic

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     Common Organizational Designs

   Traditional Designs
       Simple structure
            Low departmentalization, wide spans of control,
             centralized authority, little formalization
       Functional structure
            Departmentalization by function
       Divisional structure
            Composed of separate business units or divisions
             with limited autonomy.

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Other contemporary structures
   Team structures
       The entire org is made of work groups
   Matrix structure
       Specialists from different functions to form teams
        to work on projects
   Project structure
       Employees continuously work on projects
       But no formal departments

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Other contemporary structures
   Boundaryless org
       No predefined structures
   Virtual org
       Consists of a small core of employees and hires
        temporary outside specialists to work on
        opportunities that arise
   Network org
       A small core org that outsources major business
        functions
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