EXPLORING MANAGEMENT

Chapter 8 Organization Structure and Design

Chapter 8
What is organizing as a managerial responsibility? What are the most common types of organization structures?

What are the trends in organizational design?

8.1

Organizing
Organizing is one of the management functions Organization charts describe the formal structures of organizations Organizations also operate with informal structures Informal structures have good points and bad points

Organizing is one of the management functions

Organizing
Arranges people and resources to work toward a goal

Organizing is one of the management functions

Key managing decisions include those that:
Divide up work to be done Staff jobs with talented people Position resources for best utilization Coordinate activities Planning sets goals through organizing

ORGANIZING

Organization charts describe the formal structures of organizations

Organization structure
system of tasks, reporting relationships, and communication that links people and positions within an organization.

Organization Charts
describe the formal structure, how an organization should ideally work.

ORGANIZING

Organizational Charts
What You Can Learn from an Organization Chart
Division of work Supervisory relationships Span of control Communication channels Major subunits Staff positions Levels of management
Positions and titles show work responsibilities. Lines between positions show who reports to whom in the chain of command.

The number of persons reporting to a supervisor.

Lines between positions show routes for formal communication flows. Which job titles are grouped together in work units, departments, or divisions. Staff specialists that support other positions and parts of the organization. The number of management layers from top to bottom.

ORGANIZING

Formal Structure

ORGANIZING

Formal Structure
Division of Labor
People and groups performing different jobs.

Formal Structure
The official structure of the organization.

Informal Structure
The unofficial relationships that develop among an organizations members.

ORGANIZING

Organizations also operate with informal structures

Informal Structure
Unofficial but important working relationships between members.

ORGANIZING

Informal structures have good points and bad points

Informal Structures have good and bad points
Social network analysis identifies communication relationships Good points include problem solving, support, friendship and fill gaps in the formal structure and help compensate for its inadequacies

Bad points include rumors, inaccurate information and resistance to change, and distract members from work Eavesdropping; alert listening

8.2

Common Types of Structures

Functional structures group together people using similar skills Divisional structures group together people by products, customers or locations Matrix structures combine the functional and divisional structures Team structures use many permanent and temporary teams Network structures extensively use strategic alliances and outsourcing

8.2

Common Types of Structures

Departmentalization
Grouping people and jobs into a work unit

COMMON ORGANIZATIONAL STRUCTURES

Functional structures group together people using similar skills

Functional Structures group people with similar skills
Functional Structure
Work units have similar skills and tasks such as finance, marketing, production and human resources.

Works best in smaller or stable organizations

COMMON ORGANIZATIONAL STRUCTURES

Functional Structures
Potential Advantages of Functional Structures: Economies of scale make efficient use of human resources.

Functional experts are good at solving technical problems.

Training within functions promotes skill development. Career paths are available within each function.

COMMON ORGANIZATIONAL STRUCTURES

Functional Structures
Common functional structure

COMMON ORGANIZATIONAL STRUCTURES

Disadvantages of Functional Structures

Functional Chimneys or Silos Communication, coordination and performance decrease across functions

Focus on functional goals rather than broad org goals

Accountability issue

COMMON ORGANIZATIONAL STRUCTURES

Divisional structures group together people by products, customers or locations

Divisional structures group together people who work on a similar product, work in the same geographical region, or serve the same customers

COMMON ORGANIZATIONAL STRUCTURES

Divisional Structures
Common divisional structures

COMMON ORGANIZATIONAL STRUCTURES

Divisional Structures
Potential Advantages of Divisional Structures: Expertise focused on special products, customers, regions

Better coordination across functions within divisions

Better accountability for product or service delivery Easier to grow or shrink in size as conditions change

COMMON ORGANIZATIONAL STRUCTURES

Matrix Structures
Matrix Structures combine functional and divisional structures
uses permanent cross functional teams to try to gain the advantages of both the functional and divisional approaches Workers belong to at least two formal groups at the same time a functional group and a project group They report to two bosses functional head and project head

COMMON ORGANIZATIONAL STRUCTURES

Matrix Structures
Functions are vertical

Teams are horizontal

COMMON ORGANIZATIONAL STRUCTURES

Matrix Structures
Potential advantages of Matrix structures: Performance accountability rests with program, product, or project managers. Better communication exists across functions.

Teams solve problems at their levels.

Top managers spend more time on strategy.

COMMON ORGANIZATIONAL STRUCTURES

Matrix Structures
Potential disadvantages of Matrix structures: Two-boss system

May be costly as it needs more managers

Team meetings can be time consuming

COMMON ORGANIZATIONAL STRUCTURES

Team structures use many permanent and temporary teams

Team Structures
Make use of permanent and temporary cross functional teams Improved problem solving and project management

COMMON ORGANIZATIONAL STRUCTURES

Team Structures
Team structure example

COMMON ORGANIZATIONAL STRUCTURES

Team Structures
Possible advantages of Team structures:
Team assignments improve communication, cooperation, and decision-making. Team members get to know each other as persons, not just job titles. Team memberships boost morale, and increase enthusiasm and task involvement.

COMMON ORGANIZATIONAL STRUCTURES

Network structures extensively use strategic alliances and outsourcing

Network structures
Consist of a central core with networks of relationships with contractors Contractors and network partners supply essential services

COMMON ORGANIZATIONAL STRUCTURES

Network Structures
Network structure example

COMMON ORGANIZATIONAL STRUCTURES

Network Structures
Possible advantages of Network structures: Lower costs due to fewer full-time employees.

Better access to expertise through specialized alliance partners and contractors.

Easy to grow or shrink with market conditions. However, too much outsourcing has its own cost

COMMON ORGANIZATIONAL STRUCTURES

Network Structures
Virtual Organizations
Network that depends on information technology to link alliances and essential services

8.3

Organizational Design Trends

Organizations are becoming flatter, with fewer levels of management Organizations are increasing decentralization Organizations are increasing delegation and empowerment Organizations are becoming more horizontal and adaptive Organizations are using more alternative work schedules

ORGANIZATIONAL DESIGN TRENDS

Organizational Design
Organizational Design Aligns structure to best accomplish mission and respond to external environment

ORGANIZATIONAL DESIGN TRENDS

Organizations are becoming flatter, with fewer levels of management

Span of control How many people report to a manager
Narrow
manger supervises few people

Wide
manger supervises larger number of people flatter organizations have wide span of control

ORGANIZATIONAL DESIGN TRENDS

Organizational Design
Less efficient, less flexible, and less customer sensitive

Simplification reduces cost, improves productivity, and enhances employee satisfaction

ORGANIZATIONAL DESIGN TRENDS

Decentralized Decision-making
Centralization Top management keeps strong decisionmaking control Decentralization Decision-making is distributed throughout the organization

ORGANIZATIONAL DESIGN TRENDS

Increased Delegation
Delegation Giving others the right to make decisions and take action

Steps
1. Assign responsibilityexplain task and expectations to others. 2. Grant authorityallow others to act as needed to complete task. 3. Create accountabilityrequire others to report back, complete task.

Authority should equal responsibility

Empowerment
Empowerment Gives people freedom to do their jobs as they think best. When delegation is done well, it leads to empowerment.

ORGANIZATIONAL DESIGN TRENDS

Organizations are becoming more horizontal and adaptive

Bureaucracy Formal authority
Rules Order Fairness

Mechanistic Designs
Bureaucratic Centralized Vertical structure Fit between form and external environment

ORGANIZATIONAL DESIGN TRENDS

Horizontal and Adaptive Organizations

Organic Designs
Adaptable Decentralized Horizontal Structure Better suits unpredictable situations

ORGANIZATIONAL DESIGN TRENDS

Horizontal and Adaptive Organizations

ORGNIZATIONAL DESIGN TRENDS

Organizations are using more alternative work schedules

Alternative schedules increase flexibility and increase satisfaction for employers and employees Compressed workweek Flextime Job sharing Telecommuting