Defining Organizational Structure

Defining Organizational Structure

• Organizing consists of arranging work activities and allocating resources to achieve goals
• Organizational structure represents the formal job arrangement within an organization
• Organizational design involves decisions about six key elements

Work Specialization

• Work specialization involves dividing jobs into separate, specific tasks completed by different people
• Specialization boosts efficiency
• Overspecialization can lead to boredom, fatigue, stress, poor quality, absenteeism, and turnover

Departmentalization by Type

• Departmentalization groups jobs together
• Functional departmentalization groups jobs by functions performed
• Product departmentalization groups jobs by product line
• Geographical departmentalization groups jobs based on territory or geography
• Process departmentalization groups jobs by production process
• Customer departmentalization groups jobs by customer type and needs

Functional Departmentalization

• Functional departmentalization's advantages include efficiencies from similar specialties and common skills, coordination within the area, and in-depth specialization
• Its disadvantages include poor communication across functional areas and limited focus on organizational goals

Geographical Departmentalization

• Geographical departmentalization leads to more effective and efficient handling of regional issues
• Geographical departmentalization also serves unique geographic markets better
• A disadvantage is that one region may feel isolated

Product Departmentalization

• Product Departmenalization allows for specialization in products and services
• Product Departmentalization enables managers to become specialized in their industry, and create closer customer relationships
• A disadvantage can be a limited view of organizational goals

Process Departmentalization

• Process Departmentalization allows for more efficient workflow
• This structure can be used with certain products

Customer Departmentalization

• Customer Departmentalization addresses customer needs and problems, but can create a limited view of organizational goals

Chain of Command

• Chain of command is the continuous authority line from upper to lower organizational levels that clarifies reporting structures

Authority

• Authority refers to the rights inherent in a managerial position to instruct people and expect compliance

Line and Staff Authority

• Line authority enables managers to issue orders within their department or line of work
• Staff authority gives managers the right to support, assist, or advise other employees/managers

Responsibility

• Responsibility involves the obligation or expectation to perform assigned tasks

Unity of Command

• Unity of command dictates that each person should report to only one boss

Span of Control

• Span of control is the number of employees a manager can effectively and efficiently supervise
• Span of control helps set how many managers are needed in an organization
• The width of the control span is affected by the manager's skills, employee characteristics, task similarity and complexity, subordinate proximity, and task standardization

Members at Each Level: Contrasting Spans of Control

• Assuming a span of 4 across 6 organizational levels, there are 4,096 employees and 1,365 managers
• Assuming a span of 8 across 4 organizational levels, there are 4,096 employees and 585 managers

Centralization

• Centralization is the degree to which decision-making is concentrated at a single point
• Centralized organizations concentrate decisions with top managers, while lower-level employees carry out orders

Decentralization

• Decentralization is the degree to which lower-level employees provide input or make decisions
• Decentralized organizations push decision-making down to employees closest to the action

Employee Empowerment

• Employee empowerment involves increasing employees' decision-making authority

Factors Influencing Centralization

• Key factors that influence the amount of centralization include the environment, employee capabilities, organization size, culture, and the importance of the decision

Formalization

• Formalization is the degree to which organizational jobs are standardized and employee behavior is guided by rules and procedures
• Highly formalized jobs offer little discretion
• Low formalization entails fewer constraints on how employees work

Mechanistic vs. Organic Organization

• Mechanistic organizations emphasize high specialization, rigid departmentalization, clear chain of command, narrow spans of control, and high centralization
• Organic organizations focus on cross-functional and hierarchical teams, free information flow, and wide spans of control

Mechanistic vs. Organic Organization Examples

• KFC, General Electric, Samsung and Nestle are all examples of Mechanistic organizations
• Facebook, StarBucks, Apple and Google are all examples of Organic organizations

Contingency Factors

• Structural decisions are influenced by key factors
• As an organization grows, its structure shifts from organic to mechanistic with increased specialization, departmentalization, centralization, rules, and regulations
• Achieving strategic goals is facilitated by accommodating organizational structure changes that support those changes

Environmental Uncertainty and Structure

• Dynamic environments require organic structures, while mechanistic structures are best for stable environments
• Mechanistic organizational structures thrive in stable, simple environments
• Organic structures are better suited for dynamic, complex environments

Contemporary Organizational Designs

• Team structures are organized around work groups or teams which are fully responsible for their work
• Employees in team structures are more involved, and receive greater decision-making power, leading to faster decision-making
• Team structures can have decreased clear chains of command
• Team structures can also create greater pressure on teams to perform

Matrix Structure

• Matrix structures assign specialists from various functional areas to projects
• Under matrix structures, employees typically have two managers, one functional and one project-based
• Matrix structure advantages include fluid, flexible designs that can adjust to environmental changes
• Disadvantages include complexity in assigning people to projects, potential task and personality conflicts, and a violation of unity of command

Boundaryless Designs

• Boundaryless structures are not defined or limited by artificial internal or external boundaries

Boundaryless Organizations

• Boundaryless organizations are flexible and unstructured, intended to break down external and internal barriers, including virtual and network structures

Virtual Organization

• Virtual organizations consist of a small core of full-time employees that temporarily hires specialists for specific opportunities

Network Organization

• Network organizations are small core organizations that outsource major business functions to focus on core competencies

Removing Boundaries

• Removing Internal Boundaries eliminates the chain of command and has limitless spans of control, utilizing empowered teams across all departments
• Removing External Boundaries uses virtual and network organizational structures to get closer to stakeholders
• Advantages of removing these boundaries include being highly flexible and responsive, which draws on talent wherever it is found
• Disadvantages include a lack of control

The Learning Organization

• Learning organizations continuously learn, adapt, and change through knowledge management

Characteristics of a Learning Organization

• Learning organizations embrace open, team-based designs that empower employees
• Learning Organizations require extensive information sharing
• Learning organizations embrace leadership that provides a shared vision for creating a shared vision of the organization's future to provide support and encouragement
• Learning organizations are based on strong cultures of shared values, trust, openness, and community

Benefits and Drawbacks of Collaboration

• Benefits from collaboration include increased communications and coordination, greater innovative output, enhanced ability to address complex problems, and sharing of information and best practices
• Drawbacks include potential interpersonal conflict, differing views and competing goals, and logistical coordination challenges

Internal Collaboration

• Cross-functional teams are useful for internal collaboration
• Task forces or ad hoc committees are temporary teams formed to tackle specific short-term issues affecting several departments
• Communities of practice are groups that share concerns, problems, or passions about a topic, deepening their knowledge through interaction

External Collaboration

• Open innovation opens the search for new ideas beyond organizational boundaries
• Digital platforms are being used for customers to help create new products and messages
• Strategic partnerships facilitate collaboration between organizations wishing to combine resources to benefit mutually

Flexible Work Arrangements

• Today, organizations are adopting more flexible working arrangements
• Flexible work arrangements give organizations the resources to deploy employees when and where needed
• Working from home and teleworking during the pandemic has ushered in a new era of productivity, inclusiveness and connectedness

Types of Flexible Work Arrangements

• Telecommuting involves working at home and linking to the workplace via computer
• A compressed workweek allows employees to work longer hours per day but fewer days per week
• Flextime, also called flexible work hours, allows employees to vary their hours within limits while meeting a required weekly total
• Job sharing involves two or more people splitting a full-time job

Remote Work

• Companies are promoting remote working, including Google, Salesforce, FaceBook, PayPal, Dell and Unilever
• Before COVID 29% of FS companies had at least 60% of their workforce working from home at least once a week
• After COVID 69% of FS companies expect to have 60% of their workforce working from home at least once a week going forward

Contingent Workforce

• Contingent workers are part-time, temporary, freelance, intern, or contract workers whose employment depends on demand

Organizational Design Challenges

• Keeping employees connected is a challenge when there are a lot of contingent workers and mobile workers
• Mobile computing and communication technology gives organizations and employees a way to stay connected

Global Structural Issues

• Organizational structures are not the same for every culture/country
• Formalization and bureaucratic mechanisms may be more imporatnt in less economically developed countries
• In more developed countries employees may have higher levels of skills and education and not need the more highly formal workplaces of less developed countries