Organizational Design and Structure

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Questions and Answers

How does the technology used by an organization influence its structure?

Routine technology leads to organic structures.

Flexibility is prioritized in mechanistic structures.

Non-routine technology results in mechanistic structures.

More routine technology results in mechanistic structures. (correct)

What type of organizational structure is typically adopted by companies operating in stable and simple environments?

Mechanistic structure (correct)

Functional structure

Bureaucratic structure

Organic structure

What adjustment might a manager make to cope with high environmental uncertainty?

Adopt a mechanistic structure

Reduce departmental specialization

Increase rules and formalization

Streamline decision-making processes (correct)

Which characteristic is typical of a simple organizational structure?

Low formalization Signup and view all the answers

Which structure is likely to emerge as a company grows and faces complexity?

Divisional structure Signup and view all the answers

What type of organizational structure is best suited for organizations seeking to innovate uniquely and meaningfully?

Organic structure Signup and view all the answers

What type of design is best suited for organizations dealing with high volatility in their industry?

Organic design Signup and view all the answers

Which contingency factor is NOT typically considered when designing an organizational structure?

Employee benefits policies Signup and view all the answers

How do organizations typically respond to increased environmental uncertainty?

By adopting more flexible and adaptive structures Signup and view all the answers

In what scenario are mechanistic structures most effective?

In a stable environment focused on cost control Signup and view all the answers

What change did Jeroen van der Veer implement at Royal Dutch Shell PLC to address industry challenges?

He streamlined the corporate structure. Signup and view all the answers

As an organization grows in size, it is likely to transition from which structure to which?

Mechanistic to organic Signup and view all the answers

What is a primary characteristic of a mechanistic organization?

Clear chain of command Signup and view all the answers

How does technology influence organizational structure?

It determines the type of structure an organization adopts Signup and view all the answers

Which type of organizational structure is characterized by high specialization and rigid departmentalization?

Mechanistic structure Signup and view all the answers

Which of the following is an indicator of a dynamic environment requiring an organic structure?

Frequent changes in consumer preferences Signup and view all the answers

What is a primary characteristic of a boundaryless organization?

It utilizes empowered teams instead of departments. Signup and view all the answers

Which organizational structure allows teams to move between projects as they are completed?

Matrix structure Signup and view all the answers

What is a significant feature of a virtual organization?

It consists of a small core of full-time employees. Signup and view all the answers

Which of the following statements best describes a matrix organization?

It consists of specialists working on projects under two managers. Signup and view all the answers

What does a modular organization primarily rely on?

Outsourcing product components from suppliers. Signup and view all the answers

What is a major drawback of contemporary organizational designs?

Potential role ambiguity due to dual management. Signup and view all the answers

How does technology impact organizational structure?

It fosters flexibility and new forms of organization. Signup and view all the answers

Which factor is most associated with environmental uncertainty in organizations?

Rapidly changing customer needs. Signup and view all the answers

Study Notes

Objectives for Unit Three

Learners will be able to explain organization, organizing, organizational structure, charting, and design.
Learners will be able to explain organizational characteristics.
Learners will be able to differentiate between traditional and contemporary views of organizational design's six key elements.
Learners will be able to describe five common departmentalization forms.
Learners will be able to compare mechanistic and organic structures.
Learners will be able to contrast contingency variables that affect mechanistic or organic models of organizational design.
Learners will be able to describe traditional and contemporary organizational designs.
Learners will be able to explain the strengths and weaknesses of both traditional and contemporary organizational designs.

Organization Definition

An organization is a deliberate arrangement of people to accomplish a specific purpose.
An organization is a group of people with a particular purpose (e.g., business, government department).

Key Terms

Organizing: Arranging and structuring work to achieve organizational goals. A crucial managerial process for designing organizational structure.
Organizational Structure: The formal arrangement of jobs within an organization. This structure is often shown in an organizational chart.

Characteristics of an Organization

Distinct Purpose: Organizations have clearly defined goals.
Deliberate Structure: A structured organization systematically defines, limits, and guides member behavior.
People: Individuals make decisions and work toward organizational goals.

Six Key Elements in Organizational Design

1. Work Specialization: Dividing work activities into separate job tasks. Employees specialize in part of an activity, increasing output. Also known as division of labor.
2. Departmentalization: Subdividing a business into units based on function, product line, territory/geography, process, or customer needs. Companies may also have unique classifications (e.g., front desk, sales, laundry in a hotel).
3. Chain of Command: The unbroken line of authority that extends from the top level of an organization to the lowest. It clarifies who reports to whom. - Authority: The rights inherent in a managerial position to tell people what to do and to expect them to do it. Management can delegate downward to lower-level managers. - Responsibility: Obligation or expectation to perform assigned duties. Accountability for performance is essential. - Unity of Command: A person should report to only one superior. Conflicting demands are avoided through unity of command.
4. Span of Control: How many employees effectively and efficiently report to a manager. The traditional view (before the present day) held that managers should not have more than five or six subordinates.
5. Centralization vs. Decentralization: - Centralization: The degree to which decision-making is concentrated at a single point in the organization. Top managers make critical decisions with little input from below. - Decentralization: The degree to which lower-level employees provide input or actually make decisions.
6. Formalization: The degree to which jobs within the organization are standardized and the extent to which employee behavior is guided by rules and procedures.

Contingency Variables Affecting Structural Choice

Organization Strategy: Structure should support the goal of effective achievement. Strategies and structure are closely linked.
Size: Large organizations often have more specialization, departmentalization, centralization, and rules than smaller ones.
Technology: Organizations adapt their structure to the technology they use. Technology is a key input-output factor for every organization.
Degree of Environmental Uncertainty: Organizations in dynamic environments need flexibility (organic structures), while those in stable environments are more effective with mechanistic designs.

Organizational Designs (Traditional)

Simple Structure: Low departmentalization, wide spans of control, centralized authority, and informalization. Best for small organizations. Risks of over-reliance on a single person as the organization grows
Functional Structure: Groups similar or related occupational specializations together (functional departmentalization).
- Strengths: Cost-saving from specialization (economies of scale), minimal duplication, and employees grouped with similar skills.
- Weaknesses: Focusing on functional goals can cause managers to lose sight of the overall organization, and insulation can create a lack of understanding of other units.
Divisional Structure: Made up of separate business units or divisions. These divisions are reasonably autonomous, with a divisional manager who has authority over their unit and is responsible for performance.
- Strengths: Focuses on results, and divisional managers are responsible for what happens to their products and services.
- Weaknesses: More duplication of activities and resources increases costs and reduces efficiency.

Organizational Designs (Contemporary)

Team Structure: Entire organization is made up of teams.
- Strengths: More involvement and empowerment, and reduced barriers among functional areas.
- Weaknesses: Lack of a clear chain of command and pressure on teams to perform.
Matrix/Project Structure: Specialists from different functional areas work on projects. Employees work on projects and return to their departments after completion.
- Strengths: Fluids and flexible design that responds to environmental changes and faster decision-making.
- Weaknesses: Complexity of assigning people to projects and potential task/personality conflicts.
Boundaryless Structure: A design not limited by traditional boundaries (horizontal, vertical, or external).
- Strengths: High flexibility and responsiveness, draws on talent wherever it's found.
- Weaknesses: Lack of control and communication difficulties.
Learning Structure: Continual acquisition and sharing of knowledge and application is emphasized.
- Strengths: Knowledge is shared throughout the organization; creates sustainable competitive advantage.
- Weaknesses: Reluctance to share knowledge due to fears of losing power and numerous experienced employees close to retirement.
  - Virtual Organization: A small core of full-time employees hires specialists on an as-need basis.
  - Network Organization: A small organization that outsources main functions (e.g., manufacturing) to focus on core competencies.
  - Modular Organization: A manufacturing organization that uses outside suppliers for components of its products.

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Description

This quiz covers key concepts of organizational design and structure, including traditional and contemporary views. Learners will explore the characteristics of organizations, departmentalization forms, and the comparison between mechanistic and organic structures. Test your understanding of the strengths and weaknesses of different organizational designs.