OB Chp 14

Organizational Structure

• Structure defines how an organization divides tasks to achieve goals, requiring vertical and horizontal divisions of labor.
• Vertical division assigns decision-making authority, creating a hierarchy impacting autonomy and communication.
• Horizontal division groups tasks into jobs and departments aligning with organizational goals, leading to potential departmental silos and misalignment.
• Key structural elements include job specialization (vertical and horizontal), departmentation (functional, product, matrix, geographic, customer, hybrid), integration/coordination methods, span of control (wide/narrow), formalization (rigid/flexible), and centralization (top-down/distributed).

Departmentation Types

• Functional: Groups employees by expertise (e.g., finance, marketing), promoting efficiency and specialization but potentially hindering communication.
• Product: Organizes based on product lines (e.g., product divisions), improving coordination but potentially leading to redundancy in resources.
• Matrix: Employees report to both functional and project managers for flexibility and balance, but potentially leading to role conflict and stress.
• Geographic: Divides based on region (e.g., regional offices), enabling local responsiveness but potentially duplicating resources.
• Customer: Groups based on customer types (e.g., commercial vs. personal clients) enabling specialized service but potentially impacting economies of scale.
• Hybrid: Combines different departmentation types, maximizing strengths and minimizing weaknesses.

Structure Types: Mechanistic vs. Organic

• Mechanistic: Tall hierarchy, rigid rules, centralized decisions, best for stable, routine environments (e.g., fast-food restaurants) – efficient and predictable, but slow to adapt.
• Organic: Flat hierarchy, decentralized decisions, flexible roles, best for dynamic, innovation-driven environments (e.g., custom jewelry design) – adaptable and responsive, but less predictable and controllable.

Contemporary Structures

• Network Organization: Connects specialized organizations through liaison roles (e.g., Daimler Chrysler).
• Virtual Organization: Dynamic networks of independent entities (e.g., publishing houses outsourcing to authors).
• Modular Organization: Retains core functions, outsourcing others (e.g., Nike outsourcing production).
• Holacracy: Decentralized, self-managing teams (e.g., Zappos).
• Ambidextrous Organization: Combines exploitation of current strengths with exploration of new opportunities (e.g., Apple).

Organizational Environment

• Open Systems: Interact with the environment for resources (inputs) and products/services (outputs), in contrast to closed systems.
• Environmental Components: Include economy, customers, suppliers, competitors, social/political factors, technology, and interest groups (e.g., donors).
• Loose Coupling: Explains the disconnect between the perceived and actual environment.
• Environmental Uncertainty: A key concept in determining optimal structure, characterized by complexity (simple/complex) and rate of change (static/dynamic). Mechanistic structures suit stable, predictable environments; organic structures fit uncertain, dynamic environments.

Integration/Coordination Mechanisms

• Direct Supervision: Managers overseeing tasks directly.
• Standardization: Includes standardization of work processes (rules), outputs (budgets, deliverables), and skills (specialized training).
• Mutual Adjustment: Informal communication, most flexible coordination method.
• Liaison Roles: Individuals bridging departments.
• Task Forces: Temporary teams addressing cross-departmental issues.
• Integrators: Permanent members assigned to resolve conflicts and enhance coordination.

Diagnosing Environments

• Strategy-Structure Fit: Corresponding structures and strategies are crucial.
• Scanning and Forecasting: Identifying current and predicting future environmental conditions.

Vertical Integration

• Definition: Combining various stages of production or the supply chain under one organization.
• Examples:
  • Forward: Manufacturer opening its own retail stores.
  • Backward: Retailer initiating goods manufacturing.

Test your knowledge on organizational structure concepts, including vertical and horizontal divisions of labor. Explore different departmentation types and their impacts on efficiency and communication within organizations. Understand the key elements that shape how organizations achieve their goals.