Organizational Structure PDF

14-1 Chapter 7 Organizational Structure Copyright ©2012 Pearson Education  I-What is Organizational Structure? Organizing consists of grouping people and assigning activities so that job tasks and the mission of a business can be properly carried out....

14-1 Chapter 7 Organizational Structure Copyright ©2012 Pearson Education  I-What is Organizational Structure? Organizing consists of grouping people and assigning activities so that job tasks and the mission of a business can be properly carried out. Organizational structure is the formal framework that shows the way in which job tasks are divided and organized and how authority, power, decision-making and responsibilities are passed through the organization. Copyright ©2012 Pearson Education  Features of Organizational Structure Managers should address 6 key elements when designing organizational structure: 1. Centralization/Decentralization: Where does decision making authority lie 2. Span of control: How many individuals can a managers efficiently and effectively direct ? 3. Work specialization: To what degree are activities subdivided into separate jobs ? 4. Departmentalization: On what basis will jobs be grouped together ? 5. Chain of command: To whom individuals and groups report ? 6. Formalization: To what degree will there be rules and regulations to direct employees and managers ? Copyright ©2012 Pearson Education Copyright ©2012 Pearson Education 14-4  1. Centralization /Decentralization Centralization and decentralization are about the amount of authority to delegate. In centralized organizations, little or no authority is delegated to subordinates. A small number of managers make the decisions and hold most of the authority and power. Decentralization is the opposite. Authority and decision making are delegated rather than being held by a small group, Copyright ©2012 Pearson Education  2. Span of Control Span of control-refers to the number of subordinates working directly under one manager Is there an optimal number? What needs to be considered is the nature of the work that subordinates are performing and how much attention each requires. For example in a Call Center, the span of control can be over 100, while executive functions – with high degrees of collaboration and interaction – could not tolerate more than three or four. In a short chain of command, more people report to one manager (wide span of control) Copyright ©2012 Pearson Education In a long chain of command the span of control is usually narrow. 14-6 Copyright ©2012 Pearson Education 14-7  3. Work Specialization (division of labor) The division of labor refers to the process of breaking down a job into smaller and more precise tasks, Each task is completed by a separate individual. Employees are more efficient and performant when they focus on a narrow range of activities which will enhance their productivity and expertise. Benefits: Greater efficiency, lower costs, improved productivity Costs: Human costs when carried too far, decreased Copyright ©2012 Pearson Education flexibility  4. Departmentalization A department is a separate area or branch over which a manager has authority. Departmentalization refers to the basis by which jobs are grouped. The departmentalization type could be seen through a visual representation called “organization chart”. In an organizational chart, the employees and positions are represented by boxes or other shapes, sometimes including photos, contact information, email and page links, icons and illustrations. Lines link the levels together. Copyright ©2012 Pearson Education  5. Chain of Command According to this principle, authority and responsibility should flow in a clear, unbroken line from the highest to the lowest manager The chain of command helps organizations function smoothly by identifying :  who is responsible for what  who is accountable to whom The longer the chain the more complex communication is Copyright ©2012 Pearson Education 14-10  6. Formalization (rules prevalence) Degree to which jobs within the organization are standardized and to which employee behavior is guided by rules and procedures When there is high formalization workers have very little control over how they do their work and they will be required to follow a number of rules and procedures. – Formal = minimum discretion over what is to be done, when it is done, and how – Informal Copyright ©2012 Pearson Education = freedom to act when necessary 14-11  II-Types of Organizational Designs In general we refer to traditional or classic organizational structures and modern or flexible and innovative structures. Examples of Examples of modern traditional structures structures Functional structure Matrix structure Divisional structure Team-based structure Copyright ©2012 Pearson Education Project-based 14-12 structure  Functional structure Grouping activities around essential functions specializing in particular area such as marketing, operatins, finanace, human resources management People with similar knowledge, similar skills and performing similar tasks are grouped together into formal work units. Functional manager oversees the activities within their area. Copyright ©2012 Pearson Education  Functional structure Advantages Disadvantages Simple to establish Poor communication and operate between Efficient use of departments. resources within Slow decision departments. making Promotes Limited flexibility, specialization and lack of innovation expertise within and creativity eachCopyright function. ©2012 Pearson Education 14-14  Divisional structure The organization is split into divisions based on product lines, geographic locations, or customer types. Each division has its own functional departments (e.g., marketing, finance, operations) and its own resources, staff, and objectives. Exp: Geographical divisional structure Copyright ©2012 Pearson Education 14-15 Exp: Product divisional structure Exp: customer divisional structure Copyright ©2012 Pearson Education 14-16  Divisional structure Advantages Disadvantages More flexibility and Can be expensive responsiveness to and inefficient market changes. because of the Accountability is duplication of easier to track as resources. each division has its May lead to own profit and loss. dysfunctional Focuses on the needs competition between of specific products, divisions. markets, Copyrightor ©2012regions. Pearson Education Less economies of 14-17 scale compared to  Modern organizational Designs Managers are finding that the traditional designs often aren’t appropriate for today’s increasingly dynamic and complex environment. So managers are finding creative ways to structure and organize work by using new designs to better meet the changing consumer expectations, market conditions, or competitive challenges. Modern designs include matrix structures, team structure, project structure and virtual organization. Copyright ©2012 Pearson Education 14-18  Matrix Structure Combines two forms of departmentalization Specialists from different functional departments are assigned to work on divisions led by division managers.. Employees have a dual chain of command. Departments work closely together and communicate with each other frequently to solve issues. Copyright ©2012 Pearson Education 14-19  Matrix Structure Advantages Disadvantages Flexible and dynamic Complex chain of and allow to respond command to environmental Confusion and changes. conflict because of Encourage contradictory policy collaboration across Dual reporting lines functions Can be complex and Facilitates efficient difficult to manage. employment of Education Copyright ©2012 Pearson 14-20 resources  Team-based Structure Companies are organized around long-term stable teams. The teams are cross-functional with high level of autonomy. Teams are responsible for ongoing operations and functional goals and are held accountable for their performance. There is no hierarchy or chain of command (no need for direct supervision) Exp: Google employs a team-based structure in engineering and product Copyrightdevelopment. ©2012 Pearson Education Teams are composed of engineers, 14-21 product managers, designers, and other specialists who  Team-based Structure Advantages Disadvantages Increased Potential conflicts communication and between team collaboration members and other Flexibility and teams adaptation to Hides unperforming environmental team members change Managing multiple Motivated and teams can be difficult empowered workforce Copyright ©2012 Pearson Education 14-22  Project-based Structure A structure in which employees continuously work on projects with defined start and end dates and expected results (deliverables). Once the project is finished, the team moves on to new project s and roles in the company. Exp: Construction Firms, Advertising Agencies, Consulting Firms, Film Production Companies Copyright ©2012 Pearson Education 14-23  Project-based Structure Advantages Disadvantages Focus on project Challenges to objectives manage temporary Better control over teams and the team maintaining Schedule work with continuity dedicated resources Limited long term Facilitates multi- collaboration disciplinarity and between project team cross Copyright functional work ©2012 Pearson Education members 14-24 Key differences between team-based and project-based structures Copyright ©2012 Pearson Education 14-25  Virtual Structure A firm that relies on digital tools to link employees, teams, and business functions across different locations, often without a centralized physical office. Rely heavily on external contractors, freelancers, and business partners to perform tasks rather than maintaining a large permanent workforce. Employees may be located anywhere in the world. Copyright ©2012 Pearson Education 14-26  GitLab Inc. is an open source company that operates GitLab, a DevOps software package that can develop, secure, and operate software. The company is fully remote, with no physical office location, and employs over 1,300 people in more than 60 countries, making it one of the largest virtual companies globally. For communication, GitLab relies on tools like Slack, Zoom, and Asana to keep the team connected and manage workflows. Employees do not need to be online at the same time to collaborate, they use GitLab platform to work Copyright ©2012 Pearson Education independently and stay on track. 14-27  Virtual Structure Advantages Disadvantages Reduce use and costs High dependency on of physical assets collaborative Expanding access to technology global talent Difficulty of More flexibility and managing virtual autonomy for teams than face-to- employees improving face teams their work/life Ensuring balance Copyright ©2012 Pearson Education accountability for 14-28 remote teams  III-The Forces that Influence Structure 1. Business Strategy: differentiation vs cost minimization If you're aiming for cost minimization, you need a highly formalized and centralized structure to have a strict control over costs. While if you want to have innovative and differentiated products, you need to go more Copyright ©2012 Pearson Education for a decentralized structure where there is 2. Organizational culture : If the company culture provides employees with freedom to allocate some of their working time for innovation and side projects, your organizational structure has to allow that by reducing the level of bureaucracy. 3. Environment: turbulent vs stable In a turbulent environment technologies and customer preferences are frequently changing. In this context, modern flat structures provide the greatest benefits. These structures allows the organization to respond quickly to Copyright ©2012 Pearson Education 14-30 environment change.