Organization Structure and Design PDF

Organization Structure and Design Reference: Ricky W. Griffin. Fundamentals of Management,8th ed.2018 Majority of Slides by: Houghton Mifflin Company/Charlie Cook  Chapter Outline The Nature of Organizing –Job Specialization –Grouping Jobs: Departmentalization The...

Organization Structure and Design Reference: Ricky W. Griffin. Fundamentals of Management,8th ed.2018 Majority of Slides by: Houghton Mifflin Company/Charlie Cook  Chapter Outline The Nature of Organizing –Job Specialization –Grouping Jobs: Departmentalization The Bureaucratic Model of Organization Design Situational Influences on Organization –Core Technology –Environment –Organization Size and Life Cycle  Chapter Outline (cont’d) Basic Forms of Organization Design –Functional (U-Form) Design –Conglomerate (H-Form) Design –Divisional (M-Form) Design –Matrix Design –Hybrid Design Emerging Issues in Organization Design –The Team Organization –The Virtual Organization –The Learning Organization  Learning Objectives After studying this chapter, you should be able to: –Identify the basic elements of organizations. –Describe the bureaucratic perspective on organization design. –Identify and explain several situational influences on organization design. –Describe the basic forms of organization design that characterize many organizations. –Describe emerging issues in organization design.  Components of Organization Structure Barney, Jay B. and Ricky W. Griffin, The Management of Organizations. Copyright © 1992 by Houghton Mifflin Company. Used with permissions.  The Nature of Organizing Organization Design –The overall set of structural elements and the relationships among those elements used to manage the total organization. –A means to implement strategies and plans to achieve organizational goals. Job Specialization –The degree to which the overall task of the organization is broken down and divided into smaller component parts.  Job Specialization Benefits of Specialization –Workers can become proficient at a task. –Transfer time between tasks is decreased. –Specialized equipment can be more easily developed. –Employee replacement becomes easier. Limitations of Specialization –Employee boredom and dissatisfaction with mundane tasks. –Anticipated benefits of specialization do not always occur.  Alternatives to Specialization Job Rotation –Systematically moving employees from one job to another. Most frequent use today is as a training device for skills and flexibility. Job Enlargement –An increase in the total number of tasks workers perform. Increases training costs, unions contend that workers deserve more pay for doing more tasks, and the work may still be dull and routine. Job Enrichment –Increasing both the number of tasks the worker does and the control the worker has over the job.  Alternatives to Specialization Job Enrichment –To implement job enrichment, managers remove some controls from the job, delegate more authority to employees, and structure the work in complete, natural units. These changes increase subordinates’ sense of responsibility. –Another part of job enrichment is to continually assign new and challenging tasks, thereby increasing employees’ opportunities for growth and advancement.  Alternatives to Specialization (cont’d) Job Characteristics Approach: –Core Dimensions Skill variety—the number of tasks a person does in a job. Task identity—the extent to which the worker does a complete or identifiable portion of the total job. Task significance—the perceived importance of the task. Autonomy—the degree of control the worker has over how the work is performed. Feedback— the extent to which the worker knows how well the job is being performed. –Growth-Need Strength The desire for some people to grow, develop, and expand their capabilities that is their response to the core dimensions.  Alternatives to Specialization (cont’d) The Job Characteristics Approach – The job characteristics approach to job design provides a viable alternative to job specialization. Five core job dimensions may lead to critical psychological states that, in turn, may enhance motivation, performance, and satisfaction while also reducing absenteeism and turnover.  Alternatives to Specialization (cont’d) Work Teams –An alternative to job specialization that allows the entire group to design the work system it will use to perform an interrelated set of tasks.  Grouping Jobs: Departmentalization Departmentalization –The process of grouping jobs according to some logical arrangement. Rationale for Departmentalization –Organizational growth exceeds the owner-manager’s capacity to personally supervise all of the organization. –Additional managers are employed and assigned specific employees to supervise.  Common Bases of Departmentalization Barney, Jay B. and Ricky W. Griffin, The Management of Organizations. Copyright © 1992 by Houghton Mifflin Company. Used with permission.  Grouping Jobs: Departmentalization (cont’d) Functional Departmentalization –The grouping of jobs involving the same or similar activities.  Grouping Jobs: Departmentalization (cont’d) Advantages Disadvantages –Each department can –Decision making becomes slow be staffed by functional- and bureaucratic. area experts. –Employees narrow their focus to –Supervision is the department and lose sight of facilitated in that organizational goals/ issues. managers only need be –Accountability and performance familiar with a narrow are difficult to monitor. For set of skills. example, determining whether a –Coordination inside new product fails because of each department is production deficiencies or a poor easier. marketing campaign may not be possible.  Product Departmentalization Form Product Departmentalization –The grouping of activities around products or product groups. Advantages: –All activities associated with one product can be integrated and coordinated. –Speed and effectiveness of decision-making are enhanced. –Performance of individual products or product groups can be assessed. Product Departmentalization Form (cont’d) Disadvantages –Managers may focus on their product to the exclusion of the rest of the organization. For example, a marketing manager may see his or her primary duty as helping the group rather than helping the overall organization. –Administrative costs may increase because each department must have its own functional specialists for areas such as market research and financial analysis.  Customer Departmentalization Customer Departmentalization –Grouping activities to respond to and interact with specific customers and customer groups. Advantage –Skilled specialists can deal with unique customers or customer groups. Disadvantage –A large administrative staff is needed to integrate activities of various departments.  Location Departmentalization Location Departmentalization –The grouping of jobs on the basis of defined geographic sites or areas. Advantage –Enables the organization to respond easily to unique customer and environmental characteristics. Disadvantage –Large administrative staff may be needed to keep track of units in scattered locations.  Always remember this structure in business  Establishing Reporting Relationships Chain of Command –A clear and distinct line of authority among the positions in an organization. –Unity of Command Each person within an organization must have a clear reporting relationship to one and only one boss. –Scalar Principle A clear and unbroken line of authority must extend from the bottom to the top of the organization.  Establishing Reporting Relationships (cont’d) Span of Management (or Span of Control) –The number of people who report to a particular manager. –There is no ideal or optimal span of management.  Establishing Reporting Relationships: Tall Versus Flat Organizations Tall Organizations Flat Organizations – Are more expensive – Lead to higher levels of because of the number of employee morale and managers involved. productivity. – Foster more communication – Create more administrative problems because of the responsibility for the number of people through relatively few managers. whom information must – Create more supervisory pass. responsibility for managers due to wider spans of control.  Tall Versus Flat Organizations Tall Organization President Flat Organization President  Distributing Authority Authority –Power that has been legitimized by the organization. Delegation –The process by which managers assign a portion of their total workload to others. Reasons for Delegation –To enable the manager to get more work done by utilizing the skills and talents of subordinates. –To foster the development of subordinates by having them participate in decision making and problem solving that allows them to learn about overall operations and improve their managerial skills.  Steps in the Delegation Process Step 1 Step 2 Step 3 Assigning Granting Creating responsibility authority accountability Manager Manager Manager Manager Manager Subordinate Subordinate Subordinate  Problems in Delegation Manager Subordinate –Reluctant to delegate. –Reluctant to accept –Disorganization delegation for fear of prevents planning work failure. in advance. –Perceives no rewards –Subordinate’s success for accepting additional threatens superior’s responsibility. advancement. –Prefers to avoid any –Lack of trust in the risk and responsibility. subordinate to do well.  Decentralization and Centralization Decentralization –The process of systematically delegating power and authority throughout the organization to middle- and lower-level managers. Centralization –The process of systematically retaining power and authority in the hands of higher-level managers. Decentralization and Centralization (cont’d) Factors determining an organization’s position on the decentralization–centralization –The greater the complexity and uncertainty of the external environment, the greater is the tendency to decentralize. –The history of the organization. –The nature (cost and risk) of the decisions to be made. – In short, managers have no clear-cut guidelines for determining whether to centralize or decentralize.  Coordinating Activities Coordination –The process of linking the activities of the various departments of the organization. The Need for Coordination –Departments and work groups are interdependent; the greater the interdependence, the greater the need for coordination.  Coordinating Activities: Three Major Forms of Interdependence Pooled interdependence –When units operate with little interaction; their output is simply pooled at the organizational level. Sequential interdependence –When the output of one unit becomes the input of another unit in sequential fashion. Reciprocal interdependence –When activities flow both ways between units.  Coordinating Activities: Three Major Forms of Interdependence Reciprocal interdependence example: – In a hotel, for example, the reservations department, front-desk check-in, and housekeeping are all reciprocally interdependent. –Reservations has to provide front-desk employees with information about how many guests to expect each day, and housekeeping needs to know which rooms require priority cleaning. If any of the three units does not do its job properly, all the others will be affected  Three Major Forms of Interdependence Sequential Reciprocal Input Output Input Output Input Output Pooled Input Input Output Input Input Output  Structural Coordination Techniques The Managerial Hierarchy –Placing one manager in charge of interdependent departments or units. Rules and Procedures –Coordinating routine activities via rules and procedures that set priorities and guidelines for actions. Liaison Roles –A manager coordinates interdependent units by acting as a common point of contact, facilitating the flow of information. Structural Coordination Techniques (cont’d) Task Forces –Used with multiple units when coordination is complex requiring more than one individual and the need for coordination is acute. –Disbanded when the need for coordination has been met. Integrating Departments –Permanent organizational units that maintain internal integration and coordination on an ongoing basis. –May have authority and budgetary controls.  Electronic Coordination –Advances in information technology are also providing useful mechanisms for coordination. –E-mail, for example, makes it easier for people to communicate with one another. This communication, in turn, enhances coordination. –Similarly, many people in organizations today use electronic scheduling, at least some of which is accessible to others. Hence, if someone needs to set up a meeting with two colleagues, he or she can often check their electronic schedules to determine their availability, making it easier to coordinate their activities.  The Bureaucratic Model of Organization Design Bureaucratic Model (Max Weber) –A logical, rational, and efficient organization design based on a legitimate and formal system of authority. –Characteristics Adopt a division of labor with each position filled by an expert. Create a consistent set of rules to ensure uniformity in task performance. Establish a hierarchy of positions, which creates a chain of command. Engage in impersonal management with appropriate social distance between superiors and subordinates. Employment and advancement to be based on technical expertise and employees protected from arbitrary dismissal.  The Bureaucratic Model of Organization Design Bureaucratic Model (Max Weber) –Perhaps the best examples of bureaucracies today are government agencies and universities. –Consider, for example, the steps you must go through and the forms you must fill out to apply for admission to college, request housing, register each semester, change majors, submit a degree plan, substitute a course, and file for graduation. Even when paper is replaced with electronic media, the steps are often the same. The reason these procedures are necessary is that universities deal with large numbers of people who must be treated equally and fairly  Bureaucratic Model Advantages Disadvantages –Efficiency in function –Organizational due to well-defined inflexibility and rigidity practices and due to rules and procedures. procedures. –Organizational rules –Neglects the social and prevent favoritism. human processes –Recognition of and within the organization. requirement for –Belief in “one best way” expertise stresses the to design an value of an organization does not organization’s apply to all employees. organizations. System One Versus System Four Organization  Situational Determinants of Organization Design Barney, Jay B. and Ricky W. Griffin, The Management of Organizations. Copyright © 1992 by Houghton Mifflin Company. Used with permissions.  Situational Influences on Organization Design Core Technology –Technology is the conversion process used to transform inputs into outputs. –A core technology is an organization’s most important technology. –Joan Woodward initially sought a correlation between organization size and design; instead she found a potential relationship between technology and design. –As the complexity of technology increases, so do the number of levels of management.  Situational Influences on Organization Design (cont’d) Woodward’s Basic Forms of Technology –Unit or Small-Batch Technology Produce custom-made products to customer specifications, or else produce in small quantities. –Large Batch/Mass Production Uses assembly-line production methods to manufacture large quantities of products. –Continuous Process Use continuous-flow processes to convert raw materials by process or machine into finished products.  Situational Influences on Organization Design (cont’d) Woodward’s Findings –Unit or small-batch technology and continuous process firms tend to be organic—less rigid and more informal. –Large batch/mass production firms tend to be mechanistic—bureaucratic with higher degrees of labor specialization. –Successful firms tended to follow the typical pattern appropriate to their technology (i.e., more organic than their competitors).  Situational Influences on Organization Design (cont’d) Burns and Stalker –Research focused on identifying extreme forms of the organizational environment: Stable environments that remain constant over time. Unstable environments subject to uncertainty and rapid change. –Organization Designs Mechanistic organizations that are similar to bureaucratic models; found most frequently in stable environments. Organic organizations that are flexible and informal models; usually found in unstable and unpredictable environments.  Situational Influences on Organization Design (cont’d) Lawrence and Lorsch –Predicted that environmental factors have differential effects on the different sub-units of an organization; affecting the overall design of the organization. Differentiation is the extent to which the organization is broken down into subunits; associated with stable environments. Integration is the degree to which the various subunits must work together in a coordinated fashion. –The degree of differentiation and integration needed by an organization depends on the stability of the environments that its sub-units face.  Situational Influences on Organization Design (cont’d) Organizational Size –Defined as the total number of full-time or full-time equivalent employees. –Research findings: Small firms tend to focus on their core technology. Large firms have more job specialization, standard operating procedures, more rules and regulations, and are more decentralized. Organizational Life Cycle –A progression through which organizations evolve as they grow and mature—birth, youth, midlife, and maturity.  Basic Forms of Organization Design Functional or U-form (Unitary) Design –Organizational members and units are grouped into functional departments such as marketing and production. –Coordination is required across all departments. –Design approach resembles functional departmentalization in its advantages and disadvantages.  Functional (U-Form) Design for a Small Manufacturing Company CEO Vice president, Vice president, Vice president, Vice president, Vice president, operations marketing finance human resources R&D Plant Regional Labor relations Scientific Controller managers sales managers director director Shift District Accounting Plant human Lab manager supervisors sales managers supervisor resource manager Figure 6.2  Basic Forms of Organization Design (cont’d) Conglomerate or H-form (Holding) Design –Organization consists of a set of unrelated businesses with a general manager for each business. –Holding-company design is similar to product departmentalization. –Coordination is based on the allocation of resources across companies in the portfolio. –Design has produced only average to weak financial performance; has been abandoned for other approaches.  Conglomerate (H-Form) Design at Pearson PLC CEO Investment Periodicals Publishing Entertainment Oil services Fine china banking operations operations operations operations operations operations Figure 6.3  Basic Forms of Organization Design (cont’d) Divisional or M-form (Multidivisional) Design –An organizational arrangement based on multiple businesses in related areas operating within a larger organizational framework; following a strategy of related diversification. –Activities are decentralized down to the divisional level; others are centralized at the corporate level. –The largest advantages of the M-form design are the opportunities for coordination and sharing of resources.  Multidivisional (M-form) Design at The Limited, Inc. CEO Bath & Lerner Victoria’s Other Structure Body The Limited Express New York Secret chains Works Successful M-form organizations can out- perform U-form and H-form organizations. Figure 6.4  Basic Forms of Organization Design (cont’d) Matrix Design –An organizational arrangement based on two overlapping bases of departmentalization (e.g., functional departments and product categories). –A set of product groups or temporary departments are superimposed across the functional departments.  Basic Forms of Organization Design (cont’d) Matrix Design (cont’d) –Employees in the resulting matrix are members of both their departments and a project team under a project manager. –The matrix creates a multiple command structure in which an employee reports to both departmental and project managers.  Basic Forms of Organization Design (cont’d) Matrix design design is useful when: –There is strong environmental pressure. –There are large amounts of information to be processed. –There is pressure for shared resources.  A Matrix Organization CEO Vice president, Vice president, Vice president, Vice president, engineering production finance marketing Employees Project manager A Project manager B Project manager C Figure 6.5  Basic Forms of Organization Design (cont’d) Matrix Design Advantages –Enhances organizational flexibility. –Involvement creates high motivation and increased organizational commitment. –Team members have the opportunity to learn new skills. –Provides an efficient way for the organization to use its human resources. –Team members serve as bridges to their departments for the team. –Useful as a vehicle for decentralization.  Basic Forms of Organization Design (cont’d) Matrix Design Disadvantages –Employees are uncertain about reporting relationships. –Managers may view design as an anarchy in which they have unlimited freedom. –The dynamics of group behavior may lead to slower decision making, one-person domination, compromise decisions, or a loss of focus. –More time may be required for coordinating task- related activities.  Basic Forms of Organization Design (cont’d) Hybrid Designs –An organizational arrangement based on two or more common forms of organization design. –An organization may have a mixture of related divisions and a single unrelated division. –Most organizations use a modified form of organization design that permits them to have sufficient flexibility to make adjustments for strategic purposes.  Emerging Issues in Organization Design The Team Organization –An approach to organizational design that relies almost exclusively on project-type teams with little or no underlying functional hierarchy. The Virtual Organization –An organizational design that has little or no format structure with few permanent employees, leased facilities, and outsourced basic support services. –It may conduct its business entirely on-line and exist only to meet a specific and present need.  Emerging Issues in Organization Design (cont’d) The Learning Organization –An organization that works to facilitate the lifelong learning and development of its employees while transforming itself to respond to changing demands and needs. –Organizations that adopt this approach work to integrate continuous improvement with continuous employee learning and development.