Chapter 11 - Organization Design PDF

Elements of Organizational Design • Organizing: management function that involves arranging and structuring work to accomplish the organization’s goals • Organizational structure: the formal arrangement of jobs within an organization • Organizational chart: the visual representation of an organizati...

Elements of Organizational Design • Organizing: management function that involves arranging and structuring work to accomplish the organization’s goals • Organizational structure: the formal arrangement of jobs within an organization • Organizational chart: the visual representation of an organization’s structure • Organizational design: creating or changing an organization’s structure Copyright © 2018 Pearson Education, Ltd. All Rights Reserved Exhibit 11-1 Purposes of Organizing Purposes Divides work to be done into specific jobs and departments. Assigns tasks and responsibilities associated with individual jobs. Coordinates diverse organizational tasks. Clusters jobs into units. Establishes relationships among individuals, groups, and departments. Establishes formal lines of authority. Allocates and deploys organizational resources. Copyright © 2018 Pearson Education, Ltd. All Rights Reserved Work Specialization • Work specialization: dividing work activities into separate job tasks Copyright © 2018 Pearson Education, Ltd. All Rights Reserved Exhibit 11-2 Economies and Diseconomies of Work Specialization Exhibit 11-2 shows the economies and diseconomies of work specialization. Copyright © 2018 Pearson Education, Ltd. All Rights Reserved Departmentalization • Departmentalization: the basis by which jobs are grouped together Copyright © 2018 Pearson Education, Ltd. All Rights Reserved Exhibit 11-3 The Five Common Forms of Departmentalization (1 of 3) Exhibit 11-3 illustrates each type of departmentalization as well as the advantages and disadvantages of each. Copyright © 2018 Pearson Education, Ltd. All Rights Reserved Exhibit 11-3 The Five Common Forms of Departmentalization (2 of 3) Exhibit 11-3 illustrates each type of departmentalization as well as the advantages and disadvantages of each. Copyright © 2018 Pearson Education, Ltd. All Rights Reserved Exhibit 11-3 The Five Common Forms of Departmentalization (3 of 3) Exhibit 11-3 illustrates each type of departmentalization as well as the advantages and disadvantages of each. Copyright © 2018 Pearson Education, Ltd. All Rights Reserved Cross-Functional Team • Cross-functional team: a work team composed of individuals from various functional specialties Copyright © 2018 Pearson Education, Ltd. All Rights Reserved Chain of Command • Chain of command: the line of authority extending from upper organizational levels to the lowest levels, which clarifies who reports to whom Copyright © 2018 Pearson Education, Ltd. All Rights Reserved Authority • Authority: refers to the rights inherent in a managerial position to tell people what to do and to expect them to do it • Line authority: authority that entitles a manager to direct the work of an employee • Staff authority: positions with some authority that have been created to support, assist, and advise those holding line authority Copyright © 2018 Pearson Education, Ltd. All Rights Reserved Responsibility • Responsibility: the obligation or expectation to perform any assigned duties • Unity of command: the management principle that each person should report to only one manager Copyright © 2018 Pearson Education, Ltd. All Rights Reserved Span of Control • Span of control: the number of employees a manager can efficiently and effectively manage Copyright © 2018 Pearson Education, Ltd. All Rights Reserved Exhibit 11-4 Contrasting Spans of Controls As Exhibit 11-4 shows, if one organization has a span of four and the other a span of eight, the organization with the wider span will have two fewer levels and approximately 800 fewer managers. Copyright © 2018 Pearson Education, Ltd. All Rights Reserved Centralization and Decentralization • Centralization: the degree to which decision making is concentrated at upper levels of the organization • Decentralization: the degree to which lower-level employees provide input or actually make decisions Copyright © 2018 Pearson Education, Ltd. All Rights Reserved Exhibit 11-5 Centralization or Decentralization More Centralization More Decentralization Environment is stable. Environment is complex, uncertain. Lower-level managers are not as capable or experienced at making decisions as upper-level managers. Lower-level managers are capable and experienced at making decisions. Lower-level managers do not want a say in decisions. Lower-level managers want a voice in decisions. Decisions are relatively minor. Decisions are significant. Organization is facing a crisis or the risk of Corporate culture is open to allowing company failure. managers a say in what happens. Company is large. Company is geographically dispersed. Effective implementation of company strategies depends on managers retaining say over what happens. Effective implementation of company strategies depends on managers having involvement and flexibility to make decisions. Copyright © 2018 Pearson Education, Ltd. All Rights Reserved Employee Empowerment • Employee empowerment: giving employees more authority (power) to make decisions Copyright © 2018 Pearson Education, Ltd. All Rights Reserved Formalization • Formalization: how standardized an organization’s jobs are and the extent to which employee behavior is guided by rules and procedures (there are explicit job descriptions, numerous organizational rules, and clearly defined procedures covering work processes) Copyright © 2018 Pearson Education, Ltd. All Rights Reserved Mechanistic and Organic Structures • Mechanistic organization (bureaucracy): an organizational design that’s rigid and tightly controlled • Organic organization: an organizational design that’s highly adaptive and flexible Copyright © 2018 Pearson Education, Ltd. All Rights Reserved Exhibit 11-6 Mechanistic Versus Organic Organizations Mechanistic Organic High specialization Cross-functional teams Rigid departmentalization Cross-hierarchical teams Clear chain of command Free flow of information Narrow spans of control Wide spans of control Centralization Decentralization High formalization Low formalization Copyright © 2018 Pearson Education, Ltd. All Rights Reserved Strategy and Structure • An organization’s structure should facilitate goal achievement. Because goals are an important part of the organization’s strategies, it’s only logical that strategy and structure are closely linked. Copyright © 2018 Pearson Education, Ltd. All Rights Reserved Size and Structure • There’s considerable evidence that an organization’s size affects its structure, but once an organization grows past a certain size, size has less influence on structure. Copyright © 2018 Pearson Education, Ltd. All Rights Reserved Technology and Structure • Unit production: the production of items in units or small batches • Mass production: the production of items in large batches • Process production: the production of items in continuous processes (oil industry) Copyright © 2018 Pearson Education, Ltd. All Rights Reserved Exhibit 11-7 Mechanistic Versus Organic Organizations blank Unit Production Mass Production Process Production Structural characteristics: Low vertical differentiation Moderate vertical differentiation High vertical differentiation blank Low horizontal differentiation High horizontal differentiation Low horizontal differentiation blank Low formalization High formalization Low formalization Most effective structure: Organic Mechanistic Organic Copyright © 2018 Pearson Education, Ltd. All Rights Reserved Environmental Uncertainty and Structure • In stable and simple environments, mechanistic designs can be more effective. • The greater the uncertainty, the more an organization needs the flexibility of an organic design. Copyright © 2018 Pearson Education, Ltd. All Rights Reserved Traditional Organizational Design Options • Simple structure: an organizational design with little departmentalization, wide spans of control, centralized authority, and little formalization • Functional structure: an organizational design that groups together similar or related occupational specialties • Divisional structure: an organizational structure made up of separate, semiautonomous units or divisions Copyright © 2018 Pearson Education, Ltd. All Rights Reserved Exhibit 11-8 Traditional Organizational Designs A summary of the strengths and weaknesses of each type of organizational design can be found in Exhibit 11-8. Copyright © 2018 Pearson Education, Ltd. All Rights Reserved Team Structures • Team structure: an organizational structure in which the entire organization is made up of work teams Copyright © 2018 Pearson Education, Ltd. All Rights Reserved Matrix and Project Structures • Matrix structure: an organizational structure that assigns specialists from different functional departments to work on one or more projects (employees in a matrix organization have two managers) • Project structure: an organizational structure in which employees continuously work on projects (a project structure has no formal departments where employees return at the completion of a project. Instead, employees take their specific skills, abilities, and experiences to other projects). Copyright © 2018 Pearson Education, Ltd. All Rights Reserved Exhibit 11-9 Example of a Matrix Organization Exhibit 11-9 shows an example of a matrix organization. Copyright © 2018 Pearson Education, Ltd. All Rights Reserved The Boundaryless Organization • Boundaryless organization: an organization whose design is not defined by, or limited to, the horizontal, vertical, or external boundaries imposed by a predefined structure • Virtual organization: an organization that consists of a small core of full-time employees and outside specialists temporarily hired as needed to work on projects (work online) Copyright © 2018 Pearson Education, Ltd. All Rights Reserved Task Forces • Task force (or ad hoc committee): a temporary committee or team formed to tackle a specific short-term problem affecting several departments • Open innovation: opening up the search for new ideas beyond the organization’s boundaries and allowing innovations to easily transfer inward and outward Copyright © 2018 Pearson Education, Ltd. All Rights Reserved Exhibit 11-10 Benefits and Drawbacks of Open Innovation Benefits Drawbacks Gives customers what they want—a voice High demands of managing the process Allows organizations to respond to complex problems Extensive support needed Nurtures internal and external relationships Cultural challenges Brings focus back to marketplace Greater need for flexibility Provides way to cope with rising costs and uncertainties of product development Crucial changes required in how knowledge is controlled and shared Copyright © 2018 Pearson Education, Ltd. All Rights Reserved Telecommuting • Telecommuting: a work arrangement in which employees work at home and are linked to the workplace by computer Copyright © 2018 Pearson Education, Ltd. All Rights Reserved Compressed Workweeks, Flextime, and Job Sharing • Compressed workweek: a workweek where employees work longer hours per day but fewer days per week • Flextime (or flexible work hours): a scheduling system in which employees are required to work a specific number of hours a week but are free to vary those hours within certain limits • Job sharing: the practice of having two or more people split a full-time job Copyright © 2018 Pearson Education, Ltd. All Rights Reserved The Contingent Workforce • Contingent workers: temporary, freelance, or contract workers whose employment is contingent on demand for their services Copyright © 2018 Pearson Education, Ltd. All Rights Reserved Review Learning Objective 11.1 • Describe six key elements in organizational design. 1. Work specialization 2. Departmentalization 3. Chain of command 4. Span of control 5. Centralization/decentralization 6. Formalization Copyright © 2018 Pearson Education, Ltd. All Rights Reserved Review Learning Objective 11.2 • Contrast mechanistic and organic structures. – Mechanistic structure: rigid, tightly controlled – Organic structure: highly adaptable, flexible Copyright © 2018 Pearson Education, Ltd. All Rights Reserved Review Learning Objective 11.3 • Discuss the contingency factors that favor either the mechanistic model or the organic model of organizational design. – An organization’s structure should support the strategy. – Structure can be affected by size and technology. – Organic structure is most effective with unit production and process production technology. – Mechanistic structure is most effective with mass production technology. Copyright © 2018 Pearson Education, Ltd. All Rights Reserved Review Learning Objective 11.4 • Describe traditional organizational design options. – Simple structure: little departmentalization, wide spans of control, authority centralized in one person, and little formalization. – Functional structure – Divisional structure Copyright © 2018 Pearson Education, Ltd. All Rights Reserved Review Learning Objective 11.5 • Discuss organizing for flexibility in the twenty-first century. – Structures:  Team  Matrix  Project – Boundaryless organization – Virtual organization – Compressed workweeks, flextime, job sharing – Contingent workforce Copyright © 2018 Pearson Education, Ltd. All Rights Reserved