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Lecture 6 Organizing and Organizational Structure Organizing

This document discusses different approaches to organizing an enterprise and its structure. It describes key aspects of organizational structure including the division of labor, chain of command, span of control, and centralization vs decentralization. Three main approaches to departmentalization are covered: vertical functional, divisional, and matrix. The factors that shape an organization's structure depend on its strategic goals and production technology.

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35 views2 pages

Lecture 6 Organizing and Organizational Structure Organizing

This document discusses different approaches to organizing an enterprise and its structure. It describes key aspects of organizational structure including the division of labor, chain of command, span of control, and centralization vs decentralization. Three main approaches to departmentalization are covered: vertical functional, divisional, and matrix. The factors that shape an organization's structure depend on its strategic goals and production technology.

Uploaded by

eneri
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Lecture 6 Organizing and Organizational Structure

Organizing
Arranging the activities of the enterprise in such a way that they systematically contribute to the
enterprise’s goals.

Organization structure
The set of formal tasks assigned to individuals and departments
The formal reporting relationships, including lines of authority, decision responsibility, number of
hierarchical levels, and span of managers’ control, and
The design of systems to ensure effective coordination of employees across departments

Organization chart is the visual representation of an organization’s structure.

Work specialization or division of labor


The degree to which organizational tasks are subdivided into separate jobs
Employees within each department perform only the tasks relevant to their specialized function
Many organizations are moving away from work specialization as with too much specialization, work
becomes mundane

Chain of command
An unbroken line of authority linking all employees in an organization and shows the reporting
structure
Unity of command - each employee is held accountable to only one supervisor
Scalar principle - a clearly defined line of authority in the organization that includes all employees
Authority - formal and legitimate right of a manager to make decisions, issue orders, and allocate
resources to achieve the desired outcomes
• is vested in organizational positions, not people.
• flows down the vertical hierarchy.
• is accepted by subordinates.
Responsibility - duty to perform the task or activity as assigned.
Accountability - reporting and justifying the task outcomes to the people above in the chain of
command
Delegation - process by which managers transfer authority and responsibility to positions below them
in the hierarchy

How to delegate?
Delegate the whole task
Select the right person
Ensure that authority equals responsibility
Give thorough instruction
Maintain feedback
Evaluate and reward performance

Span of Control
the number of employees reporting to a supervisor
determines how closely a supervisor can monitor the subordinates
tall structure - overall narrow span and more hierarchical levels
flat structure - wide span, horizontally dispersed, and fewer hierarchical levels

Page 1 of 2; Lecture 6 Organizing and Organizational Structure


Centralization or Decentralization
Centralization - decision authority is located near the top of the organization
Decentralization - decision authority is pushed downward to lower organization levels
Influential factors:
• greater change and uncertainty in the environment are usually associated with
decentralization.
• the amount of centralization or decentralization should fit the firm’s strategy.
• in times of crisis or risk of company failure, authority may be centralized at the top.

Vertical Functional Approach


Departmentalization by organizational resources, i.e., based on skills, expertise, work activities, and
resource use
Information flows up and down the vertical hierarchy and converges higher in the hierarchy
Communication is mainly internal within a department, to accomplish the tasks
Managers and employees have similar training and expertise
Employees at lower levels accept the decisions made by employees at the higher level

Divisional Approach
Departments are grouped together based on organizational outputs
The chain of command converges lower in the hierarchy
Decision making is pushed down at least one level in the hierarchy so that the top management is free
for strategic planning
Grouping by geographic or customer-based divisions – an alternative for divisional responsibility

Matrix Approach
Combines aspects of both functional and divisional structures simultaneously in the same part of the
organization
Supports a formal chain of command for both functional (vertical) and divisional (horizontal)
relationships
Two-boss employees—reporting to two bosses simultaneously
Matrix boss- the product/functional boss responsible for one side of the matrix
Top leader – responsible for the whole matrix and maintaining the power balance between both sides
of the matrix

Factors Shaping Structure


Organizations with stronger horizontal designs do better than those with vertical hierarchies
The organization’s strategic goals and the nature of its technology affects whether a horizontal or
vertical structure is more appropriate
Differentiation strategy: organization attempts to develop innovative products unique to the market
Cost leadership strategy: organization strives for internal efficiency

Joan Woodward—3 basic types of production technology


Small-batch and unit production
• produce goods in batches of one or a few products designed to customer specification
• examples: custom clothing, special-order machine tools, submarines
Mass production
• standardized production runs.
• a large volume of products is produced, and all customers receive the same product.
• examples: automobile assembly lines, tobacco products, textiles
Continuous process production
• entire work flow is mechanized in a sophisticated and complex form of production technology
• examples: chemical plants, distilleries, petroleum refineries, nuclear power plants

Page 2 of 2; Lecture 6 Organizing and Organizational Structure

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