PowerPoint Presentation by Ms.

Dao Xuan Phuong Trang

University of Education 1–1
LEARNING OUTCOMES
Defining Organizational Structure
 Defining Organizational Structure
• Organizational Structure
The formal arrangement of jobs within an organization.
• Organizational Design
A process involving decisions about six key elements:
1. Work specialization
2. Departmentalization
3. Chain of command
Why is organizing
4. Span of control
important?
5. Centralization and decentralization
6. Formalization

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Exhibit 6 –1 Purposes of Organizing

• 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.

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1. Work Specialization
➢ The degree to which tasks in the organization are
divided into separate jobs with each step
completed by a different person.

➢ Overspecialization can result in human diseconomies

from boredom, fatigue, stress, poor quality, increased
absenteeism, and higher turnover.

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 2. Departmentation

Departmentalization by Type 1. Give an example

of each type.
• Functional G1-2-11 • Process G7-8-12 2. What are the
Grouping jobs by Grouping jobs on the advantages and
functions performed basis of product or disadvantages of
• Product customer flow
G3-4-13 each type?
Grouping jobs by product • Customer G9-10-14
line Grouping jobs by type of
• Geographical G5-6 customer and needs
Grouping jobs on the
basis of territory or
geography
Exhibit 6 –2 Functional Departmentalization

• Advantages
• Efficiencies from putting together similar specialties and people
with common skills, knowledge, and orientations
• Coordination within functional area
• In-depth specialization
• Disadvantages
• Poor communication across functional areas
• Limited view of organizational goals
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Exhibit 10–2 (cont’d) Geographical Departmentalization

Advantages
• More effective and efficient handling of specific regional
issues that arise
•Serve needs of unique geographic markets better
Disadvantages
• Duplication of functions
• Can feel isolated from other organizational areas

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Exhibit 10–2 (cont’d) Product Departmentalization

+ Allows specialization in particular products and services

+ Managers can become experts in their industry
+ Closer to customers
– Duplication of functions
– Limited view of organizational goals
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Exhibit 10–2 (cont’d) Process Departmentalization

+ More efficient flow of work activities

– Can only be used with certain types of products

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Exhibit 10–2 (cont’d) Customer Departmentalization

+ Customers’ needs and problems can be met by specialists

- Duplication of functions
- Limited view of organizational goals

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3. Chain of Command
The continuous line of authority that extends from
upper levels of an organization to the lowest levels of
the organization and clarifies who reports to who.

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• Authority
The rights inherent in a managerial position to tell
people what to do and to expect them to do it.
• Responsibility
The obligation or expectation to perform.
• Unity of Command
The concept that a person should have one boss and
should report only to that person.

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4. Span of Control
The number of employees who can be effectively and
efficiently supervised by a manager.
Width of span is affected by:
1. Skills and abilities of the manager
2. Employee characteristics
3. Characteristics of the work being done Why?
4. Similarity of tasks
5. Complexity of tasks
6. Physical proximity of subordinates
7. Standardization of tasks

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Exhibit 10–3 Contrasting Spans of Control

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 5. Centralization and decentralization
• Centralization
The degree to which decision-making is concentrated at a single
point in the organizations.
Organizations in which top managers make all the decisions and lower-level
employees simply carry out those orders.
• Decentralization
Organizations in which decision-making is pushed down to the
managers who are closest to the action.
• Employee Empowerment
Increasing the decision-making authority (power) of employees.

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In what situations should an
organization go for
Centralization or
Decentralization?
Exhibit 10–4 Factors that Influence the Amount of Centralization

More Centralization
➢ Environment is stable.
➢ Lower-level managers are not as capable or experienced
at making decisions as upper-level managers.
➢ Lower-level managers do not want to have a say in decisions.
➢ Decisions are relatively minor.
➢ Organization is facing a crisis or the risk of company failure.
➢ Company is large.
➢ Effective implementation of company strategies depends
on managers retaining say over what happens.

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Exhibit 10–4 (cont’d) Factors that Influence the Amount of Centralization

More Decentralization
➢ Environment is complex, uncertain.
➢ Lower-level managers are capable and experienced at making
decisions.
➢ Lower-level managers want a voice in decisions.
➢ Decisions are significant.
➢ Corporate culture is open to allowing managers to have a say in
what happens.
➢ Company is geographically dispersed.
➢ Effective implementation of company strategies depends on
managers having involvement and flexibility to make decisions.

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6. Formalization
The degree to which jobs within the organization are
standardized and the extent to which employee behavior is
guided by rules and procedures.
➢ Highly formalized jobs offer little discretion over what is to be done.

➢ Low formalization means fewer constraints on how

employees do their work.

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 Organizational Design Decisions

Mechanistic Organization Organic Organization

A rigid and tightly controlled Highly flexible and adaptable
structure structure
➢ High specialization ➢ Non-standardized jobs
➢ Rigid departmentalization ➢ Fluid team-based structure
➢ Narrow spans of control ➢ Little direct supervision
➢ High formalization ➢ Minimal formal rules
➢ Limited information network ➢ Open communication
(downward) network
➢ Low decision participation ➢ Empowered employees

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Exhibit 10–5 Mechanistic versus Organic Organization

• 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

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Contingency Factors
Structural decisions are influenced by:
❖Overall strategy of the organization
Organizational structure follows strategy.
❖Size of the organization
Firms change from organic to mechanistic organizations as
they grow in size.
❖Technology use by the organization
Firms adapt their structure to the technology they use.
❖Degree of environmental uncertainty
Dynamic environments require organic structures;
mechanistic structures need stable environments.
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Contingency Factors (cont’d)
Strategy Frameworks:
➢ Innovation
➢ Pursuing competitive advantage through meaningful and
unique innovations favors an organic structuring.
➢ Cost minimization
➢ Focusing on tightly controlling costs requires a mechanistic
structure for the organization.
➢ Imitation
➢ Minimizing risks and maximizing profitability by copying
market leaders requires both organic and mechanistic
elements in the organization’s structure.
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 Contingency Factors (cont’d)

• Strategy and Structure

Achievement of strategic goals is facilitated by changes in
organizational structure that accommodate and support
change.

• Size and Structure

As an organization grows larger, its structure tends to change from
organic to mechanistic with increased specialization,
departmentalization, centralization, and rules and regulations.

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 Contingency Factors (cont’d)
Technology and Structure
➢ Organizations adapt their structures to their technology.
➢ Woodward’s classification of firms based on the complexity
of the technology employed:
➢ Unit production of single units or small batches
➢ Mass production of large batches of output
➢ Process production in continuous process of outputs
➢ Routine technology = mechanistic organizations
➢ Non-routine technology = organic organizations
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Exhibit 10–6 Woodward’s Findings on Technology, Structure, and Effectiveness

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 Contingency Factors (cont’d)

Environmental Uncertainty and Structure

Mechanistic organizational structures tend to be most
effective in stable and simple environments.
The flexibility of organic organizational structures is
better suited for dynamic and complex environments.

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 Common Organizational Designs

Traditional Designs
➢ Simple structure (G1)
➢ Functional structure (G2)
➢ Divisional structure (G3)

Contemporary Designs
➢ Team structure (G4)
➢ Matrix-Project structure (G5)
➢ Boundaryless structure (G6)

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 Common Organizational Designs

Traditional Designs
➢ Simple structure
Low departmentalization, wide spans of control, centralized
authority, little formalization
➢ Functional structure
Departmentalization by function
– Operations, finance, human resources, and product
research and development
➢ Divisional structure
Composed of separate business units or divisions with limited
autonomy under the coordination and control the parent corporation.

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Exhibit 10–7 Strengths and Weaknesses of Traditional Organizational Designs

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 Organizational Designs (cont’d)
Contemporary Organizational Designs
Team structures
➢ The entire organization is made up of work groups or self- managed teams
of empowered employees.

Matrix and project structures

➢ Specialists from different functional departments are assigned to work on
projects led by project managers.

➢ Matrix and project participants have two managers.

➢ In project structures, employees work continuously on projects; moving on

to another project as each project is completed.
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Exhibit 10–9 An Example of a Matrix Organization

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 Organizational Designs (cont’d)
Contemporary Organizational Designs (cont’d)
Boundaryless Organization
➢ An flexible and unstructured organizational design that is intended to break down external
barriers between the organization and its customers and suppliers.
➢ Removes internal (horizontal) boundaries:
– Eliminates the chain of command
– Has limitless spans of control
– Uses empowered teams rather than departments
➢ Eliminates external boundaries:
– Uses virtual, network, and modular organizational structures to get closer to
stakeholders.

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Exhibit 10–8 Contemporary Organizational Designs

Team Structure
• What it is: A structure in which the entire organization is made up of
work groups or teams.
• Advantages: Employees are more involved and empowered. Reduced
barriers among functional areas.
• Disadvantages: No clear chain of command. Pressure on teams to perform.

Matrix-Project Structure
What it is: A structure that assigns specialists from different functional
areas to work on projects but who return to their areas when
the project is completed. Project is a structure in which
employees continuously work on projects. As one project is
completed, employees move on to the next project.
• Advantages: Fluid and flexible design that can respond to environmental
changes. Faster decision making.
• Disadvantages: Complexity of assigning people to projects. Task and
personality conflicts.

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Exhibit 10–8 (cont’d) Contemporary Organizational Designs

Boundaryless Structure
What it is: A structure that is not defined by or limited to artificial
horizontal, vertical, or external boundaries; includes virtual
and network types of organizations.
• Advantages: Highly flexible and responsive. Draws on talent wherever it’s
found..
• Disadvantages: Lack of control. Communication difficulties..

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 Removing External Boundaries

• Virtual Organization
An organization that consists of a small core of full-time employees and that
temporarily hires specialists to work on opportunities that arise.
• Network Organization
A small core organization that outsources its major business functions (e.g.,
manufacturing) in order to concentrate what it does best.
• Modular Organization
A manufacturing organization that uses outside suppliers to provide product
components for its final assembly operations.

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Today’s Organizational Design Challenges

• Keeping Employees Connected

Widely dispersed and mobile employees

• Building a Learning Organization

• Managing Global Structural Issues

Cultural implications of design elements

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The Learning Organization
➢ An organization that has developed the capacity to continuously learn, adapt,
and change through the practice of knowledge management by employees.

➢ Characteristics of a learning organization:

➢ An open team-based organization design that empowers employees

➢ Extensive and open information sharing

➢ Leadership that provides a shared vision of the organization’s future, support and
encouragement

➢ A strong culture of shared values, trust, openness, and a sense of community.

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 Terms to Know
• organizing • responsibility • divisional structure
• organizational structure • unity of command • team structure
• organizational design • span of control • matrix structure
• work specialization • centralization • project structure
• departmentalization • decentralization • boundaryless organization
• functional departmentalization • employee empowerment • virtual organization
• product departmentalization • formalization • network organization
• geographical • mechanistic organization • learning organization
departmentalization • organic organization • organizational chart
• process departmentalization • unit production
• customer departmentalization • mass production
• cross-functional teams • process production
• chain of command • simple structure
• authority • functional structure
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 Assignment

I. Individual task:

Draw an organization chart of an organization with

which you’re familiar (where you work, a student organization to which you belong,
your college or university, etc.). Be very careful in showing the departments (or
groups) and especially be careful to get the chain of command correct.

Do you think this organizational structure and design is the best for this organization?
Why/ why not? Is there anything that can be changed to improve the organizational
structure and design?
Thank you