Introduction To

Lecture#19 & 20
▪ Organizing
▪ Organizational Structure
▪ Organizational Design: 6 elements
▪ Mechanic Organization VS Organic
organization
▪ Traditional Organizational Designs
▪ Organizing for flexibility in 21st Century
▪ Contingency factors affecting structural choice
 Organizing
• Organizing is defined as
arranging and structuring work
to accomplish organizational
goals.

• It’s an important process during

which managers design an
organization’s structure.
 Purpose 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.
 Organizational structure
• Organizational structure is
the formal arrangement of
jobs within an
organization.

• This structure, which can

be shown visually in an
organizational chart, also
serves many purposes.
 Organizational Design

• When managers create or change the structure,

they’re engaged in organizational design, a process
that involves decisions about six key elements:
➢Work specialization
➢Departmentalization
➢Chain of command
➢Span of control
➢Centralization and decentralization
➢Formalization
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➢ Work Specialization:
▪ The degree to which tasks in the organization are
divided into separate jobs with each step completed
by a different person.

▪ Individual employees “specialize” in doing part of an

activity rather than the entire activity in order to
increase work output. It’s also known as division of
labor
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• Work specialization makes efficient use of the diversity
of skills that workers have. In most organizations, some
tasks require highly developed skills others can be
performed by employees with lower skill levels
Example:
McDonald’s uses high work specialization to get its products
made and delivered to customers efficiently and quickly that’s
why it’s called “fast” food.
• One person takes orders at the drive-through window, others
cook and assemble the hamburgers, another works the fryer,
another gets the drinks, another bags orders, and so forth.
• Such single-minded focus on maximizing efficiency has
contributed to increasing productivity.
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➢ Departmentalization:
How jobs are grouped together is called
departmentalization.
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Departmentalization by Type:
• Functional
– Grouping jobs by functions performed
• Product
– Grouping jobs by product line
• Geographical
– Grouping jobs on the basis of territory or geography
• Process
– Grouping jobs on the basis of product or customer
flow
• Customer
– Grouping jobs by type of customer and needs
Examples
Functional Departmentalization
 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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 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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 Process Departmentalization

+ More efficient flow of work activities

– Can only be used with certain types of products

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 Customer Departmentalization

+ Customers’ needs and problems can be met by specialists

- Duplication of functions
- Limited view of organizational goals

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➢ Chain of Command:
▪ The chain of command is the line of authority
extending from upper organizational levels to lower
levels, which clarifies who reports to whom.

▪ Managers need to consider it when organizing work

because it helps employees with questions such as
“Who do I report to?” or “Who do I go to if I have a
problem?”
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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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➢ Span of control:
– The number of employees who can be effectively &
efficiently supervised by a manager.
– Width of span is affected by:
• Skills and abilities of the manager
• Employee characteristics
• Characteristics of the work being done
• Similarity of tasks
• Complexity of tasks
• Physical proximity of subordinates
• Standardization of tasks
Example: Contrasting spans of control
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➢Centralization & Decentralization:
❖Centralization:
▪ Centralization occurs when decision-making
authority is concentrated at the top levels of the
organizational hierarchy.

▪ In a centralized structure, key decisions are made by

a few individuals at the upper level of management,
and lower-level employees have limited autonomy.
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❑Characteristics:
✓ Top-Down Decision Making: Decision-making
authority flows from the top management downward.

✓ Efficiency: Centralization can lead to quicker

decision-making and streamlined processes.

✓ Uniformity: Policies and procedures are

implemented consistently across the organization.

✓ Clear Hierarchy: There is a clear chain of command.

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❖Decentralization:
▪ Decentralization occurs when decision-making
authority is distributed among various levels of the
organizational hierarchy.

▪ In a decentralized structure, lower-level managers and

employees are given more autonomy to make
decisions related to their specific areas of
responsibility.
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❑Characteristics:
✓ Delegated Authority: Decision-making authority is
pushed down to lower levels of the organization.

✓ Flexibility: Decentralization allows for greater

adaptability to local conditions or specific challenges.

✓ Employee Empowerment: Lower-level employees

have more responsibility and autonomy.

✓ Local Decision Making: Decisions can be made

closer to where the information and expertise reside.
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➢ Hybrid Approaches:
▪ In reality, many organizations adopt a hybrid approach,
combining elements of both centralization and
decentralization.
▪ This is known as a "decentralized centralization" or
"centralized decentralization" model.
▪ In these cases, certain decisions are made centrally for
consistency and efficiency, while others are decentralized to
promote flexibility and responsiveness at lower levels of the
organization.
▪ The key is finding the right balance that suits the
organization's goals and operating environment.
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➢Formalization
▪ Formalization refers to how standardized an
organization’s jobs are and the extent to which
employee behavior is guided by rules and procedures.

▪ In highly formalized organizations, there are explicit

job descriptions, numerous organizational rules, and
clearly defined procedures covering work processes.
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▪ Employees have little discretion over what’s done,
when it’s done, and how it’s done.

▪ However, where formalization is low, employees

have more discretion in how they do their work.

▪ Although some formalization is necessary for

consistency and control, many organizations today
rely less on strict rules and standardization to guide
and regulate employee behavior.
 Mechanistic VS Organic Organization

❖ Mechanistic Organization: ❖ Organic Organization:

▪ A rigid and tightly ▪ Highly flexible and
controlled structure adaptable 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 ▪ Open communication
network (downward) network
▪ Low decision participation ▪ Empowered employees
Mechanistic VS Organic Model
 Mechanistic VS 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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 Common Organizational Designs

1. Traditional
Organizational Designs

2. Contemporary
organizational designs
 Common Organizational Designs
1.Traditional Organizational 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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 Strengths and Weaknesses of Traditional Organizational Designs

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2.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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– Boundary less 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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 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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 Contemporary Organizational Designs

Boundary less
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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 Organizing for flexibility in 21st century
1.Dynamic Environment:
• The 21st-century business landscape is
characterized by rapid technological
advancements, globalization, and market
uncertainties.

• Organizations need to be agile and adaptable to

navigate through constant changes.
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2.Organizational Structure:
• Move away from rigid hierarchies and embrace
flatter structures that facilitate faster decision-
making.

• Matrix structures, cross-functional teams, and

networked organizations promote flexibility.
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3.Flexible Work Arrangements:
• Embrace remote work, flexible schedules, and
telecommuting to accommodate the diverse needs
of employees.

• Example: Companies like Google and Microsoft

have implemented flexible work policies,
allowing employees to work remotely and
promoting a healthy work-life balance.
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4. Technology Integration:
• Leverage technology for seamless communication
and collaboration, enabling employees to work
from different locations.

• Cloud-based tools, project management software,

and virtual collaboration platforms enhance
organizational flexibility.
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5. Agile Methodology:
• Implement agile project management
methodologies to respond quickly to changing
customer needs and market dynamics.
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6. Cross-Training and Skill Development:
• Encourage employees to develop diverse skill sets
to perform multiple roles within the organization.

• Example: Cross-training employees in different

departments allows for a more flexible workforce.
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7. Responsive Supply Chain:
• Establish a responsive and agile supply chain to
quickly adapt to fluctuations in demand and
supply.

• Example: Fast fashion companies like Zara are

known for their agile supply chain that enables
them to respond rapidly to changing fashion
trends.
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8. Continuous Learning and Innovation:
• Foster a culture of continuous learning and
innovation to stay ahead in a rapidly changing
landscape.

• Example: Companies like Apple and Tesla

prioritize innovation and invest in research and
development to introduce new products and
technologies.
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9. Customer-Centric Approach:
• Stay attuned to customer feedback and
preferences, adjusting products and services
accordingly.

• Example: Amazon continuously evolves its

offerings based on customer feedback and market
trends.
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10. Collaborative Networks:
• Build partnerships and collaborative networks
with other organizations to share resources and
expertise.

• Example: Open-source software communities

collaborate across organizations to develop and
improve software collectively.
 Contingency Factors Affecting Structural
Choice

✓ 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.
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– 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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✓ 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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✓ 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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✓ Technology and Structure
– Organizations adapt their structures to their
technology.
– 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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✓ 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.
Reference Books:
• Book Name: Management by
“Stephen P. Robbins” & “Mary Coulter”
(Latest edition)

• Book Name: Management by

“H. Koontz Odonnel” & “H.Weihrich”
(Latest edition)
Reference Books:

• Book Name: Management Foundation and

Practice by: “Mc Farland” (Latest edition)

• Book Name: The New Management by:

“Robert M. Fulmer” (Latest edition)
THANK YOU