Chapter 5

• Organizing as a Managerial Function:

o Organizing is the function of management for developing an organizational structure and allocating
human resources to ensure the accomplishment of objectives effectively and efficiently.
o Organizing the design of individual jobs within the organization.
• Principles of Organizing Teams
o Authority: The formal right of a manager to make decisions, gives orders.
o Responsibility: The manager/ employee duties to perform assigned tasks.
o Accountability: The expectations that the manager/employee must be able to deliver results to a
manager at a higher level (efficiently).
o Parity (Equality) Principle: Person who given responsibility must also be given enough authority to
conduct that responsibility.
o Unity of Command: Each employee should have only one boss.
o Chain of Command: The flow of authority in the team must be clear for all members; it is the unbroken
line of authority that extends from the top of the organization (e.g. a CEO) all the way down to the
bottom. All chains of command clarify who reports to whom.
o Allocation/specification of Tasks: Each employee should have the task that matches his abilities, skills
and experience.
• Terms to Know
o Span of Control: Refers to the number of workers a manager manages, it depends on the factors:
▪ Manager skills to manage no. of workers efficiently.
▪ Nature of tasks and level complexity.
o Line authority: Managers in the direct chain of command for production of goods or services. Example:
Sales (Manager --> supervisor --> salesman).
o Staff authority: Managers in positions that give advice/put system or policy to line managers.
Example: Legal, HR (Policy and system to apply on all other departments).
o Centralization: If decision-making power is concentrated at a single point or by a single person, your
organizational structure is centralized.
o Decentralization: When decision-making power is spread out through a department or a team, your
structure is decentralized.
• Specialization:
o It is the degree to which activities/tasks are
broken down/divided into individual jobs.
o High specialization can be beneficial for an
organization, allowing employees to become
“masters” in specific areas, increasing their
productivity and giving organization the benefit of
having experts.
o Rotation can be used to widen the employee’s
expertise.
o However low specialization, or “wearing lots of
hats,” allows for more flexibility, as employees can
more easily tackle a broader array of tasks.
o Low specialization is the most recent global trend.
• Departmentalization:
o Departmentalization is grouping jobs together to coordinate common activities and tasks.
o If an organization has rigid departmentalization, each department or team is highly autonomous, and
there is little to no interaction between different teams.
o On the other hand, loose departmentalization means teams have more freedom to interact/collaborate.
• Formalization:
o Formalization also considers the degree to which an employee’s tasks and activities are governed by
rules, procedures, and other mechanisms.
o A formal organizational structure seeks to separate the individual from the role or position, as the role
or position stays the same regardless of who is holding it.
o An informal organization, on the other hand, places more value on the individual. It allows for the
evolution of a role or position based on an individual’s references, skill set, etc.
• Tall & Flat Organizations:
o Tall structures many levels of authority relative to the organization’s size, usually appear in huge
organizations.
▪ As levels in the hierarchy increase, communication gets difficult.
▪ The extra levels result in more time being taken to implement decisions.
▪ Communications can also become distorted as it is repeated through the firm.
o Flat structures have few levels but wide spans of control.
▪ Results in quick communications but can lead to overworked managers.
• Org. Structure Approaches:
1. Mechanistic Org. Structure:
o A mechanistic structure, also known as a bureaucratic structure,
describes an organizational structure that is based on a formal,
centralized network.
o It looks like narrow spans of control, a rigid departmentalization, and a
clear chain of command.
o Characteristics of mechanistic structures include Well-defined
hierarchy; top-level managers make the majority of decisions.
2. Organic Org. Structure:
o It typified by wide spans of control, a loose departmentalization, and the
chain of command, whether long or short, can sometimes be difficult to
decipher.
o An organic organizational structure is characterized by an extremely flat
reporting structure within an organization.
o Interactions among employees tend to be horizontally across the
organization, rather than vertically between layers of managers and
their direct reports.
➢ The mechanistic structure represents the
traditional, top-down approach to organizational
structure, whereas the organic structure
represents a more collaborative, flexible approach.

➢ Hybrid structure allows organizations to have

advantages of both mechanistic and organic
structures, while trying to minimize the negative
consequences of each.
• Org. Design vs. Strategies

Vertical & Horizontal Dimensions of Org. Structure

Management Layers
o Vertical Dimension: The element of who has authority to make decisions
and who supervise which delegates (subordinates).
o Horizontal Dimension: The element of dividing work into a specific job,
tasks and assigning jobs into units.

Different
• Building Org. Structure: job is the first primary building block of the org. structure. Departments
• Job Design Model:
Jobs have five characteristics describing extent of:
o Skill variety: employee uses a wide range of skills.
o Task identity: worker involved in all tasks of job from
beginning to end of the production process.
o Task significance: worker feels the task is meaningful
to organization.
o Autonomy: employee has freedom to schedule tasks
and carry them out.
o Feedback: worker gets direct information about how
well the job is done.
These affect the motivation, satisfaction and performance
of employees.
• Grouping Job - Departmentalization:
o The second building block of the organization is the grouping of jobs according to logical arrangement.
o The horizontal basis for organizing jobs into units in an organization is called Departmentalization.
• Job Design: (Alternatives to Specialization):
o Job Rotation: systemically moves employees from one job to another.
o Job enlargement: increase tasks for a given job to reduce boredom.
o Job enrichment: increases the degree of responsibility a worker has over a job, can lead to increased worker
involvement (a figure of delegation).
• Types of Org. Structure:
o Conglomerate Org. Design : It used by organizations made up of a set of unrelated businesses (Samsung).
o Functional Structure:
▪ A departmentalization approach that places similar jobs into
departments.
▪ It works well with small and medium sized companies where
business environment is stable to somewhat without great
change and uncertainty.
▪ Decision making are centralized at top management.
▪ Career paths foster professional identity with the business function.
▪ Specialization, because it permits employees to do specialized tasks, it creates a high degree of efficiency and
builds expertise.
▪ Easy for managers to monitor & evaluate workers.
Disadvantages of Functional Structure:
▪ Poor communication & coordination across functional units.
▪ Delay in decision making and in response to changes.
▪ Focusing more on departmental goals more than the overall company objectives (interest conflict).
▪ The specialization will lead to a narrow viewpoint and lack of overall perspective.
▪ Problem of succession: The functional organizational structure develops specialist rather than generalists (
problem of succession in top executives).
▪ Disadvantages can be mitigated by rotation between different departments.
o Divisional Structure:
▪ A division is a collection of functions working together to produce a product (organize employees into units
based on common product, services or market).
▪ Divisions create smaller, manageable parts of a firm each with business-level strategy to compete.
▪ Each division within a divisional structure can have its own marketing team, its own sales team, etc.).
▪ Functional managers report to divisional managers who then report to corporate management.
▪ Strengths: Allows units to become accustomed to different products , regions, customers. Fits large
organizations that operate in several regions , products and different markets.
▪ Weaknesses: Makes integration and standardization across organization are difficult, not economic.
▪ Forms of Divisional Structure:
✓ Product structure: divisions created according to the type of product or service. (Arabi Group)
✓ Geographic structure: divisions based on the area of a country or world served. (Regional offices)
✓ Market structure: divisions based on the types of customers served. (Construction companies –
governmental and non-governmental sector)
✓ Process-Based Org Structure: Process-based organizational structures are designed around the end-to-
end flow of different processes. (Suzuki)
o Matrix & Product Teams
▪ Matrix structure: managers group people by function and
product teams simultaneously.
▪ Results in a complex network of reporting.
▪ Very flexible and can respond rapidly to change.
▪ Development of cross functional skills by
employees.
▪ Each employee has two bosses which can cause
problems.
▪ Functional manager gives different directions than
product manager/employee cannot satisfy both.
▪ Mostly common in construction companies.
o Product Team Structure
▪ With a product team structure, the staff report to the product manager, with secondary reporting to a
functional manager.
▪ The functional manager does not have direct authority over staff members or resources dedicated to the
product team.
▪ In a software environment, for example, this structure in software developers, technical writers, instructional
designers, quality assurance engineers, marketing, personnel and customer service staff are all directly
supervised by a product manager.
▪ Downside of Product Team Structure:
- If each product team has the same structure, the business risks duplicating effort on shared components,
creating inefficiencies.
- It may increase the agency conflict, where team members focus on a particular product at the expense of
the overall strategy for the company.
- In addition, without a functional management structure, individual contributors do not have the potential
for growth as they mature in their skills, which may lead to higher turnover rates.
Matrix is more efficient than the product as the product manager may lack the knowledge in other specialties
but with the matrix the employee to both types of managers the functional and the project manager.
 o Hybrid Structures
▪ Many large organizations have divisional structures where each manager can select the best structure for
that particular division.
▪ One division may use a functional structure, one geographic, and so on.
▪ This ability to break a large organization into many smaller ones makes it much easier to manage.
o Integrating Mechanisms
▪ Direct contact: get managers from different divisions or functions together to solve mutual problems.
▪ Liaison Roles: one manager in each area is responsible for communication with other areas.
▪ Task Forces: temporary committees formed across divisions to solve a specific problem.
▪ Cross-functional teams: works much like a permanent task force that deals with recurring problems/task.
▪ Matrix structure: already contains many integrating mechanisms.
• Strategic Alliances
• Strategic alliance: a formal agreement committing two or more firms to exchange resources to produce
a good.
• Network Structure: a whole series of strategic alliances.
o Created between suppliers, manufacturers, and distributors.
o Network structures allow firms to bring resources together in a boundary-less organization.

• Practice Questions:
• Organic structure gives more formality and centralization, while mechanistic structure gives more
flexibility to employees (T/F).
False. This statement is inaccurate. In reality, organic structures are typically associated with flexibility
and decentralization, while mechanistic structures are characterized by formality and centralization.
• Succession planning may be difficultly with functional structure (T/F).
True. Succession planning can indeed be difficult with a functional structure.
• In tall structure there are few levels of authority (T/F).
False. In a tall organizational structure, there are typically many levels of authority.
• Strategic alliance could be with competitors(T/F).
True. Strategic alliances can indeed involve partnerships between competitors. While it might seem
unexpected, such alliances can be beneficial for both parties in various ways.

Good Luck ☺