Lesson 8 Notes

LESSON 8 NOTES – ORGANIZATIONAL STRUCTURE & SYSTEMS

I. What Is Organizational Structure?

A. Introduction
1. An organizational structure defines how job tasks are formally divided,
grouped, and coordinated.
2. There are six key elements: (
a. Work specialization
b. Departmentalization
c. Chain of command
d. Span of control
e. Centralization and decentralization
f. Formalization
B. Work Specialization
1. Henry Ford became rich and famous by building automobiles on an assembly
line, demonstrating that work can be performed more efficiently by using a
work specialization strategy.
a. Every Ford worker was assigned a specific, repetitive task.
b. By dividing jobs up into small standardized tasks, Ford was able to
produce cars at the rate of one every 10 seconds, while using employees
who had relatively limited skills.
c. Work specialization, or division of labor, describes the degree to which
activities in the organization are subdivided into separate jobs.
d. In essence, an entire job is broken into a number of steps, each completed
by a separate individual.
2. By the 1960s, there became increasing evidence that a good thing can be
carried too far.
3. The human diseconomies from specialization—boredom, fatigue, stress, low
productivity, poor quality, increased absenteeism, and high turnover—more
than offset the economic advantages.
a. In such cases, enlarging the scope of job activities could increase
productivity.
4. Most managers today recognize the economies specialization provides in
certain jobs and the problems when it’s carried too far.
a. High work specialization helps fast food restaurants make and sell
hamburgers and fries efficiently and aids medical specialists in most
health maintenance organizations.
b. Amazon’s Mechanical Turk program, TopCoder, and others like it have
facilitated a new trend in “microspecialization,” “eLancing,” or “crowd
sourcing” in which extremely small pieces of programming, data
processing, or evaluation tasks are delegated to a global network of
individuals by a program manager who then assembles the results.
c. This emerging trend suggests there still may be advantages to be had in
specialization.
5. Thus, whereas specialization of yesteryear focused on breaking manufacturing
tasks into specific duties within the same plant, today’s specialization breaks
Lesson 8 Notes

complex tasks into specific elements by technology, by expertise, and often

globally.
C. Departmentalization
1. Grouping jobs together so common tasks can be coordinated is called
departmentalization.
2. One of the most popular ways to group activities is by functions performed.
a. For example, a manufacturing manager might organize a plant by
separating engineering, accounting, manufacturing, personnel, and
purchasing specialists into common departments.
b. The advantage to this type of grouping is obtaining efficiencies from
putting specialists that focus on similar areas together.
3. Tasks can also be departmentalized by the type of product or service the
organization produces.
a. Procter & Gamble recently reorganized along these lines. Each major
product—such as Tide, Pampers, Charmin, and Pringles—will be placed
under the authority of an executive who will have complete global
responsibility for that product.
b. The major advantage to this type of grouping is increased accountability
for product performance under a single manager.
4. Another way to departmentalize is on the basis of geography or territory.
a. The sales function, for instance, may have western, southern, mid-western,
and eastern regions.
5. Process departmentalization can be used for processing customers as well as
products. For example, at the state motor vehicles office you might find:
a. Validation by motor vehicles division.
b. Processing by the licensing department.
c. Payment collection by the treasury department.
6. A final category of departmentalization is by type of customer.
a. Microsoft, for instance, recently reorganized around four customer
markets: consumers, large corporations, software developers, and small
businesses.
D. Chain of Command
1. The chain of command was once a basic cornerstone in the design of
organizations; it is far less important today.
2. The chain of command is an unbroken line of authority that extends from the
top of the organization to the lowest echelon and clarifies who reports to
whom.
3. Two complementary concepts: authority and unity of command.
a. Authority—the rights inherent to management to give orders and expect
the orders to be obeyed.
b. The unity-of-command principle helps preserve the concept of an
unbroken line of authority. It states that a person should have only one
superior to whom he/she is directly responsible.
4. Times change, and so do the basic tenets of organizational design. The
concepts of chain of command have less relevance today because of
technology and the trend of empowering employees.
Lesson 8 Notes

5. A low-level employee today can access information in seconds that a

generation ago was available only to top managers.
6. Operating employees are empowered to make decisions previously reserved
for management.
7. Add the popularity of self-managed and cross-functional teams and the
creation of new structural designs that include multiple bosses, and you can
see why authority and unity of command hold less relevance.
8. Many organizations still find they can be most productive by enforcing the
chain of command.
a. Indeed, one survey of more than 1,000 managers found that 59 percent of
them agreed with the statement, “There is an imaginary line in my
company’s organizational chart. Strategy is created by people above this
line, while strategy is executed by people below the line.”
b. However, this same survey found that buy-in to the organization’s strategy
by lower-level employees was inhibited by too much reliance on hierarchy
for decision making.
E. Span of Control
1. How many employees a manager can efficiently and effectively direct is an
important question.
2. All things being equal, the wider or larger the span of control, the more
efficient the organization.
3. Exhibit 14-3 illustrates that reducing the number of managers leads to
significant savings.
4. Wider spans are more efficient in terms of cost.
5. However, at some point, wider spans reduce effectiveness.
6. Narrow or small spans have their advocates. By keeping the span of control to
five or six employees, a manager can maintain close control.
7. Narrow spans have three major drawbacks.
a. First, as already described, they are expensive because they add levels of
management.
b. Second, they make vertical communication in the organization more
complex.
c. Third, narrow spans of control encourage overly tight supervision and
discourage employee autonomy.
8. The trend in recent years has been toward wider spans of control.
a. They are consistent with recent efforts by companies to reduce costs, cut
overhead, speed up decision making, increase flexibility, get closer to
customers, and empower employees.
b. To ensure that performance does not suffer because of these wider spans,
organizations have been investing heavily in employee training.
F. Centralization and Decentralization
1. Centralization refers to the degree to which decision making is concentrated
at a single point in the organization.
a. In centralized organizations, top managers make all the decisions, and
lower-level managers merely carry out their directives.
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b. In organizations at the other extreme, decentralized decision making is

pushed down to the managers closest to the action.
2. The concept of centralization includes only formal authority—that is, the
rights inherent in a position.
3. An organization characterized by centralization is inherently different
structurally from one that’s decentralized.
a. A decentralized organization can act more quickly to solve problems,
more people provide input into decisions, and employees are less likely to
feel alienated from those who make decisions that affect their work lives.
b. Management efforts to make organizations more flexible and responsive
have produced a recent trend toward decentralized decision making by
lower-level managers, who are closer to the action and typically have
more detailed knowledge about problems than top managers.
c. When Procter & Gamble empowered small groups of employees to make
many decisions about new-product development independent of the usual
hierarchy, it was able to rapidly increase the proportion of new products
ready for market.
4. Research investigating a large number of Finnish organizations demonstrates
that companies with decentralized research and development offices in
multiple locations were better at producing innovation than companies that
centralized all research and development in a single office.
5. However, sometimes decentralization can be a double-edged sword—one
study of nearly 3,000 UU Air Force officers suggests that there can sometimes
be negative effects of decentralization in organizations with multiteam
systems, including excessive risk seeking and coordination failures.
G. Formalization
1. Formalization refers to the degree to which jobs within the organization are
standardized.
a. A highly formalized job gives the job incumbent a minimum amount of
discretion over what is to be done, when it is to be done, and how he or
she should do it. Employees can be expected always to handle the same
input in exactly the same way.
2. Low formalization—job behaviors are relatively nonprogrammed, and
employees have a great deal of freedom to exercise discretion in their work.
3. The degree of formalization can vary widely between organizations and
within organizations.
H. Boundary Spanning
1. We’ve described ways that organizations create well-defined task structures
and chains of authority.
a. These systems facilitate control and coordination for specific tasks, but if
there is too much division within an organization, attempts to coordinate
across groups can be disastrous.
b. One way to overcome this sense of compartmentalization and retain the
benefits of structure is to encourage or create boundary-spanning roles.
2. Within a single organization, boundary spanning occurs when individuals
form relationships with people outside their formally assigned groups.
Lesson 8 Notes

a. Boundary-spanning activities occur not only within but also between

organizations.
b. Positive results are especially strong in organizations that encourage
extensive internal communication; in other words, external boundary
spanning is most effective when it is followed up with internal boundary
spanning.
c. In addition, research on 225 manufacturer-distributor dyads in China
suggests that although ties between salespersons and buyers (across
organizations) are linked with greater relationship quality between two
organizations (than ties between executives across organizations), when
there are strong relationships between executives and employees there
may be cooperation and better conflict resolution.
3. Organizations can use formal mechanisms to facilitate boundary-spanning
activities. One method is to assign formal liaison roles or develop committees
of individuals from different areas of the organization.
4. Development activities can also facilitate boundary spanning.
a. Employees with experience in multiple functions, such as accounting and
marketing, are more likely to engage in boundary spanning.
5. Many organizations try to set the stage for these sorts of positive relationships
by creating job rotation programs so new hires get a better sense of different
areas of the organization.
6. A final method to encourage boundary spanning is to bring attention to overall
organizational goals, such as efficiency and innovation, and shared identity
concepts.
II. Common Organizational Designs
A. The Simple Structure
1. The simple structure is characterized most by what it is not rather than what
it is.
a. It is not elaborate.
b. It has a low degree of departmentalization, wide spans of control,
authority centralized in a single person, and little formalization.
c. The simple structure is a “flat” organization; it usually has only two or
three vertical levels.
d. One individual has the decision making authority.
2. The simple structure is most widely practiced in small businesses in which the
manager and the owner are one and the same. (Exhibit 14-4)
3. The strength of the simple structure lies in its simplicity. It is fast, flexible,
inexpensive to maintain, and accountability is clear.
4. One major weakness is that it is difficult to maintain in anything other than
small organizations.
5. It becomes increasingly inadequate as an organization grows because its low
formalization and high centralization tend to create information overload at
the top.
6. As size increases, it is very difficult for the owner-manager to make all the
choices.
Lesson 8 Notes

a. If the structure is not changed and made more elaborate, the firm often
loses momentum and can eventually fail.
7. The simple structure’s other weakness is that it is risky—everything depends
on one person. Illness can literately destroy the information and decision-
making center of the company.
B. The Bureaucracy
1. Standardization—the key concept for all bureaucracies.
2. The bureaucracy is characterized by:
a. Highly routine operating tasks achieved through specialization.
b. Very formalized rules and regulations.
c. Tasks that are grouped into functional departments.
d. Centralized authority.
e. Narrow spans of control.
f. Decision making that follows the chain of command.
3. Its primary strength is in its ability to perform standardized activities in a
highly efficient manner.
a. Putting like specialties together in functional departments results in
economies of scale, minimum duplication of personnel and equipment,
etc.
b. Bureaucracies get by nicely with less talented and less costly middle- and
lower-level managers.
4. Weaknesses
a. Specialization creates subunit conflicts; functional unit goals can override
the organization’s goals.
b. Obsessive concern with following the rules.
c. The bureaucracy is efficient only as long as employees confront familiar
problems with programmed decision rules.
5. The Functional Structure
a. The functional structure groups employees by their similar specialties,
roles, or tasks.
b. An organization organized into production, marketing, human resources,
and accounting departments is an example.
i. Many large organizations utilize this structure, although this is
evolving to allow for quick changes in response to business
opportunities.
c. Still, there are advantages, including that the functional structure allows
specialists to become experts more easily than if they worked in
diversified units.
i. Employees can also be motivated by a clear career path to the top of
the organization chart specific to their specialties.
d. The functional structure works well if the organization is focused on one
product or service.
i. Unfortunately it creates rigid, formal communications because the
hierarchy dictates the communication protocol.
ii. Coordination among many units is a problem, and infighting in units
and between units can lead to reduced motivation.
Lesson 8 Notes

6. The Divisional Structure

a. The divisional structure groups employees into units by product, service,
customer, or geographical market area.
i. It is highly departmentalized.
b. Sometimes this structure is known by the type of division structure it uses:
product/service organizational structure (like units for cat food, dog food,
and bird food that report to an animal food producer), customer
organizational structure (like units for outpatient care, inpatient care, and
pharmacy that report to hospital administration), or geographic
organizational structure (like units for Europe, Asia, and South America
that report to corporate headquarters).
c. The divisional structure has the opposite benefits and disadvantages of the
functional structure.
d. It facilitates coordination in units to achieve their goals, while addressing
the specific concerns of each unit.
e. It provides clear responsibility for all activities related to a product, but
with duplication of functions and costs.
f. Furthermore, it appears as if organizations can shift from a divisional to a
functional structure, and vice versa; however, those who shift from a
functional to a divisional structure tend to perform the best.
C. The Matrix Structure
1. The matrix structure is used in advertising agencies, aerospace firms,
research and development laboratories, construction companies, hospitals,
government agencies, universities, management consulting firms, and
entertainment companies.
2. It combines two forms of departmentalization—functional and product:
a. The strength of functional departmentalization—putting like specialists
together and the pooling and sharing of specialized resources across
products.
b. Its major disadvantage is the difficulty of coordinating the tasks.
c. Product departmentalization facilitates coordination.
d. It provides clear responsibility for all activities related to a product, but
with duplication of activities and costs.
3. The most obvious structural characteristic of the matrix is that it breaks the
unity-of-command concept.
4. Its strength is its ability to facilitate coordination when the organization has a
multiplicity of complex and interdependent activities.
5. The dual lines of authority reduce tendencies of departmental members to
protect their worlds.
6. It facilitates the efficient allocation of specialists.
7. The major disadvantages of the matrix lie in the confusion it creates, its
propensity to foster power struggles, and the stress it places on individuals.
8. Violation of unity-of-command concept increases ambiguity that often leads
to conflict.
9. Confusion and ambiguity also create the seeds of power struggles.
Lesson 8 Notes

10. Reporting to more than one boss introduces role conflict, and unclear
expectations introduce role ambiguity.
III. Alternate Design Options
A. The Virtual Organization
1. The essence of the virtual organization is that it is typically a small, core
organization that outsources major business functions.
a. Also referred to as modular or network organization.
b. It is highly centralized, with little or no departmentalization.
c. The prototype of the virtual structure is today’s movie-making
organization.
i. In Hollywood’s golden era, movies were made by huge, vertically
integrated corporations.
(a) Nowadays, most movies are made by a collection of individuals
and small companies who come together and make films project by
project.
(b) This structural form allows each project to be staffed with the
talent most suited to its demands, rather than having to choose just
from those people the studio employs.
2. A virtual organization outsources all of the primary functions of the business.
a. The dotted lines in this exhibit represent those relationships typically
maintained under contracts.
b. Managers in virtual structures spend most of their time coordinating and
controlling external relations.
3. Network organizations often take many forms.61 Some of the more
“traditional” forms include the franchise form in which there are managers,
systems, and other experts in the central node (i.e., executive group) whereas
customer sales and services are carried out by franchise units.
a. This popular form of network organization is very common in service
business models, such as 7-Eleven, McDonald’s, Jimmy John’s, and
Dunkin’ Donuts.
b. However, in this form, franchisees do not tend to collaborate or coordinate
with one another, and may actually be in direct competition for resources
from the executive group.
c. Another example is the starburst form in which a “parent” firm splits off
one of its functions into a “spinoff” firm. For example, in 2012 Netflix
split off its DVD function into its own separate entity, now DVD.com.
4. The major advantage to the virtual organization is its flexibility.
5. Virtual organizations’ drawbacks have become increasingly clear as their
popularity has grown.
a. They are in a state of perpetual flux and reorganization, which means
roles, goals, and responsibilities are unclear, setting the stage for political
behavior.
B. The Team Structure
1. The team structure seeks to eliminate the chain of command and replace
departments with empowered teams.
Lesson 8 Notes

2. This structure removes vertical and horizontal boundaries in addition to

breaking down external barriers between the company and its customers and
suppliers.
a. By removing vertical boundaries, management flattens the hierarchy and
minimizes status and rank.
3. Cross-hierarchical teams (which include top executives, middle managers,
supervisors, and operative employees), participative decision-making
practices, and the use of 360-degree performance appraisals (in which peers
and others evaluate performance) can be used.
a. When fully operational, the team structure may break down geographic
barriers.
4. Today, most large U.S. companies see themselves as team-oriented global
corporations; many, like Coca-Cola and McDonald’s, do as much business
overseas as in the United States, and some struggle to incorporate geographic
regions into their structure.
C. The Circular Structure
1. Picture the concentric rings of an archery target. In the center are the
executives, and radiating outward in rings grouped by function are the
managers, then the specialists, then the workers. This is the circular
structure.
a. The circular structure has intuitive appeal for creative entrepreneurs, and
some small innovative firms have claimed it. However, as in many of the
current hybrid approaches, employees are apt to be unclear about whom
they report to and who is running the show.
2. We are still likely to see the popularity of the circular structure spread. The
concept may have intuitive appeal for spreading a vision of corporate social
responsibility (CSR) initiatives, for instance.
IV. The Leaner Organization: Organizational Downsizing
A. The goal of the new organizational forms we’ve described is to improve agility by
creating a lean, focused, and flexible organization.
B. Downsizing is a systematic effort to make an organization leaner by selling off
business units, closing locations, or reducing staff.
1. It has been very controversial because of its potential negative impacts on
employees.
2. The radical shrinking of Motorola Mobility in recent years was a case of
downsizing due to loss of market share and changes in consumer demand.
3. Some companies downsize to focus on their core competencies.
4. Some companies focus on lean management techniques to reduce bureaucracy
and speed decision making.
C. Despite the advantages of being a lean organization, the impact of downsizing on
organizational performance has been very controversial.
1. Reducing the size of the workforce perhaps has positive outcomes in the long
run, although the majority of the evidence suggests that downsizing negatively
impacts stock returns the year of downsizing (although this may be contingent
upon the organization’s goals for downsizing along with other contextual
factors).
Lesson 8 Notes

2. Part of the problem is the effect of downsizing on employee attitudes.

a. Employees who remain (and victims alike) often feel worried about future
layoffs (including those who are furloughed, or suspended without pay)
and may be less committed to the organization and experience a greater
amount of stress and strain.
b. Downsizing can also lead to psychological withdrawal and more voluntary
turnover, so vital human capital is lost.
c. The result is a company that is more anemic than lean. Paradoxically,
some research suggests that the victims may even fare better than the
survivors, experiencing higher control perceptions along with less stress.
3. Companies downsizing to improve strategic focus often see positive effects on
stock prices after the announcement.
D. The following are some effective strategies for downsizing and suggestions for
implementing them.
1. Invest. Companies that downsize to focus on core competencies are more
effective when they invest in high-involvement work practices afterward.
2. Communicate. When employers make efforts to discuss downsizing with
employees early, employees are less worried about the outcomes and feel the
company is taking their perspective into account.
3. Participate. Employees worry less if they can participate in the process in
some way. In some companies, voluntary early retirement programs or
severance packages can help achieve leanness without layoffs.
4. Assist. Providing severance, extended health care benefits, and job search
assistance demonstrates a company does really care about its employees and
honors their contributions.
E. Companies that make themselves lean can be more agile, efficient, and
productive—but only if they make cuts carefully and help employees through the
process.
V. Why Do Structures Differ?
A. Introduction
1. The mechanistic model synonymous with the bureaucracy—has extensive
departmentalization, high formalization, a limited information network
(mostly downward), and little participation in decision making.
2. The organic model looks a lot like the boundaryless organization; it uses
cross-hierarchical and cross-functional teams, low formalization, a
comprehensive information network, and high participation in decision
making.
3. Why are some organizations structured along mechanistic lines while others
are organic?
B. Organizational Strategy
1. An organization’s structure is a means to help management achieve its
objectives.
a. Objectives derive from the organization’s overall strategy.
b. Structure should follow strategy.
Lesson 8 Notes

2. Most current strategy frameworks focus on three strategy dimensions—

innovation, cost minimization, and imitation—and the structural design that
works best with each.
a. An innovation strategy means a strategy for meaningful and unique
innovations. This strategy may appropriately characterize 3M Company.
b. A cost-minimization strategy tightly controls costs, refrains from
incurring unnecessary innovation or marketing expenses, and cuts prices
in selling a basic product. This describes Walmart’s strategy.
c. An imitation strategy tries to capitalize on the best of both minimize risk
and maximize opportunity for profit.
i. It moves into new products or new markets only after viability has
been proven by innovators.
ii. It copies successful ideas of innovators.
3. Exhibit 14-8 describes the structural option that best matches each strategy.
a. Innovators need the flexibility of the organic structure, whereas cost
minimizers seek the efficiency and stability of the mechanistic structure.
b. Imitators combine the two structures.
i. They use a mechanistic structure to maintain tight controls and low
costs in their current activities but create organic subunits in which to
pursue new undertakings.
C. Organizational Size
1. An organization’s size significantly affects its structure.
2. Large organizations—employing 2,000 or more people—tend to have more
specialization, more departmentalization, more vertical levels, and more rules
and regulations than do small organizations.
3. The impact of size becomes less important as an organization expands.
4. Once an organization has around 2,000 employees, it’s already fairly
mechanistic. An additional 500 employees will not have much impact.
5. However, adding 500 employees to a 300-employee firm is likely to result in a
mechanistic structure.
D. Technology
1. Technology refers to how an organization transfers its inputs into outputs.
a. Every organization has at least one technology for converting financial,
human, and physical resources into products or services.
b. The Chinese consumer electronics company Haier (the owners of GE
Appliances) uses an assembly-line process to make its products.
c. Regardless, organizational structures adapt to their technology—and vice
versa. Organizational structure and culture can become inscribed in the
data structure, software, and hardware an organization uses.
E. Environment
1. An organization’s environment includes outside institutions or forces that can
affect its performance, such as suppliers, customers, competitors, government
regulatory agencies, and public pressure groups.
2. Dynamic environments create significantly more uncertainty for managers
than do static ones.
Lesson 8 Notes

a. To minimize uncertainty, managers may broaden their structure to sense

and respond to threats.
b. For example, most companies, including Pepsi and Southwest Airlines,
have added media departments to counter negative information posted on
blogs.
3. Any organization’s environment has three dimensions: capacity, volatility,
and complexity.
a. Capacity
i. The degree to which it can support growth.
ii. Rich and growing environments generate excess resources, which can
buffer times of relative scarcity.
b. Volatility
i. Refers to the degree of instability in an environment.
ii. A dynamic environment with a high degree of unpredictable change
makes it difficult for management to make accurate predictions.
iii. At the other extreme is a stable environment.
c. Complexity
i. The degree of heterogeneity and concentration among environmental
elements.
ii. Simple environments are homogeneous and concentrated.
d. In contrast, environments characterized by heterogeneity and dispersion
are called complex.
4. Exhibit 14-9 summarizes our definition of the environment along its three
dimensions.
a. The arrows indicate movement toward higher uncertainty.
b. Thus, organizations that operate in environments characterized as scarce,
dynamic, and complex face the greatest degree of uncertainty because they
have high unpredictability, little room for error, and a diverse set of
elements in the environment to monitor constantly.
5. Given this three-dimensional definition of environment, we can offer some
general conclusions about environmental uncertainty and structural
arrangements.
a. The more scarce, dynamic, and complex the environment, the more
organic a structure should be.
b. The more abundant, stable, and simple the environment, the more the
mechanistic structure will be preferred.
F. Institutions
1. Another factor that shapes organizational structure is institutions. These are
cultural factors that act as guidelines for appropriate behavior.
2. Institutional theory describes some of the forces that lead many organizations
to have similar structures and, unlike the theories we’ve described so far,
focuses on pressures that aren’t necessarily adaptive.
a. The most obvious institutional factors come from regulatory pressures;
certain industries under government contracts, for instance, must have
clear reporting relationships and strict information controls.
Lesson 8 Notes

b. Sometimes simple inertia determines an organizational form—companies

can be structured in a particular way just because that’s the way things
have always been done.
c. Organizations in countries with high power distance might have a
structural form with strict authority relationships because it’s seen as more
legitimate in that culture.
d. Some have attributed problems in adaptability in Japanese organizations to
the institutional pressure to maintain authority relationships.
e. Sometimes organizations start to have a particular structure because of
fads or trends.
f. Many companies have recently tried to copy the organic form of a
company like Google only to find that such structures are a very poor fit
with their operating environment.
3. Institutional pressures are often difficult to see specifically because we take
them for granted, but that doesn’t mean they aren’t powerful.
VI. Organizational Designs and Employee Behavior
A. We opened this chapter by implying that an organization’s structure can have
significant effects on its members.
1. A review of the evidence leads to a pretty clear conclusion: you can’t
generalize!
2. Not everyone prefers the freedom and flexibility of organic structures.
3. Different factors stand out in different structures as well.
a. In highly formalized, heavily structured, mechanistic organizations, the
level of fairness in formal policies and procedures is a very important
predictor of satisfaction.
b. In more personal, individually adaptive organic organizations, employees
value interpersonal justice more.
4. Some people are most productive and satisfied when work tasks are
standardized and ambiguity minimized—that is, in mechanistic structures.
5. So, any discussion of the effect of organizational design on employee
behavior has to address individual differences.
B. Let’s consider employee preferences for work specialization, span of control, and
centralization.
1. The evidence generally indicates that work specialization contributes to higher
employee productivity—but at the price of reduced job satisfaction.
a. However, work specialization is not an unending source of higher
productivity.
b. Problems start to surface, and productivity begins to suffer, when the
human diseconomies of doing repetitive and narrow tasks overtake the
economies of specialization.
c. As the workforce has become more highly educated and desirous of jobs
that are intrinsically rewarding, we seem to reach the point at which
productivity begins to decline more quickly than in the past.
2. There is still a segment of the workforce that prefers the routine and
repetitiveness of highly specialized jobs.
Lesson 8 Notes

a. Some individuals want work that makes minimal intellectual demands

and provides the security of routine; for them, high work specialization is
a source of job satisfaction.
b. The question, of course, is whether they represent 2 percent of the
workforce or 52 percent.
c. Given that some self-selection operates in the choice of careers, we might
conclude that negative behavioral outcomes from high specialization are
most likely to surface in professional jobs occupied by individuals with
high needs for personal growth and diversity.
3. It is probably safe to say no evidence supports a relationship between span of
control and employee satisfaction or performance.
a. Although it is intuitively attractive to argue that large spans might lead to
higher employee performance because they provide more distant
supervision and more opportunity for personal initiative, the research fails
to support this notion.
b. Some people like to be left alone; others prefer the security of a boss who
is quickly available at all times.
c. Consistent with several of the contingency theories of leadership discussed
in Chapter 13, we would expect factors such as employees’ experiences
and abilities and the degree of structure in their tasks to explain when wide
or narrow spans of control are likely to contribute to their performance and
job satisfaction.
d. However, some evidence indicates that a manager’s job satisfaction
increases as the number of employees supervised increases.
4. We find fairly strong evidence linking centralization and job satisfaction.
a. In general, less centralized organizations have a greater amount of
autonomy.
b. And autonomy appears positively related to job satisfaction. But, again,
while one employee may value freedom, another may find autonomous
environments frustratingly ambiguous.
C. We can draw one obvious insight: other things equal, people don’t select
employers randomly.
1. They are attracted to, are selected by, and stay with organizations that suit
their personal characteristics.
2. Job candidates who prefer predictability are likely to seek out and take
employment in mechanistic structures, and those who want autonomy are
more likely to end up in an organic structure.
3. Thus, the effect of structure on employee behavior is undoubtedly reduced
when the selection process facilitates proper matching of individual
characteristics with organizational characteristics.
D. Research suggests national culture influences the preference for structure.
1. Organizations that operate with people from high power-distance cultures,
such as Greece, France, and most of Latin America, find their employees are
much more accepting of mechanistic structures than are employees from low
power-distance countries.
Lesson 8 Notes

2. So consider cultural differences along with individual differences when

predicting how structure will affect employee performance and satisfaction.
VII. Summary and Implications for Managers
A. The theme of this chapter is that an organization’s internal structure contributes to
explaining and predicting behavior.
1. That is, in addition to individual and group factors, the structural relationships
in which people work has a bearing on employee attitudes and behavior.
B. What’s the basis for this argument?
1. To the degree that an organization’s structure reduces ambiguity for
employees and clarifies concerns such as “What am I supposed to do?” “How
am I supposed to do it?” “To whom do I report?” and “To whom do I go if I
have a problem?” shapes their attitudes and facilitates and motivates them to
higher levels of performance.
C. Exhibit 14-10 summarizes what we’ve discussed. Specific implications for
managers are below:
1. Specialization can make operations more efficient, but remember that
excessive specialization can create dissatisfaction and reduced motivation.
2. Avoid designing rigid hierarchies that overly limit employees’ empowerment
and autonomy.
3. Balance the advantages of virtual and boundaryless organizations against the
potential pitfalls before adding flexible workplace options.
4. Downsize your organization to realize major cost savings, and focus the
company around core competencies—but only if necessary, because
downsizing can have a significant negative impact on employee affect.
5. Consider the scarcity, dynamism, and complexity of the environment, and
balance the organic and mechanistic elements when designing an
organizational structure.