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Building Specification

This document discusses different approaches to organizing structures within companies. It describes vertical and horizontal organizational structures, and different types of departmentalization including functional, divisional, matrix, team and network structures. It analyzes the advantages and disadvantages of each approach. Mechanistic structures with more vertical specialization are more appropriate for stable environments and mass production, while organic structures with horizontal coordination work better in unstable, innovative environments that require flexibility.

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Salman Sayeed
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18 views

Building Specification

This document discusses different approaches to organizing structures within companies. It describes vertical and horizontal organizational structures, and different types of departmentalization including functional, divisional, matrix, team and network structures. It analyzes the advantages and disadvantages of each approach. Mechanistic structures with more vertical specialization are more appropriate for stable environments and mass production, while organic structures with horizontal coordination work better in unstable, innovative environments that require flexibility.

Uploaded by

Salman Sayeed
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPT, PDF, TXT or read online on Scribd
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Chapter 7

Designing Adaptive
Organizations

Major Concerns in Organizing


Division of Labor (Differentiation)
Coordination (Integration)

In Reference to the Organizational Chart,


Organizing Involves:
VERTICAL STRUCTURE
Coordination from Top to Bottom
HORIZONTAL STRUCTURE
Departmentalization (Who works together?)

Work Specialization
Degree to which tasks are subdivided
into individual jobs
A highly specialized job is narrow in
scope
Increases efficiency up to a point
With extreme specialization, workers
tend to become bored and alienated

Chain of Command
The line of authority, shown in the
organization chart, that links all persons
and shows who reports to whom.
CEO

VP Marketing

VP Production

VP Finance

Authority

Managers have authority because of the positions


they hold (not who they are)
To be effective, it must be accepted by
subordinates.

Responsibility

Duty to perform the task an employee has been


assigned
Authority should be commensurate with
responsibility.

Delegation
Process to transfer authority and
responsibility to positions below
Delegation does not reduce responsibility
Benefits both the organization and the
individual employee

Common Practice is to:

CENTRALIZE (authority at top)


Accounting
Finance
Human Resources Management
Information Systems

DECENTRALIZE (much delegation)


Production
Marketing

Span of Management
Number of employees reporting to a
supervisor
Tradition has recommended a span of
management of four to seven
subordinates
What is best depends on the situation

Departmentalization
Basis for grouping job positions into departments and departments
into the total organization.
Internal Operations Oriented
Functional
Network (Virtual)

Output Oriented
Divisional

Product
Geographic
Customer

Team (Cluster)

Combinations
Hybrid (different types at different places in
an org.)
Matrix (different types at simultaneous at
the same places in an org.)

Functional Approach
Departments based on similar activities, skills
and resource use.
Advantages:
Disadvantages:
Poor communication
Efficient use of
among departments
resources
Slow response to
Economies of Scale
external changes
In-depth skill
Loyalty more to function
specialization
than customer or the
whole organization

Divisional Approach
Departments are grouped together based
on organizational outputs (e.g., product,
geography, customer)
Functions (e.g., marketing) are split
among the divisions
Its advantages and disadvantages tend to
be the opposite of those of the functional
approach

Divisions
Advantages:

Quicker changes in
an unstable
environment
More in touch with
customers

Disadvantages:

Duplication
Competition for
resources among
divisions
More managers
needed

Less professional
specialization

Matrix Approach
Functional and divisional chains of
command simultaneously
Violates the unity of command concept.

Matrix Structure - Why?


To get the advantages of both Functional
and Divisional Structures
Sophisticated technology, fast-changing
environment
Diverse products and geographical areas

Disadvantages of Matrix
Many meetings to coordinate activities
High conflict between two sides of matrix
Need for extensive human relations
training

Team Approach
Cross-functional teams (Clusters) consist
of employees from various functional
departments
Teams typically have more decision
making power than previously held by
workers at their levels.

Team Approach

Advantages
Quicker response time
Better morale
Reduced administrative overhead

Disadvantages
Conflict
Time and resources spent on meetings

Network (Virtual) Approach


Organization divides major functions
among separate companies brokered by
a small headquarters organization
Somewhat like a functional organization.

Network Approach
Advantages

Increases competitiveness, especially of


small firms
Flexibility
Reduced Costs

Disadvantages
No hands-on control
Loyalty weakened.

Mechanistic vs. Organic


Organizations

Vertical vs. Horizontal Structural Dominance


Rigid vs. Flexible
Specialized Jobs vs. Unspecialized
Boss Control vs. Self-Control
Centralized Decisions vs. Decentralized
Bureaucratic vs. Non-bureaucratic

Departmentalization Types
(From most Mechanistic to most Organic)
Functional
Functional with integrators, crossfunctional committees, etc.
Matrix
Divisional
Team

When the Mechanistic (Vertical)


Approach is most Appropriate:
External Environment is: Stable
Growth and Innovation Goals are:
Few or Nonexistent (Internal Stability)
The Organizations Size is: Large
The Technology is: Mass Production (or
involving low-level skills)

When the OrganicApproach is


most Appropriate:
External Environment is: Unstable
Growth and Innovation Goals are: Numerous
Technology is:
Small Batch
Continuous Process
Flexible Manufacturing (Computer Assisted)
Service, especially professional service jobs.

Service Technology
Tends to be more Organic (Horizontal)
than manufacturing
Employees have direct contact with
customers
Output of the firm is intangible
Production and consumption are
simultaneous

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