Chapter 15: Foundations of Organization Structure

 

What are you responsible to learn?

 

§         Identify the six key elements that define an organization’s structure

§         Explain the characteristics of a bureaucracy

§         Describe a matrix organization

§         Explain the characteristics of a “virtual” organization

§         Summarize why managers want to create boundaryless organizations

§         Contrast mechanistic and organic structural models

§         List the factors that favor different organizational structures

§         Explain the behavioral implications of different organizational designs

 

What is organizational structure?

 

It defines how job tasks are formally divided, grouped, and coordinated.

 

Specifically, there are six key elements that managers need to address when they design an organizational structure:

 

·        Work specialization - the degree to which tasks in the organization are subdivided into separate jobs.  Division of labor and the early auto assembly plants in the US are examples of this.

 

·        Departmentalization - the basis by which jobs are grouped together.  The most common ways of doing this is by function (e.g., manufacturing, marketing) type of product, geography or territory (e.g. east coast office, west coast office)

 

·        Chain of command - the unbroken line of authority that extends from the top of the organization to the lowest echelon and clarifies who reports to whom.

 

·        Span of control - the number of subordinates a manager can efficiently and effectively direct.

 

·        Centralization/Decentralization - the degree to which decision making is concentrated at a single point in the organization.  Decentralization is when decision discretion is pushed down to lower-level employees.

 

·        Formalization - the degree to which jobs within the organization are standardized.

 

Common Organizational Designs

 

  • The Simple Structure
  • The Bureaucracy

 

 

 

  • The Matrix Structure

 

New Design Options

 

The Team Structure – the use of teams as the central device to coordinate work activities.

 

The Virtual Organization – a small, core organization that out sources major business functions

 

The Boundaryless Organization – an organization that seeks to eliminate the chain of command, have limitless spans of control, and replace departments with empowered teams.

 

Why Do Structures Differ?

 

Consider the mechanistic model and the organic model.  The mechanistic model is characterized by extensive departmentalization, high formalization, a limited information network, and centralization.  The organic model is flat, uses cross-hierarchical and cross-functional teams, has low formalization, possesses a comprehensive information network, and relies on participative decision making.

 

Strategy

    Innovation, cost minimization, and imitation.

Organization Size

    An organization’s size significantly affects its structure.

    The relationship isn’t linear, rather size affects structure at a decreasing rate.

Technology

    How an organization transfers its inputs into outputs

    Every organization has at least one technology for converting financial, human, and physical resources into products or services

    The common theme that differentiates technologies is their degree of routineness.

Environment

-         institutions or forces outside the organization that potentially affect the organization’s performance.

 

Organizational Designs and Employee Behavior

 

It is difficult to generalize what will work best for all employees. For example, work specialization may lead to higher productivity but can reduce job satisfaction.  Individual differences, experience, and the work task are key.

 

Summary and Implications for Managers

 

An organization’s internal structure contributes to explaining and predicting behavior.

 

An organization’s structure reduces ambiguity for employees.

 

The specific effect of structural designs on performance and satisfaction I moderated by employees’ individual preferences and cultural norms.

 

Managers should be reminded that structural variables like work specialization, span of control, formalization, and centralization are objective characteristics that can be measured by organizational researchers.  However, most employees do not perceive structure the same way as researchers do.  Instead, they observe in an “unscientific” fashion (see “implicit models of organizational structure” p. 447).