chapter 8 1 designing organizational structures prepared by norm althouse university of calgary...

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Designing Organizational StructuresDesigning Organizational Structures

Prepared byNorm Althouse

University of Calgary

Prepared byNorm Althouse

University of Calgary

Copyright © 2011 by Nelson Education Ltd.

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Learning Outcomes

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1 Identify the five structural building blocks that managers use to design organizations.

2 Examine the tools companies use to establish relationships within their organizations.

3 Show how the degree of centralization/decentralization can be altered to make an organization more successful.

4 Describe the differences between a mechanistic and organic organization.

5 Discuss the contemporary organizational structures companies are using.

6 Summarize why companies are using team-based organizational structures.

7 Explain how the informal organization affects the performance of the company.

8 List some of the trends that are influencing the way businesses organize.


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Organizational Structures

3Copyright © 2011 by Nelson Education Ltd.

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Division Division of of LabourLabour

Division Division of of LabourLabour DelegationDelegationDelegationDelegationDepartmental-Departmental-

izationization

Departmental-Departmental-izationization


Span of ControlSpan of ControlSpan of ControlSpan of ControlCentralizationCentralization

ofofDecision MakingDecision Making

CentralizationCentralizationofof

Decision MakingDecision Making

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Structural Building Blocks

Copyright © 2008 by Nelson, a division of Thomson Canada Limited 5

1. Division of Labour– specialization of tasks

2. Departmentalization– creating an organization chart

3. Delegation (formerly: Managerial Hierarchy)– chain of command– delegation of authority

4. Span of Control– narrow span– wide span

5. Centralization of Decision Making– degree of centralization vs. decentralization

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Five Types of Departmentalization

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FunctionalFunctional Based on the primary functions performed

Based on the primary functions performed

ProductProduct Based on the goods/servicesproduced or sold

Based on the goods/servicesproduced or sold

ProcessProcess Based on the productionprocess used

Based on the productionprocess used

CustomerCustomer Based on the primary type ofcustomer served

Based on the primary type ofcustomer served

GeographicGeographic Based on the geographicsegmentation of organizational units

Based on the geographicsegmentation of organizational units


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Functional Organization

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Product (or Service) Organization

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Organization by Process

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Organization by Customer

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Geographic Organization

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Organizational Chart Example


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Managerial Hierarchy

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Middle Management

SupervisoryManagement

Top Management PowerPower

EmployeesEmployees


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Chain of Command

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The line of authority thatextends from one level

of an organization’shierarchy to the next,from top to bottom,

and makes clear whoreports to whom.

The line of authority thatextends from one level

of an organization’shierarchy to the next,from top to bottom,

and makes clear whoreports to whom.

Chain of CommandChain of Command


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Span of Control

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The number of employees a manager directly

supervises; also calledspan of management.

The number of employees a manager directly

supervises; also calledspan of management.

Span of Control(span of management)

Span of Control(span of management)


Narrow Span:few subordinates

Narrow Span:few subordinates

Wide Span:many subordinates

Wide Span:many subordinates

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Nature of the taskNature of the task

Location of the workersLocation of the workers

Ability of the managerto delegate responsibility

Ability of the managerto delegate responsibility

Amount of interaction and feedbackbetween workers and manager

Amount of interaction and feedbackbetween workers and manager

Level of skill and motivationof the workers

Level of skill and motivationof the workers

Factors DeterminingOptimal Span of Control

Factors DeterminingOptimal Span of Control

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Degree of Centralization

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The degree to which formal authority is

concentrated in onearea or level of an

organization.

The degree to which formal authority is

concentrated in onearea or level of an

organization.

CentralizationCentralization

The process of pushingdecision-making

authority down theorganizational hierarchy.

The process of pushingdecision-making

authority down theorganizational hierarchy.

DecentralizationDecentralization


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Mechanistic Versus Organic Organization


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Flat Versus Tall Organizational Structures


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Common Organizational Structures

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An organizational structure with direct, clear lines of authority and communication flowing

from the top managers downward.

An organizational structure with direct, clear lines of authority and communication flowing

from the top managers downward.

Line OrganizationLine Organization

An organizational structure that includes both line and

staff positions.

An organizational structure that includes both line and

staff positions.

Line-and-Staff Organization

Line-and-Staff Organization


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Line versus Staff Positions

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All positions in the organization directly concerned with producing goods and services

and that are directly connected from top to bottom

All positions in the organization directly concerned with producing goods and services

and that are directly connected from top to bottom

Line PositionLine Position

Positions held by individuals who provide the administrative and support services that

the line employees need to achieve the firm’s goals

Positions held by individuals who provide the administrative and support services that

the line employees need to achieve the firm’s goals

Staff PositionStaff Position


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Common Organizational Structures

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An organizational structure in which authority and responsibility are held by a

group rather than an individual.

An organizational structure in which authority and responsibility are held by a

group rather than an individual.Committee StructureCommittee Structure

An organizational structure that combines functional and product departmentalization by bringing together people from different

functional areas to work on a special project.

An organizational structure that combines functional and product departmentalization by bringing together people from different

functional areas to work on a special project.Matrix OrganizationMatrix Organization


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Teams

Work Groups:Groups that share resources and coordinate efforts to help members better perform their individual jobs.

Work Teams: Similar to work groups, but also requires the pooling of knowledge, skills, abilities, and resources to achieve a common goal.


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Matrix Structure Advantages

– teamwork– efficient use of resources– flexibility– ability to balance

conflicting objectives– higher performance– opportunities for personal

and professional growth

Disadvantages– power struggles– confusion among team

members– lack of cohesiveness

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Group Decision Making


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Self-Managed Work Teams

Self-Managed Work Teams

Manage themselves without formal supervision, take responsibility forgoal setting, planning work activities

Manage themselves without formal supervision, take responsibility forgoal setting, planning work activities

Cross-Functional TeamsCross-Functional Teams Made up of employees from samehierarchical level, but different functional areas

Made up of employees from samehierarchical level, but different functional areas

Problem-Solving TeamsProblem-Solving Teams Generate ideas and alternatives andmay recommend a course of action

Generate ideas and alternatives andmay recommend a course of action

Types of Teams


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Functions of the Informal Organization

Source of friendships and social contact

Helps employees feel better informed and connected with what is going on

Provides informal status and recognition

Aids the socialization of new employees


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Trends in Organizational Structures

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Virtual TeamsVirtual Teams


OutsourcingOutsourcing

Structuring for Global MergersStructuring for Global Mergers

Virtual CorporationVirtual Corporation

Re-engineering Organizational StructureRe-engineering Organizational Structure

chapter 8 1 designing organizational structures prepared by norm althouse university of calgary...

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