Organizational Structure and Design

Chapter 11. Human Resource Management and Selection

Defining Organizational StructureOrganizational StructureThe formal arrangement of jobs within an organizationOrganizational DesignA process involving decisions about six key elements:Work specializationDepartmentalizationChain of commandSpan of controlCentralization and decentralizationFormalization

Chapter 11. Human Resource Management and Selection

Purposes of OrganizingDivides work to be done into specific jobs and departmentsAssigns tasks and responsibilities associated with individual jobsCoordinates diverse organizational tasksEstablishes relationships among individuals, groups, and departmentsEstablishes formal lines of authorityAllocates organizational resources Cluster jobs in to units

Chapter 11. Human Resource Management and Selection

Designing Organizational StructureWork SpecializationThe degree to which tasks in the organization are divided into separate jobs with each step completed by a different person

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Departmentalization by TypeFunctional Grouping jobs by functions performedProductGrouping jobs by product lineGeographicalGrouping jobs on the basis of territory or geography

Process Grouping jobs on the basis of product or customer flowCustomerGrouping jobs by type of customer and needs

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Functional DepartmentalizationPlant ManagerManager,ManufacturingManager,Human ResourcesManager,AccountingManager,EngineeringManager,Purchasing+ Efficiencies from putting together similar specialties and people with common skills, knowledge, and orientations+ Coordination within functional area+ In-depth specialization Poor communication across functional areas Limited view of organizational goals

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Geographical DepartmentalizationVice Presidentfor SalesSales Director,Central RegionSales Director,Southern RegionSales Director,Western RegionSales Director,Eastern Region+ More effective and efficient handling of specific regional issues that arise+ Serve needs of unique geographic markets better Duplication of functions Can feel isolated from other organizational areas

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Product Departmentalization+Allows specialization in particular products and services+Managers can become experts in their industry+Closer to customersDuplication of functionsLimited view of organizational goalsSource: Bombardier Annual Report.CEO.Truck DivisionCar DivisionBus Division

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Process Departmentalization+More efficient flow of work activitiesCan only be used with certain types of productsPlantManagerSpinningDyeingWeavingFininshing

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Customer Departmentalization+ Customers needs and problems can be met by specialists Duplication of functions Limited view of organizational goalsDirectorof SalesManager,Wholesale AccountsManager,Retail AccountsManager,Government Accounts

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Organizational Structure (contd)Chain of CommandThe continuous line of authority that extends from upper levels of an organization to the lowest levels of the organization and clarifies who reports to whom

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Organizational Structure (contd)AuthorityThe rights inherent in a managerial position to tell people what to do and to expect them to do itResponsibilityThe obligation or expectation to perform. Responsibility brings with it accountability (the need to report and justify work to managers superiors)Unity of CommandThe concept that a person should have one boss and should report only to that personDelegationThe assignment of authority to another person to carry out specific duties

Chapter 11. Human Resource Management and Selection

Organizational Structure (contd)Line and Staff AuthorityLine managers are responsible for the essential activities of the organization, including production and sales. Line managers have the authority to issue orders to those in the chain of commandThe president, the production manager, and the sales manager are examples of line managersStaff managers have advisory authority, and cannot issue orders to those in the chain of command (except those in their own department)

Chapter 11. Human Resource Management and Selection

Organizational Structure (contd)Span of ControlThe number of employees who can be effectively and efficiently supervised by a managerWidth of span is affected by:Skills and abilities of the manager and the employeesCharacteristics of the work being doneSimilarity of tasksComplexity of tasksPhysical proximity of subordinatesStandardization of tasksSophistication of the organizations information systemStrength of the organizations culturePreferred style of the manager

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Organizational Structure (contd)CentralizationThe degree to which decision making is concentrated at a single point in the organizationOrganizations in which top managers make all the decisions and lower-level employees simply carry out those ordersDecentralizationThe degree to which lower-level employees provide input or actually make decisionsEmployee EmpowermentIncreasing the decision-making discretion of employees

Chapter 11. Human Resource Management and Selection

Organizational Structure (contd)FormalizationThe degree to which jobs within the organization are standardized and the extent to which employee behavior is guided by rules and proceduresHighly formalized jobs offer little discretion over what is to be doneLow formalization means fewer constraints on how employees do their work

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Organizational Design DecisionsMechanistic OrganizationA rigid and tightly controlled structureHigh specializationRigid departmentalizationNarrow spans of controlHigh formalizationLimited information network (mostly downward communication)Low decision participation by lower-level employeesOrganic OrganizationHighly flexible and adaptable structureNonstandardized jobsFluid team-based structureLittle direct supervisionMinimal formal rulesOpen communication networkEmpowered employees

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Mechanistic Versus Organic OrganizationMechanistic High Specialization Rigid Departmentalization Clear Chain of Command Narrow Spans of Control Centralization High FormalizationOrganic Cross-Functional Teams Cross-Hierarchical Teams Free Flow of Information Wide Spans of Control Decentralization Low Formalization

Chapter 11. Human Resource Management and Selection

Structural Contingency Factors (contd)Strategy and StructureAchievement of strategic goals is facilitated by changes in organizational structure that accommodate and support changeSize and StructureAs an organization grows larger, its structure tends to change from organic to mechanistic with increased specialization, departmentalization, centralization, and rules and regulations

Chapter 11. Human Resource Management and Selection

Structural Contingency Factors (contd)Technology and StructureOrganizations adapt their structures to their technologyRoutine technology = mechanistic organizationsNonroutine technology = organic organizations

Chapter 11. Human Resource Management and Selection

Structural Contingency Factors (contd)Environmental Uncertainty and StructureMechanistic organizational structures tend to be most effective in stable and simple environmentsThe flexibility of organic organizational structures is better suited for dynamic and complex environments

Chapter 11. Human Resource Management and Selection

Organizational Designs

Chapter 11. Human Resource Management and Selection

Common Organizational DesignsTraditional DesignsSimple StructureLow departmentalization, wide spans of control, centralized authority, little formalizationFunctional StructureDepartmentalization by functionOperations, finance, human resources, and product research and developmentDivisional StructureComposed of separate business units or divisions with limited autonomy under the coordination and control of the parent corporation

Chapter 11. Human Resource Management and Selection

Organizational Designs (contd)Contemporary Organizational DesignsTeam StructuresThe entire organization is made up of work groups or self-managed teams of empowered employeesMatrix StructuresSpecialists for different functional departments are assigned to work on projects led by project managersMatrix participants have two managersProject StructuresEmployees work continuously on projects, moving on to another project as each project is completed

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A Matrix Organization in an Aerospace Firm

Chapter 11. Human Resource Management and Selection

Organizational Designs (contd)Contemporary Organizational Designs (contd)Boundaryless OrganizationA flexible and an unstructured organizational design that is intended to break down external barriers between the organization and its customers and suppliersRemoves internal (horizontal and vertical) boundariesEliminates external boundaries

Chapter 11. Human Resource Management and Selection

Organizational Designs (contd)Learning OrganizationAn organization that has developed the capacity to continuously learn, adapt, and change through the practice of knowledge management by employeesCharacteristics of a learning organization:An open team-based organization design that empowers employeesExtensive and open information sharingLeadership that provides a shared vision of the organizations future; support; and encouragementA strong culture of shared values, trust, openness, and a sense of community

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Co-ordinationLinking of two or more organizational members and/or work units so that they function well togetherTwo main types of co-ordination are:Vertical coordinationHorizontal Coordination

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Vertical Coordination: Linking work units (individual, team, departments) separated by hierarchical levelHorizontal Coordination: Linking work units (individual, team, departments) at the same hierarchical level

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Techniques for effective coordinationCoordination by chain of commandCoordination by leadershipCoordination by committeesStaff meetingsSpecial CoordinatorsSelf- coordination

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DifferentiationDifferences in attitudes and working styles, arising naturally among members of different departments, that can complicate coordination of an organization's activities.

Chapter 11. Human Resource Management and Selection

IntegrationThe degree to which members of various departments work together in a unified manner.

Chapter 11. Human Resource Management and Selection

ABPowerThe ability to exert influence; that is, the ability to change the attitudes or behavior of individuals or groups . A capacity that A has to influence the behavior of B so that B acts in accordance with As wishes.DependencyBs relationship to A when A possesses something that B requires.

Chapter 11. Human Resource Management and Selection

Coercive Power A power base dependent on fear.Reward Power Compliance achieved based on the ability to distribute rewards that others view as valuableLegitimate PowerThe power a person receives as a result of his or her position in the formal hierarchy of an organization.

Chapter 11. Human Resource Management and Selection

Expert PowerInfluence based on special skills or knowledge.Referent PowerInfluence based on possession by an individual of desirable resources or personal traits.

Chapter 11. Human Resource Management and Selection

Dependency: The Key To PowerThe General Dependency PostulateThe greater Bs dependency on A, the greater the power A has over B.Possession/control of scarce organizational resources that others need makes a manager powerful.Access to optional resources (e.g., multiple suppliers) reduces the resource holders power.What Creates DependencyImportance of the resource to the organizationScarcity of the resourceNonsubstitutability of the resource

Chapter 11. Human Resource Management and Selection

Authority (mainly) derives from roleAuthority is the right to make an ultimate decision, and in an organisation it refers to the right to make decisions which are binding on others (Obholzer, 1994).

Chapter 11. Human Resource Management and Selection

Line & Staff AuthorityLine authority is the relationship in which a superior exercises direct supervision over a subordinate Staff relationship is advisory

Chapter 11. Human Resource Management and Selection

Difference between Authority & Power

Power

AuthorityIt is a ability to command & influence behavior of anotherIt rests with persons, in their individual capacitiesIt doesn't follow any hierarchyPower, being personalized attribute, can not be delegatedEmerges because of personal factorsMay exist between any 2 persons

It is institutional right to commandIt lies in managerial position

It is hierarchical in natureIt can be delegatedInstitutional & originates from structural relationshipSuperior-subordinate relationship

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DelegationTransfering formal authority from one position to another is known as delegation

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Assign TasksTransfer task responsibilityCreation of responsibilityAcceptance ConditionAcceptReject

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Blocks to effective delegationFactors in delegator:Love for authorityMaintenance of tight controlFear of subordinates growthFear of exposureAttitude towards subordinatesPersonality of superior

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Guides for Overcoming Weak Delegation Define assignments and delegate authority in light of results expected Select the person in light of the job to be done Maintain open lines of communication Establish proper controls Reward effective delegation and successful assumption of authority

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Definition of StaffingStaffing is filling, and keeping filled, positions in the organization structure

Chapter 11. Human Resource Management and Selection

SITUATIONAL FACTORS AFFECTING STAFFING External factors include the level of education, the prevailing attitudes in society (such as the attitude toward work), the many laws and regulations that directly affect staffing, the economic conditions, and the supply of and demand for managers outside the enterprise

Chapter 11. Human Resource Management and Selection

SITUATIONAL FACTORS AFFECTING STAFFING cont.Internal factors that affect staffing include, for example, organizational goals, tasks, technology, organization structure, the kinds of people employed by the enterprise, the demand for and the supply of managers within the enterprise, the reward system, and various kinds of policies

Chapter 11. Human Resource Management and Selection

Chapter 11. Human Resource Management and Selection

****************************** introduces the key components of an organizations human resources management process.