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Organization Design and Structure Organization designA process in which managers develop or change their organizations structure

Work specializationA component of organization structure that involves having each discrete step of a job done by a different individual rather than having one individual do the whole job

Key Concepts OrganizingDeciding how to best group organizational activities and resources

Organization StructureSet of building blocks that can be used to configure an organization

Organizational Structure Chain of commandThe management principle that no person should report to more than one boss

Span of controlThe number of subordinates a manager can direct efficiently and effectively

Organizational Structure AuthorityThe rights inherent in a managerial position to give orders and expect them to be obeyed

PowerAn individuals capacity to influence decisions

ResponsibilityAn obligation to perform assigned activities

Types of Organizational Authority Line authorityThe position authority (given and defined by the organization) that entitles a manager to direct the work of operative employees

Staff authorityPositions that have some authority (e.g., organization policy enforcement) but that are created to support, assist, and advise the holders of line authority

Chain of Command

Line Versus Staff Authority

Centralization And Decentralization CentralizationA function of how much decision-making authority is pushed down to lower levels in an organization; the more centralized an organization, the higher the level at which decisions are made

DecentralizationThe pushing down of decision-making authority to the lowest levels of an organization

6 Basic Building Blocks1. 2. 3. 4. 5. 6. Designing Jobs (Job Specialization) Grouping Jobs (Departmentalization) Establishing Reporting Relationships Distributing Authority Coordinating Activities Differentiating Between Positions

1. Job Design The determination of an individuals work-related responsibilities.

Job Specialization Degree to which the overall task of the organization is broken down into smaller components Benefits1. 2. 3. 4. Workers can become proficient at a task Transfer time between tasks decrease Specialized equipment can be developed Employee replacement becomes easier

Limitations1. Employee boredom and dissatisfaction 2. Anticipated benefits do not always occur

2. Grouping Jobs: Departmentalization

The process of grouping jobs according to some logical arrangement. Rationale for DepartmentalizationOrganizational growth exceeds the owner-managers capacity to personally supervise all of the organization. Additional managers are employed and assigned specific employees to supervise.

Departmentalization 4 Basic Types:Functional Product Customer Location

Functional Departmentalization

PresidentComputers Manufacturing Finance Marketing

Functional Departmentalization FormAdvantagesDepartment can be staffed by experts Supervision is facilitated Coordination within department is easier

DisadvantagesDecision making becomes slow and bureaucratic Lose sight of organizational goals/issues Accountability and performance are difficult to monitor

Product Departmentalization

PresidentComputers Manufacturing Printers Finance Software Marketing

Product DepartmentalizationAdvantagesActivities with one product can be integrated Speed and effective-ness of decision making Performance of these individual products can be assessed

DisadvantagesFocus on product at the exclusion of the rest of the organization Administrative costs may increase

Customer Departmentalization Form

PresidentComputers ManufacturingDallas Phoenix


MarketingIndustrial Sales Consumer Sales

Customer Departmentalization

AdvantageSkilled specialists can deal with unique customer needs

DisadvantageLarge administrative staff needed to integrate activities of various departments

Location Departmentalization Form









St. Louis

Location Departmentalization Advantage The organization can respond to unique customer and regional/ environmental characteristics Disadvantage Large administrative staff may be needed

3. Establishing Reporting Relationships

Chain of Command: a clear and distinct line ofauthority among the positions in an organization.1. Unity of Command

Each person within an organization must have a clear reporting relationship to one and only one boss.2. Scalar Principle

A clear and unbroken line of authority must extend from the bottom to the top of the organization.

Establishing Reporting Relationships (cont.) Span of Management (Span of Control)The number of people who report to a particular manager. Narrow versus wide

Establishing Reporting Relationships:Tall versus Flat Organizations

Tall Organizations

Flat Organizations

More expensive Communication can be difficult because of the number of channels through which it must pass

higher levels of employee morale and productivity More administrative responsibility for managers

Tall Versus Flat Organizations

Tall Organization


Flat Organization


Factors Influencing the Span of Management

Competence of the supervisor or subordinates Physical dispersion of subordinates Extent of non supervisory work in managers job Degree of required interaction Extent of standardized procedures Similarity of tasks being supervised Frequency of new problems Preferences of supervisors and subordinates

4. Distributing Authority AuthorityPower that has been legitimized by the organization.

DelegationThe process by which managers assign a portion of their total workload to others.

Reasons for DelegationTo enable the manager to get more work done by utilizing the skills and talents of subordinates. To foster the development of subordinates by having them participate in decision making and problem solving that allows them to learn about overall operations and improve their managerial skills.

Parts of the Delegation ProcessPart 1: Assigning responsibility Part 2: Granting authority Part 3: Creating accountability







DelegationProblems in the Delegation Process SuperiorReluctance Disorganization Subordinates success threatens superiors advancement Trust

SubordinateReluctance No rewards for the acceptance of delegated tasks Risk avoidance

5. Coordinating Activities CoordinationThe process of linking the activities of the various departments of the organization.

The Need for CoordinationDepartments and work groups are interdependent; the greater the interdependence, the greater the need for coordination.

Structural Coordination Techniques1. The Managerial Hierarchy 2. Rules and Procedures 3. Task Forces 4. Integrating Departments

6. Differentiating Between Positions

Line PositionsPositions in the direct chain of command that are responsible for the achievement of an organizations goals

Staff PositionsIntended to provide expertise, advice, and support to line positions

Administrative IntensityThe degree to which managerial positions are concentrated in staff positions

Differentiating Between PositionsLine and Staff Structure at Toys R UsCorporate StaffFinance and Administration Real Estate MIS Architecture and Construction Treasurer Controller Attorney



President India

Senior Vice President Marketing

Senior Vice President Store Merchandising

Vice President Planning

Vice President Physical Distribution

Vice President Divisional Merchandising

Vice President Divisional Merchandising

Organization Design Applications

Organization Design Applications Simple structureAn organization that is low in specialization and formalization but high in centralization

Functional structureAn organization in which similar and related occupational specialties are grouped together

SBU Type StructureAn organization made up of self-contained units

Functional Structure

Functional Organizational Structures: StrategicAdvantages/Disadvantages

Strategic Advantages Permits centralized control of strategic results Very well-suited for structuring a single business Promotes in-depth functional expertise Well suited to developing a functionalbased distinctive competence Enhances operating efficiency where tasks are routine and repetitive

Strategic Disadvantages Poses problems of functional coordination Can lead to inter functional rivalry, conflict, and empire-building May promote overspecialization and narrow management viewpoints Hinders development of managers with cross-functional experience because the ladder of advancement is up the ranks within the same functional area

SBU Type of Organization StructureChief Executive Officer Corporate Staff Services/FunctionsR&D Finance and Corporate Accounting Marketing Services Planning Personnel Legal Affairs Public Relations and Communications

Group Vice President SBU I

Group Vice President SBU II

Group Vice President SBU III

Business Units/Divisions

Business Units/Divisions

Business Units/Divisions

SBU Type Organization Structure: StrategicAdvantages/Disadvantages

Strategic Advantages Provides a strategically relevant way to organize large numbers of different business units Improves coordination between the role and authority of the business with similar strategies, markets, and growth opportunities Helps allocate corporate resources to areas with greatest growth opportunities Facilitates the coordination of related activities within an SBU, thus helping to capture the benefits of strategic fits in the SBU.

Strategic Disadvantages It is easy for the definition and grouping of businesses into SBUs to be so arbitrary that the SBU serves no other purpose than administrative convenience. If the criteria for defining SBUs are rationalizations and have little to do with the nitty-gritty of strategy coordination, then the groupings lose real strategic significance. Unless the SBU head is strong willed, very little strategy coordination is likely to occur across business units in the SBU.

Other Organizational Structures Matrix structureAn organization in which specialists from functional departments are assigned to work on one or more projects led by a project manager

Team-based structureAn organization that consists entirely of work groups or teams

Boundaryless organizationAn organization that is not defined or limited by boundaries or categories imposed by traditional structures

Sample Matrix Structure

Matrix Organization Structures: StrategicAdvantages/Disadvantages

Strategic Advantages Gives formal attention to each dimension of strategic priority Facilitates capture of functionality based strategic fits in diversified companies Promotes making trade-off decisions on the basis of whats best for the organization as a whole Encourages cooperation, consensus-building, conflict resolution, and coordination of related activities

Strategic Disadvantages Very complex to manage Hard to maintain balance between the two lines of authority So much shared authority can result in a transaction logjam and disproportionate amounts of time being spent on communications