Organizational Structure

and Design
Organizational Structure
The formal arrangement of jobs within an organization
Organizational Design
A process involving decisions about six key elements:
Work specialization
Departmentalization
Chain of command
Span of control
Centralization and decentralization
Formalization

Work Specialization
The degree to which tasks in the
organization are divided into separate jobs
with each step completed by a different
person


Functional
Grouping jobs by
functions performed
Product
Grouping jobs by
product line
Geographical
Grouping jobs on the
basis of territory or
geography

Process
Grouping jobs on the
basis of process or the
no. of process carried
on a product
Customer
Grouping jobs by type
of customer and
needs and customer
flow


Plant Manager
Manager,
Manufacturing
Manager,
Human
Resources
Manager,
Accounting
Manager,
Engineering
Manager,
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
Vice President
for Sales
Sales Director,
Central Region
Sales Director,
Southern Region
Sales Director,
Western Region
Sales 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
+ Allows specialization in particular products and
services
+ Managers can become experts in their industry
+ Closer to customers
Duplication of functions
Limited view of organizational goals
Source: Bombardier Annual Report.
CEO.
Truck
Division

Car
Division
Bus
division
+ More efficient flow of work activities
Can only be used with certain types of
products
t
Plant
Manager
Spinning
Dyeing
Weaving
Finishing

+ Customers needs and problems can be met by
specialists
Duplication of functions
Limited view of organizational goals
Director
of Sales
Manager,
Wholesale Accounts
Manager,
Retail Accounts
Manager,
Government Accounts
Chain of Command
The 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

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

Span of Control
The number of employees who can be effectively and
efficiently supervised by a manager
Width of span is affected by:
Skills and abilities of the manager and the employees
Characteristics of the work being done
Similarity of tasks
Complexity of tasks
Physical proximity of subordinates
Standardization of tasks
Sophistication of the organizations information system
Strength of the organizations culture
Preferred style of the manager


Assuming Span of 4
Span of 4:
Employees:
Managers (level 16)
= 4096
= 1365
Span of 8:
Employees:
Managers (level 14)
Assuming Span of 8
1
2
3
4
5
6
7
(Highest)
(Lowest)
Members at Each Level
1
4
16
64
256
1024
4096
1
8
64
512
4096
O
r
g
a
n
i
z
a
t
i
o
n
a
l

L
e
v
e
l

= 4096
= 585
Centralization
The degree to which decision making is
concentrated at a single point in the organization
Organizations in which top managers make all the
decisions and lower-level employees simply carry out
those orders
Decentralization
The degree to which lower-level employees provide
input or actually make decisions
Employee Empowerment
Increasing the decision-making discretion of
employees

More Centralization
Environment is stable
Lower-level managers are not as capable or
experienced at making decisions as upper-level
managers
Lower-level managers do not want to have a say in
decisions
Decisions are significant
Organization is facing a crisis or the risk of company
failure
Company is large

More Decentralization
Environment is complex, uncertain
Lower-level managers are capable and experienced at
making decisions
Lower-level managers want a voice in decisions
Decisions are relatively minor
Corporate culture is open to allowing managers to
have a say in what happens
Company is geographically dispersed
Effective implementation of company strategies
depends on managers having involvement and
flexibility to make decisions
Formalization
The degree to which jobs within the organization
are standardized and the extent to which employee
behavior is guided by rules and procedures
Highly formalized jobs offer little discretion over what is to be
done
Low formalization means fewer constraints on how
employees do their work
Mechanistic Organization
A rigid and tightly
controlled structure
High specialization
Rigid
departmentalization
Narrow spans of control
High formalization
Limited information
network (mostly
downward
communication)
Low decision
participation by lower-
level employees
Organic Organization
Highly flexible and
adaptable structure
Non standardized jobs
Fluid team-based
structure
Little direct supervision
Minimal formal rules
Open communication
network
Empowered employees

Mechanistic
High Specialization
Rigid Departmentalization
Clear Chain of Command
Narrow Spans of Control
Centralization
High Formalization
Organic
Cross-Functional Teams
Cross-Hierarchical Teams
Free Flow of Information
Wide Spans of Control
Decentralization
Low Formalization
Organizational Designs
Traditional
-Simple
Structure
-Functional
-Divisional
Contemporary
-Team
-Matrix-Project
-Boundary less
-Learning
Organization
Traditional Designs
Simple Structure
Low departmentalization, wide spans of control, centralized
authority, little formalization
Functional Structure
Departmentalization by function
Operations, finance, human resources, and product research and
development
Divisional Structure
Composed of separate business units or divisions with
limited autonomy under the coordination and control of the
parent corporation

Contemporary Organizational Designs
Team Structures
The entire organization is made up of work groups or
self-managed teams of empowered employees
Matrix Structures
Specialists for different functional departments are
assigned to work on projects led by project managers
Matrix participants have two managers
Project Structures
Employees work continuously on projects, moving on
to another project as each project is completed

Design
Engineering
Manufacturing
Contract
Administration
Purchasing Accounting
Human
Resources (HR)
Design
Group
Alpha
Project
Manufacturing
Group
Contract
Group
Purchasing
Group
Accounting
Group
HR
Group
Design
Group
Beta
Project
Manufacturing
Group
Contract
Group
Purchasing
Group
Accounting
Group
HR
Group
Design
Group
Gamma
Project
Manufacturing
Group
Contract
Group
Purchasing
Group
Accounting
Group
HR
Group
Design
Group
Omega
Project
Manufacturing
Group
Contract
Group
Purchasing
Group
Accounting
Group
HR
Group
Contemporary Organizational Designs
(contd)
Boundary less Organization
A flexible and an unstructured organizational design
that is intended to break down external barriers
between the organization and its customers and
suppliers
Removes internal (horizontal) boundaries
Eliminates external boundaries

Learning Organization
An organization that has developed the capacity to
continuously learn, adapt, and change through the
practice of knowledge management by employees
Characteristics of a learning organization:
An open team-based organization design that empowers
employees
Extensive and open information sharing
Leadership that provides a shared vision of the
organizations future; support; and encouragement
A strong culture of shared values, trust, openness, and a
sense of community

Linking of two or more organizational
members and/or work units so that they
function well together
Two main types of co-ordination are:
Vertical coordination
Horizontal Coordination
Vertical Coordination:
Linking work units (individual, team,
departments) separated by hierarchical level
Horizontal Coordination:
Linking work units (individual, team,
departments) at the same hierarchical level
Coordination by chain of command
Coordination by leadership
Coordination by committees
Staff meetings
Special Coordinators
Self- coordination

Differences in attitudes and working styles,
arising naturally among members of different
departments, that can complicate
coordination of an organization's activities.
The term lawrence and lorsch use in place of
coordination, to designate the degree to
which members of various departments work
together in a unified manner.