Lecture29 Org Structure2

Organizational Behavior
Lecture 29
Dr. Amna Yousaf
PhD (HRM)
University of Twente, the
Netherlands
Foundations of Organizational Structure
Lecture 29
Lecture Objectives
• What is Structure
• Matching Strategy with structure
• Forms of organizational structure
• Functional structure
• Divisional structure
• SBU Structure
• Matrix structure
• Conclusions and implications
© 2009 Prentice-Hall Inc. All rights reserved. 10-3

Why Do Structures Differ? – Strategy
Innovation Strategy
A strategy that emphasizes the introduction of major
new products and services.
Cost-minimization Strategy
A strategy that emphasizes tight cost controls,
avoidance of unnecessary innovation or marketing
expenses, and price cutting.
Imitation Strategy
A strategy that seeks to move into new products or
new markets only after their viability has already
been proven.
© 2007 Prentice Hall Inc. All rights
reserved.
The Strategy-Structure Relationship
Strategy Structural Option
Innovation Organic: A loose structure; low

specialization, low formalization,
decentralized
Cost minimization Mechanistic: Tight control; extensive work

specialization, high formalization, high
centralization
Imitation Mechanistic and organic: Mix of loose

with tight properties; tight controls over
current activities and looser controls for
new undertakings
EXHIBIT
© 2007 Prentice Hall Inc. All rights 16–9
reserved.
Why Do Structures Differ? – Size
Size
How the size of an organization affects its structure.
As an organization grows larger, it becomes more
mechanistic.
Characteristics of large organizations:

• More specialization
• More vertical levels
• More rules and regulations

reserved.
“Bureaucracy Is Dead”
• Why Bureaucracy Survives
• Characteristics of Bureaucracies – Large size prevails
– Specialization – Environmental turbulence
– Formalization can be largely managed
– Departmentalization – Standardization achieved
– Centralization through hiring people
who have undergone
– Narrow spans of control
extensive educational
– Adherence to a chain of command training
– Technology maintains
control

reserved.
Organizational Designs and Employee Behavior
Research Findings:
• Work specialization contributes to higher employee productivity, but
it reduces job satisfaction.
• The benefits of specialization have decreased rapidly as employees
seek more intrinsically rewarding jobs.
• The effect of span of control on employee performance is contingent
upon individual differences and abilities, task structures, and other
organizational factors.
• Participative decision making in decentralized organizations is
positively related to job satisfaction.

reserved.
Organization Structure: Its
Determinants and Outcomes
Associated
with
Implicit Models of Organizational

Structure
Perceptions that people hold
regarding structural variables
formed by observing things around
them in an unscientific fashion.
EXHIBIT
© 2007 Prentice Hall Inc. All rights 16–11
reserved.
Matching Structure with Strategy
Changes in Strategy Changes in Structure
1. Structure largely dictates how objectives and policies will be

established.
2. Structure dictates how resources will be allocated

reserved.
Chandler’s Strategy-Structure
Relationship
Organizational
New strategy New administrative
performance
Is formulated problems emerge
declines
Organizational
New organizational
performance
structure is established
improves

reserved.
Basic Forms of Structure
1. Functional Structure
• Groups tasks and activities by business function
• Simple and inexpensive
• Speicalization of business activities
• Minimizes need of elaborate control systems
• Accountability at the top
• Delegation of authority not encouraged

reserved.
Basic Forms of Structure
1. Functional Structure
• Low employee morale

• Inadequate planning of products and markets
• Leads to short term and narrow thinking
• Lack of integration and communication
• Centralized
R & D may strive to overdesign products while manufacturing may favor low frills
products that are mass produced.
Speicailization, economies of scale, standarized products such as manufacturing.
Sharp – consumer electronics firm as an examaple

reserved.
Thank You

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Organizational Behavior

© 2009 Prentice-Hall Inc. All rights reserved. 10-3

Innovation Organic: A loose structure; low

Cost minimization Mechanistic: Tight control; extensive work

Imitation Mechanistic and organic: Mix of loose

Characteristics of large organizations:

© 2007 Prentice Hall Inc. All rights

© 2007 Prentice Hall Inc. All rights

© 2007 Prentice Hall Inc. All rights

Implicit Models of Organizational

Changes in Strategy Changes in Structure

1. Structure largely dictates how objectives and policies will be

2. Structure dictates how resources will be allocated

© 2007 Prentice Hall Inc. All rights

© 2007 Prentice Hall Inc. All rights

© 2007 Prentice Hall Inc. All rights

• Low employee morale

© 2007 Prentice Hall Inc. All rights

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