Organizational Structure and Design

ORGANIZATIONAL STRUCTURE and DESIGN

ORGANIZATIONAL STRUCTURE

• ORGANIZING The Process of Creating an Organization’s Structure

• ORGANIZATIONAL STRUCTUREHow Job Tasks are Formally Divided, Grouped, and Coordinated

• ORGANIZATIONAL DESIGN A process that involves decisions about Six Key Elements;

ORGANIZATIONAL STRUCTURE

Organizational Design Six key Elements 1. Work Specialization

-Division of Labor -The Degree to which Tasks/ Activities in an organization are divided into Separate Jobs.

-A Job is broken down in Steps and each Step is done by a different person

1. Work Specialization

• Human Diseconomies from Specialization came to be known as BOREDOM, FATIGUE, STRESS, LOW PRODUCTIVITY, POOR QUALITY, INCREASED ABSENTEEISM and HIGH TURNOVER

ORGANIZATIONAL STRUCTURE

Organizational Design

2. DEPARTMENTALIZATION• It is the basis of grouping of Jobs• Ways of Classifying and Grouping Work

Activities

• 1. FUNCTIONAL: • Groups Jobs by Functions

Performed. • It is the most popular

way to GROUP ACTIVITIES

2. DEPARTMENTALIZATION- FUNCTIONAL:

• …Can be Used in ALL types of Organizations, Only the Functions Change to Reflect the Organization’s Activies

ORGANIZATIONAL STRUCTURE

Organizational Design

3. PRUDUCT

• Departmentalization:Groups Jobs by the Type of Product or Product Line.

• The major Advantage is the Increased ACOUNTABILITY for product PERFORMANCE

ORGANIZATIONAL STRUCTURE

4. PROCESS• Groups jobs on the basis of Product Flow• Each Dept. is Specializes in ONE SPECIFIC

PHASE of PRODUCTION• It can also be Used for processing

CUSTOMERS as well as products

5. GEOGRAPHICAL …• Groups jobs on the basis of Territory

or Geography6. CUSTOMER• Groups jobs on the basis of Common Customers• Microsoft- organized around Four Customer

Markets;Consumers, Businesses, Large Corporations, Software Developers

ORGANIZATIONAL STRUCTURE

Organizational Design

3. CHAIN OF COMMANDIt is the Continuous Line of Authority that extends from upper organizational level to lower levels and CLARIFIES Who Reports to Whom.

• Authority and Unity of Command• These concept do not have Substantial Relevance

today because of Advancements in Information Technologyand Trend toward Empowering Employees

ORGANIZATIONAL STRUCTURE

Organizational Design

4. SPAN OF CONTROL

Number of employees a manager can Efficiently an Effectively Manage

• The Wider or Larger the Span, The more Efficient the Organization

ORGANIZATIONAL STRUCTURE

Organizational Design

7. FORMALIZATON

the extent to which employee behavior is Guided by Rules and Procedures

ORGANIZATIONAL STRUCTURE

Organizational Design5. CENTERLIZATION

The degree to which decision making is concentrated at a single point in the organization

6. DECENTERLIZATION The degree to which Lower level employees provide input or actually make decision

ORGANIZATIONAL STRUCTURE

Organizational Design Two models of Organizational Design

1. MECHANISTIC This organization is a Rigid, and Tightly Controlled Structure and Characterized by High Specialization Rigid Departmentalization Narrow Span of Control High Formalization and Little Participation in decision making by the lower-level employees.

Two models of Organizational Design 1. MECHANISTIC

• This organization has Rigid, and Tightly Controlled Structure and Characterized by High Specialization Rigid Departmentalization Narrow Span of Control High Formalization and Little Participation in decision making by the lower-level employees

ORGANIZATIONAL STRUCTURE Organizational Design

2. ORGANIC ORGANIZATION

Highly Adaptive and Flexible• Cross-Functional Teams• Cross Hierarchical Teams• Free flow of Information• Wide span of control• Decentralization• Low Formalization

ORGANIZATIONAL STRUCTURE Organizational Design

• CONTIGENCY FACTORS What an appropriate structure of an organization should be depends on Four Contingency factors:

1. Organization’s Strategy 2. Size 3. Technology 4. Degree of Environmental Uncertainty

ORGANIZATIONAL STRUCTURE Organizational Design

1. STRATEGY and STRUCTURE:

• Structure should Follow Strategy• It must facilitates the Achievement of

Organizational Goals

2. SIZE AND STRUCTURE

ORGANIZATIONAL STRUCTURE Organizational Design

3. TECHNOLOGY and STRUCTURE

a. Unit Production b. Mass Production

c. Process Production

ORGANIZATIONAL STRUCTURE Organizational Design

4. ENVIRONMENTAL UNCERTAINTY and STRUCTURE

The greater the uncertainty, the more an organization needs FLEXIBILITY which is offered by the Organic organization

ORGANIZATIONAL STRUCTURE Organizational Design

TRADITIONAL ORGANIZATIONAL DESIGNS

1. SIMPLE STRUCTURE:

A. Low Departmentalization

b. Wide Span of Control

c. Authority Centralized in a Single person

d. Little Formalization

ORGANIZATIONAL STRUCTURE TRADITIONAL ORGANIZATIONAL DESIGNS

2. BUREAUCRACY

• Highly Routine Operating Tasks Achieved through -Specialization -Very Formal Rules & Reg.. -Tasks Grouped into Functional Depts. -Centralized Authority -Narrow Span of Control -Decision making follows Chain of Command

ORGANIZATIONAL STRUCTURE: Bureaucracy

• The primary Strength lies in its Ability to Perform Standardized Activities in a highly Efficient Manner

• Putting Like Specialists together in Functional Depts. Results in economies of scale

• Minimum duplication of Personnel and Equipment

ORGANIZATIONAL STRUCTURE: Bureaucracy

• Works best with Less Talented- Low/Middle Level Managers

• Greater prevalence of Rules and Regulations Substitutes Managerial Discretion

• Little need for Innovative and Experienced Decision makers below the Senior Executives

• Specialization creates Subunits Conflicts- Functional Unit goals Override the overall goals of the org.

ORGANIZATIONAL STRUCTURE

MATRIX STRUCTURE• Combines two forms of departmentalization:

Functional and Product• It attempts to gain the Strengths of Each, while

Avoiding their Weaknesses• It Breaks the Unity of command concept- Dual

Chain of command

MATRIX STRUCTURE

• It has Ability to Facilitate coordination When the organization has a multiplicity of complex and Interdependent activities

• The dual line of Authority reduce the Tendencies of departmental members to become so busy protecting their interests over the organization’s overall goals.

NEW DESIGN OPTIONS

TEAM STRUCTURE

• Management uses Teams as Coordination Device

• It breaks down departmental barriers and decentralizes Decision making to the level of the Work Team

NEW DESIGN OPTIONS

VIRTUAL ORGANIZATION• They are small organizations that

OUTSOURCE major business functions• It is highly Centralized, with little or no

Departmentalization- Movie Making orgs.- Reduces long-term risks, because there is no

long term- a team Assembled for a Finite period and then Disbanded

NEW DESIGN OPTIONS

BOUNDARYLESS ORGANIZATION

• Breaking down the External Barriers bt. The company and its Customers and Suppliers

• It seeks to Eliminate the Chain of Command Have Limitless Span of Control Replace departments with Empowered Teams

ORGANIZATION DESIGN AND EMPLOYEE BEHAVIOR

• Work Specialization contributes to higher employee Productivity but at the price of Reduced Job Satisfaction

- But Individual differences prevail

• The negative behavioral outcomes from high specialization are most likely to surface in Professional jobs occupied by individuals with High Needs for Personal Growth and Diversity

ORGANIZATION DESIGN AND EMPLOYEE BEHAVIOR

• Relationship bt.Span of Control and Employee Performance- Individual Differences Prevail

• However there is some evidence that A Manager’s Job Satisfaction increases as the Number of Employees Supervised Increases

ORGANIZATION DESIGN AND EMPLOYEE BEHAVIOR

• There is strong evidence linking Centralization and Job Satisfaction

• Less Centralized orgs. Have a Greater amount of Participative Decision Making which is positively Related with Job Satisfaction

ORGANIZATION DESIGN AND EMPLOYEE BEHAVIOR

• The Decentralization- Satisfaction relationship is Strongest with employees who have LOW SELF-ESTEEM

• They have less confidence in their abilities• They place higher value on shared decision

making- thus to share Responsibilities