Chapter 10

Managing Organizational Structure

Leanne PowersMHR301

From McGraw-Hill Irwin

Contemporary Management

Designing Organizational Structure

• Organizing– The process by which managers establish

working relationships among employees to achieve goals.

• Organizational Structure– Formal system of task and reporting

relationships showing how workers use resources.

• Organizational design– The process by which managers make

specific choices that result in a particular kind of organizational structure.

The Organizational Environment

The Organizational Environment– The quicker the environment

changes, the more problems face managers.

– Structure must be more flexible (i.e., decentralized authority) when environmental change is rapid.

Formal or Flexible?

More flexible structure More formal structure

Rapidly-changing environment

Stable environment

More complex (or non-routine) technology

Less-complex technology used in task environment

Higher task variety Higher task analyzability

Small batch or continuous-process production

Mass-production

More highly-skilled workforce

More entry-level or semiskilled workforce

Strategic necessity (differentiation strategy)

Strategic necessity (low-cost strategy)

More vertical integration or global expansion

Less vertical integration; fewer global operations

Job Design

• Job Design– The process by which managers

decide how to divide tasks into specific jobs.

– The appropriate division of labor results in an effective and efficient workforce.

• Job Simplification– The process of reducing the tasks

each worker performs.• Too much simplification and boredom

results.

Job Design

• Job Enlargement– Increasing the number of tasks for

a given job to reduce boredom.

• Job Enrichment– Increasing the degree of

responsibility a worker has over a job can lead to increased worker involvement.

Job Characteristics Model

Job characteristics

Skill variety Employee uses a wide range of skills

Task identity Worker is involved in all tasks of the job from beginning to end of the production process

Task significance Worker feels the task is meaningful to organization.

Autonomy Employee has freedom to schedule tasks and carry them out.

Feedback Worker gets direct information about how well the job is done.

Functional Structure

An organizational structure composed of all the departments that an organization requires to produce its goods or services.– Advantages

• Encourages learning from others doing similar jobs.

• Easy for managers to monitor and evaluate workers.

– Possible Disadvantages• Difficult for departments to communicate with

others.• Preoccupation with own department and losing

sight of organizational goals.

Divisional Structures

An organizational structure composed of separate business units within which are the functions that work together to produce a specific product for a specific customer

• Divisions create smaller, manageable parts of a firm.

• Divisions develop a business-level strategy to compete.

• Divisions have marketing, finance, and other functions.

• Functional managers report to divisional managers who then report to corporate management.

Types of Divisional Structures

• Product structure– Divisions by the product group or

category

• Market structure– Divisions by type of customer

• Geographic structure– Global or regional divisions

Divisional Structures

Divisional Structures

Divisional Structures

Matrix Design Structure

An organizational structure that simultaneously groups people and resources by function and product.• Results in a complex network of

superior-subordinate reporting relationships.

• The structure is very flexible and can respond rapidly to the need for change.

• Each employee has two bosses (functional manager and product manager) and may not be able to satisfy both.

Product Team Design Structure

• The members are permanently assigned to the team and empowered to bring a product to market.

• Avoids problems of two-way communication and the conflicting demands of functional and product team bosses.

• Cross-functional team is composed of a group of managers from different departments working together to perform organizational tasks.

Product Team Design Structure

Hybrid Structures

The structure of a large organization that has many divisions an simultaneously uses many different organizational structures• Managers can select the best structure

for a particular division—one division may use a functional structure, another division may have a geographic structure.

• The ability to break a large organization into smaller units makes it easier to manage.

Strategic Alliances

• Strategic Alliance– An agreement in which managers pool or

share firm’s resources and know-how with a foreign company and the two firms share in the rewards and risks of starting a new venture.

• Network Structure:– A series of strategic alliances that an

organization creates with suppliers, manufacturers, and distributors to produce and market a product.

– Network structures allow firms to bring resources together in a boundary-less organization.

B2B Network Structures and IT

• Boundaryless Organization– An organization whose members are

linked by computers, faxes, computer-aided design systems, and video-conferencing and who, rarely, if ever, see one another face-to-face.

• Knowledge Management System– A company-specific virtual information

system that allows workers to share their knowledge and expertise and find others to help solve problems.