Designing Organizational StructuresDesigning Organizational Structures

Chapter 7

*other resources used

I. Why Organize?Organizing: coordinating and

allocating a firm’s resources so that the firm can carry out its plans and achieve its goals

(one of the four activities of management)

Organizational structure - intended to help the business accomplish its objectives by arranging the work to be done

II. Organizing FundamentalsA. Clear objectivesB. CoordinationC. Formal and informal organizations

1. Formal 2. Informal

a. Friendships & social contactb. Workers feel informed and connected with

what’s going on c. aids the socialization of new employees

D. Organization chart

E. two types of authority structures 1. Line authority - direct authority over lower positions in the hierarchyadvantages disadvantages- structural simplicity -neglects advisors - easily grasped authority -decision overload hierarchy -skilled line managers a - quickness of decision necessity making

2. Staff authority - advisory authority

advantages disadvantages

-experts can be used -causes confusion

-frees line managers -creates line-staff

to make day-to-day conflicts

decisions -places staff in

-used to screen and subservient role

train future line managers

F. Deciding the amount of authority to delegate 1. Centralized business

Advantages: Disadvantages

-uniformity of policies -demands/pressures

rules, and procedures on a few managers

-helps avoid duplication -reduces sense of

of effort involvement

-decisions are uniform -large amount of power

to a few managers

2. Decentralized business

Advantages Disadvantages- decision making - coordination is close to action difficult- ind. decision makers - capable managers

not take more resp. for their always available actions- helps develop managers - lack of uniformity

of for the future policies

III. Guidelines for OrganizingA. Division of labor B. Unity of command C. Scalar principle

D. Span of control

1. Nature of the task

2. Location of the workers

3. Ability of manager to delegate

4. Amount of interaction and feedback between manager and workers

5. Level of skill and motivation of the workers

E. Departmentalization: grouping jobs together so that similar tasks and activities can be coordinated

1. Functional - based on primary functions

2. Product - based on goods/services produced

3. Process - based on production process

4. Customer - based on the primary type of customer

served

5. Geographic - based on geographic segmentation

IV. Mechanistic vs. Organic Structures

SSttrruuccttuurraallCChhaarraacctteerriissttiicc

MMeecchhaanniissttiicc OOrrggaanniicc

Job specialization High Low

Departmentalization Rigid Loose

Managementhierarchy

Tall (manylevels)

Short (fewlevels)

Span of control Narrow Wide

Decision-makingauthority

Centralized Decentralized

Chain of command Long Short

V. Reengineering: A. Possible changes

1. Redesign business processes

2. Redesign organizational structure

VI. The Virtual Corporation

A. Structure B. Unique characteristics:

1. Take advantage of rapidly changing opp. 2. Helps distant companies form alliances 3. Each business partner brings core

competencies to the alliance 4. Increased trust

Example = General Life, a virtual life insurance company, reduces fixed costs (80% of traditional company costs) by subcontracting