Foundations of Organization Structure, Chapter 16-Organizational Behavior
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The document discusses organizational structure, defining its key elements such as work specialization, departmentalization, chain of command, span of control, centralization, and formalization. It compares different structural designs, including simple, bureaucratic, matrix, team, and virtual structures, along with their advantages and disadvantages. Additionally, it explores the factors that influence organizational structure, such as strategy, size, technology, and environmental aspects.
Foundations of Organization Structure, Chapter 16-Organizational Behavior
- 1. PSYCOLOGY FOR MANAGERS Chapter-16 Foundations of Organization Structure Dr.Amrinder Singh Assistant Professor Govt. College of Commerce & Business Administration, Sector-50,Chandigarh
- 2. What Is Organizational Structure? Key Elements: • Work specialization • Departmentalization • Chain of command • Span of control • Centralization and decentralization • Formalization Organizational Structure How job tasks are formally divided, grouped, and coordinated.
- 3. Key Design Questions and Answers for Designing the Proper Organization Structure The Key Question The Answer Is Provided By 1. To what degree are articles subdivided into separate jobs? 2. On what basis will jobs be grouped together? 3. To whom do individuals and groups report? 4. How many individuals can a manager efficiently and effectively direct? 5. Where does decision-making authority lie? 6. To what degree will there be rules and regulations to direct employees and managers? Work specialization Departmentalization Chain of command Span of control Centralization and decentralization Formalization
- 4. What Is Organizational Structure? (cont’d) Division of labor: • Makes efficient use of employee skills • Increases employee skills through repetition • Less between-job downtime increases productivity • Specialized training is more efficient. • Allows use of specialized equipment. Work Specialization The degree to which tasks in the organization are subdivided into separate jobs.
- 5. What Is Organizational Structure? (cont’d) Grouping Activities By: • Function • Product • Geography • Process • Customer Departmentalization The basis by which jobs are grouped together.
- 6. What Is Organizational Structure? (cont’d) Authority The rights inherent in a managerial position to give orders and to expect the orders to be obeyed. Chain of Command The unbroken line of authority that extends from the top of the organization to the lowest echelon and clarifies who reports to whom. Unity of Command A subordinate should have only one superior to whom he or she is directly responsible.
- 7. What Is Organizational Structure? (cont’d) Narrow Span Drawbacks: • Expense of additional layers of management. • Increased complexity of vertical communication. • Encouragement of overly tight supervision and discouragement of employee autonomy. Concept: Wider spans of management increase organizational efficiency. Span of Control The number of subordinates a manager can efficiently and effectively direct.
- 8. Contrasting Spans of Control
- 9. What Is Organizational Structure? (cont’d) Centralization The degree to which decision-making is concentrated at a single point in the organization. Decentralization The degree to which decision-making is spread throughout the organization. Formalization The degree to which jobs within the organization are standardized.
- 10. Common Organization Designs Simple Structure A structure characterized by a low degree of departmentalization, wide spans of control, authority centralized in a single person, and little formalization. A Simple Structure: Jack Gold’s Men’s Store
- 11. Common Organization Designs (cont’d) Bureaucracy A structure of highly operating routine tasks achieved through specialization, very formalized rules and regulations, tasks that are grouped into functional departments, centralized authority, narrow spans of control, and decision making that follows the chain of command.
- 12. The Bureaucracy Strengths • Functional economies of scale • Minimum duplication of personnel and equipment • Enhanced communication • Centralized decision making Weaknesses • Subunit conflicts with organizational goals • Obsessive concern with rules and regulations • Lack of employee discretion to deal with problems
- 13. Common Organization Designs (cont’d) Key Elements: + Gains the advantages of functional and product departmentalization while avoiding their weaknesses. + Facilitates coordination of complex and interdependent activities. – Breaks down unity-of-command concept. Matrix Structure A structure that creates dual lines of authority and combines functional and product departmentalization
- 14. Matrix Structure (College of Business Administration)
- 15. New Design Options Characteristics: • Breaks down departmental barriers. • Decentralizes decision making to the team level. • Requires employees to be generalists as well as specialists. • Creates a “flexible bureaucracy.” Team Structure The use of teams as the central device to coordinate work activities.
- 16. New Design Options (cont’d) Concepts: Advantage: Provides maximum flexibility while concentrating on what the organization does best. Disadvantage: Reduced control over key parts of the business. Virtual Organization A small, core organization that outsources its major business functions. Highly centralized with little or no departmentalization.
- 17. Why Do Structures Differ? Mechanistic Model A structure characterized by extensive departmentalization, high formalization, a limited information network, and centralization.
- 18. Why Do Structures Differ? Organic Model A structure that is flat, uses cross-hierarchical and cross-functional teams, has low formalization, possesses a comprehensive information network, and relies on participative decision making.
- 19. Mechanistic Versus Organic Models
- 20. Four ReasonsStructures Differ 1. Strategy – Innovation Strategy • A strategy that emphasizes the introduction of major new products and services • Organic structure best – Cost-minimization Strategy • A strategy that emphasizes tight cost controls, avoidance of unnecessary innovation or marketing expenses, and price cutting • Mechanistic model best – Imitation Strategy • A strategy that seeks to move into new products or new markets only after their viability has already been proven • Mixture of the two types of structure
- 21. Why Structures Differ 2. Organizational Size – As organizations grow, they become more mechanistic, more specialized, with more rules and regulations 2. Technology – How an organization transfers its inputs into outputs • • The more routine the activities, the more mechanistic the structure with greater formalization Custom activities need an organic structure 2. Environment – Institutions or forces outside the organization that potentially affect the organization’s performance – Three key dimensions: capacity, volatility, and complexity
- 22. Three-Dimensional Environment Model Capacity – The degree to which an environment can support growth Volatility – The degree of instability in the environment Complexity – The degree of heterogeneity and concentration among environmental elements Complexity Volatility Capacity
- 23. Organizational Designsand Employee Behavior Impossible to generalize due to individual differences in the employees 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. People seek and stay at organizations that match their needs.
- 24. Global Implications Culture and Organizational Structure – Many countries follow the U.S. model – U.S. management may be too individualistic Culture and Employee Structure Preferences – Cultures with high-power distance may prefer mechanistic structures Culture and the Boundaryless Organization – May be a solution to regional differences in global firms – Breaks down cultural barriers, especially in strategic alliances – Telecommuting also blurs organizational boundaries
- 25. 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.
- 26. 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
- 27. Organization Structure: Its Determinants and Outcomes Implicit Models of Organizational Structure Perceptions that people hold regarding structural variables formed by observing things around them in an unscientific fashion.