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Chapter 10
Managing Organizational
Structure and Culture
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Learning Objectives
1. Identifythefactorsthatinfluencemanagers’ch
organizational structure.
2. Explain how managers group tasks into jobs that are
motivating and satisfying for employees.
3. Describe the types of organizational structures managers
can design, and explain why they choose one structure
over another.
4. Explain why managers must coordinate jobs, functions,
and divisions using the hierarchy of authority and
integrating mechanisms.
5. List the four sources of organizational culture, and explain
whyandhowacompany’sculturecanleadtocompet
advantage.
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AManager’sChallenge
Organizing to Better
ManageBannerHealth’s
Facilities
• How can an effective
organizational structure
enable high performance?
• Banner health decide to
centralize its facility
management practices,
reducing energy expenses
by nearly $12 million in the
first years of the program.
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Organizational Structure
Organizational architecture:
• The organizational structure, control systems, culture,
and human resource management systems
determining together how efficiently and effectively
organizational resources are used.
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Designing Organizational Structure 1
Organizing:
• Process by which managers establish the structure of
working relationships among employees to allow them
toachieveanorganization’sgoalsefficient
effectively.
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Designing Organizational Structure 2
Organizational structure:
• Formal system of task and reporting relationships that
coordinates and motivates organizational members so
they work together to achieve organizational goals.
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Designing Organizational Structure 3
The way an organization’sstructureworks
depends on the choices managers make about:
1. How to group tasks into individual jobs.
2. How to group jobs into functions and divisions.
3. How to allocate authority and coordinate functions
and divisions.
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Designing Organizational Structure 4
Organizational design:
• The process by which managers create a specific type
of organizational structure and culture so that a
company can operate in the most efficient and
effective way.
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Figure 10.1: Factors Affecting
Organizational Structure
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The Organizational Environment
Strategy:
• Different strategies require the use of different
structures.
Technology:
• The combination of skills, knowledge, tools,
equipment, computers, and machines used in the
organization.
Human Resources:
• Different strategies require the use of different
structures.
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Grouping Tasks into Jobs: Job
Design
Job design:
• Job design is the process by which managers decide
how to divide tasks into specific jobs (division of
labor).
• The appropriate division of labor results in an effective
and efficient workforce.
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Job Design
Job simplification:
• The process of reducing the number of tasks that
each worker performs.
Job enlargement:
• Increasing the number of different tasks in a given job
by changing the division of labor.
Job enrichment:
• Increasing the degree of responsibility a worker has
over a job.
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Job Enrichment
1. Empowering workers to experiment to find new
or better ways of doing the job.
2. Encouraging workers to develop new skills.
3. Allowing workers to decide how to do the work.
4. Allowing workers to monitor and measure their
own performance.
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The Job Characteristics Model 1
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 the
organization.
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The Job Characteristics Model 2
Autonomy:
• Employee has freedom to schedule tasks and carry
them out.
Feedback:
• Worker gets direct information about how well the job
is done.
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Departmentalization (Types of
Structures)
Departmentalization Bases
Functional Divisional Matrix
Product-Team
Product [Temporarily [Permanent
customer Teams] Teams]
Location
Hybrid
Hierarchical Structures Team-Based Structures
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Grouping Jobs into Functions
Functional structure:
• Organizational structure composed of all the
departments that an organization requires to produce
its goods or services.
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Figure 10.2: The Functional Structure
of the Home Depot
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Functional Structure 1
Advantages:
• Encourages learning from others doing similar jobs.
• Easy for managers to monitor and evaluate workers.
• Allows managers to create the set of functions they
need in order to scan and monitor the competitive
environment.
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Functional Structure 2
Disadvantages:
• Difficult for departments to communicate with others.
• Preoccupation with own department and losing sight
of organizational goals.
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Divisional Structures: Product,
Market, and Geographic
Divisional structure:
• 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.
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Figure 10.3: Product Structure
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Product Structure
• Managers place each distinct product line or
business in its own self-contained division.
• Divisional managers have the responsibility for
devising an appropriate business-level strategy to
allow the division to compete effectively in its
industry or market.
• GlaxoSmithKline groups research into 8 product
divisions to focus on particular clusters of
diseases.
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Product Structure: Advantages
• Allows functional managers to specialize in one
product area.
• Allows division managers to become experts in their
area.
• Removes need for direct supervision of division by
corporate managers.
• Allows divisional management to improve the use of
resources.
• Puts divisional managers close to customers for a
quick and appropriate response.
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Figure 10.3: Geographic Structure
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Geographic Structure
Geographic structure:
• Divisions are broken down by geographic location.
Global geographic structure:
• Managers locate different divisions in each of the
world regions where the organization operates.
• This generally occurs when managers are pursuing a
multidomestic strategy.
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Figure 10.4: Global Geographic and
Global Product Structures
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Figure 10.3: Market Structure
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Market Structure
• Groups divisions according to the particular kinds
of customers they serve.
• Allows managers to be responsive to the needs of
their customers and act flexibly in making
decisionsinresponsetocustomers’cha
needs.
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Matrix Structure
• A matrix structure is an organizational structure
that simultaneously groups people and resources
by function and product.
• The structure is very flexible.
• Each employee has two bosses.
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Figure 10.5: Matrix Structure
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Product Team Structure 1
Product team structure:
• Structure in which employees are permanently
assigned to a cross-functional team and report only to
theproductteammanagerortooneoftheman
direct subordinates.
• Does away with dual reporting relationships and two-
boss managers.
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Product Team Structure 2
Cross-functional team:
• A group of managers brought together from different
departments to perform organizational tasks.
• Example: Northwestern Mutual’s
work on redesigning
visuals for customers.
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Figure 10.5: Product Team Structure
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Allocating Authority 1
Authority:
• Power to hold people accountable for their actions
and to make decisions concerning the use of
organizational resources.
Hierarchy of authority:
• Anorganization’schainofcommand,specifyingth
relative authority of each manager.
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Allocating Authority 2
Span of control:
• The number of subordinates who report directly to a
manager.
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Allocating Authority 3
Line manager:
• Someone in the direct line or chain of command who
has formal authority over people and resources at
lower levels.
Staff manager:
• Someone responsible for managing a specialist
function, such as finance or marketing.
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Tall and Flat Organizations 1
Tall structures have many levels of authority and
narrow spans of control.
• As hierarchy levels increase, communication gets
difficult, creating delays in the time being taken to
implement decisions.
• Communications can also become distorted as they
are repeated through the firm.
• Tall structures can become expensive.
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Flat Organizations
Flat structures have fewer levels and wide spans
of control.
• Results in quick communications but can lead to
overworked managers.
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Tall Organizations
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The Minimum Chain of Command
The organizing principle:
Top managers should always
construct a hierarchy with the
fewest levels of authority
necessary to efficiently and
effectively use organizational
resources.
• David Novak of Yum Brands
• Plexus Corp.: Empowered
work teams.
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Centralization and Decentralization of
Authority
Decentralizing
authority:
• Giving lower-level
managers and
nonmanagerial
employees the right to
make important
decisions about how to
use organizational
resources.
• Flexible and responsive.
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Figure 10.8: Types and Examples of
Integrating Mechanisms
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