Six Key Elements in Organizational Design
Organizational design is engaged when managers develop or change an organization's structure.
Organizational Design is a process that involves decisions about the following six key elements: I. Work Specialization Describes the degree to which tasks in an organization are divided into separate jobs. The main idea of this organizational design is that an entire job is not done by one individual. It is broken down into steps, and a different person completes each step. Individual employees specialize in doing part of an activity rather than the entire activity. II. Departmentalization It is the basis by which jobs are grouped together. For instance every organization has its own specific way of classifying and grouping work activities. There are five common forms of departmentalization:
1. Functional Departmentalization. As shown in the Figure 2-1, it groups jobs by
This section is presented by: Claudia Gardea
functions performed. It can be used in all kinds of organizations; it depends on the goals each of them wants to achieve. Figure 2-1Functional Departmentalization example
Different aspects on this type of departmentalization: Positive Aspects Efficiencies from putting together similar specialties and people with common skills, knowledge, and orientations o Coordination within functional area
o o o
Negative Aspects Poor communication across functional areas Limited view of organizational goals
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In-depth
specialization
2. Product Departmentalization. It groups jobs by product line. Each manager is
responsible of an area within the organization depending of his/her specialization Figure 2: Product Departmentalization example Source: Bombardier Annual Report
Different aspects on this type of departmentalization: Positive Aspects Allows specialization in particular products and services o Managers can become experts in their industry
o o o
Negative Aspects Duplication of functions Limited view of organizational goals
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Closer to customers
3. Geographical Departmentalization. It groups jobs on the basis of territory or
geography. Figure 2-3: Geographical Departmentalization example
Different aspects on this type of departmentalization: Positive Aspects More effective and efficient handling of specific regional issues that arise
o o
Negative Aspects Duplication of functions Can feel isolated from other organizational areas
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Serve needs of unique geographic markets better
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4. Process Departmentalization. It groups on the basis of product or customer flow.
Figure 2-4: Process Departmentalization example
Different aspects on this type of departmentalization: Positive Aspects More efficient flow of work activities
o o
Negative Aspects Can only be used with certain types of products
5. Customer Departmentalization. It groups jobs on the basis of common customers
Figure 2-5: Customer Departmentalization example
Different aspects on this type of departmentalization: Positive Aspects Customers' needs and problems can be met by specialists
o o
Negative Aspects Duplication of functions Limited view of organizational goals
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III. Chain of command It is defined as a continuous line of authority that extends from upper organizational levels to the lowest levels and clarifies who reports to whom. There are three important concepts attached to this theory:
Authority: Refers to the rights inherent in a managerial position to tell people what to do and to expect them to do it. Responsibility: The obligation to perform any assigned duties. Unity of command: The management principle that each person should report to only one manager.
IV. Span of Control It is important to a large degree because it determines the number of levels and managers an organization has. Also, determines the number of employees a manager can efficiently and effectively manage. V. Centralization and Decentralization More Centralization
More Decentralization
Environment is stable Lower-level managers are not as capable or experienced at making decisions as upper-level managers.
Environment is complex, uncertain. Lower-level managers are capable and experienced at making decisions. Lower-level managers want a
Lower-level managers do not want to have say in decisions Decisions are significant. Organization is facing a crisis or the risk of company failure. Company is large. Effective implementation of company strategies depends on managers retaining say over what happens.
voice in decisions. Decisions are relatively minor. Corporate culture is open to allowing managers to have a say in what happens. Company is geographically dispersed. Effective implementation of company strategies depends on managers having involvement and flexibility to make decisions
VI. Formalization It refers to the degree to which jobs within the organization are stander