Organizational Structure & Design
Topics
• Authority: How and why vertical differentiation occurs
• Control: Factors affecting the shape of the hierarchy
• Functional structure to divisional structure
• Matrix structure
• Virtual network structure and outsourcing
• Principles of Bureaucracy
• Holacracy team structure
• Network structure and Boundaryless organization
ORGANIZATION STRUCTURE
There are three key components in the definition of organization structure:
1. Organization structure designates formal reporting relationships, including the number
of levels in the hierarchy and the span of control of managers and supervisors.
2. Organization structure identifies the grouping together of individuals into departments
and of departments into the total organization.
3. Organization structure includes the design of systems to ensure effective
communication, coordination, and integration of efforts across departments.
Information sharing perspective of Organization Structure
Formal Reporting
Number of levels Span of control
Relationships
Grouping of Creation of
Design of Systems
Individuals departments
Horizontal
Communication,
information and
coordination, and
coordination
integration of
reflected in
efforts
organization chart
Information-Sharing Perspective on Structure
Organizations can choose whether to orient toward a traditional organization
designed for efficiency, which emphasizes vertical communication and control, or
toward a contemporary learning organization, which emphasizes horizontal
communication and coordination.
An emphasis on efficiency and control is associated with specialized tasks, a
hierarchy of authority, rules and regulations, formal reporting systems, few teams or task
forces, and centralized decision making, which means problems and decisions are
funneled to top levels of the hierarchy for resolution.
Emphasis on learning and adaptation is associated with shared tasks, a relaxed
hierarchy, few rules, face-to-face communication, many teams and task forces, and informal,
decentralized decision making.
Efficiency versus Learning Outcomes
Organization Design Alternatives
Required Work Activities
Reporting Relationships
Departmental Grouping Options
Departmental Grouping Options
Functional Divisional Multifocused
Grouping Grouping Grouping
Horizontal Virtual Network
Grouping Grouping
Functional Structure
✔Activities grouped by common function
✔All specific roles, skills, specialties and knowledge
are consolidated
✔Promotes economies of scale
✔Slow response to environmental changes
✔Prevalent approach but few companies can respond
in today’s environment without horizontal linkages
Divisional Structure
✔Classifying business operations based on the
product, geographical locations, or markets.
✔Market-based divisional organizational structure
✔Product-based divisional organizational structure
✔ Geographic based on the regions, territories, or
districts.
✔Good for achieving coordination across functional
departments
Matrix Structure
A matrix organizational structure is a combination of two or more
organizational structures in which the reporting relations are managed
in a grid and matrix rather than the traditional hierarchies.
The matrix organizational structure includes dual reporting relations
which generally include functional and product divisional managers.
Hence, the matrix organizational structure includes two chains of
command.
However, the matrix organizational structure also includes complexity
and confusion regarding the authority due to dual reporting.
Horizontal Structure
A horizontal organizational structure is just like a flat management
structure that involves a few hierarchical levels and a short chain of
command.
The organization that follows a horizontal organizational structure has few
managers in the organization which allows the employees to make various
decisions without taking managerial approval.
The horizontal organizational structure is mainly used by start-ups to
build employee engagement and collaboration.
Virtual Networks and Outsourcing
✔ Virtual Organization is a flexible
network of separate entities which
forms a collaboration by connecting
companies, institutions or individuals.
✔ The most common strategy is
outsourcing
✔ Contract out certain tasks/functions
Hybrid Structure
✔Combination of various structure approaches
✔Tailored to specific needs
✔Often used in rapidly changing environments
✔Greater flexibility
Structure to Organization’s Need for Efficiency
vs. Learning
Principles of Bureaucracy
As coined and defined by Max Weber in his seminal work, bureaucracy can
be understood as the hierarchy of organizational roles and
responsibilities.
It involves dividing work into well-defined jobs, a structured flow of
communications, and preset standard operating procedures for core
activities.
Principles of Bureaucracy
Holacracy team structure
Holacracy is a decentralized governance structure where employees exercise
equal responsibilities to take multiple roles and make key decisions
in their work areas.
It is the opposite of the traditional hierarchy-based governance system,
which is rigid and follows a single chain of command.
It aims to achieve higher productivity and less time spent following a chain of
command, declining a system where no voice is given to individual groups
and employees.
Organization design is a process for structuring and
running organizations
21
Source: Daft, Murphy & Willmott, 2010
22
[Link]
Organization Design
The Organization Design research shows more than 50% of companies are not effective in designing
organization structures, and only 1 in 5 is effective in work design.
DIMENSIONS OF
ORGANIZATION
DESIGN -
Contextual
and Structural
Thank You