Organizational
Structure & Design
Lecture 7
Agenda
Definition Models of Organizational
01 03 Design
Elements of Common Organization
02 Organization Structure 04 Designs
Organizational Structure
Organizing
Arranging and structuring work to accomplish an organization’s
goals.
Organizational Structure
The formal arrangement of jobs within an organization.
Purpose of Organizing
Divides work to be done Establishes relationships
into specific jobs and among individuals,
departments. groups, and departments.
Assigns tasks and
Establishes formal lines
responsibilities associated
of authority
with individual jobs.
Allocates and deploys
Coordinates diverse
organizational
organizational tasks.
resources.
Elements of Organizational Structure
Work Specialization
The degree to which tasks in the
Departmentalization organization are divided into separate
jobs with each step completed by a
different person
Chain of Command
Overspecialization can result in human
Span of Control boredom, poor quality, increased
absenteeism, and higher turnover.
Centralization Vs. Decentralization
Formalization
Elements of Organizational Structure
Departmentalization by type
Work Specialization Functional:
Grouping jobs by functions performed
Departmentalization
Chain of Command
Span of Control
Centralization Vs. Decentralization
Formalization
Elements of Organizational Structure
Departmentalization by type
Work Specialization Geographical
Grouping jobs on the basis of territory or geography
Departmentalization
Chain of Command
Span of Control
Centralization Vs. Decentralization
Formalization
Elements of Organizational Structure
Departmentalization by type
Work Specialization Product
Grouping jobs by product line
Departmentalization
Chain of Command
Span of Control
Centralization Vs. Decentralization
Formalization
Elements of Organizational Structure
Departmentalization by type
Work Specialization Process
Grouping jobs on the basis of customer flow
Departmentalization
Chain of Command
Span of Control
Centralization Vs. Decentralization
Formalization
Elements of Organizational Structure
Departmentalization by type
Work Specialization Customer
Grouping jobs by type of customer and needs
Departmentalization
Chain of Command
Span of Control
Centralization Vs. Decentralization
Formalization
Elements of Organizational Structure
Authority:
Work Specialization
The rights inherent in a
Departmentalization The continuous line of managerial position to
authority that extends from tell people what to do and
upper levels of an organization to expect them to do it.
Chain of Command to the lowest levels of the
organization and clarifies who
reports to whom. Responsibility
Span of Control
The obligation or
expectation to perform
Centralization Vs. Decentralization
Formalization
Elements of Organizational Structure
Work Specialization
The number of
employees who can be
Departmentalization effectively and efficiently
supervised by a
manager.
Chain of Command
Span of Control
Width of Span is affected by:
Centralization Vs. Decentralization
• Skills and abilities of the manager
• Employee Characteristics
Formalization • Similarity and Complexity of the tasks
Elements of Organizational Structure
Work Specialization
Centralization
Departmentalization The degree to which
decision making is
concentrated at upper
Chain of Command levels in the organization
Decentralization
The degree to which
Span of Control decision making is
pushed down to the
managers who are closest
Centralization Vs. Decentralization to the action
Formalization
Elements of Organizational Structure
More More
Centralization Decentralization
Work Specialization
• Environment is • Environment is
Departmentalization
stable complex,
• Organization is uncertain
Chain of Command facing a crisis • Lower-level
• Lower-level managers are
managers are capable &
experienced at
Span of Control not
experienced at making
making decisions
Centralization Vs. Decentralization decisions • Company is
• Company is geographically
large spread
Formalization
Elements of Organizational Structure
Work Specialization
The degree to which jobs
within the organization
Departmentalization are standardized and the
extent to which employee
behavior is guided by
Chain of Command rules and procedures Highly formalized jobs
offer little discretion over
what is to be done.
Span of Control
Low formalization means
fewer constraints on how
employees do their work.
Centralization Vs. Decentralization
Formalization
Models of Organizational Design
Mechanistic Organic
• High specialization • Cross-functional teams
• Rigid departmentalization • Cross-hierarchical teams
• Clear chain of command • Free flow of information
• Narrow spans of control • Wide spans of control
• Centralization • Decentralization
• High formalization • Low formalization
Contingency Factors Achievement of strategic goals is facilitated
by changes in organizational structure that
Strategy & Structure accommodate and support change.
Organization structure follows strategy
As an organization grows larger, its
structure tends to change from organic to
Size & Structure mechanistic with increased specialization,
departmentalization, centralization, and
rules and regulations.
Organizations adapt their structures to their
Technology & Structure technology
Routine technology: mechanistic
Non-routine technology = organic
Contingency Factors Mechanistic organizational structures tend to
be most effective in stable and simple
Environmental
environments.
Uncertaininty & The flexibility of organic organizational
Structure structures is better suited for dynamic and
complex environments.
Pursuing competitive advantage through
Innovation meaningful and unique innovations
favors an organic structuring.
Cost Minimization Focusing on tightly controlling costs
requires a mechanistic structure for the
organization.
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