Disclaimer: This study guide is NOT a substitute for reading the textbook chapters, and this

guide alone will not guarantee you a passing grade on exams. You must read the textbook
chapters in their entirety in order to fully prepare for the exam.

Management Chapter 9: Designing Adaptive Organizations

Organizational structure is the vertical and horizontal configuration of departments, authority,

and jobs within a company. Organizational structure is concerned with questions such as “Who
reports to whom?” and “Who does what?” and “Where is the work done?”

An organizational process is the collection of activities that transform inputs into outputs that
customers value. Organizational process asks, “How do things get done?”

Departmentalization is a method of subdividing work and workers into separate organizational

units that take responsibility for completing particular tasks. Typically, there are five methods
of departmentalization:

- Functional departmentalization organizes work and workers into separate units

responsible for particular business functions or areas of expertise. A common functional
structure might have individuals organized into accounting, sales, marketing,
production, and human resources departments.
- Product departmentalization organizes work and workers into separate units
responsible for producing particular products or services. Unlike the narrow expertise
and experiences in functional departmentalization, however, managers and workers
develop a broader set of experiences and expertise related to an entire product line.
- Customer departmentalization organizes work and workers into separate units
responsible for particular kinds of customers. The primary advantage of customer
departmentalization is that it focuses the organization on customer needs rather than
on products or business functions.
- Geographic departmentalization organizes work and workers into separate units
responsible for doing business in particular geographic areas. The primary advantage of
geographic departmentalization is that it helps companies respond to the demands of
different markets. This can be especially important when the company sells in different
countries.
- Matrix departmentalization is a hybrid structure in which two or more forms of
departmentalization are used together. The most common matrix combines the product
and functional forms of departmentalization. The primary advantage of matrix
departmentalization is that it allows companies to manage in an efficient manner large,
complex tasks like researching, developing, and marketing pharmaceuticals or carrying
out complex global businesses. Efficiency comes from avoiding duplication. For example,

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 rather than having an entire marketing function for each project, the company simply
assigns and reassigns workers from the marketing department as they are needed at
various stages of product completion.
o Simple matrix is a form of matrix departmentalization in which managers in
different parts of the matrix negotiate conflicts and resources.
o Complex matrix is a form of matrix departmentalization in which managers in
different parts of the matrix report to matrix managers, who help them sort out
conflicts and problems.

The second part of traditional organizational structures is authority. Authority is the right to
give commands, take action, and make decisions to achieve organizational objectives.
Organizational authority has been characterized by the following four dimensions:

- The chain of command is the vertical line of authority that clarifies who reports to
whom throughout the organization. People higher in the chain of command have the
right, if they so choose, to give commands, take action, and make decisions concerning
activities occurring anywhere below them in the chain.
o Unity of command states that workers should report to just one boss.
- A second dimension of authority is the distinction between line and staff authority. Line
authority is the right to command immediate subordinates in the chain of command.
Staff authority is the right to advise, but not command, others who are not subordinates
in the chain of command.
o A line function is an activity that contributes directly to creating or selling the
company’s products. So, for example, activities that take place within the
manufacturing and marketing departments would be considered line functions.
o A staff function, such as accounting, human resources, or legal services, does not
contribute directly to creating or selling the company’s products, but instead
supports line activities. For example, marketing managers might consult with the
legal staff to make sure the wording of a particular advertisement is legal.
- A third dimension of authority is Delegation of authority, which is the assignment of
direct authority and responsibility to a subordinate to complete tasks for which the
manager is normally responsible.
- The fourth dimension of authority is the degree of centralization.
o Centralization of authority is the location of most authority at the upper levels of
the organization. In a centralized organization, managers make most decisions,
even the relatively small ones.
o Decentralization is the location of a significant amount of authority in the lower
levels of the organization. An organization is decentralized if it has a high degree
of delegation at all levels. In a decentralized organization, workers closest to
problems are authorized to make the decisions necessary to solve the problems
on their own. Decentralization develops employee capabilities throughout the
company and leads to faster decision making and more satisfied customers and
employees.
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 o One rule of thumb is to stay centralized where standardization is important and
to decentralize where standardization is unimportant. Standardization is solving
problems by consistently applying the same rules, procedures, and processes.

Job design is the number, kind, and variety of tasks that individual workers perform in doing
their jobs.
- Job specialization occurs when a job is composed of a small part of a larger task or
process. Specialized jobs are characterized by simple, easy-to-learn steps, low variety,
and high repetition.
- Job rotation attempts to overcome the disadvantages of job specialization by
periodically moving workers from one specialized job to another to give them more
variety and the opportunity to use different skills.
- Job enlargement increases the number of different tasks that a worker performs within
one particular job. Instead of being assigned just one task, workers with enlarged jobs
are given several tasks to perform.
- Job enrichment attempts to overcome the deficiencies in specialized work by increasing
the number of tasks and by giving workers the authority and control to make
meaningful decisions about their work.

The job characteristics model (JCM) is an approach to job redesign that seeks to formulate jobs
in ways that motivate workers and lead to positive work outcomes.
- Internal motivation is motivation that comes from the job itself rather than from outside
rewards such as a raise or praise from the boss.

The five core job characteristics are:

- Skill variety is the number of different activities performed in a job.
- Task identity is the degree to which a job, from beginning to end, requires completion of
a whole and identifiable piece of work.
- Task significance is the degree to which a job is perceived to have a substantial impact
on others inside or outside the organization.
- Autonomy is the degree to which a job gives workers the discretion, freedom, and
independence to decide how and when to accomplish the work.
- Feedback is the amount of information the job provides to workers about their work
performance.

The following two kinds of organizational designs are appropriate for different kinds of
organizational environments:
- Mechanistic organizations are characterized by specialized jobs and responsibilities;
precisely defined, unchanging roles; and a rigid chain of command based on centralized
authority and vertical communication. This type of organization works best in stable,
unchanging business environments.
- By contrast, organic organizations are characterized by broadly defined jobs and
responsibility; loosely defined, frequently changing roles; and decentralized authority

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 and horizontal communication based on task knowledge. This type of organization
works best in dynamic, changing business environments.
o The key difference between these approaches is that mechanistic organizational
designs focus on organizational structure, whereas organic organizational
designs are concerned with organizational process, or the collection of activities
that transform inputs into outputs valued by customers.

An intraorganizational process is the collection of activities that take place within an

organization to transform inputs into outputs that customers value. The following three
methods used to redesign intraorganizational processes:
- Reengineering fundamental rethinking and radical redesign of business processes to
achieve dramatic improvements in critical measures of performance, such as cost,
quality, service, and speed. Reengineering changes an organization’s orientation from
vertical to horizontal. Instead of taking orders from upper management, lower- and
middle-level managers and workers take orders from a customer who is at the
beginning and end of each process. In essence, reengineering changes work by changing
task interdependence, the extent to which collective action is required to complete an
entire piece of work. There are three types of task interdependence:
o In pooled interdependence, each job or department contributes to the whole
independently.
o In sequential interdependence, work must be performed in succession, as one
group’s or job’s outputs become the inputs for the next group or job.
o In reciprocal interdependence, different jobs or groups work together in a back-
and-forth manner to complete the process.
- A second way of redesigning intraorganizational processes is through empowerment,
which is a feeling of intrinsic motivation, in which workers perceive their work to have
meaning and perceive themselves to be competent, have an impact, and be capable of
self-determination. Empowering workers means permanently passing decision-making
authority and responsibility from managers to workers. For workers to be fully
empowered, companies must give them the information and resources they need to
make and carry out good decisions and then reward them for taking individual initiative.
- The third way of redesigning intraorganizational processes is through Behavioral
informality, which refers to workplace atmospheres characterized by spontaneity,
casualness, and interpersonal familiarity. By contrast, behavioral formality refers to
workplace atmospheres characterized by routine and regimen, specific rules about how
to behave, and impersonal detachment.
o Open office systems try to increase interaction by removing physical barriers that
separate workers. One characteristic of open office systems is that they have
much more shared space than private space.
o Shared spaces are areas used by and open to all employees. Examples include:
Cubicles with low-to-the-ground partitions (used by 75% of office workers);
offices with no doors or with glass walls; collections of comfortable furniture that

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 encourage people to congregate; and common areas with tables and chairs that
encourage people to meet, work, or eat together.
o In contrast, private spaces, such as private offices with doors, are used by and
open to just one employee.

- An interorganizational process is a collection of activities that occur among companies

to transform inputs into outputs that customers value. In other words, many companies
work together to create a product or service that keeps customers happy. Example:
From soundtracks to staging, to locations, to post-production and marketing, dozens of
different firms worked with Warner Bros Pictures to create the last two films in the
Harry Potter movies series. The following two types of organizations are involved with
interorganizational processes:
o Except for the core business activities that they can perform better, faster, and
cheaper than others, modular organizations outsource all remaining business
activities to outside companies, suppliers, specialists, or consultants. The primary
disadvantage is the loss of control that occurs when key business activities are
outsourced to other companies.
- In contrast to modular organizations in which the interorganizational process revolves
around a central company, A virtual organization is part of a network in which many
companies share skills, costs, capabilities, markets, and customers with each other.
Virtual organizations have a number of advantages: They let companies share costs, and
because members of virtual organizations can quickly combine their efforts to meet
customers’ needs, they are fast and flexible.