Organization Structure

Spring 2007 Organization Structure 1

 Why Organizations Are Structured
• Organizing:
• The deployment and structuring of organizational resources
to achieve organizational goals
• Dimensions
• Specialization / division of labor
• Formal lines of authority
• Mechanisms for coordination
• Organization or structure is designed to:
• Facilitate accomplishment of organizational goals
• Fit with technology and environment

Spring 2007 Organization Structure 2

 Dimensions of Organization Structure
• Hierarchical
• Vertical dimension
• “...relative ranks in a manner similar to the organization
chart”
• Functional
• Horizontal dimension
• “...different types of work to be done”
• Inclusion or centrality
• “...the degree to which any given person is nearer to or
farther from the central core of the organization”

Spring 2007 Organization Structure 3

 Specialization / Division of Labor
• Adam Smith and the pins
• Efficiency vs. effectiveness
• Individuals perform well-defined tasks
• Short training time
• Individuals become expert
• Individuals can perform tasks for which they are best
suited
• Problems
• Lose sight of overall goal
• Boredom, fatigue, stress
• Lack of flexibility

Spring 2007 Organization Structure 4

 Issues in Determining Division of Labor

• Nature of the work

• Complexity of work
• Task interdependency
• Organization
• Goals (re-engineering)
• Resources
• Employees
• Abilities
• Expectations

Spring 2007 Organization Structure 5

 Authority and Responsibility
• Look back at Fayol, Weber
• Chain of command
• Unity of command
• Scalar principle
• Authority
• The right to make decisions, issue orders and allocate
resources
• Does it exist if not accepted?
• Responsibility
• Accountability
• Unity of authority and responsibility
• Delegation
• Line and staff

Spring 2007 Organization Structure 6

 Span of Control
• Tall vs. flat organizations
• Nature of work
• Stability
• Task similarity
• Location
• Employees
• Preferences
• Skills
• Organization
• Policies and procedures
• Support for managers

Spring 2007 Organization Structure 7

 Centralization vs. Decentralization

• Where are decisions made?

• Need for pooled resources
• Speed and flexibility (environmental
uncertainty)
• Consistency
• Where is the knowledge?
• Who must implement decisions

Spring 2007 Organization Structure 8

 Formalization
• Policies and procedures
• Bureaucracy
• Max Weber again
• Pro
• Uniformity
• Less uncertainty
• Con
• Less flexibility
• Deciding
• Nature of the work
• Nature of the employees

Spring 2007 Organization Structure 9

 Mechanistic vs. Organic Structures
Teams
Free flow of information
Wide spans of control
Decentralization
Mechanistic Low formalization

High specialization
Rigid departmentalization
Clear chain of command
Narrow span of control Organic
Centralization
High formalization

Spring 2007 Organization Structure 10

 Departmentalization
• Functional
• Divisional
• Product
• Customer
• Geographical
• Matrix
• Project teams

Spring 2007 Organization Structure 11

 Functional Structures
• Pro:
• Specialization
• Efficiency
• Career progress for employees
• High-quality problem solving
• Con:
• Poor communication between functions
• May be too centralized
• Employees have limited perspective on total organization
• Where best used
• Stable environment
• Single product

Spring 2007 Organization Structure 12

 Functional Structure
CEO
CEO

VP VP VP
VP
VP VP
Sales Manufacturing Finance
Finance
Sales Manufacturing

G/LL
G/

Tax
Tax

Budget
Budget

Spring 2007 Organization Structure 13

 Divisional
• Types • Where best used
• Product • Uncertain environment
• Geographical • Diversified organization
• Customer

• Pro: • Con:
• Speed and flexibility of • Resources duplicated
response (inefficient)
• Cross-fertilization of ideas • Less coordination
• Focus on product / between divisions
customer / area • Competition for resources
• Emphasis on
organizational goals

Spring 2007 Organization Structure 14

 Sample Divisional Structure

CEO
CEO

VP VP VP
VP
VP VP
Cereal Detergent Paper
Paper
Cereal Detergent
Tissue
Tissue
Diapers
Diapers
Towels
Towels
Spring 2007 Organization Structure 15
 ThyssenKrupp

Spring 2007 Organization Structure 16

 Sara Lee Structure

Headquarters

Food and Intimates and Household

Beverage Underwear Products

Spring 2007 Organization Structure 17

 University of Tennessee System
Board of
Trustees

UT -
UT- Martin UT - Knoxville
Chattanooga

Institute of Space Institute

Agriculture at Tullahoma

Institute for Health Science

Public Service Center at Memphis

Spring 2007 Organization Structure 18

 Mixed Structure

CEO
CEO

VP VP VP
VP
VP VP
Admin Manufacturing Sales
Sales
Admin Manufacturing

Retail
Retail

Wholesale
Wholesale

International
International
Spring 2007 Organization Structure 19
 Unilever Structure
Unilever
Bestfoods Home &
Personal Care
• Africa, Middle East & Turkey • Africa, Middle East & Turkey
Bestfoods Home
• Ice Cream and Frozen Foods • Diverseyever
• Latin America & [Link] • Home and Personal Care, Asia
worldwide • Home & Personal Care, Europe
• Unilever Bestfoods Asia • Home & Personal Care, North
• Unilever Bestfoods, Europe America
• Unilever Bestfoods, North • Latin America
America

Spring 2007 Organization Structure 20

 Matrix
• Dual lines of authority
• Examples
• Pro:
• Combines advantages of functional and divisional
structures
• Con:
• Conflict may arise
• Cost associated with grater need for coordination
• Where best used:
• Extreme environmental pressure
• Very large or geographically dispersed organizations

Spring 2007 Organization Structure 21

 Organizing Work Processes

• Unit production
• Mass production
• Process production

Spring 2007 Organization Structure 22

 Technology, Structure and
Effectiveness

Characteristic Unit Mass Process

Vertical
Low Moderate High
Differentiation
Horizontal
Low High Low
Differentiation
Formalization Low High Low
Structure Organic Mechanistic Organic

Spring 2007 Organization Structure 23