‘ORGANIZING’

Organizational Structure and Design

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 OUTLINE
• Organizational Structure
• Organizational Design
• Org. Design Decisions
– Mechanistic and Organic
– Contingency Factors
– Common Designs

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 The ORGANIZING function of
Management
Organizing refers to arranging and structuring work to
accomplish organizational goals.

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 Purposes of Organizing

• Divides work to be done into specific jobs and

departments
• Assigns tasks and responsibilities associated with
individual jobs
• Coordinates diverse organizational tasks
• Clusters jobs into units
• Establishes relationships among individuals, groups,
and departments
• Establishes formal lines of authority
• Allocates and deploys organizational resources
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 Defining Organizational Structure
• Organizational Structure
– The formal arrangement of jobs within an organization,
referring to distribution of power and responsibility.
• Organizational Design
– A process involving decisions about six key elements:
1. Work specialization
2. Departmentalization
3. Chain of command
4. Span of control
5. Centralization and decentralization
6. Formalization

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• Organizational Chart

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 Organizational Design
1. Work Specialization
– The degree to which tasks in the organization are
divided into separate jobs with each step
completed by a different person
• Overspecialization can result in human diseconomies
from boredom, fatigue, stress, poor quality, increased
absenteeism, and higher turnover

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 2. Deparmentalization: Grouping
jobs into larger relevant categories
• Functional • Process
– Grouping jobs by – Grouping jobs on the
functions performed basis of product or
• Product customer flow
– Grouping jobs by • Customer
product line – Grouping jobs by type
• Geographical of customer and needs
– Grouping jobs on the
basis of territory or
geography

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 Exhibit 9.2a Functional
Departmentalization

Plant Manager

Manager, Manager, Manager, Manager, Manager,

Engineering Accounting Manufacturing Human Resources Purchasing

+ Efficiencies from putting together similar specialties and

people with common skills, knowledge, and orientations
+ Coordination within functional area
+ In-depth specialization
– Poor communication across functional areas
– Limited view of organizational goals

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 Exhibit 9.2b Geographical
Departmentalization

Vice President
for Sales

Sales Director, Sales Director, Sales Director, Sales Director,

Western Region Prairies Region Central Region Eastern Region

+ More effective and efficient handling of specific

regional issues that arise
+ Serve needs of unique geographic markets better
– Duplication of functions
– Can feel isolated from other organizational areas

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 Exhibit 9.2c Product Departmentalization
Bombardier, Ltd.

Mass Transit Sector Recreational and Rail Products

Utility Vehicles Sector
Sector

Mass Transit Bombardier–Rotax Rail and Diesel

Division (Vienna) Products Division

Recreational Logistic Industrial Bombardier–Rotax

Products Division Equipment Division Equipment Division (Gunskirchen)

+ Allows specialization in particular products and services

+ Managers can become experts in their industry
+ Closer to customers
– Duplication of functions
– Limited view of organizational goals
Source: Bombardier Annual Report.

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Exhibit 9.2d Process Departmentalization

Plant
Superintendent

Sawing Assembling Lacquering Finishing Inspection

Planing
Departme Department and Department and
and
nt Manager Sanding Manager Shipping
Milling
Manager Departme Department
Departme
nt Manager
nt
Manager
Manager

+ More efficient flow of work activities

– Can only be used with certain types of products

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Exhibit 9.2e Customer Departmentalization

Director
of Sales

Manager, Manager, Manager,

Retail Accounts Wholesale Accounts Government Accounts

+ Customers’ needs and problems can be met by specialists

– Duplication of functions
– Limited view of organizational goals

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 Group Exercise
• Think of a place where you have (or do)
work(ed). Looking at the various forms of
departmentalization…choose an example
from one of your group members places of
employment and answer the following:
– Which would have been (would be) the most
appropriate model of departmentalization for this
workplace? Why – explain your rationale?

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3. Chain of Command
– The continuous line of authority that extends from
upper levels of an organization to the lowest levels
of the organization and clarifies who reports to
whom

– a company's hierarchy of reporting

relationships – from the bottom to the top of
an organization. It not only establishes
accountability, it lays out a company's lines of
authority and decision-making power.

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 Organizational Structure (cont’d)
• Authority
– The rights inherent in a managerial position to tell people what to do
and to expect them to do it
• Responsibility
– The obligation or expectation to perform. Responsibility brings with it
accountability (the need to report and justify work to manager’s
superiors)
• Unity of Command
– The concept that a person should have one boss and should report
only to that person
• Delegation
– The assignment of authority to another person to carry out specific
duties

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 Organizational Structure (cont’d)
• Line and Staff Authority
– Line managers are responsible for the essential activities
of the organization, including production and sales. Line
managers have the authority to issue orders to those in
the chain of command
• The president, the production manager, and the sales manager
are examples of line managers
– Staff managers have advisory authority, and cannot issue
orders to those in the chain of command (except those in
their own department)

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Chapter 9, Stephen P. Robbins,
Mary Coulter, and Nancy
Langton, Management, Eighth
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Canadian Edition.
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4. Span of Control
– The number of employees who can be effectively and
efficiently supervised by a manager
– Width of span is affected by:
• Skills and abilities of the manager and the employees
• Characteristics of the work being done
• Similarity of tasks
• Complexity of tasks
• Physical proximity of subordinates
• Standardization of tasks
• Sophistication of the organization’s information system
• Strength of the organization’s culture
• Preferred style of the manager

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Span of Control

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5. Centralization
– The degree to which decision making is concentrated at a
single point in the organization
• Organizations in which top managers make all the decisions and
lower-level employees simply carry out those orders
• Decentralization
– The degree to which lower-level employees provide input or
actually make decisions
– Employee Empowerment
• Increasing the decision-making discretion of employees

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To centralize or not centralize…

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6. Formalization
– The degree to which jobs within the organization
are standardized and the extent to which
employee behavior is guided by rules and
procedures.

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 Organizational Design Decisions
• Mechanistic Organization • Organic Organization
– A rigid and tightly – Highly flexible and
controlled structure adaptable structure

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

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 Structural Contingency Factors
• Structural decisions are influenced by:
1. Overall strategy of the organization
– Innovation
• The business focusing on meaningful and unique
innovations favors an organic structuring
– Cost minimization
• Focusing on tightly controlling costs requires a
mechanistic structure for the organization
– Imitation
• Minimizing risks and maximizing profitability by copying
market leaders requires both organic and mechanistic
elements in the organization’s structure

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 Structural Contingency Factors
(cont’d)
Structural decisions are influenced by:

2. Size of the organization

• Firms change from organic to mechanistic organizations as they
grow in size
3. Technology use by the organization
• Firms adapt their structure to the technology they use
4. Degree of environmental uncertainty
• Dynamic environments require organic structures; mechanistic
structures need stable environments

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 Structural Contingency Factors
(cont’d)
• Strategy and Structure
– Achievement of strategic goals is facilitated by
changes in organizational structure that
accommodate and support change
• Size and Structure
– As an organization grows larger, its structure
tends to change from organic to mechanistic with
increased specialization, departmentalization,
centralization, and rules and regulations

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 Structural Contingency Factors
(cont’d)
• Technology and Structure
– Organizations adapt their structures to their
technology
– Routine technology = mechanistic organizations
– Non–routine technology = organic organizations

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 Common Organizational Designs
• Traditional Designs
– Simple Structure
• Low departmentalization, wide spans of control, centralized
authority, little formalization
– Functional Structure
• Departmentalization by function
– Operations, finance, human resources, and product research and
development
– Divisional Structure
• Composed of separate business units or divisions with limited
autonomy under the coordination and control of the parent
corporation

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 Exhibit 9.7 Strengths and
Weaknesses of Common Traditional
Organizational Designs

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 Organizational Designs (cont’d)
• Contemporary Organizational Designs
– Team Structures
• The entire organization is made up of work groups or
self-managed teams of empowered employees
– Matrix Structures
• Specialists for different functional departments are
assigned to work on projects led by project managers
• Matrix participants have two managers
– Project Structures
• Employees work continuously on projects, moving on
to another project as each project is completed

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Exhibit 9.8 Contemporary Organizational
Designs

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Exhibit 9.9 A Matrix Organization in
an Aerospace Firm

Design Manufacturing Contract Purchasing Accounting Human

Engineering Administration Resources (HR)

Alpha Design Manufacturing Contract Purchasing Accounting HR

Project Group Group Group Group Group Group

Beta Design Manufacturing Contract Purchasing Accounting HR

Project Group Group Group Group Group Group

Gamma Design Manufacturing Contract Purchasing Accounting HR

Project Group Group Group Group Group Group

Omega Design Manufacturing Contract Purchasing Accounting HR

Project Group Group Group Group Group Group

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 Organizational Designs (cont’d)
• Contemporary Organizational Designs (cont’d)
– Boundaryless Organization
• A flexible and an unstructured organizational design
where the design is not defined by, or limited to, the
horizontal, vertical or external boundaries imposed by
a predefined structure.
• Removes internal (horizontal) boundaries:
– Eliminates the chain of command
– Has limitless spans of control
– Uses empowered teams rather than departments
• Eliminates external boundaries:
– Uses virtual, network, and modular organizational structures
to get closer to stakeholders

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 Removing Boundaries
• Virtual Organization
– An organization that consists of a small core of full-time
employees and that temporarily hires specialists to work on
opportunities that arise
• Network Organization
– A small core organization that outsources its major business
functions (e.g., manufacturing) in order to concentrate on
what it does best

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 Organizational Designs (cont’d)

• Learning Organization
– An organization that has developed the capacity to
continuously learn, adapt, and change through the
practice of knowledge management by employees
Organizational Design
•Boundaryless
• Teams
•Empowerment

Organizational Culture Information Sharing

Strong
• Mutual Relationships THE LEARNING • Open
•Sense of Community ORGANIZATION • Timely
• Caring • Accurate
• Trust

Leadership
•Shared Vision
•Collaboration
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