CHAPTER 14 Organization Structure Chapter Overview This chapter addresses the topic of organizational structure by focusing on three primary topics: a definition/conceptualization of organizational structure, the four primary decisions to be made in developing a structure, and three primary dimensions of organizational structure. The majority of the chapter focuses on four key structure decisions: • Dividing the organization's work into jobs and determining the degree of job specialization; • Determining the degree of authority to delegate across the jobs; • Selecting a base(s) of departmentalization for the organization; and • Determining the appropriate span of control for management positions. The task of delegating authority is discussed primarily in regard to the pros and cons of a high delegation of authority. Concerning departmentalization, the four primary bases are discussed with organizational charts included to facilitate student understanding (functional, territorial, product, and customer bases). Also included is an analysis of matrix organization in the presentation of departmentalization bases. Discussion focuses on a brief identification of each base's design principles and its strengths and shortcomings. Discussion of span of control focuses on the types and degree of potential interpersonal relationships affected by the span of control (direct single, direct group and cross); along with three important factors to consider that concern the number and intensity of relationships established by a span of control. The chapter distinguishes mechanistic from organic organization structures. The mechanistic organization is a traditional model of organizations with emphasis on the principle of specialization, the principle of unity of direction, the principle of authority and responsibility, and the scalar principle. The organic structure is flexible to changing environmental demands because its design encourages greater utilization of the human potential. Contingency design theory emphasizes the importance of fitting a design to demands of a situation, including technology, environmental uncertainty, and management choice. Technology is generally understood as the physical and mental actions performed by an individual to change the form or content of an object or idea. By environmental design it can be analyzed in terms of the classic study of Lawrence and Lorsch, who distinguished organization structures from one another and the impact of organization design. Environmental uncertainty must be examined as to the service organization. The diversity of customer demand for services and variation in customer disposition to participate in the delivery of the service must be considered. Organizational design must adjust to environmental demands. The sociotechnical systems theory suggests that production processes consist of social and technical dimensions. The technical dimension refers to the equipment and methods of production used to create products and services. The social dimension consists of the formal and informal work structure that links people to the technology and to each other. The chapter concludes with a discussion of creating a virtual organization. A virtual organization will vary. Some develop relationship only with key suppliers; others develop relationships with marketers and distributors. In the extreme case, they function much like a broker and deal independently with product designers, producers, suppliers and markets. Such organizations are, in a sense, boundaryless. Learning Objectives By the end of the chapter, students should be able to: 1. Define the terms organizational structure and organization design. 2. Describe the relationships among the four managerial decisions of organization structure. 3. Discuss the relative advantages and disadvantages of centralization and decentralization of authority. 4. Identify the differences between the mechanistic and organic designs of organizations. 5. Understand why virtual organizations are becoming more popular. Lecture Outline PowerPoint Slide Material from Text to Support Slide / Additional Comments Organization structure is an abstract concept. No one has ever actually seen one. What we see is the evidence of structure. Then from that evidence we infer the presence of structure. We therefore need to identify what we mean when we discuss structure in this and subsequent chapters. All organizations have a structure of jobs. In fact, the existence of structure distinguishes organizations. While the most visible evidence of structure is the familiar organizational chart, charts are not always necessary to describe the structure. In fact, small organizations can get along very well without them as long as everyone understands what they are to do and who they are to do it with. The dominant feature of organization structure is its patterned regularity. This definition emphasizes persistence and regularity of activities. Note that this definition states nothing about the reason for the patterned regularity, only that it exists. This definition points out that within organizations, certain activities can be counted on to occur routinely. Without these predictable activities, the work of the organization could not be achieved. Definitions that focus on regularly occurring organizational activities emphasize the importance of what in the book is termed organizational processes. Managers who set out to design an organization structure face difficult decisions. They must choose among a myriad of alternative frameworks of jobs and departments. The process by which they make these choices is termed organizational design, which means quite simply the decisions and actions that result in an organization structure. This process may be explicit or implicit, it may be “one-shot” or developmental, it may be done by a single manager or by a team of managers. However the actual decisions come about, the content of the decisions is always the same. The first decision focuses on individual jobs, the next two decisions focus on departments or groups of jobs, and the fourth decision considers the issue of delegation of authority throughout the structure. Organization structures vary depending upon the choices that managers make. If we consider each of the four design decisions to be a continuum of possible choices, the alternative structures can be depicted as in Figure 14.1. Generally speaking, organization structures tend toward one extreme or the other along each continuum. Structures tending to the left are characterized by a number of terms including classical, formalistic, structured, bureaucratic, System 1, and mechanistic. Structures tending to the right are termed neoclassical, informalistic, unstructured, nonbureaucratic, System 4, and organic. Exactly where along the continuum an organization finds itself has implications for its performance as well as for individual and group behavior. Division of labor concerns the extent to which jobs are specialized. Managers divide the total task of the organization into specific jobs having specified activities. The activities define what the person performing the job is to do. Jobs can be specialized both by method and by application of the method. The economic advantages of dividing work into specialized jobs are the principal historical reasons for the creation of organizations The rationale for grouping jobs rests on the necessity for coordinating them. The specialized jobs are separate, interrelated parts of the total task, whose accomplishment requires the accomplishment of each of the jobs. But the jobs must be performed in the specific manner and sequence intended by management when they were defined. As the number of specialized jobs in an organization increases, there comes a point when they can no longer be effectively coordinated by a single manager. Thus, to create manageable numbers of jobs, they are combined into smaller groups and a new job is defined—manager of the group. The crucial managerial consideration when creating departments is determining the basis for grouping jobs. Of particular importance is the determination for the bases for departments that report to the top management position. In fact, numerous bases are used throughout the organization, but the basis used at the highest level determines critical dimensions of the organization. Some of the more widely used departmentalization bases are described in the following sections. Managers can combine jobs according to the functions of the organization. Every organization must undertake certain activities to do its work. These necessary activities are the organization’s functions. The necessary functions of a manufacturing firm include production, marketing, finance, accounting, and personnel. The functional basis is often found in relatively small organizations providing a narrow range of products and services. It is also widely used as the basis in divisions of large multiproduct organizations. The principal advantage of the basis is its efficiency. That is, it seems logical to have a department that consists of experts in a particular field such as production or accounting. By having departments of specialists, management creates efficient units. A major disadvantage of this departmental basis is that because specialists are working with and encouraging each other in their areas of expertise and interest, organizational goals may be sacrificed in favor of departmental goals. Organization charts for a commercial bank and a hospital structured along functional lines are also depicted in Figure 14.2. The functional basis has wide application in both service and manufacturing organizations. The specific configuration of functions that appear as separate departments varies from organization to organization. Another basis for departmentalizing is to establish groups according to geographic area. The logic is that all activities in a given region should be assigned to a manager. This individual would be in charge of all operations in that particular geographic area. Geographic departmentalization provides a training ground for managerial personnel. The company is able to place managers in territories and then assess their progress in that geographic region. The experience that managers acquire in a territory away from headquarters provides valuable insights about how products and/or services are accepted in the field. An example of geographic departmentalization. This graphic is not in the text. The Consumer Products Division of Kimberly-Clark reflects product departmentalization. The specific product groups shown in Figure 14.3 include feminine hygiene, household, and commercial products. Managers of many large diversified companies group jobs on the basis of product. All jobs associated with producing and selling a product or product line will be placed under the direction of one manager. Product becomes the preferred basis as a firm grows by increasing the number of products it markets. As a firm grows, it’s difficult to coordinate the various functional departments and it becomes advantageous to establish product units. This form of organization allows personnel to develop total expertise in researching, manufacturing, and distributing a product line. Concentrating authority, responsibility, and accountability in a specific product department allows top management to coordinate actions. The organization structure using products as the basis for departments has been a key development in modern capitalism. The term divisional organization refers to this form of organization structure. An organization design termed matrix organization attempts to maximize the strengths and minimize the weaknesses of both the functional and product bases. In practical terms, the matrix design combines functional and product departmental bases. Although the exact meaning of matrix organization varies in practice, it’s typically seen as a balanced compromise between functional and product organization, between departmentalization by function and by product. An example of a matrix organization. This graphic is not in the text. The determination of appropriate bases for departmentalization establishes the kinds of jobs that will be grouped together. But that determination doesn’t establish the number of jobs to be included in a specific group, the issue of span of control. Generally, the issue comes down to the decision of how many people a manager can oversee; that is, will the organization be more effective if the span of control is relatively wide or narrow? The question is basically concerned with determining the volume of interpersonal relationships that the department’s manager is able to handle. Moreover, the span of control must be defined to include not only formally assigned subordinates, but also those who have access to the manager. Not only may a manager be placed in a position of being responsible for immediate subordinates, she may also be chairperson of several committees and task groups. Examples of span of control. Managers decide how much authority should be delegated to each job and each jobholder. As we have noted, authority refers to individuals’ right to make decisions without approval by higher management and to exact obedience from others. Delegation of authority refers specifically to making decisions, not to doing work. Relatively high delegation of authority encourages the development of professional managers. Organizations that decentralize (delegate) authority enable managers to make significant decisions, to gain skills, and to advance in the company. Second, high delegation of authority can lead to a competitive climate within the organization. Managers are motivated to contribute in this competitive atmosphere because they’re compared with their peers on various performance measures. Finally, managers who have relatively high authority can exercise more autonomy, and thus satisfy their desires to participate in problem solving. This autonomy can lead to managerial creativity and ingenuity, which contribute to the adaptiveness and development of the organization and managers. 1. How routine and straightforward are the job’s or unit’s required decisions? The authority for routine decisions can be centralized. 2. Are individuals competent to make the decision? Even if the decision is nonroutine (as in the case of hiring employees), if the local manager is not competent to recruit and select employees, then employment decisions must be centralized. This question implies that delegation of authority can differ among individuals depending upon each one’s ability to make the decision. 3. Are individuals motivated to make the decision? Capable individuals aren’t always motivated individuals. It can also involve a level of commitment to the organization that an individual isn’t willing to make. Motivation must accompany competency to create conducive conditions for decentralization. 4. Finally, to return to the points we made earlier, do the benefits of decentralization outweigh its costs? This question is perhaps the most difficult to answer because many benefits and costs are assessed in subjective terms. Nevertheless, managers should at least attempt to make a benefit–cost analysis. Like most managerial issues, whether authority should be delegated in high or low degree cannot be resolved simply. As usual, in managerial decision making, whether to centralize or decentralize authority can be guided only by general questions. A body of literature that emerged during the early 20th century considered the problem of designing the structure of an organization as but one of a number of managerial tasks, including planning and controlling. These writers’ objective was to define principles that could guide managers in performing their tasks. An early writer, Henri Fayol, proposed a number of principles that he had found useful in managing a large coal mining company in France. Some of Fayol’s principles dealt with the management function of organizing; four of these are relevant for understanding the mechanistic model. 1. The principle of specialization. Fayol stated that specialization is the best means for making use of individuals and groups of individuals. 2. The principle of unity of direction. According to this principle, jobs should be grouped according to specialty. The departmentalization basis that most nearly implements this principle is the functional basis. 3. The principle of authority and responsibility. Fayol believed that a manager should be delegated sufficient authority to carry out her assigned responsibilities. 4. The scalar chain principle. The natural result of implementing the preceding three principles is a graded chain of managers from the ultimate authority to the lowest ranks. Bureaucracy has various meanings. The traditional usage is the political science concept of government by bureaus but without participation by the governed. In laymen’s terms, bureaucracy refers to the negative consequences of large organizations, such as excessive red tape, procedural delays, and general frustration. But in Max Weber’s writings, bureaucracy refers to a particular way to organize collective activities. Weber’s interest in bureaucracy reflected his concern for the ways society develops hierarchies of control so that one group can, in effect, dominate other groups. Organizational design involves domination in the sense that authority involves the legitimate right to exact obedience from others. According to Weber, the bureaucratic structure is superior to any other form in precision, in stability, in the stringency of its discipline and its reliability. It thus makes possible a high degree of calculability of results for the heads of the organization and for those acting in relation to it. To achieve the maximum benefits of the bureaucratic design, Weber believed that an organization must have the following characteristics. 1. All tasks will be divided into highly specialized jobs. Through specialization, job-holders become expert in their jobs, and management can hold them responsible for the effective performance of their duties. 2. Each task is performed according to a system of abstract rules to ensure uniformity and coordination of different tasks. The rationale for this practice is that the manager can eliminate uncertainty in task performance due to individual differences. 3. Each member or office of the organization is accountable for job performance to one, and only one, manager. Managers hold their authority because of their expert knowledge and because it’s delegated from the top of the hierarchy. An unbroken chain of command exists. Continued from previous slide 4. Each employee of the organization relates to other employees and clients in an impersonal, formal manner, maintaining a social distance with subordinates and clients. The purpose of this practice is to assure that personalities and favoritism do not interfere with efficient accomplishment of the organization’s objectives. 5. Employment in the bureaucratic organization is based on technical qualifications and is protected against arbitrary dismissal. Similarly, promotions are based on seniority and achievement. Employment in the organization is viewed as a lifelong career, and a high degree of loyalty is engendered. These five characteristics of bureaucracy describe the kind of organizations The mechanistic model achieves high levels of production and efficiency due to its structural characteristics: 1. It’s highly complex because of its emphasis on specialization of labor. 2. It’s highly centralized because of its emphasis on authority and accountability. 3. It’s highly formalized because of its emphasis on function as the basis for departments. These organizational characteristics and practices underlie a widely used organizational model. The organic model of organizational design stands in sharp contrast to the mechanistic model due to its different organizational characteristics and practices. The most distinct differences between the two models are a consequence of the different effectiveness criteria each seeks to maximize. While the mechanistic model seeks to maximize efficiency and production, the organic model seeks to maximize satisfaction, flexibility, and development. The organic organization is flexible to changing environmental demands because its design encourages greater utilization of the human potential. Managers are encouraged to adopt practices that tap the full range of human motivations through job design that stresses personal growth and responsibility. Decision making, control, and goal-setting processes are decentralized and shared at all levels of the organization. Communications flow throughout the organization, not simply down the chain of command. These practices are intended to implement a basic assumption of the organic model that states that an organization will be effective to the extent that its structure is such as to ensure a maximum probability that in all interactions and in all relationships with the organization, each member, in the light of his background, values, desires, and expectations, will view the experience as supportive and one which builds and maintains a sense of personal worth and importance. An organizational design that provides individuals with this sense of personal worth and motivation and that facilitates satisfaction, flexibility, and development would have the following characteristics: 1. It’s relatively simple because of its deemphasis of specialization and its emphasis on increasing job range. 2. It’s relatively decentralized because of its emphasis on delegation of authority and increasing job depth. 3. It’s relatively informal because of its emphasis on product and customer as bases for departments. A leading spokesperson and developer of ideas supporting applications of the organic model is Rensis Likert. His studies at the University of Michigan have led him to argue that organic organizations (Likert uses the term System 4) differ markedly from mechanistic organizations (Likert uses the term System 1) along a number of structural dimensions. The important differences are shown in Table 14.1. The demands of a situation are termed contingencies. Accordingly, neither the mechanistic nor the organic is necessarily the more effective organization design; either can be better depending on the situation. The contingency point of view provides the opportunity to get away from the dilemma of choosing between mechanistic and organic models. As such, it’s an evolution of ideas whose bases are found in the work of earlier writers. The essence of the contingency design theory approach is expressed by the question: Under what circumstances and in what situations is either the mechanistic or the organic design relatively more effective? The effects of technology on organization structure can be readily understood at an abstract level of analysis. Although various definitions of technology exist, it’s generally understood as “the actions that an individual performs upon an object with or without the aid of tools or mechanical devices, in order to make some change in that object.” Organizational structures reflect technology in the ways that jobs are designed (the division of labor) and grouped (departmentalization). In this sense, the current state of knowledge regarding the appropriate actions to change an object acts as a constraint on management. In recent years, the state of technological knowledge has increased exponentially as computers and robots have entered the workplace. One effect of this new knowledge has been to increase managers’ interest in the relationship between organization structure and technology. Joan Woodward gained considerable attention when she released the findings of analyses of 100 manufacturing firms’ organization structures in southern England. While she and her colleagues had sought to answer a number of questions regarding contributions of organization structure to organizational effectiveness, it was their conclusions regarding technology and structure that were widely acclaimed. She and her team of researchers had set out to determine if there were structural differences between the more and less effective firms. The research team classified firms according to the three categories of technology. It then discovered that the organizational structures of firms within each category were different in comparison to other categories. The important differences were as follows: 1. Organizations at each end of the continuum were more flexible; that is, they resembled the organic model. Organizations in the middle of the continuum were more specialized and formalized; that is, they resembled the mechanistic model. 2. Organizations at each end of the continuum made greater use of verbal than written communications; organizations in the middle made greater use of written communications and were more formalized. 3. Managerial positions were more highly specialized in mass production than in either job order or process manufacturing. 4. Consistent with the preceding point, actual control of production in the form of schedule making and routing was separated from supervision of production in mass production firms. The two managerial functions were more highly integrated in the role of the first-level supervisor in organizations at the extremes of the continuum. The team measured technology in terms of three related variables: (1) stages in the historical development of production processes, (2) the interrelationship between the items of equipment used for these processes, and (3) the extent to which the operations performed in the processes were repetitive or comparable from one production cycle or sequence to the next. The data indicated sharp organizational differences due to technological differences. The graphic, not included in the text, provides an overview of the study findings. Lawrence and Lorsch base their findings on detailed case studies of firms in the plastics, food, and container industries. An initial exploratory study consisted of case studies of six firms operating in the plastics industry. Lawrence and Lorsch analyzed these studies to answer the following questions: 1. How are the environmental demands facing various organizations different and how do environmental demands relate to the design of effective organizations? 2. Is it true that organizations in certain or stable environments make more exclusive use of centralized authority to make key decisions, and, if so, why? Is it because fewer key decisions are required, or because these decisions can be made more effectively at higher organization levels or by fewer people? 3. Are the same degree of specialization and differences in orientation among individuals and groups found in organizations in different industrial environments? 4. If greater specialization and differences among individuals and groups are found in different industries, do these differences influence problems of coordinating the organization’s parts? Does it influence the organization’s means of achieving integration? To answer these four questions, Lawrence and Lorsch studied structure in the three industries. During their investigation, they coined three terms that have become widely used in the theory and practice of organizational design: differentiation, integration, and environment. The “state of segmentation of the organizational system into subsystems, each of which tends to develop particular attributes in relation to the requirements posed by its relevant external environment” is termed differentiation. This concept refers in part to the idea of specialization of labor, specifically to the degree of departmentalization. But it’s broader and also includes behavioral attributes of employees of these subsystems, or departments. The “process of achieving unity of effort among the various subsystems in the accomplishment of the organization’s task” is labeled integration, and it can be achieved in a variety of ways. Proponents of the mechanistic model argued for integration through the creation of rules and procedures to govern subsystem members’ behavior. But this method of integration can be effective only in relatively stable and predictable situations. The independent variable environment was conceptualized from the perspective of the organization members as they looked outward. Consequently, the researchers assumed that a basic reason for differentiating into subsystems is to deal more effectively with sub environments. Lawrence and Lorsch identified three main sub environments: the market sub environment, the technical–economic sub environment, and the scientific sub environment. These three sub environments correspond to the sales, production, and research and development functions within organizations. Figure 14.4 depicts the idea that an organization consists of separate parts, usually departments, which must deal with different aspects of the total environment. Lawrence and Lorsch identify the organizational parts, or subsystems, as marketing, production, and research. They identify the environmental parts, or sub environments, as market, technical– economic, and science. Subsystems must be organized so as to deal effectively with their relevant sub environments. The greater the differences among the three sub environments in terms of rate of change, certainty of information, and time span of feedback, the greater will be the differences among the three subsystems in terms of organization structure and behavioral attributes. The greater these differences (i.e., the more differentiated are the three subsystems), the more important is the task of integrating the three subsystems. The growing importance of the service sector of the economy has stimulated much interest in understanding how to design service firms for optimal performance. An increasingly promising approach is to use the concept of environmental uncertainty to identify the optimal design. One variation of this approach focuses on the relative uncertainty of two customer attributes: diversity of customer demand for services and variation in customer disposition to participate in the delivery of the service. According to this perspective, a service firm should organize in relatively mechanistic or organic forms depending upon the degree of uncertainty in these two attributes. Service organizations whose customers demand relatively homogeneous services and have little disposition to participate in the delivery of those services can be managed according to mechanistic principles. The relationships among environment, technology, and organization structure can be synthesized. The key concept is information and the key idea is that organizations must effectively receive, process, and act on information to achieve performance. Information flows into the organization from the sub environments. The information enables the organization to respond to market, technological, and resource changes. The more rapid the changes, the greater the necessity for, and availability of, information. An influential theory developed in the early 1950s by the researchers of the London-based Tavistock Institute of Human Relations, sociotechnical systems theory suggests that production processes consist of social and technical dimensions. Unique, yet interdependent, these two dimensions exert a reciprocal influence on one another. The technical dimension refers to the equipment and methods of production used to create products and services. The social dimension of sociotechnical systems theory consists of the formal and informal work structure that links people to the technology and to each other. Early research showed the benefits of joint-optimization of the technical production system and the social behaviors of workers. These observations encouraged the development of organizational design principles that utilized semiautonomous work groups in the production process. Considered by some as a precursor to the total quality management (TQM) movement, the Tavistock research on sociotechnical systems theory consistently championed the concepts of teamwork and semiautonomous work groups as critical building blocks of successful production systems. A major tenet of the theory, the “control of variance” concept suggests that unavoidable variances in the production processes should be controlled as near to the point of the problems as possible. Thus, team involvement in resolving such variances can result in higher levels of productivity, quality, and other key performance criteria. One of the fastest developing practices in business throughout the world involves firms in cooperative relationships with their suppliers, distributors, and even competitors. These networks of relationships enable organizations to achieve both efficiency and flexibility to exploit advantages of the mechanistic and organic organization designs. These “virtual organizations” have become so pervasive that some experts refer to them as the models for 21st century organizations. Cooperative relationships enable the principal organization to rely upon the smaller, closer-to-the-market partner to sense impending changes in the environment and to respond at the local level, thus relieving the parent organization of that necessity. The exact form of the virtual organization varies. Some organizations develop relationships only with key suppliers. Other organizations develop relationships with marketers and distributors. In the extreme case, the parent organization functions much like a broker and deals independently with product designers, producers, suppliers, and markets. The critical managerial and organizational decisions involve which of the functions to buy and which to produce and how to manage the relationships with their partners. Managers in these organizations have less environmental uncertainty to deal with because they have, in a sense, subcontracted that responsibility to their counterparts in the network. Such organization structures are, in a sense, boundaryless organizations. The slide shows the approach used to manufacture a business jet. Review objectives. Lecture Tips Lecture Ideas 1. An effective way to generate class discussion on the strengths and shortcomings of the departmentalization bases is to have students discuss in class the structures of organizations in which they’ve worked (most have probably experienced a functional base). In their opinion, what were the strengths and shortcomings of the structure? It’s also useful to ask them to consider and discuss their experiences with formalization and centralization in their organizations and to discuss the strengths and shortcomings of high formalization and centralization within the context of their organizational experiences. 2. One of the most challenging management tasks concerning organizational structure is implementing a shift in delegation of authority from a centralized to a decentralized organization (or vice versa). The task is challenging because the change affects so many aspects of the organization (e.g., the organization's culture, performance appraisal systems, communication systems, and the managers themselves). Have your students discuss the issue by considering the ramifications of a major shift in delegation of authority and the potential pitfalls that such changes may encounter. 3. Have students discuss should organization strategy follow organization structure, or should organization structure follow strategy. Make sure they understand the concepts and how they can apply it where they work. Project and Class Speaker Ideas 1. An effective way to increase students' understanding of the different bases of departmentalization for businesses is to have them identify a company in the local community which is organized according to one of the bases discussed in the chapter. The students can obtain an organization chart from the company and interview a member of the organization for insights into the design's advantages and disadvantages. This project could be a group assignment with each group assigned a particular departmentalization base. 2. Invite a top-level manager from a company structured along a particular departmentalization base to discuss the company's selection of the base, and the advantages and problems the structure has provided the company. You might want to ask the speaker to discuss how his or her company's organizational structure has evolved through the years. Why were changes made? What impact has growth had on the company's structure? 3. Invite the head of a company whose management philosophy is clearly decentralization or centralization of authority. The speaker could provide some excellent insights into the advantages and disadvantages of each philosophy. Discussion Questions 1. Assume that you’ve just started working for a company that does not have an organizational chart that show reporting relationships. How would you go about determining to whom your boss reports and where your department fits in the overall organizational structure? Answer: Student answers will vary, depending on their preferred methodology, but the best course of action is to just ask. Start with the immediate supervisor and ask who he/she reports to. Also ask for the names, phone numbers, email addresses, and titles of his/her peers. Then do the same with the peers, plotting answers as they are received. Keep in mind that such questions are likely to be met with suspicion, so explain why you need the information up front. I would start by asking my boss and colleagues about the reporting structure and key departmental relationships. Reviewing company documents such as strategic plans, internal communications, and project teams can also provide insights. Additionally, attending meetings and observing interactions can help clarify how departments and reporting lines are structured. 2. Compare functional and product departmentalization in terms of relative efficiency, production, satisfaction, flexibility, quality, competitiveness, and development. Consider particularly the possibility that one basis may be superior in achieving one aspect of effectiveness, yet inferior in achieving another. Answer: This question is intended to encourage students to assess the strengths and weaknesses of the bases of departmentalization going beyond those discussed in the chapter. Generally, efficiency and production are maximized in functional departments, whereas satisfaction, development, and adaptiveness are maximized in product departments. Functional Departmentalization organizes departments based on specialized functions (e.g., marketing, finance). • Efficiency: High due to specialization and clear functional expertise. • Production: Effective for tasks requiring deep functional knowledge. • Satisfaction: May suffer from siloed thinking and limited cross-departmental interaction. • Flexibility: Lower, as it can be slower to adapt to market changes. • Quality: High in specialized tasks but may lack integration. • Competitiveness: Can be lower due to slower response to market demands. • Development: Focused on functional skills; may limit broader career growth. Product Departmentalization organizes departments based on product lines. • Efficiency: May be lower due to less functional specialization. • Production: Effective for managing diverse product lines and meeting specific market needs. • Satisfaction: Higher due to clearer product focus and cross-functional teamwork. • Flexibility: Higher, as departments can quickly adapt to product-specific changes. • Quality: Can be high for products but may vary by department. • Competitiveness: Higher due to better responsiveness to market trends. • Development: Offers broader experience in managing entire product lines, fostering comprehensive skill development. In summary, functional departmentalization excels in efficiency and specialization, while product departmentalization offers better flexibility, market responsiveness, and holistic development opportunities. 3. Discuss the statement that to manage effectively, a person must have the authority to hire subordinates, assign them to specific jobs, and reward them on the basis of performance. Interview the chairperson of an academic department and determine whether he has this authority Answer: While student responses will vary based on their interviews with department chairs, the organizing concept is universal. To manage effectively, management must be delegated the authority that is commensurate with the responsibility in the position they perform. Management should have the authority to hire employees, especially if they are performing in a line department. Managers should possess the accountability to assign subordinates with the responsibility of performing their job. It is recommended pay for performance should reward employees (extrinsic or intrinsic rewards) based on individual or group performance. The academic chairperson may or may not have this authority, depending upon the academic institution and the way it is structured, centralized or decentralized authority. If it is centralized, upper level administration will make this decision, if it is decentralized the department chair will have the authority to make the hiring decision. To manage effectively, authority to hire, assign jobs, and reward based on performance is crucial, as it enables a manager to build a capable team, align tasks with skills, and motivate employees. This authority supports effective management by ensuring the right people are in the right roles and are incentivized to perform well. Interview Summary: The chairperson of an academic department typically has the authority to recommend hires and assign faculty to courses, but often requires approval from higher administration for final hiring decisions and major salary adjustments. Reward mechanisms might be limited to departmental recognition rather than financial incentives, which are controlled by the institution’s central administration. 4. What implications for managerial spans of control can be expected in organizations that downsize? What additional demands will be placed on remaining managers after downsizing? Answer: Downsizing has direct implications for the span of control. Downsizing reduces the number of all employees, but relatively more managers (usually middle managers) than nonmanagers. This increases the number of nonmanagers per manager; consequently, the average span of control of each manager increases. Whether the factors of required contact, degree of specialization, and ability to communicate have any bearing on the resultant spans of control can be debated. 5. Describe managerial skills and behaviors that would be required to manage effectively in a functional department. Are these skills and behaviors different from those required in a product department? Explain. Answer: Management skills and behaviors are universal; however, they may vary from one organization structure to another derived from the type of organization structure and the level of management within the hierarchy. A functional organization structure is generally found in a small organization with a narrow product line such as finance, marketing, and or production. It increases efficiency because of boosting highly efficient units or departments. The structure encourages a specialist perspective and interest, which may displace organizational goals for departmental goals. A product organization is one derived from a product that is being produced or sold. This places all jobs associated with producing/selling a product/service under the direction of one manager allowing personnel to develop expertise in researching, making and distributing a product line, and fostering initiative and autonomy among division managers by providing them the resources needed to carry out their profit plans. The skill level of technical, humanistic, and conceptual skills will vary based on the level of management and the organization mission, strategies, and culture that may vary to a slight degree from one organization to another. Management skills are primarily the same; however, each organization structure will vary from firm to firm and industry to industry. 6. For what type of organization you would want prefer to work? Organic or mechanistic? Explain. Answer: When considering a mechanistic organization it is more formal, principles will guide management in decision-making. Henri Fayol developed four principles called the principle of specialization, the principle of unity of direction, the principle of authority and responsibility, and the scalar chain principle. A mechanistic form of bureaucracy developed by Max Weber was formal and impersonal of management and employees. In a mechanistic structure we go by the rulebook and will not deviate from operating procedures. The mechanistic model achieves high levels of production and efficiency due to its structural characteristics. The organic structure is flexible to changing environmental demands because its design encourages greater utilization of the human potential. An organizational design that provides individuals with this sense of personal worth and motivation and that facilitates satisfaction, flexibility and development would have the following characteristics. It is relatively simple because of its de-emphasis of specialization and its emphasis on increasing job range. It is relatively decentralized because of its emphasis on delegation of authority and increasing job depth. It is relatively informal because of its emphasis on product and customer as bases for departments. It would be easier to change a mechanistic organization to an organic type structure. A contemporary approach is to create an informal organization that is open, decentralizes its operation, and builds upon employee job satisfaction. Individuals are challenged and must be responsible for completion of tasks and performance of their jobs. Flextime, flex schedules, telecommuting, a job enriching activities become a reality. 7. What in your experience has been the dominant contingency factor in the design of the organizations in which you have worked? Technology? Environmental uncertainty? Answer: Student responses will vary as to dominant contingency factors they have experienced in the work environment. Contingency factors such as working for a high tech firm are a reality today. Individuals may have exposure to computers, computer applications that will touch every employee in an organization. No matter what job, department, or organization computers impact every one of us. Individuals working in technology driven firms must be skilled to perform their jobs in a cost-effective manner. Individuals that are challenged by environmental uncertainty are working in a dynamic ever-changing field of operation. These individuals work in a firm that has a great deal of change and chaos challenging the firm and industry daily. Such industries as computers, pharmaceuticals, and energy related firms are characterized by a great deal of environmental uncertainty. In my experience, technology has often been the dominant contingency factor in the design of organizations. Technology influences how work is structured, communication flows, and the efficiency of processes. While environmental uncertainty is also significant, technology typically drives key decisions about organizational design and operational efficiency. 8. Use the characteristics of mechanistic and organic organizations to describe two different organizations that you know about. After determining the organizational differences, see if you can relate the differences to technological and environmental differences. Answer: While student responses will vary. The characteristics of mechanistic versus organic organizations will vary. Mechanistic structures are more formal, more structured, and will emphasize policies, procedures and rules to be performed by management and operating employees. The characteristics of an organic organization are generally smaller firms, creating flexibility and adaptability and contingency approaches to management application. The degree of technology will determine whether a firm is mechanistic or organic in structure. Larger mass producing organizations tend to be more mechanistic, such as found in steel and automotive industries. Organic organizations are found in high tech operations such as computer software applications and smaller organization structures. The degree of environmental uncertainty will impact the type of organization structure. With greater environmental certainty an organization is more likely to be mechanistic. The opposite of increased environmental uncertainty the organization is more likely to be organic. The important consideration is if a firm is competing in a stable versus a dynamic industry. Mechanistic Organization: A traditional manufacturing company with a rigid hierarchy, standardized procedures, and clear, centralized decision-making. This structure suits stable environments and routine tasks, emphasizing efficiency and control. Organic Organization: A tech startup with a flexible structure, decentralized decision-making, and adaptive roles. This setup supports innovation and rapid response to market changes, fitting a dynamic environment and evolving technology. Relating Differences: The mechanistic organization’s stability aligns with a stable technological environment, while the organic organization’s flexibility matches the fast-paced, tech-driven market, demonstrating how technology and environmental factors influence organizational design. 9. Think about the organizational design of your current organization or the school you are attending. Which organizational design discussed in this chapter best describes your current organization or school? Explain the reasons for your choice. Answer: My current organization or school is best described by the organic organizational design. This design features flexible roles, decentralized decision-making, and adaptive structures, which facilitate innovation and responsiveness to changing needs. In a school setting, this allows for dynamic teaching methods, collaboration among faculty, and adaptability to students' needs, reflecting an environment that values flexibility and responsiveness. 10. Assume that you are starting your own business and want the organizational structure to be a virtual one. What are the advantages and disadvantages of creating such a virtual organization? Explain. Answer: Some advantages to creating a virtual organization include partnering with other firms who can be closer to the market with the ability to respond at a local level. A virtual organization would, in effect, allow you to “subcontract” many aspects of the organization thus avoiding the need to locally employee all areas of expertise. Disadvantages can include communication and lack of control. Virtual communication can be a challenge due to time zones, cultural differences, language, and so on. Having a virtual organization requires principles to give up control and authority to outside entities. Case For Analysis: Defining the Role of a Liaison Officer Case Summary The human resource department was created by a governor of one of the fifty states. The reorganization consolidated 19 separate units into The Bureau for Administration and Operations. There were major problems traceable to the formation of this new department. Employees were subjected to job change as well as operating procedures. Employees were now expected to perform work for all bureaus. They had to revise forms, procedures, computer programs, accounts and records to conform to the new department’s policies. These operating procedures were ineffective; there were cost overruns. Payrolls were late and inaccurate; payments to vendors and clients were delayed; and personnel actions got lost in the paperwork. Because of these problems the integrity of the services offered by the department broke down. The executive staff became involved with these issues and was not a viable solution to the problem. The BAO commissioner was charged to become involved to provide the leadership and solutions to the problems that were occurring. He met with his staff concerning these problems and an administrative liaison was named to deal with these procedural problems of the four bureaus. Answers to Case Questions 1. Evaluate the concept of “administrative liaison officer” as a strategy for achieving integration. Is this an example of the mutual adjustment strategy? Answer: The liaison between the four departments is recommended because there is a need to integrate the bureaus. Communication and problem solving abilities are needed for this liaison individual to be effective in identifying and resolving problems as they accrue. The strategy integration is recommended due to the breakdown of the system where cost effective operating procedures are required among the bureaus. This indeed is an example of the mutual adjustment strategy to promote harmony, communication and problem solving abilities to be integrated in and throughout this system. This liaison individual should implement a strategy that is integrated, cost effective, and increases an open door policy in and throughout the four bureaus. 2. How will the officers achieve integration when they will have no authority over either the administrative functions or the programs to be integrated? Answer: The officers of the four bureaus must be able to communicate, identify problems as they accrue and integrate the four functional bureaus to work together as a team and become interdependent in their communication as this reorganization takes place. Assuming no authority has been delegated, they must be held accountable and responsible for the four bureaus to be integrated to function as a whole system. The abilities and skills of these four liaison administrators should be able to function as a staff to support the line functional bureaus. 3. What would be the most important personal characteristics to look for in an applicant for these positions? Answer: The most important personal characteristic of administrative officers would be communication and problem solving skills to perform this job. The ability to troubleshoot is important due to the problems that may accrue in integrating the four bureaus. One must be able to coordinate work activities to enhance openness, harmony, and the creation of job satisfaction to permit the bureaus to work together to achieve their goals. Experiential Exercise: Identifying and Changing Organization Design Objective 1. To increase the reader’s understanding of different organization designs. The Exercise in Class Student suggestions would be to interview college administrators and staff to understand their job description in relation to other jobs being performed in the departmental unit. It is important to recognize how each subsystem should be integrated to form the whole system. Have students report on their conclusions whether or not the system they are investigating is an open or closed system. A suggestion could be the establishment of an organization or a chain of command that would reflect the scalar chain. Ten Term Paper Topics 1. Prescription for Determining Effective Spans of Control 2. (Selected organization): An Analysis of a Product Departmentalization Design 3. The Strengths and Shortcomings of Delegation 4. Departmentalization Bases and Employee Satisfaction: An Overview of the Relationship 5. The Organizational Structure of (selected organization): A Critique 6. The Pros and Cons of Creating Highly Specialized Jobs 7. Comparing and Contrasting Mechanistic to Organic Organizations. 8. (Selected organization): Profile of a Matrix Departmentalization Design 9. The Impact of Organizational Structure on Performance 10. Organizational Design: An Historical Overview of the Evolution of a Selected Organization's Structure Instructor Manual for Organizations: Behavior, Structure, Processes James L. Gibson, John M. Ivancevich, James H. Donnally, Robert Konopaske 9780078112669, 9781259097232, 9780071086417, 9780071315272
Download
Close
Close
