Why do we care about Organizational Structure
- Organizational structure is about the flow of capital and information
- Defines how work is accomplished, what employees do and how that is connected to coworkers and the organization’s goals
6 elements of organization structure
- To what degree are tasks subdivided into separate jobs? Work Specialization
- On what basis will jobs be grouped together? Departmentalization
- To whom do individuals and groups report? Chain of Command
- How many individuals can a manager efficiently and effectively handle? Span of Control
- Where does decision-making authority lie? Centralization and Decentralization
- To what degree will there be rules and regulations to direct employees and managers? Formalization
Work Specialization
- Subdividing work into separate jobs assigned to different people Division of Labour
- Pros:
- Potentially increases work efficiency.
- Less time changing tasks, putting equipment away
- Easier to train employees.
- Cons:
- Boredom, stress, low productivity, high turnover, increased absenteeism
- Necessary as the company grows and work becomes more complex
Departmentalization
- Specifies how employees and activities are grouped
- Types of departmentalization:
- Functional- based on work performed E.g. engineering, accounting, human resources, info systems
- Product- based on product areas in the organization E.g. women’s apparel, men’s footwear
- Geographic- based on the location served
E.g. North, South, Midwest - Process - based on workflow e.g. testing, payment
- Customer - based on customers’ problems and needs E.g. wholesale, retail, government
Chain of Command
A continuous line of authority that extends from the upper levels to the lowest level and clarifies who reports to whom
- Authority: Who has the right to give orders and expect them to be obeyed
- Delegation: Assignment of authority to another person to carry out specific duties, allowing the employee to make some of the decisions
- Unity of Command: Subordinates should have one superior
Formalization
- To what extent are there clear rules, regulations, and procedures for how things should be done?
Bureaucracy:
Job specialization
High departmentalization
Narrow spans of control
Centralized authority
A clear chain of command
Formalized rules
Simple Structure:
Low departmentalization
Wide spans of control
Centralized (single person)
Little formalization
Matrix Structure:
Combines functional and product departmentalization.
Has a dual chain of command
Mechanistic model
- High specialization
- Rigid departmentalization
- Clear chain of command
- Narrow spans of control
- Centralization
- High formalization
The organic Model
- Cross-functional teams
- Cross-hierarchical teams
- Free flow of information
- Wide spans of control
- Decentralization
- Low formalization
Mechanistic vs Organic
Mechanistic VS. Organic:
Strategy: Cost minimization - Innovation
Size: Bigger - Smaller
Technology: Routine - Non-routine
Environment; Certain - Uncertain
Culture: High power distance - Low power-distance
(De)Centralization
Who has decision-making authority?
- Varying degrees of centralization in different areas of the company
E.g., Sales are decentralized; info systems centralized
