3. Designing Organizational
Structures
0 After reading these sections, you should be able to:
1. Describe the departmentalization approach to
organizational structure
2. Explain organizational authority
3. Discuss the different methods for job design
6. Functional
Departmentalization
Advantages Disadvantages
Work done by highly
skilled specialists
Lowers costs through
reduced duplication
Communication and
coordination problems
are lessened
Cross-department
coordination can be
difficult
May lead to slower
decision making
Produces managers
with narrow
experiences
7. Product Departmentalization
United TechnologiesUnited Technologies
CarrierCarrier
Hamilton
Sundstrand
Hamilton
Sundstrand
ChubbChubb
OtisOtis
Pratt & WhitneyPratt & Whitney
UTC PowerUTC Power
--Administrative services
--Communication & public relations
--Customer service & support
--E-Business
--Engineering
--etc…
SikorskySikorsky
8. Product Departmentalization
Advantages Disadvantages
Focuses on customer
needs
Products and services
tailored to customer
needs
Duplication of
resources
Difficult to coordinate
across departments
Efforts to please
customers may hurt the
company
9. Customer Departmentalization
U.S.
Businesses
U.S.
Businesses
Local
Service
Local
Service
Supply Chain
Integration
Supply Chain
Integration
Local
Service
Local
Service
Sprint
Corporation
Sprint
Corporation
International
Businesses
International
Businesses
Long-
Distance
Service
Long-
Distance
Service
Logistics
Network
Logistics
Network
Long-
Distance
Service
Long-
Distance
Service
SolutionsSolutions Wireless
Services
Wireless
Services
Distribution
Centers
Distribution
Centers
Wireline &
Wireless
Services
Wireline &
Wireless
Services
Business
Solutions
Business
Solutions
Consumer
Solutions
Consumer
Solutions
Sprint
North Supply
Sprint
North Supply
Local Telecom
Division
Local Telecom
Division
(Partial Listing)
10. Customer Departmentalization
Advantages Disadvantages
Focuses on customer
needs
Products and services
tailored to customer
needs
Duplication of
resources
Difficult to coordinate
across departments
Efforts to please
customers may hurt the
company
12. Geographic Departmentalization
Advantages Disadvantages
Responsive to the
demands of different
market areas
Unique resources
located close to the
customer
Duplication of
resources
Difficult to coordinate
across departments
13. Matrix Departmentalization
Adapted from Exhibit 9.7
CitiGroup InternationalCitiGroup International
NorthNorth
AmericaAmerica
(excluding(excluding
Mexico)Mexico)
NorthNorth
AmericaAmerica
(excluding(excluding
Mexico)Mexico)
Europe,Europe,
Middle East,Middle East,
AfricaAfrica
Europe,Europe,
Middle East,Middle East,
AfricaAfrica
Asia PacificAsia PacificAsia PacificAsia Pacific
Global
Corporate &
Investment
Bank
Global
Corporate &
Investment
Bank
Global
Investment
Management
Global
Investment
Management
Global
Consumer
Global
Consumer
Smith BarneySmith Barney
Country
Managers in
Spain, UAE,
Kenya, etc.
Country
Managers in
Spain, UAE,
Kenya, etc.
Country
Managers in
China, Australia,
etc.
Country
Managers in
China, Australia,
etc.
14. Matrix Departmentalization
Advantages Disadvantages
Efficiently manage
large, complex tasks
Pool of available
resources
Requires high levels
of coordination
Conflict between
bosses
Requires high levels of
management skills
16. Chain of Command
0 The vertical line of authority in an organization
0 Clarifies who reports to whom
0 Unity of command
0 Workers report to only one boss
0 Matrix organization violate this principle
17. Line versus Staff Authority
0 Line authority
0 The right to command immediate subordinates in the
chain of command
0 Staff authority
0 The right to advise but not command others
20. How to be a More
Effective Delegator
1. Trust your staff to be a good job
2. Avoid seeing perfection
3. Give effective job instructions
4. Know your true interests
5. Follow up on progress
6. Praise the efforts of your staff
7. Don’t wait to the last minute to delegate
8. Ask questions, expect answer, assist employees
9. Provide the resources you would provide if doing the
assignment yourself
10. Delegate to the lowest possible level
21. Degree of Centralization
0 Centralization of authority
0 Primary authority is held by upper management
0 Decentralization
0 Significant authority is found in lower levels of the
organization
0 Standardization
0 Solving problems by applying rules, procedures, and
processes
22. Designing Organizational Processes
0 You should be able to:
0 Explain the methods that companies are using to
redesign international organizational processes (i.e.,
intra-organizational processes)
0 Describe the methods that companies are using to
redesign external organizational processes ( i.e., inter-
organizational processes)
24. Reengineering
0 The fundamental rethinking and radical resign of
business processes
0 Intended to achieve dramatic improvements in
performance
0 Change the orientation from vertical to horizontal
0 Changes task interdependence
26. Empowerment
Empowering
Worker
Permanently passing decision making
authority and responsibility from managers
to workers by giving them the information
and resources they need to make good
decisions
0 A feeling of intrinsic motivation
0 Workers perceive meaning in their work
0 Employees are capable of self-determination
31. Modular Organizations
Advantages Disadvantages
Can cost less to run than
traditional organization
Lets organizations focus on core
competencies
Loss of control from outscoring
May reduce their competitive
advantage
33. Virtual Organizations
Advantages Disadvantages
Let companies share cost
Fast and flexible
Being the best should provide
best service
Difficult to control the quality of
partners
Requires tremendous
management skills
