1. Organizational
Structure

2. • Organizing: the process by which managers
establish working relationships among
employees to achieve goals.
– Organizational Structure: formal system of task &
reporting relationships showing how workers use
resources.
– Organizational design: managers make specific
choices resulting in a given organizational structure.
• Successful organizational design depends on
the organization’s unique situation.

3. Factors Affecting Organizational Design
Environment
Determine design
Determine design
Strategy or organizational Technology
or organizational
structure
structure
Human
Resources

4. Characteristics of a formal
organization
• Well defined rules and regulation
• Arbitrary structure
• Determined objectives and policies
• Status symbol
• Limitation on the activities of the individual
• Strict observance of the principle of co-ordination
• Messages are communicated through scalar
chain

5. Key characteristics of the informal
organization:
• evolving constantly
• grass roots
• dynamic and responsive
• excellent at motivation
• requires insider knowledge to be seen
• treats people as individuals
• flat and fluid
• cohered by trust and reciprocity
• difficult to pin down
• collective decision making
• essential for situations that change quickly or are not yet
fully understood

6. Reasons for informal organization:
• Informal standards: personal goals and interests of workers differ from
official organizational goals.
• Informal communication: changes of communication routes within an
enterprise due to personal relations between coworkers.
• Informal group: certain groups of coworkers have the same interests, or
(for example) the same origin.
• Informal leaders: due to general popularity, certain members of the
organization win more influence than originally intended.
• Different interests and preferences of coworkers.
• Different status of coworkers.
• Difficult work requirements.
• Unpleasant conditions of work.

7. Determinants of Structure
The environment: The quicker the environment
changes, the more problems face managers.
• Structure must be more flexible when environmental
change is rapid.
– Usually need to decentralize authority.
Strategy: Different strategies require the use of
different structures.
• A differentiation strategy needs a flexible structure,
low cost may need a more formal structure.
• Increased vertical integration or diversification also
requires a more flexible structure.

8. Determinants of Structure
– Technology: The combination of skills, knowledge,
tools, equipment, computers and machines used in the
organization.
• More complex technology makes it harder for managers to
regulate the organization. Technology can be measured by:
– Task Variety: new problems a manager encounters.
– Task Analyzability: programmed solutions available to a
manager to solve problems.
• High task variety and low analyzability present many unique
problems to managers.
– Flexible structure works best in these conditions.
• Low task variety and high analyzability allow managers to
rely on established procedures.

9. Technology & People
Small Batch Technology: produces small quantities
of one-of-a-kind products.
• Based on the skills of the workers who need a flexible
structure.
Mass Production Technology: automated machines
make high volumes of standard products.
• Workers perform repetitive tasks so a formal structure
works well.
Continuous Process Technology: totally mechanized
systems of automatic machines.
• Workers must watch for unexpected problems and react
quickly. A flexible structure is needed here.

10. Determinants of Structure
Human Resources: the final factor affecting
organizational structure.
• Higher skilled workers who need to work in teams usually
need a more flexible structure.
• Higher skilled workers often have professional norms
(CPA’s, physicians).
Managers must take into account all four
factors (environment, strategy, technology
and human resources) when designing the
structure of the organization.

11. Job Design
• Job Design: group tasks into specific jobs.
• Results in a division of labor between workers that is
effective and efficient.
– Job simplification: reduction of the tasks each
worker performs.
• Too much and boredom results.
– Job enlargement: increase tasks for a given job to
reduce boredom.
– Job enrichment: increases the degree of
responsibility a worker has over a job.
• can lead to increased worker involvement.

12. Job Characteristics Model
Skill Variety
Skill Variety Meaningfulness
Task Identity Meaningfulness
Task Identity of work
of work
Task Significance
Task Significance
Responsibility
Responsibility High:
High:
Autonomy for Work
for Work
Autonomy Outcomes
Motivation
Motivation
Outcomes Performance
Performance
Satisfaction
Satisfaction
Knowledge of
Knowledge of
Feedback
Feedback results of
results of
work
work

13. Job Characteristics Model
Jobs have five characteristics describing extent of:
– Skill variety: employee uses a wide range of skills
– Task identity: worker involved in all tasks of job from
beginning to end of the production process
– Task significance: worker feels the task is meaningful to
organization.
– Autonomy: employee has freedom to schedule tasks and
carry them out.
– Feedback: worker gets direct information about how well
the job is done.
These affect the motivation, satisfaction and
performance of employees.

14. Grouping Jobs into Functions
• Once tasks are grouped into jobs, managers
must decide how to group jobs together.
– Function: people working together with similar
skills, tools or techniques to perform their jobs.
• Functional structure consists of departments such
as marketing, production, and finance.
Pros – Workers can learn from others doing similar tasks.
Pros
– Easy for managers to monitor and evaluate workers.
– Hard for one department to communicate with others.
Cons
Cons – Managers can become preoccupied with their
department and forget the firm

15. A Sample of Pier 1’s Functional Structure
C la r k J o h n s o n
C E O
E x e c . V .P . S e n io r V . P . S e n io r V . P .
F in a n c e & A d m in . S to re s L o g is t ic s
V .P . T a x V . P . C o n t r o lle r V .P .
D is t r ib u t io n
V .P . M IS D ir e c t o r
C o r p . P la n n in g D ir e c t o r
T r a n s p o r t a t io n

16. Divisional Structures
• A division is a collection of functions working
together to produce a product.
• Divisions create smaller, manageable parts of a firm.
Divisions develop a business-level strategy to compete.
A division has marketing, finance, and other functions.
Functional managers report to divisional managers who then report
to corporate management.
– Product structure: divisions created according to the
type of product or service.
– Geographic structure: divisions based on the area of
a country or world served.
– Market structure: divisions based on the types of
customers served.

17. Product Structure
CEO
C o r p o r a tio n
C o rp o ra te
M a n a g e rs
W a s h in g M a c h in e L ig h tin g T e le v is io n
D iv is io n D iv is io n D iv is io n

18. Geographic Structure
CEO
C o r p o r a tio n
C o rp o ra te
M a n a g e rs
N o rth e rn W e s te rn S o u th e rn E a s te rn
R e g io n R e g io n R e g io n R e g io n

19. Market Structure
CEO
C o r p o r a tio n
C o rp o ra te
M a n a g e rs
L a r g e B u s in e s s S m a ll B u s in e s s E d u c a tio n a l In d iv id u a l
C u s to m e rs C u s to m e rs In s titu tio n s C u s to m e rs

20. Global Structures
• When managers find different problems or
demands across the globe, global solutions are
needed.
– Global geographic structure: different divisions
serve each world region.
• For customer needs that vary between regions.
– Global product structure: Customers in different
regions buy similar products so firms keep most
functional work at home and set up a division to
market product abroad.

21. Matrix & Product Teams
– Matrix structure: managers group people by
function and product teams simultaneously.
• Results in a complex network of reporting relationships.
• Very flexible and can respond rapidly to change.
• Each employee has two bosses which can cause
problems.
– Functional manager gives different directions than
product manager and employee cannot satisfy both.
– Product Team Structure: no 2-way reporting and
the members are permanently assigned to the team
and empowered to bring a product to market.

22. Matrix management

23. The advantages of a matrix
include:
• The advantages of a matrix include:
• Individuals can be chosen according to the needs
of the project.
• The use of a project team that is dynamic and
able to view problems in a different way as
specialists have been brought together in a new
environment.
• Project managers are directly responsible for
completing the project within a specific deadline
and budget.

24. The disadvantages are
• A conflict of loyalty between line managers
and project managers over the allocation of
resources.
• Projects can be difficult to monitor if teams
have a lot of independence.
• Costs can be increased if more managers (i.e.
project managers) are created through the
use of project teams.

25. Product Team Structure
CEO
Func.
Managers
Sales Design Production
Manufacturing Manufacturing Manufacturing
= Product Team Manager = Team member

26. Hybrid Structures
• Many large organizations have divisional
structures where each manager can select the
best structure for that particular division.
– One division may use a functional structure, one
geographic, and so on.
• This ability to break a large organization into
many smaller ones makes it much easier to
manage.

27. Coordinating Functions
•To ensure sufficient coordination between
functions, managers delegate authority.
– Authority: the power vested in the manager to
make decisions and use resources.
– Hierarchy of authority: describes the relative
authority each manager has from top to bottom.
• Span of Control: refers to the number of workers a
manager manages.
• Line authority: managers in the direct chain of command
for production of goods or services. Example: Sales
• Staff authority: managers in positions that give advice to
line managers. Example: Legal

28. Tall & Flat Organizations
– Tall structures have many levels of authority
relative to the organization’s size.
• As levels in the hierarchy increase, communication gets
difficult.
• The extra levels result in more time being taken to
implement decisions.
• Communications can also become garbled as it is
repeated through the firm.
– Flat structures have few levels but wide spans of
control.
• Results in quick communications but can lead to
overworked managers.

29. Minimum Chain of Command
– Managers should carefully evaluate:
• Do they have the right number of middle managers?
• Can the structure be altered to reduce levels?
• Centralized v. Decentralized
– Decentralized operations puts more authority at
lower levels and leads to flat organizations.
• Workers must be able to reach decisions.
• Divisions and functions can begin to lose sight of
organizational goals and focus only on their small area.

30. Integrating Mechanisms
– Direct contact: get managers from different
divisions or functions together to solve mutual
problems.
– Liaison Roles: one manager in each area is
responsible for communication with other areas.
– Task Forces: temporary committees formed
across divisions to solve a specific problem.
– Cross-functional teams: works much like a
permanent task force that deals with recurring
problems.
– Matrix structure: already contains many
integrating mechanisms.

31. Strategic Alliances
• Strategic alliance: a formal agreement
committing two or more firms to exchange
resources to produce a good.
• Network Structure: a whole series of strategic
alliances.
– Created between suppliers, manufacturers, and
distributors.
• Toyota and Honda use many such alliances.
– Network structures allow firms to bring resources
together in a boundary-less organization.