Chapter 16: Organizational Design and Structure

The problems that occur when there are too many rules

1. excessive formalization or too many rules can "straitjacket" employees and prevent them from responding creatively and flexibly to new situations. 2. employees used to following rules eventually do this without thinking about their consequences and in some situations this can reduce the quality of organizational decision making -- or even result in a crisis. 3. too much emphasis on following existing rules and procedures can make it especially difficult for an organization to change when contingencies change and develop new rules, or adopt new ways of organizing, to improve performance.

Virtual Organization

A company that operates largely using new information technology where people and functions are linked through company Intranets and databases.

Geographic Structure

A division organizational structure that groups functions by region so that each division contains the functions it needs to service customers in a specific geographic area.

Market Structure

A divisional organizational structure that groups functions by types of customers so that each division contains the functions it needs to service a specific segment of the market.

Product Structure

A divisional organizational structure that groups functions by types of product so that each division contains the functions it needs to service the products it produces.

Division

A group of functions created to allow an organization to produce and dispose of a particular kind of good or service to customers.

Function

A group of people who perform the same types of tasks or hold similar positions in an organization.

Mass-production technology

A method of production using automated machines programmed to perform the same operations time and time again.

Divisional Structure

A structure that groups employees into functions but who then focus their activities on making a particular product or serving a specific type of customer.

Hierarchy of Authority

An organization's chain of command that defines the relative authority of each level management.

Mechanistic Structure

An organizational structure designed to induce employees to behave in predictable, accountable ways. In mechanistic structure, decision-making authority is retained at the top of the organization, each employee performs a clearly defined task, and each knows exactly what his/her area of responsibility is.

Organic Structure

An organizational structure designed to promote flexibility so that employees can initiate change and adapt quickly to changing conditions.

Functional Structure

An organizational structure that groups together people who hold similar positions, perform a similar set of tasks, or use the same kinds of skills.

Matrix Structure

An organizational structure that simultaneously groups people by function and by product team.

Disadvantages of Functional Structure

As an organization grows and its activities become more diverse and complex, a functional structure may not longer allow it to coordinate its activities effectively. It may even hinder the organization for any one of the following reasons: 1. When a range of products or services that a company produces increases, its various functions can begin to experience difficulties. 2. Coordination problems may arise. As organizations attract customers with different needs, it may find it hard to service these different needs by using a single set of functions. 3. As companies grow, they often expand their operations nationally. Servicing the needs of different regional customers with a single set of manufacturing, sales, or purchasing functions becomes very difficult.

Disadvantages of a Matrix Structure

Can increase the role conflict and ambiguity, and high levels of stress within. Employees may have trouble demonstrating their personal contributions to team performance because the move so often from team to team.

Advantages of Divisional Structure

Coordination- because each division contains its own set of functions, functional groups are able to focus their activities on a specific kind of good, service, or customer. This narrow focus helps a division create high-quality products and provide high-quality customer service. Motivational- 1) gives rise to a new level of management (corporate management). Corporate managers' responsibility is to supervise and oversea the mangers of the various divisions. Divisional structure makes it easier for organizations to evaluate and reward the performance of individual divisions and their managers and reward them in a way that is closely linked to their performance.

Advantages of Matrix Structure

Coordination: flexibility allows an an organization to make best use of its human resources. Motivational: provides a work setting giving employees freedom and autonomy over their work activities.

Advantages of a Functional Structure

Coordination: people grouped by similarities can easily communicate and share information with each other. Motivational: when employees are grouped by function, supervisors are in a good position to monitor individual performance, reward high performance, and discourage social loafing.

Types of Integrating Mechanisms

Direct contact: managers from different functions establish face-to-face working relationships that allow them to solve common problems informally without having to go through the form channels of authority in the hierarchy. Liaison roles: giving specific functional managers the formal responsibility of communicating with managers in another function to solve common problems. Teams & Task Forces: organizations often create teams and task forces composed of employees from different functions to facilitate communication and cooperation. Cross Functional Team: consists of people from different functions who are permanently assigned to work full time on a team to bring a new good or service to the market.

The effects of IT inside organizations

IT increases communications and coordination and promotes mutual adjustment among teams, functions and divisions. It permits greater decentralization of decision making because employees have instant access to the information they need to make a decision. IT permits organizations to no longer nee tall management hierarchies.

3 reasons a company would use the matrix structure:

It needs to develop new products rapidly. It needs to maximize communication and cooperation between team members. Innovation and creativity are key to the organization's continuing success.

Disadvantages of Divisional Structure

Operating costs increase, communication may suffer, divisions may start to compete for organizational resources and pursue their own goals at the expense of organizational goals.

Standardizing Outputs

Organization specifies what the final output of its employees must be to achieve its goals. By using specific goals and targets to measure the performance of individuals and groups, an organization increases the control it has over their activities.

Contingency Theory

Organizational structure should be designed to match the set of contingencies-- factors or conditions-- that cause an organization the most uncertainty. 3 contingencies: the organization environment the organization's technology human resources and the employee relationship

Integrating Mechanisms

Organizing tools used to increase communication and coordination among functions and divisions.

The Minimum Chain of Command

States that an organization should operate with the fewest hierarchical levels necessary to organize and control its activities effectively. By following this principal, managers scrutinize their hierarchies to ensure they do not become too tall.

Technology

The combination of skills, knowledge, tools, machines, computers, and equipment used in the design, production, and distribution of goods and services.

Organizational Environment

The more quickly forces in the environment are changing, the greater the uncertainty within it, and the greater are the problems of accessing the resources an organization needs to perform at a high level such as additional computers, machinery, and skilled employees. In contrast, if the environment is stable, resources are readily available and uncertainty is less, then less coordination and communication among people and functions is needed to obtain resources.

Span of Control

The number of employees who report to a specific manager.

Authority

The power that enables one person to hold another personal accountable for his or her actions.

Continuous-process technology

a method of production involving the use of automated machines working in sequence an controlled through computers from a central monitoring station.

Small-batch technology

a method used to produce small quantities of customized, one-of-a-kind products based on the skills of people who work together in small groups.

Most organizations group jobs together by __________ and choose a ____________ structure.

function; functional

Flat organizations

have few hierarchical levels.

Tall Organizations

have many hierarchical levels relative to their size

Standardization

the development of programmed responses, performance standards, written rules, and standard operating procedures that specify how people and groups should respond to recurring opportunities or problems.

Organizational Structure

the formal system of task and job reporting relationships that determines how employees use resources to achieve the organization's goals.

Human Resources and the Employment Relationship

the more highly skilled an organization's work force, or the more a company relies on empowered work teams to find ways to improve performance, the more likely are employees to work together in groups or teams to perform their tasks. The longer and more harmonious the employment relationship a company has with its employees, the more likely it is to choose a structure that allows them the freedom to make important decisions. Highly skilled employees usually desire freedom and autonomy and dislike close supervision. When people work in teams like doctors and nurses and groups of research scientists do, they must be able to interact freely. A more flexible organizational structure makes this possible. When it comes to designing an organizational structure, both the work and the people who it are important.

Mutual Adjustment

the ongoing informal communication among different people and functions that is necessary for an organization to achieve its goals.

Organizing

the process of establishing the structure of working relationships among employees to allow them to achieve organizational goals effectively.

Organizational Design

the process of making the specific choices about how to arrange the tasks and job relationships that comprise the organizational structure.

Formalization

the use of rules and standard operating procedures to control an organization's activities. The more an organization can rely on formalization to specify required behaviors, the less it needs to use either direct supervision from the hierarchy or rely on some type of mutual adjustment.

Standardizing the Conversion Process

to standardize the conversion process an organization uses to make or create the final product, organizations specify the kinds of behavior they expect from their employees. When these behaviors are specified, both people and groups are likely to act consistently in ways that allow an organization to achieve its goals.