Module 1 - Lists

LESSON 2

Lesson 2: Four Common Organizational Structures and Six Related Theories

Teams structures typically organize

people to cooperate on a mutually beneficial goal or project.

Divisional structures typically organize by

product lines or regions.

Some organizations also choose a hybrid method and incorporate components of

two or more of these structures to better suit their needs.

1 The hierarchical chain of command typically flows from top management and executive officers down through ...

levels of management and onto staff and employees.

1 Contemporary and team-based structures are more flexible and assemble employees to

respond quickly to dynamic business environments.

1 Hierarchy of authority is essentially the chain of command—a control mechanism for making sure

the right people do the right things at the right time.

1 Regardless of the structural framework a company chooses to implement, all managers must first consider

what kind of work needs to be done within the organization.

Fayol's theory focuses on the following five elements of management:

Planning: Managers should draft strategies and objectives to determine the stages of the plan and the technology necessary to implement it. Organizing: Managers must organize and provide the resources necessary to execute the plan, including raw materials, tools, capital, and human resources. Command (delegation): Managers must utilize authority and gain a thorough understanding of long-term goals to delegate tasks and make decisions for the betterment of the organization. Coordination: High-level managers must work to integrate all activities to facilitate organizational success. Communication is key to success in this component. Monitoring: Managers must compare the activities of the personnel to the plan of action; this is the evaluation component of management.

six organizational theories and learn how they align to the four organizational structures

Scientific management theory is applicable to all organizational structures. Bureaucratic theory applies to functional and divisional organizational structures. Administrative theory applies to functional and divisional organizational structures. Neoclassical theory applies to matrix and divisional organizational structures. Modern theory applies to the matrix and teams organizational structures. Contingency/situational theory focuses on ongoing interconnection between the operating environment and all organizational structures.

2. Functional or departmental: This structure is based on the primary functions performed within an

1. organizational unit or 2. department, such as marketing, finance, production, sales, customer service, and so on.

2 As many organizations strive to integrate themselves into capitalistic societies, they initiate a ripple effect between

1. other competing companies and 2. already-existing economic pressures.

2 In today's dynamic business environment, organizational structures need to be designed so the organization can ...

1. quickly respond to new competitive threats and 2. quickly respond to changing customer needs.

six common organizational theories:

1. scientific management, 2. bureaucratic, 3. administrative, 4. neoclassical, 5. modern, and 6. contingency or situational.

3 Organizations can encounter various types of changes, including ...

1. structural, 2. technological, and 3. cultural changes.

3 In evaluating these changes, organizations have to consider ...

1. the dimensions of the scope, 2. level, and 3. intentionality of change.

2 Future success for companies will depend on ...

1. their ability to be flexible and 2. respond to the needs of customers.

3 Typically, organizations base their frameworks on

1. traditional, 2. contemporary, or 3. team-based approaches.

1 Matrix: This structure often combines ...

1. two different departments from complementary functional areas, such as manufacturing and marketing, specifically to work on a special project.

High Centralization One advantage to being highly centralized within an organizational structure, depending on the degree of centralization, is efficiency due to the CEO and other chief officers making the decisions and setting objectives for managers and team members to follow.

A disadvantage is primarily having too many levels of bureaucracy, which in turn often leads to lower productivity

Informal If the level of formality is more informal within an organizational structure, the organization operates by an employee-developed system instead of using a written document of rules or a chain of command.

The informality typically extends to a business-casual dress code and the use of first names when addressing other people within the organization while still respecting titles and positions.

Formal If the level of formality is very formal within an organizational structure, there will likely be written documentation that provides standards and an organizational chart that visually depicts each management level and how it works.

This is typically based on the hierarchal pyramid.

Functions and Departments

Functions and Departments

LEVEL OF FORMALITY

LEVEL OF FORMALITY

Lesson 1: Primary Influential Factors in an Organization

Learning Objectives: Identify the primary factors that influence an organizational structure and their roles.

Module 1: Organizational Design

Module 1: Proficiency Statement. Given a limited business scenario, the student describes ways that the organizational structure can affect the business.

1 Functions and departments help establish ...

division of labor relevant to designated tasks.

Functional structures typically organize similarly skilled workers into

groups or departments to work together on the same project or goal.

3 Understanding the connections between ...

1. goals, 2. structure, and 3. effectiveness is essential for an organization's success.

4 The level of formality in an organization applies to the

1. implementation of rules, 2. procedures, and 3. guidelines, as well as 4. behavioral norms and expectations.

2 The structure or arrangement of components within an organization helps serve its ...

1. mission and 2. channels the behavior of its members.

4 Some of the primary factors that influence and direct organizational structure, along with the roles they serve, include the following:

1. Functions or departments 2. Chain of command 3. Centralized or decentralized 4. Level of formality

4 _________________ resources are deliberately connected to form the business organization.

1. Human, 2. material, 3. financial, and 4. information

5 An organization's structure is ...

1. essentially an end in itself, 2. a goal or purpose for its own sake, as it forms the framework for an organization. 3. Yet it also serves the higher purpose, 4. mission, or 5. goals of the organization.

2 Level of formality involves either ___________ or sometimes a combination of (or range between) both, depending on the needs of the organization.

1. formal or 2. informal business elements

6 Traditional structures are more rigid and group employees by

1. function, 2. products, 3. processes, 4. customers, or 5. regions.

2 Divisional: This structure typically groups each organizational function into ...

1. a division, 2. geographical division

3 Teams: This structure is a newer type of organizational structure that includes ...

1. a group of workers, 2. with complementary skills, 3. all working toward a common goal such as a specific project.

3 Formal organizations have well-defined lines of

1. authority, 2. channels for information flow, and 3. means of control.

2 Developments in organizations help

1. boost economic potential in a society and 2. help generate the tools necessary to fuel its capitalistic system.

2 Decision-making can be either

1. centralized—top executives make the primary decisions—or 2. decentralized—managers and corporate personnel are authorized to make decisions.

2 The chain of command is a factor within an organizational structure that establishes procedures regarding

1. control and 2. decision-making.

2 Some organizations also use a hybrid method that incorporates components of two or more of these structures. Most common in this category is the matrix structure, which often combines...

1. divisional and 2. teams structural features.

2 The structure or design of an organization influences its ...

1. effectiveness and 2. success.

four common organizational structures—

1. functional or departmental, 2. divisional, 3. matrix, and 4. teams.

CENTRALIZATION OR DECENTRALIZATION

CENTRALIZATION OR DECENTRALIZATION

CHAIN OF COMMAND

CHAIN OF COMMAND

Functions and departments within an organizational structure include distinct advantages and disadvantages: Advantages Grouping employees by function, knowledge, and skill levels inspires higher levels of productivity and performance. Establishing fixed roles and responsibilities facilitates greater levels of accountability and security. Reporting to one manager or supervisor streamlines overall communications. Cooperating and communicating within the department maintains a higher level of clarity. Working in one department does not preclude employees from pursuing career growth into another department.

Disadvantages Boredom may result if employees feel their roles are monotonous or repetitive. Feelings of low morale and conflicts may arise if performance reviews or appraisals are not handled fairly. Paying more to highly skilled employees increases costs for the department. Communicating between departments is weak and problematic for coordination, flexibility, innovation, and teamwork. Adapting to change may be difficult due to the rigidity of the structure. Making decisions may result in delays and is usually done without consulting with team members.

Each design choice, such as a more traditional or rigid chain of command, has its own distinct advantages and disadvantages when applied to an organization's structure. Advantages It clearly defines the reporting relationships to let everyone know who is responsible for different tasks, including providing information and direction, and who has authority and responsibility to assign tasks. Only one boss or manager oversees and bears responsibility and accountability for his or her own group of employees. Confusion is alleviated over who to approach for any type of assistance, resources, or feedback. Job titles indicate who is responsible for various types of decisions and tasks within the organization.

Disadvantages Restricted decision-making and authority or autonomy by only those in top management tiers does not necessarily work well in today's more complex and multifaceted organizations. New ways of communicating in intellectual and technical jobs often requires more rapid decision-making, which is impeded by following the traditional chain of command. Readily available information from multiple sources to inform decisions and actions means a chain of command structure is not necessary or efficient. Direct communication in a dynamic work environment is essential and requires greater flexibility and speed than in a chain-of-command structure. Autonomy and the ability to respond quickly are necessary for response in a timely manner (Heathfield, 2018).

Advantages of being formal within an organizational structure include the following: All roles and responsibilities are clearly delineated for every member of the organization, so there is no confusion about who does what. The formal chain of command within the structure helps keep business operations and processes under control. An established protocol is in place for decision-making and the implementation of business instructions.

Disadvantages of being formal within an organizational structure include the following: Disadvantages of being formal within an organizational structure include the following: Business decisions often take too long to move through levels of bureaucracy. A disconnect often exists between departments, and between managers and employees.

Advantages of being informal within an organizational structure include the following: It is easily adaptable to change. Organizational shifts in response to external influences can happen quickly and efficiently.

Disadvantages of being informal within an organizational structure include the following: It can easily become too informal and cause disorganization, confusion, and misinterpretations of communications. Employee decisions may lack input from management and turn out to be poor or wrong and not in the best interest of the organization (Quain, 2019).

Low Centralization or Decentralization Advantages to the decentralized structure in organizations are the use of a team environment and shared expertise among managers and team members.

Disadvantages often include differences of opinion and difficulty in getting everyone to agree with the best decisions for the company

Matrix structures typically organize by

combining people from different departments who have complementary strengths, such as production and marketing.