OB Foundations of Organizational Structure

Capacity

"The degree to which it can support growth." *) Rich and growing environments generate excess resources, which can buffer times of relative scarcity

Complexity

The degree of heterogeneity and concentration among environmental elements." Simple environments are homogeneous and concentrated. *) In contrast, environments characterized by heterogeneity and dispersion are called complex.

Environment

*) An organization's environment includes outside institutions or forces that can affect its performance, such as suppliers, customers, competitors, government regulatory agencies, and public pressure groups. *) Dynamic environments create significantly more uncertainty for managers than do static ones. *) To minimize uncertainty, managers may broaden their structure to sense and respond to threats. For example, most companies, including Pepsi and Southwest Airlines, have added social networking departments to counter negative information posted on blogs. *) Any organization's environment has three dimensions: capacity, volatility, and complexity.

Why are some organizations structured along mechanistic lines while others are organic?

*) An organization's structure is a means to help management achieve its objectives. *) Objectives derive from the organization's overall strategy. *) Structure should follow strategy *) Most current strategy frameworks focus on three strategy dimensions—innovation, cost minimization, and imitation

Disadvantage of Departmentalization

*) Department many not communicate well. *) Employee can take care of the department's goals rather than the organization's goals. *) People may not be trained to take different managerial task instead they become specialist.

Advantage of Centralization

*) Easier to implement common policies and practices for the whole business *) Prevent other parts of the business from becoming too independent. *) Easier to co-ordinate and control *) Economies of scale and overhead saving easier achieve

The advantages of Formalization

*) Formalization makes the process of succession routine. *) Increase the rationality of organization. *) Make explicit and visible the structure of relationships among organizational participants.

The advantage of matrix structure

*) Its strength is its ability to facilitate coordination when the organization has a multiplicity of complex and interdependent activities. *) The dual lines of authority reduce tendencies of departmental members to protect their worlds. *) It facilitates the efficient allocation of specialists.

Analyze the behavioral implications of different organizational designs

*) Not everyone prefers the freedom and flexibility of organic structures. *) Different factors stand out in different structures as well. *) In highly formalized, heavily structured, mechanistic organizations, the level of fairness in formal policies and procedures is a very important predictor of satisfaction. *) In more personal, individually adaptive organic organizations, employees value interpersonal justice more. *) Some people are most productive and satisfied when work tasks are standardized and ambiguity minimized—that is, in mechanistic structures. *) So, any discussion of the effect of organizational design on employee behavior has to address individual differences.

Culture has influence on the structure

*) Organizations that operate with people from high power-distance cultures, such as Greece, France, and most of Latin America, find their employees are much more accepting of mechanistic structures than are employees from low power-distance countries. *) So consider cultural differences along with individual differences when predicting how structure will affect employee performance and satisfaction.

Three dimensional model of the environment

*) The arrows indicate movement toward higher uncertainty. *) Thus, organizations that operate in environments characterized as scarce, dynamic, and complex face the greatest degree of uncertainty because they have high unpredictability, little room for error, and a diverse set of elements in the environment to monitor constantly. *) Given this three-dimensional definition of environment, we can offer some general conclusions about environmental uncertainty and structural arrangements. *)The more scarce, dynamic, and complex the environment, the more organic a structure should be. *) The more abundant, stable, and simple the environment, the more the mechanistic structure will be preferred

Chain of Command

*) The concepts are less relevant today because of technology and the trend of empowering employees. *) Operating employees make decisions previously reserved for management. *) The popularity of self-managed and cross-functional teams. *) Many organizations find most productive by enforcing the chain of command.

Let's consider employee preferences for work specialization, span of control, and centralization.

*) The evidence generally indicates that work specialization contributes to higher employee productivity—but at the price of reduced job satisfaction. *) Work specialization is not an unending source of higher productivity. - Problems start to surface, and productivity begins to suffer, when the human diseconomies of doing repetitive and narrow tasks overtake the economies of specialization. - As the workforce has become more highly educated and desirous of jobs that are intrinsically rewarding, we seem to reach the point at which productivity begins to decline more quickly than in the past. - There is still a segment of the workforce that prefers the routine and repetitiveness of highly specialized jobs. - Some individuals want work that makes minimal intellectual demands and provides the security of routine; for them, high work specialization is a source of job satisfaction. The question, of course, is whether they represent 2 percent of the workforce or 52 percent - we might conclude that negative behavioral outcomes from high specialization are most likely to surface in professional jobs occupied by individuals with high needs for personal growth and diversity. *) We might conclude that negative behavioral outcomes from high specialization are most likely to surface in professional jobs occupied by individuals with high needs for personal growth and diversity. - we would expect factors such as employees' experiences and abilities and the degree of structure in their tasks to explain when wide or narrow spans of control are likely to contribute to their performance and job satisfaction. - However, some evidence indicates that a manager's job satisfaction increases as the number of employees supervised increases. *) We find fairly strong evidence linking centralization and job satisfaction. In general, less centralized organizations have a greater amount of autonomy. And autonomy appears positively related to job satisfaction. But, again, while one employee may value freedom, another may find autonomous environments frustratingly ambiguous.

The leaner organization: Downsizing

*) The goal of the new organizational forms we've described is to improve responsiveness by creating a lean, focused, and flexible organization. *) Downsizing is a systematic effort to make an organization leaner by selling off business units, closing locations, or reducing staff. It has been very controversial because of its potential negative impacts on employees. *) Some companies downsize to focus on their core competencies. Some companies focus on lean management techniques to reduce bureaucracy and speed decision-making

The disadvantage of work specialization

*) The human diseconomies from specialization are boredom, fatigue, stress, low productivity, poor quality, increased absenteeism, and high turnover.

The disadvantage of matrix structure

*) The major disadvantages of the matrix lie in the confusion it creates, its propensity to foster power struggles, and the stress it places on individuals. *) Violation of unity-of-command concept increases ambiguity that often leads to conflict. *) Confusion and ambiguity also create the seeds of power struggles. *) Reporting to more than one boss introduces role conflict, and unclear expectations introduce role ambiguity

Summary

*) There are a few other take-home messages worth considering. *) Although specialization can bring efficiency, excessive specialization also can breed dissatisfaction and reduced motivation. *) Formal hierarchies offer advantages like unification of mission and goal while employees in excessively rigid hierarchies can feel they have no power or autonomy. *) As with specialization, the key is striking the right balance. *) Virtual and boundaryless forms are changing the face of many organizations. *) Contemporary managers should thoroughly understand their implications and recognize advantages and potential pitfalls. *) Organizational downsizing can lead to major cost savings and focus organizations around their core competencies, but it can leave workers dissatisfied and worried about the future of their jobs. *) When determining an appropriate organizational form, managers will need to consider scarcity, dynamism, and complexity of the environment and balance the organic and mechanistic elements appropriate to their organization's environment.

Organizational size

*) There is considerable evidence to support that an organization's size significantly affects its structure. *) large organizations are fairly mechanistic to begin with and adding an extra 500 employees won't have much effect on a 2,000 employee company. *) Large organizations—employing 2,000 or more people—tend to have more specialization, more departmentalization, more vertical levels, and more rules and regulations than do small organizations

The advantage of work specialization

*) Work can be performed more efficiently. *) employees can gain skills and expertise *) facilitate the process of selecting employees as well as decreasing training requirement *) allow manager to supervise more employees

Virtual organization

*) a small, core organization that outsources major business functions. *) virtual organization in which management outsources all the primary functions of the business. The core of the organization is a small group of executives whose job is to oversee directly any activities done in-house and to coordinate relationships with the other organizations that manufacture, distribute, and perform other crucial functions for the virtual organization. *) managers in virtual structures spend most of their time coordinating and controlling external relations, typically by way of computer-network links. *) The major advantage to the virtual organization is its flexibility, which allows individuals with an innovative idea and little money to successfully compete against larger, more established organizations. Virtual organizations also save a great deal of money by eliminating permanent offices and hierarchical roles. *) The primary drawback is that it reduces management's control over key parts of its business. They are in a state of perpetual flux and reorganization, which means roles, goals, and responsibilities are unclear, setting the stage for political behavior. *) Team members who are geographically dispersed and communicate infrequently find it difficult to share information and knowledge, which can limit innovation and slow response time. *) Cultural alignment and shared goals can be lost because of the low degree of interaction among members. *) some virtual organizations are less adaptable and innovative than those with well-established communication and collaboration networks.

Innovation strategy

*) a strategy that emphasizes the introduction of major new products and services *) Innovative firms will use competitive pay and benefits to attract top candidates and motivate employees to take risks. Some degree of mechanistic structure can actually benefit innovation. Well-developed communication channels, policies for enhancing long-term commitment, and clear channels of authority all may make it easier for rapid changes to occur smoothly. *) Organic: A loose structure; low specialization, low formalization, decentralized

Cost-minimizing strategy

*) a strategy that emphasizes tight cost controls, avoidance of unnecessary innovation or marketing expenses, and price cutting. *) Cost-minimizing organizations pursue fewer policies meant to develop commitment among their workforce. *) Mechanistic: Tight control; extensive work specialization, high formalization, high centralization

Imitation strategy

*) a strategy that seeks to move into new products or new markets only have their viability has already been proven. or *) try to both minimize risk and maximize opportunity for profit, moving new products or entering new markets only after innovators have proven their viability. *) Mechanistic and organic: Mix of loose with tight properties; tight controls over current activities and looser controls for new undertakings

Mechanistic model

*) a structure characterized by extensive departmentalization, high formalization, a limited information network, and centralization. *) it is synonymous with the bureaucracy. - High specialization - Rigid departmentalization - Clear chain of command - Narrow spans of control - Centralization - High formalization

Organic model

*) a structure that is flat, uses cross-hierarchal and cross-functional teams, has low foramzliation, possesses a comprehensive information network and relies on participative decision making *) The organic model looks a lot like the boundaryless organization. - Cross-functional teams - Cross-hierarchical teams - Free flow of information - Wide spans of control - Decentralization - Low formalization

Common organizational design: Simple structure

*) an organization structure characterized by a low degree of departmentalization, wide spans of control, authority centralized in a single person, and little formalization. *) it is flat organization *) usually has only tow or three vertical levels and one individual in whom that decision making authority is centralized. *) is most widely adopted in a small business *) The strength of the simple structure lies in its simplicity. It's fast, flexible, and inexpensive to operate, and accountability is clear. *) One major weakness is that it becomes increasingly inadequate as an organization grows, because its low formalization and high centralization tend to create information overload at the top.

Common organizational design: Matrix structure

*) an organization structure that creates dual lines of authority and combines functional and product departmentalization. *) It is used in advertising agencies, aerospace firms, research and development laboratories, construction companies, hospitals, government agencies, universities, management consulting firms, and entertainment companies. *) it combines two forms of departmentalization: 1) The strength of functional departmentalization putting like specialists together and the pooling and sharing of specialized resources across products Its major disadvantage is the difficulty of coordinating the tasks. Its major disadvantage is the difficulty of coordinating the tasks of diverse functional specialists on time and within budget. 2) Product departmentalization facilitates coordination. It provides clear responsibility for all activities related to a product, but with duplication of activities and costs.

Common organizational design: Bureaucracy

*) an organization structure with highly routine operating tasks achieved through specialization, very formalized rules and regulations, tasks that are grouped into functional departments, centralized authority, narrow spans of control, and decision making that follows the chain of command *) The bureaucracy's primary strength is in its ability to perform standardized activities in a highly efficient manner. *) Putting like specialties together in functional departments results in economies of scale, minimum duplication of personnel and equipment, etc. Bureaucracies get by nicely with less talented and less costly middle- and lower-level managers. *) The bureaucracy's weaknesses include that specialization creates subunit conflicts, functional unit goals can override the organization's goals. *) An obsessive concern with following the rules can develop. And, the bureaucracy is efficient only as long as employees confront familiar problems with programmed decision rules.

Bounderlyess organization

*) an organization that seeks to eliminate the chain of command, have limitless spans of control, and replace departments with empowered teams *) By removing vertical boundaries, management flattens the hierarchy and minimizes status and rank. *) It uses cross-hierarchical teams, participative decision-making practices, and 360-degree performance appraisals. *) Functional departments create horizontal boundaries that stifle interaction among functions, product lines, and units. The way to reduce them is to replace functional departments with cross-functional teams and organize activities around processes. *) Another way to lower horizontal barriers is to rotate people through different functional areas using lateral transfers. This approach turns specialists into generalists. *) When fully operational, the boundaryless organization also breaks down geographic barriers. *) The boundaryless organization provides one solution because it considers geography more of a tactical, logistical issue than a structural one. In short, the goal is to break down cultural barriers.

Wider Span

*) are more efficient in terms of cost *) They're consistent with firms' efforts to reduce costs, cut overhead, speed decision making, increase flexibility, get closer to customers, and empower employees. *) However, to ensure performance doesn't suffer because of these wider spans, organizations have been investing heavily in employee training. *) Managers recognize they can handle a wider span best when employees know their jobs inside and out or can turn to co-workers when they have questions. *) reduce effectiveness

Decentralized decision making

*) decision making is pushed down to the managers closest to the action or even to work groups *) A decentralized organization can act more quickly to solve problems, more people provide input into decisions, and employees are less likely to feel alienated from those who make decisions that affect their work lives. *) Management efforts to make organizations more flexible and responsive have produced a recent trend toward decentralized decision making by lower level managers, who are closer to the action and typically have more detailed knowledge about problems than top managers.

Narrow Span

*) maintain close control *) they are expensive because they add levels of management. *) they make vertical communication in the organization more complex. The added levels of hierarchy slow down decision making and tend to isolate upper management. *) narrow spans of control encourage overly tight supervision and discourage employee autonomy

Disadvantage of Centralization

*) more bureaucratic - often extra layers in the hierarchy *) Local or junior manager are likely to much closer to customer needs *) Lack of authority down the hierarchy may reduce manager motivation *) customer service does misses flexibility and speed of local decision making

Why organizational structure is so important

*) organization's internal structure contributes to explaining and predicting behavior. *) That is, in addition to individual and group factors, the structural relationships in which people work has a bearing on employee attitudes and behavior. *) What's the basis for this argument? To the degree that an organization's structure reduces ambiguity for employees and clarifies concerns such as "What am I supposed to do?" "How am I supposed to do it?" "To whom do I report?" and "To whom do I go if I have a problem?" it shapes their attitudes and facilitates and motivates them to higher levels of performance.

Departmentalization

*) the basis by which jobs in an organization are grouped together. *) Departmentalization or grouping jobs together so common tasks can be coordinated. *) most popular ways to group activities is by functions performed. Example, Finance, HR, manufacturing. "The advantage to this type of grouping is obtaining efficiencies from putting like specialists together" *) Tasks can also be departmentalized by the type of product or service the organization produces. " Each line will be placed under the authority of an executive who will have complete global responsibility for that product." The major advantage to this type of grouping is increased accountability for product performance under a single manager *) Departmentalize is on the basis of geography or territory *) Process departmentalization can be used for processing customers as well as products.

Centralization

*) the degree to which decision making is concentrated at a single point in an organizations. *) top managers make all the decisions, and lower-level managers merely carry out their directives.

Formalization

*) the degree to which jobs within an organization are standardized. *) A highly formalized job gives the employee a minimum amount of choice. *) The greater the standardization, the less input the employee has into how the job is done. *) Low formalization—job behaviors are relatively non-programmed, and employees have a great deal of freedom to exercise choice in their work.

Work specialization

*) the degree to which tasks in an organization are subdivided into separate jobs. *) Work specialization, or division of labor, describes the degree to which activities in the organization are subdivided into separate jobs. *) entire job is broken into a number of steps, each completed by a separate individual *) Managers also looked for other efficiencies that could be achieved through work specialization. 1) employee skills at performing a task successfully increase through repetition. 2) Training for specialization is more efficient from the organization's perspective. 3) It increases efficiency and productivity, encouraging the creation of special inventions and machinery "managers viewed work specialization as an unending source of increased productivity" *) enlarging the scope of job activities could increase productivity

Span of control

*) the number of subordinates a manager can efficiently and effectively direct *) How many employees a manager can efficiently and effectively direct is an important question. *) reducing the number of managers leads to significant savings.

Chain of command

*) the unbroken line of authority that extends from the top of the organization to the lowest echelon and clarifies who reports to whom *) Authority is "the rights inherent to management to give orders and expect the orders to be obeyed." To facilitate coordination, each managerial position is given a place in the chain of command, and each manager is given a degree of authority in order to meet his or her responsibilities. *) The unity-of-command principle helps preserve the concept of an unbroken line of authority. It states that a person should have only one superior to whom he/she is directly responsible. "helps preserve the concept of an unbroken line of authority. It says a person should have one and only one superior to whom he or she is directly responsible."

Technology

*) the way in which an organization transfers its inputs into outputs. *) Every organization has at least one technology for converting financial, human, and physical resources into products or services. *) Every organization has at least one technology. *) Numerous studies have examined the technology-structure relationship. "Routine activities are characterized by automated and standardized operations, Non routine activities are customized and require frequent revision and updating." *) Organizations engaged in non routine activities tend to prefer organic structures.

Organizational structure

*) the way in which job tasks are formally divided, grouped, and coordinated. *) There are six key elements work specialization, Departmentalization, Chain of command, Span of control, Centralization and decentralization, and Formalization.

Advantage of Departmentalization

1) Specialization 2) Growth and Expansion 3) Fixing responsibilities 4) Better customer services 5) Performance appraisal 6) Management development 7) Facilitate better control

Volatility

which refers to "the degree of instability in an environment characterized by a high degree of unpredictable change." *) The environment is dynamic, making it difficult for management to predict accurately the probabilities associated with various decision alternatives

Effective strategies for downsizing:

● Investment. Companies that downsize to focus on core competencies are more effective when they invest in high-involvement work practices afterward. ● Communication. When employers make efforts to discuss downsizing with employees early, employees are less worried about the outcomes and feel the company is taking their perspective into account. ● Participation. Employees worry less if they can participate in the process in some way. Voluntary early-retirement programs or severance packages can help achieve leanness without layoffs. ● Assistance. Severance, extended health care benefits, and job search assistance demonstrate a company cares about its employees and honors their contributions