Ch. 15 Foundations of Organization Structure

Which of the following terms refers to the rights inherent in a managerial position to give orders and expect them to be obeyed?

authority

A plant manager organizes a plant by separating engineering, accounting, manufacturing, personnel, and purchasing into departments. The plant is departmentalized on the basis of ________.

function

AgriProducers has customers all over the United States that need their soil and crops tested in their labs. The crops and soil are different in the various large areas of the nation, such as the West Coast and the Midwest. Which type of departmentalization would be best for AgriProducers?

geographic

Which of the following is a characteristic of a simple structure?

high centralization

A(n) ________ model is a structure that is flat, uses cross-hierarchical and cross-functional teams, has low formalization, possesses a comprehensive information network, and relies on participative decision making.

organic

Procter & Gamble has separate departments for Tide, Pampers, Charmin, and Pringles. This is an example of departmentalization by ________.

product

Which of the following is typically a characteristic of the mechanistic model of organization?

rigid departmentalization

The clerical and editorial employees in a publishing house need to be at their desks by 8:00 AM and follow a set of precise procedures dictated by management. The jobs of these clerical and editorial employees ________.

score high on the degree of formalization

According to the principle of unity of command, ________.

an individual should be directly responsible to only one supervisor

Which of the following dimensions of an environment describes the degree to which the environment can support growth?

capacity

The unbroken line of authority that extends from the top of the organization to the lowest echelon and clarifies who reports to whom is termed ________.

chain of command

What are the key dimensions to any organization's environment?

complexity, volatility, and capacity

In centralized organizations, top managers make all the decisions, and lower-level managers merely carry out their directives.

TRUE

In structural terms, a virtual organization is highly centralized, with little or no departmentalization.

TRUE

Institutions are cultural factors that act as guidelines for appropriate behavior for organizational structure.

TRUE

Narrow spans of control make vertical communication in the organization more complex.

TRUE

For much of the first half of the twentieth century, managers viewed work specialization as ________.

an unending source of increased productivity

Describe the various characteristics of bureaucracy.

A bureaucracy is characterized by highly routine operating tasks achieved through specialization, very formalized rules and regulations, tasks grouped into functional departments, centralized authority, narrow spans of control, and decision making that follows the chain of command. Its primary strength is its ability to perform standardized activities in a highly efficient manner. Putting like specialties together in functional departments results in economies of scale and minimum duplication of personnel and equipment. In a bureaucracy, rules and regulations substitute for managerial discretion. Standardized operations and high formalization allow decision making to be centralized. There is little need for innovative and experienced decision makers below the level of senior executives. A drawback of bureaucracy is that if cases don't precisely fit the rules, there is no room for modification. The bureaucracy is efficient only as long as employees confront familiar problems with programmed decision rules.

Which of the following statements is true regarding a virtual organization?

A virtual organization tends to have unclear roles, goals, and responsibilities.

Compare and contrast the three primary organizational strategies: innovation, cost-minimization, and imitation.

An innovation strategy strives to achieve meaningful and unique innovations. 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. An organization pursuing a cost-minimization strategy tightly controls costs, refrains from incurring unnecessary expenses, and cuts prices in selling a basic product. This describes the strategy pursued by Walmart and the makers of generic or store-label grocery products. Cost-minimizing organizations pursue fewer policies meant to develop commitment among their workforce. Organizations following an imitation strategy try to both minimize risk and maximize opportunity for profit, moving new products or entering new markets only after innovators have proven their viability. Mass-market fashion manufacturers that copy designer styles follow this strategy, as do firms such as Hewlett-Packard and Caterpillar. They follow smaller and more innovative competitors with superior products, but only after competitors have demonstrated the market is there.

Which of the following statements is true regarding a bureaucracy?

Bureaucracies can get by with less talented middle- and lower-level managers.

Harald is opening a manufacturing plant with a mechanistic and centralized structure. Employees from which of the following countries will be least comfortable with this type of a structure?

Canada

________ refers to the degree to which decision making is concentrated at a single point in the organization.

Centralization

________ is a systematic effort to make an organization leaner by selling off business units, closing locations, or reducing staff.

Downsizing

Elena is the senior manager of a scientific operations team at a well-known clinical research organization. The organization delivers more than 4,000 solutions across more than 18 therapeutic areas. Being a perfectionist, Elena has reached her present position through hard work and dedication. Given that she has also worked effectively with teams in the past, she has recently been assigned to lead a team working on a new project which is critical to the company. Elena refuses to allocate any tasks to her team and decides to put in extra hours and weekends to complete the groundwork herself. Based on the information presented here, which of the following would best explain this contradiction?

Elena is reluctant to delegate work as she lacks confidence in her team's abilities.

A bureaucracy is characterized by decentralized authority and wider spans of control.

FALSE

A virtual organization lacks flexibility.

FALSE

As compared to a decentralized organization, a centralized organization can act more quickly to solve problems.

FALSE

Departmentalization refers to the degree to which jobs within the organization are standardized.

FALSE

The matrix structure reduces the possibility of power struggles.

FALSE

The simple structure is characterized by a high degree of departmentalization and narrow span of control.

FALSE

________ refers to the degree to which jobs within the organization are standardized.

Formalization

Formalization is a key element of organizational structure. What is indicated by formalization? Describe the characteristics of a highly formalized organization.

Formalization refers to the degree to which jobs within an organization are standardized. If a job is highly formalized, the employee has a minimum amount of discretion over what, when, and how to do it. In a highly formalized organization, employees are always expected to handle the same input in exactly the same way, resulting in a consistent and uniform output. There are explicit job descriptions, lots of organizational rules, and clearly defined procedures covering work processes in organizations in which there is high formalization.

Compare and contrast centralized and decentralized organizations.

In centralized organizations, top managers make all the decisions, and lower-level managers merely carry out their directives. In decentralized organizations, decision making is pushed down to the managers closest to the action. An organization characterized by centralization is inherently different structurally from one that is decentralized. 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.

Organizations do not always stay with the basis of departmentalization they first adopt, as is the case with Microsoft, explain.

Interestingly, organizations do not always stay with the basis of departmentalization they first adopt. Microsoft for instance, used customer departmentalization for years, organizing around its customer bases: consumers, large corporations, software developers, and small businesses. However, in a June, 2013 letter from CEO Steve Ballmer to all employees, Ballmer announced restructuring the organization to functional departmentalization, citing a need to foster continuing innovation. The new departments grouped jobs by traditional functions including engineering, marketing, business development, strategy and research, finance, HR, and legal. Ballmer expected the change in the basis for Microsoft's departmentalization would "reshape how we interact with our customers, developers, and key innovation partners, delivering a more coherent message and family of product offerings." As we see throughout this text, whenever changes are deliberately made in organizations to align practices with organizational goals, particularly the goals of strong leaders, a good execution of the changes creates a higher probability for improvement. In this case, the results are not yet determined—Ballmer, who is a strong leader, announced his retirement two months later (he officially Microsoft left in 2014), and further changes ensued. Microsoft continued to struggle with the reorganization, announcing further changes in its leadership personnel and team structure less than a year later.

Which of the following statements is true about the simple structure?

It becomes increasingly inadequate as an organization grows.

Which of the following statements is true regarding a matrix structure?

It breaks the unity-of-command concept.

Which of the following is a drawback of a narrow span of control?

It is more expensive.

According to a 2011 survey, many workers in Qtopia Inc. are dissatisfied with their jobs. The survey revealed that most of the dissatisfied workers believe that they have very little control over their job assignments. Therefore, to increase workers' job satisfaction, Boris, a production manager, feels they need to only concentrate on changing the dissatisfied workers' beliefs regarding the degree of control they have over their job assignments. Which of the following, if true, would weaken the conclusion made by Boris?

Many dissatisfied workers feel that their wages are too low and working conditions are unsatisfactory.

Mike Morrell is a production supervisor in Porco Rosso, an aircraft manufacturing firm. After evaluating Mike's managerial capabilities, some members of the senior management feel that average productivity would improve if more workers were assigned to him. However, some managers are skeptical about Mike's ability to handle more workers. Which of the following statements, if true, would support the argument favoring increased span of control?

Mike's team consists of highly experienced and skilled labor.

Which of the following statements, if true, would weaken the argument favoring increased span of control?

Performance reports from the last few years show that teams that were monitored closely had higher productivity.

Blastkrieg, a chain of audio equipment stores, uses computerized inventory control and customer self-service to eliminate the category of sales clerks from its force of employees. After diversifying into computer electronics, it now plans to employ the same concept in selling desktop PCs and laptops. Which of the following is an assumption made in Blastkrieg's strategy?

Sales personnel are not required for selling computer electronics successfully.

Why is span of control important within an organization, and which common organizational design would most likely have the widest span of control? Explain your answer.

The question of span of control is important because, to a large degree, it determines the number of levels and managers an organization has. It answers the question "How many employees can a manager efficiently and effectively direct?" All things being equal, the wider or larger the span of control, the more efficient the organization. A simple structure, because of its natural small size, would have a fairly narrow span of control. The bureaucracy is typically characterized by narrow spans of control and decision making that follows the chain of command. A matrix organization, characterized by dual lines of authority that combine functional and product departmentalization, would lend itself to a very wide span of control with managers from the different departments all being in some part responsible for a large number of employees. One of the disadvantages of the matrix lies in the confusion it creates, its propensity to foster power struggles, and the stress it places on individuals, somewhat due to the wide span of control. Without the unity-of-command concept, ambiguity about who reports to whom is significantly increased and often leads to conflict.

What is a virtual organization? What elements of organizational structure are important to create and sustain a successful virtual organization? Explain your answer.

The virtual organization is sometimes called the network or modular organization. Typically, a small, core organization outsources major business functions. In structural terms, the virtual organization is highly centralized, with little or no departmentalization. "Why own when you can rent?" is the question that captures the essence of the virtual organization. Work specialization would characterize the different types of contracts that an owner of a virtual organization would need to focus on. Each of the separate jobs needed to produce the product would be specializations that would be contracted out. A strong leader, or leadership structure in a centralized form, that could recognize, negotiate, contract, and coordinate the activities of all the different contractors would be essential for the success of the virtual organization. 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.

Chain of command is a key element of an organization's structure. Which of the following key questions is addressed by this element?

To whom do individuals and groups report?

Which of the following statements is true regarding work specialization?

Work specialization decreases the time spent in changing tasks.

Compare and contrast the three common organizational designs: simple structure, bureaucracy, and matrix structure.

a) The simple structure is said to be characterized most by what it is not rather than what it is. The simple structure is not elaborate. It has a low degree of departmentalization, wide spans of control, authority centralized in a single person, and little formalization. The simple structure is a "flat" organization; it usually has only two or three vertical levels, a loose body of employees, and one individual in whom the decision-making authority is centralized. b) Standardization is the key concept that underlies the bureaucracy. It is characterized by 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. c) The matrix combines two forms of departmentalization: functional and product. It breaks the unity-of-command concept. Employees in the matrix have two bosses—their functional department managers and their product managers. Therefore, the matrix has a dual chain of command.

You are interested in explaining the different types of organizational designs to students of basic management. These students need to know the advantages and disadvantages of each structure as well as the structure's characteristics. You extol the virtues and benefits of standardization. You are most likely to be promoting the ________.

bureaucracy

The strength of product departmentalization in the matrix structure is that it facilitates ________.

coordination among specialties

Wiper Inc., a parts supplier, has separate departments for government aircraft and contracts, large commercial aircraft clients, and small personal aircraft clients. This is an example of departmentalization on the basis of ________.

customer

The basis by which jobs are grouped is called ________.

departmentalization

Which of the following is most likely to be a characteristic of an organization pursuing an innovation strategy?

decentralized control

Which one of the following problems is most likely to occur in a matrix structure?

employees receiving conflicting directives

The major advantage of a virtual organization is its ________.

flexibility

Which of the following is typically a characteristic of an organic model of organization?

free flow of information

A narrow span of control ________.

is expensive because it adds levels of management

You describe to your students a new committee within the university that brings together specialists from all different departments to develop a new interdisciplinary program. The structure of the committee best meets the definition of the ________ structure.

matrix

Which of the following types of organizational designs combines two forms of departmentalization, functional and product?

matrix structure

A(n) ________ model is generally synonymous with the bureaucracy in that it has highly standardized processes for work, high formalization, and more managerial hierarchy.

mechanistic

A virtual organization is also known as a(n) ________ organization.

modular

Publishing representatives who call on college professors to inform them of their company's new publications have a great deal of freedom in their jobs. They have only a general sales pitch, which they tailor as needed. Based on this information, we can say that the job of these publishing representatives ________.

scores low on the degree of formalization

A ________ is characterized by a low degree of departmentalization, wide spans of control, authority centralized in a single person, and little formalization.

simple structure

Mark is the owner of a local shoe business. He has fifteen employees who report directly to him, he makes all the decisions regarding the type and quality of shoes, and he looks after the shop's finances. Which type of organizational structure does Mark have?

simple structure

You explain to your students the structure of a local grocery store situated in your neighborhood. The store employs two full-time employees, a salesperson and a cashier. The owner of the store acts as its manager and makes all the decisions. Which of the following organizational structures is being described by you?

simple structure

The ________ refers to the number of subordinates that a manager directs.

span of control

The key concept that underlies all bureaucracies is ________.

standardization

Which of the following terms refers to the way an organization transfers inputs into outputs?

technology

The simple structure is most widely practiced in small businesses in which ________.

the manager and owner are one and the same

Gordon is a new divisional manager at AskSocrates.com. In reorganizing his division, he must make some decisions regarding the span of control for management within his division. The question of span of control determines ________.

the number of levels and managers in an organization

The principle of ________ helps preserve the concept of an unbroken line of authority.

unity of command

A ________ organization is a small, core organization that outsources major business functions.

virtual

You are the CEO of Achilles Incorporation. You have decided to hire other organizations to perform many of the basic functions of your business. You have hired an accounting firm to keep your records, a recruiting firm to handle human resource functions, and a computer firm to handle all records. To keep costs down, you are looking for other areas in which to outsource operations. You have chosen to operate your business as a ________.

virtual organization

A ________ is consistent with recent efforts by companies to reduce costs, cut overhead, speed up decision making, increase flexibility, get closer to customers, and empower employees.

wider span of control

The term used to describe the degree to which tasks in an organization are subdivided into separate jobs is called ________.

work specialization

The divisional structure has the opposite benefits and disadvantages of the functional structure.

TRUE

The functional structure groups employees by their similar specialties, roles, or tasks.

TRUE

The more scarce, dynamic, and complex the environment, the more organic a structure should be.

TRUE

The organization's structure will determine what relationships form, the formality of those relationships, and many work outcomes.

TRUE

The organizational design of a simple structure is highly risky.

TRUE

The strength of a bureaucracy lies in its ability to perform standardized activities in a highly efficient manner.

TRUE

A(n) ________ strategy emphasizes the introduction of major new products and services.

innovation

Volatility refers to the degree of ________ within an environment.

instability

Describe the simple structure. Discuss its advantages and disadvantages.

A simple structure is not elaborate. It has a low degree of departmentalization, wide spans of control, authority centralized in a single person, and little formalization. It is a "flat" organization; it usually has only two or three vertical levels, a loose body of employees, and one individual in whom the decision-making authority is centralized. 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's difficult to maintain in anything other than small organizations. It becomes increasingly inadequate as an organization grows because its low formalization and high centralization tend to create information overload at the top. As size increases, decision making typically becomes slower and can eventually come to a standstill as the single executive tries to continue making all the decisions. The simple structure's other weakness is that it's risky—everything depends on one person. One illness can literally destroy the organization's information and decision-making center.

What are the three dimensions that characterize the environment of an organization?

An organization's environment is composed of those institutions or forces that are outside the organization and potentially affect the organization's performance. These typically include suppliers, customers, competitors, government regulatory agencies, public pressure groups, and the like. Any organization's environment has three dimensions: capacity, volatility, and complexity. a) Capacity refers to the degree to which the environment can support growth. Rich and growing environments generate excess resources, which can buffer the organization in times of relative scarcity. b) Volatility describes the degree of instability in the environment. A dynamic environment with a high degree of unpredictable change makes it difficult for management to make accurate predictions. c) Complexity is the degree of heterogeneity and concentration among environmental elements. Simple environments—like in the tobacco industry—are homogeneous and concentrated. Environments characterized by heterogeneity and dispersion—like the broadband industry—are complex and diverse, with numerous competitors.

Describe the various ways in which the negative impact of downsizing can be minimized.

Companies can reduce negative impacts by preparing for the post-downsizing environment in advance, thus alleviating some employee stress and strengthening support for the new strategic direction. Some of the ways in which the negative impact of downsizing can be minimized are: a) Investment: Companies that downsize to focus on core competencies are more effective when they invest in high-involvement work practices afterward. b) 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. c) Participation: Employees worry less if they can participate in the process in some way. In some companies, voluntary early retirement programs or severance packages can help achieve leanness without layoffs. d) Assistance: Providing severance, extended healthcare benefits, and job search assistance demonstrates a company does really care about its employees and honors their contributions.

Span of control is a key element of an organization's structure. Which of the following key questions is addressed by this element?

How many individuals can a manager efficiently and effectively direct?

One way to overcome too much division within an organization and retain the positive elements of structure is to encourage or build in boundary-spanning roles.

TRUE

The chain of command is an unbroken line of authority that extends from the top of the organization to the lowest echelon and clarifies who reports to whom.

TRUE

Explain the approaches successful companies have taken to structuring themselves during growth.

The approaches successful companies have taken to structuring themselves during growth provide two major lessons. First, a vision is needed of how the increasingly complex organization can coordinate people around a common strategy. Second, an organization must ensure that organizational structures and reporting relationships don't become so restrictive that they undermine the creative passions that made them successful in the first place. As you can see, organizational structures set up a company for future success.

While observing the departments in his division, Gordon notices that some managers with wide spans of control seem to perform more effectively than other managers with similarly sized spans of control. Which of the following statements is most likely to be true regarding the high-performing managers?

The employees within their departments are highly skilled and very knowledgeable about their jobs.

Describe the five common ways of departmentalization. Give an example of each.

The five common ways of departmentalization are as follows: a)One of the most popular ways to group activities is by functions performed. A manufacturing manager might organize his or her plant by separating engineering, accounting, manufacturing, personnel, and supply specialists into common departments. b)Tasks can also be departmentalized by type of product the organization produces. Procter & Gamble is organized along these lines. Each major product is placed under the authority of an executive who has complete global responsibility for that product. c)Another way to departmentalize is on the basis of geography or territory. The sales function, for instance, may have western, southern, Midwestern, and eastern regions. Each of these regions is, in effect, a department organized around geography. d) Process departmentalization works for processing customers as well as products. At an Alcoa aluminum tubing plant in upstate New York, production is organized into five departments: casting; press; tubing; finishing; and inspecting, packing, and shipping. Each department specializes in one specific phase in the production of aluminum tubing. e) A final category is to use the particular type of customer the organization seeks to reach. Microsoft recently reorganized around four customer markets: consumers, large corporations, software developers, and small businesses.

Anna's company needs to dramatically cut costs, speed decision making, and increase flexibility. Which of the following structural decisions will help her achieve the desired objectives?

increasing the span of control

Discuss the advantages and disadvantages of a matrix structure.

The matrix structure combines two forms of departmentalization: functional and product. The most obvious structural characteristic of the matrix is that it breaks the unity-of-command concept. Employees in the matrix have two bosses: their functional department managers and their product managers. The strength of the matrix is its ability to facilitate coordination when the organization has a number of complex and interdependent activities. Direct and frequent contacts between different specialties in the matrix can let information permeate the organization and more quickly reach the people who need it. 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. Without the unity-of-command concept, ambiguity about who reports to whom is significantly increased and often leads to conflict. Reporting to more than one boss introduces role conflict, and unclear expectations introduce role ambiguity.

In an organization, top managers make all the decisions and lower-level managers merely carry out their directives. This organization is most likely to be characterized by ________.

a high degree of centralization

You have learned about the traditional and new design options for organizational structures. You have decided that one of the designs developed during the last decade or two is probably the most appropriate for your newly formed organization. You have recently started your business with a small capital investment. Your business needs a very high degree of flexibility so that you can quickly respond to environmental changes and you are also interested in minimizing costs. Which of the following types of organizations is best suitable for your business?

a virtual organization

The ________ of an environment refers to the degree of heterogeneity and concentration among environmental elements.

complexity

Which of the following is most likely to be a drawback of a virtual organization?

constant flux and reorganization

Which of the following is most likely to be a characteristic of an organization pursuing a cost-minimization strategy?

high centralization

The more the lower-level personnel provide input or are actually given the discretion to make decisions, the ________ within that organization.

higher is the degree of decentralization

Organizations following a(n) ________ strategy try to both minimize risk and maximize opportunity for profit, moving into new products or new markets only after innovators have proven their viability.

imitation