Organizational Structure

Integration:

Coordination across Levels and between Units • Formalization: rules, policies, procedures • Information systems: reports, computer‐based communication systems • Chain of command: formal reporting relationships • Centralization: having decision making authority at the top of the organization • Standardization: use of uniform inputs, processes, output standards Fundamental principle of organizational design: • The more differentiation, the greater the need for integration

Differentiation:

Division of Labor • Horizontal: division of work into units at the same hierarchical level • Vertical: division of work by level of authority • Spatial: geographical dispersion of organization's activities & subunits

• Know the challenges to introducing structural or cultural change (on the leadership day— cultural, structural, and individual inertia)

Forces working against change • Structural inertia - Resistance to change rooted in size, complexity and interdependence in an organization's structures, systems and formal processes • Cultural inertia - Resistance to change rooted in shared expectations of how things are done, norms, values, relationships and myths that have evolved and become embedded over time • Individual Resistance - Uncertainty avoidance, fear, failure to perceive benefits, apathy

ambidextrous organization

Works on existing business and emerging and be broken up into 2 teams.

DIVISIONAL STRUCTURE

• Departments are formed on the basis of organizational outputs, geography, or customer type • Each department then typically has sub‐ departments by function

Specialization / Division of Labor- dimensions of structure

• Division of labor: process of dividing up the many tasks within an organization • The more tasks are divided into separate, narrowly‐ defined jobs, the greater degree of specialization • Question: What are the pros/cons of specialization? - Pros: efficient, employees develop expertise/skills - Cons: boring and demotivating; may reduce adaptability to change

Formalization

• Formalization: the extent to which the organization relies on rules and procedures • Some signs of high formalization in an organization: - For almost any situation that arises, there are specific documented procedures to follow in dealing with it - Rules and procedures are usually documented in written form ('standard operating procedures') - Job descriptions are very specific and documented in written form Formalization • Pros/cons - Pros: can increase efficiency with routine tasks; can reduce employee error - Cons: reduces flexibility/adaptability; can reduce efficiency with more complex tasks; may be impossible to write rules for everything

Span of Control

• Number of employees that report to a given supervisor - Wide span: many subordinates reporting (flat hierarchy) - Narrow span: few subordinates reporting (tall hierarchy) • Helps determine how closely supervisors can be involved with activities of subordinates - How much delegation there tends to be

MATRIX STRUCTURE

• Organized by functional and divisional (functional X divisional layered on top of each other) - Vertical structure provides traditional hierarchy by function - Horizontal structure provides coordination across departments - Each employee reports to two managers • One functional manager, one divisional manager • Dual lines of authority • Can also have matrix structure: - product (division) X geography

FUNCTIONAL

• People are grouped by similar function - Similar expertise, tasks, and background - e.g., sales, R&D, marketing, etc. • Each department performs tasks for the organization as a whole - e.g., marketing department does marketing for the entire organizatio

when you might need to redesign or restructure an organization

• Strategic shifts • Major organizational changes (e.g., M&A) • Technological changes (e.g., automation) • Cultural and political changes • Organization grows larger • Larger size makes coordination more difficult • Functional form may become infeasible • Signs that current structure is causing problems

Matrix Structure S&W

• Tends to be appropriate for: - Complex and uncertain environments - Organizations with multiple but not too many products • OR, orgs serving several different geographic regions or customer segments • Strengths: - Flexible/adaptable - Provides better information flow, can improve coordination - Saves on functional resources (e.g., IT & HR) • Weaknesses? - More potential for conflict (e.g., b/w functional and divisional) - Requires more meetings, constant coordination less efficient - Two boss problem: can be confusing/frustrating for employees

Divisional Structure strengths and weakneses

• Tends to be appropriate for: - Moderately dynamic environments - Larger organizations with multiple products / markets • Strengths: - More flexible/adaptable: each unit can be turned to its environment - Better customer service: each unit deals with just one product - Better coordination between functional departments - More delegation of decision‐making: reduced burden on top managers • Weaknesses: - Reduces economies of scale - Can introduce duplication and redundancy (e.g. multiple HR, IT, etc. departments) - Lack of coordination and increased conflict across divisions - May threaten the clarity of organization's identity: different divisions may have different images, different quality levels, competition between them

Functional Structure strengths and Weaknesses

• Tends to be appropriate for: - Organizations in stable environments - Organizations with one or a few products/services - Small to medium organizations • Strengths: - Efficient; economies of scale within functions - Deep skill specialization and development • Weaknesses: - Poor inter‐function coordination (e.g., marketing with R&D) - Slow to respond to environmental changes - As organizations get more complex and offer more products, departments get too big and complicated - Overly centralized: Heads of departments may have more decision‐making responsibility than they can handle

"Chain of Command" or Formal Hierarchy

• The configuration of reporting relationships within organizations (i.e., who reports to whom) • Determines formal authority - Formal and legitimate right to make decisions, issue orders, allocate resources and responsibility - vs. informal authority, or status

Centralization

• The extent to which decision‐making authority is centralized in a few individuals vs. spread out • Highly centralized: authority and decision making is concentrated among a few top managers • Decentralized: authority and decision making is spread throughout all levels of an organization - Lower‐level employees also have decision‐making authority Difficult to determine from the Org. chart! • Centralized: - Less need for coordination & less potential for conflict things get done - Decisions are made by individuals who understand the "big picture" • Decentralized: - Decisions are made by people closest to the problems (potentially with greatest information and expertise) - Less burden on top managers to make every decision - Provides employees with sense of voice, feelings of responsibility greater intrinsic motivation

Choose Divisional vs. Functional

• The more that organizational effectiveness requires interpersonal communication and mutual adjustment among individuals in different functions, the more that a divisional structure is favored over functional structure. - Volatile/uncertain environment creates need for divisional structure. - Need for responsiveness to the local market creates need for divisional structure. The more that excellence of output/reduction in costs depends upon communication among those within a specialty, the greater the need for functional organization - Technological sophistication of organizational outputs • the greater the technological sophistication of organizational outputs, the more benefit from communication among those working on similar technologies - Stability of organizational environment/focus on cost • The more stable the organizational environment, and/or the greater the focus on putting out a low cost product, the more benefit from economies of scale afforded by functional structure