STRUCTURES - chp 12
Formalization
the degree to which organizations standardize behavior through rules, procedures, formal training, and related mechanisms -routines and standards
organizational structure
the division of labor as well as the patterns of coordination, communication, workflow, and formal power that direct organizational activities
Chain of command
the line of authority that moves from the top of a hierarchy to the lowest level -used to be viewed as backbone of organizational strength
Span of control
the number of subordinates who report directly to a manager
Organizational strategy
the way the organization positions itself in its setting in relation to its stakeholders, given the organization's resources, capabilities, and mission -"structure follows strategy"
standardized skills
training is critical for coordination (ex. surgery), important for better coordination of skills and tasks
standardized outputs
Involves ensuring that individuals and work units have clearly defined goals and output measures
Contingencies of organizational structure
external environment size technology strategy
three variations of divisional structure
geographical divisional structure product divisional structure client divisional structure
What external influences encourage formalization?
government safety legislation and strict accounting rules
when is there a narrow/large span of control?
narrow span: very few people report directly to manager (less than 20) wide span: manager has many direct reports -best plants have above 38 employees, have self directed teams through informal communication and standardization
Technology
processes by which organization turns out its product/service -variability is a contingency -analyzability is contingency
Functional units
production, marketing, design, human resources, etc. serve company worldwide rather than in geographical clusters
Division of labor
refers to subdivision of work into separate jobs assigned to diff people
5 most common pure types of departmentalization
simple, functional, decisional, team-based, matrix
which form of organized divisional structure should companies adopt?
depends on following: -primary source of environmental diversity/uncertainty
External environment
-best structure depends on external environment, aka anything outside organization
Components of division of labor
- leads to job specialization bc each job has specific tasks -as companies grow, horizontal division is accompanies by vertical division of labor
myths of matrix structure
- you report to two bosses, no only employees at one level in the organization report to two bosses
implications of interconnection of span of control, O size and number of layers
-as O grows, they must widen span of control, build taller hierarchy, or both -most end up building taller hierarchy, but that creates problems: 1. taller structures have higher overhead costs because they have more managers per employee 2. senior managers in tall hierarchies seem to receive lower quality and less timely info 3. tend to undermine employee empowerment and engagement -cause companies to delayer
Why do old and large companies tend to become standardized?
-bc work routines become more routinized and in large companies formalization reduces cost due to direct supervision
cons of team based structure
-can be costly to maintain due to the need of ongoing interpersonal skill training - takes more time to coordinate than formal hierarchy during early stages of team dev. -more stress bc increased ambiguity -leaders have more stress bc increased conflict, loss of functional power, and unclear career progression ladders -suffer from duplication of resources and potential competition (and lack of resource sharing) across teams
complexity
-complex environments, more decentralized the organization should be because decisions are pushed down to ppl and subunits with necessary info to make informed choice
What 2 requirements must all O structures have?
-division of labor into distinct tasks -coordination of that labor so employees are able to accomplish common goals
hostility
-firms in hostile environments face more resources scarcity, more competition, they are more dynamic - ORGANIC structures do best in these environments, but when EXTREMELY hostile, companies tend to temporarily centralize so decisions can be made more quickly -ironically, centralization may result in lower-quality decisions
characteristics of matrix structure
-focuses employees on end goal while simultaneously encouraging knowledge sharing
Limitations of functional structure
-grouped employees tend to focus attention on those skills and related professional needs rather than on the companies' product, service, client need -aka, might not develop a broad, better understanding of company -produces higher dysfunctional conflict and poorer coordination in serving clients/developing products
Coordinating mechanisms
-informal communication -formal hierarchy -standardization
Pros of Divisional Structure
-it is a building bock structure and accommodates growth relatively easily and focuses on employee attention on products and customers rather than tasks -different products can be added
How larger companies keep informal communication
-keep production site small -liaison roles-share info to coworkers in other units -integrator roles- coordinating a work process by encouraging employees in each unit to share info and informally coordinate work activities *do not have authority over ppl involved in that process so they rely on persuasion and commitment -temporary teams - common in vehicle design
Organizational Size
-larger companies should have different structures than smaller ones, -larger firm = more standardization, less informal communication, more decentralized
Pros of Matrix structure
-makes good use of resources and expertise - ideal for project-based organizations -improves communication, efficiency, flexibility, innovation -focuses on serving clients and making products while keeping ppl organized around specialization -logical choice when 2 diff dimensions are equally important
diversity
-more diversity calls for greater variation of products/services, clients, and regions, so more the firm need to use a divisional structure aligned with that diversity
Evaluating the Functional Structure
-more economics of scale -increases employee identity -direct supervision is easier
Pros of team-based structure
-more flexible nd responsive in turbulent environment -reduces costs bc less reliance on formal hierarchy -cross functional team structure improves communication and cooperation across traditional boundaries -quicker/more informed decision making with greater autonomy
Concerns of formal hierarchy/ chain of command
-not as agile for coordination in complex and novel situations -rarely as fast or accurate as direct communication with employees -managers are able to closely supervise only a limited number of employees, can be costly as company grows -today's workforce requires more autonomy over work and more involvement in company decisions
Coordinating work activities
-organizations ability to divide work among people depends on how well those people can coordinate with each other -coordination tends to be more expensive and difficult as division of labor increases, so they specialize jobs only to point where it isnt too costly
Formalization may increase efficiency and compliance, but what are the contingencies?
-rules/procedures reduce flexibility - high levels of formalization tend to undermine learning and creativity -some rules may even decrease efficiency -can cause job dissatisfaction and stress -rules can take on a life of their own, become focus of attention rather than companies ultimate objectives
Informal communication
-sharing info about mutual tasks; forming common mental models to synchronize work activities -most flexible but can be chaotic
Characteristics of departmentalization
-shown by organizational chart -specifies how employees and their activities are grouped -establishes chain of command and interdependence -focuses ppl around common mental models (common budget, measures of performance etc) -encourages specific people and work units to coordinate through informal communication
characteristics of team-based structure
-typically organic -wide span of control -in extremes, no formal leader -highly decentralized structure -low formalization -typically found in manufacturing or service operations of larger divisional structures
Why do many companies move away from structures that organize people around geographic clusters?
1. clients can purchase products online and communicate with businesses from almost anywhere, so local representation is less critical 2. reduced geographic variation, freer trade has reduces gov. intervention, and consumer preferences for many products/services are becoming quite similar 3. large companies increasingly have global business customers who demand one global point of purchase, not one in every country/region
4 characteristics of external environment that influence structure
1. dynamism 2. complexity 3. diversity 4. hostility
Factors influencing best span of control
1. self directed teams which coordinate through informal communication and various forms of standardization/ many employees coordinate work through standardization 2. whether employees perform routine tasks 3. degree of interdependence among employees within the department or team - narrow when highly interdependent
Contingencies of Divisional structure
1. tends to duplicate resources, such as production equipment and engineering info technology expertise 2. unless division quite large, resources not used as efficiently 3. creates silos of knowledge, reduces motivation to share knowledge 4. preferred divisional structure depends on the company's primary source of environmental diversity/uncertainty- causes waffling which generates further complications bc structure decisions shift power and status among executives
geographical divisional structure
A divisional structure in which divisions are organized according to the requirements of the different locations in which an organization operates.
Matrix structure
An organizational structure that overlays two structures (such as a geographic divisional and a functional structure) in order to leverage the benefits of both.
dynamism
dynamic environments change a lot, leading to novel situations and lack of identifiable patterns, better for ORGANIC structures if they coordinate well and are experienced -stable environments better for MECHANISTIC structures bc more efficient and predictable
factors into work concentration
economics, expertise, openness
Elements of organizational structure
Span of Control Centralization Formalization Departmentalization
Standarization
creating routine patterns of behavior or output three forms: standardized process standardized outputs standardized skills
Team-Based structure
an organizational structure built around self-directed teams that complete an entire piece of work
Divisional Structure
an organizational structure in which employees are organized around geographic areas, outputs, or clients
Global integrated enterprise
an organizational structure in which work processes and executive functions are distributed around the world through global centers rather than developed in a home country and replicated in satellite countries or regions -usually product or client division -virtual teamwork!!
mechanistic structure
an organizational structure with a narrow span of control and a high degree of formalization and centralization
organic structure
an organizational structure with a wide span of control, little formalization, and decentralized decision making
Formal hierarchy
assigning legitimate power to individuals, who then use this power to direct work processes and allocate resources; much less popular today -direct supervision and formal communication channels
why is informal communication vital in nonroutine situations?
bc employees can exchange a large volume of info through face-to-face communication and other media rich channels
standardized process
can improve quality and consistency of a produce/service
Centralization
centralization: is the degree to which formal decision authority is held by small group of people, those at top of hierarchy -larger companies typically decentralize, in that they disperse decision authority and power throughout organization
Simple structure
has authority centralized in a single person, a flat hierarchy, few rules, and low work specialization
Why do companies divide work into several jobs?
increases work efficiency -less time and money wasted -easier to match ppl with specific aptitudes to jobs
Because integrated enterprise no longer orchestrates its business from a single headquarters, where are they operated?
lead from where the work is concentrated
cons of matrix structure
managerial power struggles, confusion and stress of reporting relationships- who takes ownership of ambiguous problems
Characteristics of mechanistic structure
many rules/procedures limited decision making at lower levels tall hierarchies of ppl in specialized roles vertical rather than horizontal commun. flow
General rule with these two structures:
mechanistic structures operate better in stable environments bc they rely on efficiency and routine whereas organic structures work better in rapidly changing environments
Organic Structure characteristics
opposite of mechanistic structure: wide span of control decentralized decision making little formalization fluid tasks adjusting to new situations/formalized needs
which structure is better in dynamic environments only when employees have developed well-established roles and expertise?
organic, bc without those conditions, employees are unable to coordinate effectively with each other, resulting in errors and gross inefficiencies
Are organic or mechanistic structures more compatible with learning, high performance, and quality management?
organic- bc they emphasize info sharing and empowerment rather than hierarchy and status
What is span of control interconnected to?
organizational size and number of layers in organizational hierarchy -wider span of control for bigger companies and have fewer layers of management
product/service divisional structure
organizes employees around distinct outputs
client divisional structure
organizes employees around specific customer groups
Functional structure
organizes employees around specific knowledge or resources
Can different degrees of decentralization and/or centralization occur at the same time in a company?
yes
