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CHAPTER 17: ORGANIZATIONAL STRUCTURE AND DESIGN |
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CHAPTER 17 ORGANIZATIONAL STRUCTURE AND DESIGN CHAPTER OUTLINE
I. DIVISION OF LABOR AND COORDINATION
A. Organizational structure refers to the division of labor as well as the patterns of coordination, communication, work flow, and formal power that direct organizational activities.
B. Organizational design creates and modifies organizational structures.
C. Two fundamental processes in organizational structure are division of labor and coordination.
II. DIVISION OF LABOR AND COORDINATION
A. Division of labor refers to the subdivision of work into separate jobs assigned to different people.
1. Job specialization includes a narrow subset of the tasks necessary to complete the product or service.
B. Coordinating work activities ensures that everyone works in concert.
C. Coordination through informal communication which includes sharing information on mutual tasks as well as forming common mental models so that employees synchronize work activities using the same mental road map.
1. Concurrent engineering (also called platform teams) involves assigning product development to a cross-functional project team consisting of people from marketing, design, manufacturing, customer service, and other areas.
D. Coordination through formal hierarchy where work is coordinated through direct supervision.
E. Coordination through standardization which creates routine patterns of behavior or output.
III. ELEMENTS OF ORGANIZATIONAL STRUCTURE
A. Span of control refers to the number of people directly reporting to the next level in the hierarchy.
B. Tall and flat structures.
1. Arguments in favor of delayering:
a. It potentially cuts overhead costs and puts decision-makers closer to front-line staff and information about customer needs.
C. Centralization and decentralization
1. Centralization means that formal decision authority is held by a small group of people, typically those at the top of the organizational hierarchy.
2. Decentralize means larger organizations disperse decision authority and power throughout the organization.
D. Formalization is the degree to which organizations standardize behavior through rules, procedures, formal training, and related mechanisms.
1. Problems with formalization:
a. Rules and procedures reduce organizational flexibility. b. Organizational efficiency can decline. c. Union power. d. Employees become alienated and feel powerless in these structures.
E. Mechanistic versus organic structures.
1. Mechanistic structures are characterized by a narrow span of control and high degree of formalization and centralization.
2. Organic structure has a wide span of control, little formalization, and decentralized decision making.
IV. FORMS OF DEPARTMENTALIZATION
Departmentalization establishes a system of common supervision among positions and units within the organization.
Departmentalization usually creates common measures of performance.
Departmentalization encourages coordination through informal communication among people and subunits.
A. Simple structure is where most companies begin by employing only a few people and typically offering only one distinct product or service.
B. Functional structure organizes employees around specific knowledge or other resources.
1. Advantages
a. They foster professional identity and clarify career paths. b. They permit greater specialization so that the organization has expertise in each area. c. Direct supervision is easier. d. They create common pools of talent that typically serve everyone in the organization.
2. Disadvantages
a. Tend to emphasize subunit goals over superordinate organizational goals. b. Employees in specific departments give priority to the company's product or service to their specific department. c. Employees fail to develop a broader understanding of the business.
C. Divisional structure groups employees around geographic areas, clients, or outputs (products/services).
1. Advantages
a. A building block structure accommodates growth relatively easily. b. Related products or clients can be added to existing divisions with little need for additional learning.
2. Disadvantages
a. Duplicates and underutilizes resources. b. Reduce cooperation across groups.
D. Matrix structure overlays two organizational structures in order to leverage the benefits of both types of structure.
1. Advantages
a. Optimize the use of resources and expertise. b. Improve communication efficiency, project flexibility, and innovation compared to purely functional designs. c. Focus technical specialists on the goals of serving clients and creating marketable products.
2. Disadvantages
a. Require more coordination than functional or pure divisional structures. b. Tend to generate conflict, organizational politics, and stress.
E. Hybrid structure allows organizations to combine some parts of various designs into a hybrid structure.
F. Team-based (lateral) structure is very flat and relies on extensive lateral communication.
1. Advantages
a. Empower employees and reduce reliance on a managerial hierarchy, reducing costs. b. Improves communication and cooperation across traditional boundaries.
2. Disadvantages
a. Costly to maintain due to the need for ongoing interpersonal skills training. b. Employees may experience more stress due to increased ambiguity. c. Takes more time to coordinate.
G. Network structures is an alliance of several organizations for the purpose of creating a product or serving a client.
H. Affiliate networks have a special historical or financial support from the core firm.
I. Virtual corporations represent several independent companies that form unique partnership teams to provide customized products or services, usually to specific clients, for a limited time.
V. CONTINGENCIES OF ORGANIZATIONAL DESIGN
A. Organizational size - as the number of employees increases, job specialization increases due to a greater division of labor.
B. Technology - contingencies that influence the best type of organizational structure are the variety and analyzability of work activities.
1. Variety refers to the number of exceptions to standard procedure that can occur in the team or work unit. 2. Analyzability refers to the extent that the transformation of input resources to outputs can be reduced to a series of standardized steps.
C. External environment includes most stakeholders, resources, and competitors.
1. Four relatively distinct characteristics of external environments influence they type of organizational structure best suited to a particular situation:
a. Dynamism b. Complexity c. Diversity d. Hostility
D. Organizational strategy refers to the way the organization positions itself in its setting in relation to its stakeholders, given the organization's resources, capabilities, and mission.
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