Cptr 3

• Organizational design


  A process involving decisions about six key elements: work specialization, departmentalization, chain of command, span of control, centralization and decentralization, and formalization

  
• Six key elements in organizational design

  • Work specialization
  • Departmentalization
  • Chain of command
  • Span of control
  • Centralization and decentralization
  • Formalization
• Work specialization


  The degree to which tasks in the organization are divided into separate jobs with each step completed by a different person
• Overspecialization can result in human diseconomies such as boredom, fatigue, stress, poor quality, increased absenteeism, and higher turnover
• Types of departmentalization


  • Functional
  • Product
  • Geographical
  • Process
  • Customer

  
• Chain of command


  The continuous line of authority that extends from upper levels of an organization to the lowest levels of the organization—clarifies who reports to whom
• Authority


  The rights inherent in a managerial position to tell people what to do and to expect them to do it
• Responsibility


  The obligation or expectation to perform
• Unity of command


  The concept that a person should have one boss and should report only to that person
• Span of control


  The number of employees who can be effectively and efficiently supervised by a manager
• Factors affecting span of control

  • Skills and abilities of the manager
  • Employee characteristics
  • Characteristics of the work being done
  • Physical proximity of subordinates
  • Sophistication of the organization's information system
  • Strength of the organization's culture
  • Preferred style of the manager
• Centralization


  The degree to which decision making is concentrated at upper levels in the organization
• Decentralization


  When an organization relegates decision making to managers who are closest to the action
• Employee empowerment


  Increasing the decision-making authority (power) of employees
• Formalization


  The degree to which jobs within the organization are standardized and the extent to which employee behavior is guided by rules and procedures
• Mechanistic organizations


  • Highly formalized, centralized, and specialized
  • Rigid and bureaucratic
• Organic organizations


  • Flexible and adaptive
  • Decentralized and loosely controlled
• Contingency factors influencing structural decisions

  • Overall strategy of the organization
  • Size of the organization
  • Technology use employed by the organization
  • Degree of environmental uncertainty
• Innovation strategy


  Pursuing competitive advantage through meaningful and unique innovations favors an organic structuring
• Cost minimization strategy


  Focusing on tightly controlling costs requires a mechanistic structure for the organization
• As an organization grows larger


  Its structure tends to change from organic to mechanistic with increased specialization, departmentalization, centralization, and rules/regulations
• Routine technology


  Mechanistic organizations
• Non-routine technology


  Organic organizations
• Stable and simple environments


  Mechanistic organizational structures tend to be most effective
• Dynamic and complex environments

  The flexibility of organic organizational structures is better suited
• Mechanistic organizational structures


  Tend to be most effective in stable and simple environments
• Organic organizational structures


  Better suited for dynamic and complex environments
• Vertical differentiation


  • Customers rank products based on a measurable factor, such as price or quality, and then choose the most highly ranked item
• Horizontal differentiation


  • Customers choose between products based on personal preference rather than an objective measurement
• Traditional organizational designs


  • Simple structure
  • Functional structure
  • Divisional structure
• Simple structure


  Low departmentalization, wide spans of control, centralized authority, little formalization
• Functional structure


  Departmentalization by function (operations, finance, marketing, human resources, and product research and development)

  
• Divisional structure


  Composed of separate business units or divisions with limited autonomy under the coordination and control of the parent corporation
• Divisional structure example


  • McDonald's Corporation
• Terms to know

  • organizing
  • organizational structure
  • organizational chart
  • organizational design
  • work specialization
  • departmentalization
  • cross-functional teams
  • chain of command
  • authority
  • responsibility
  • unity of command
  • span of control
  • centralization
  • decentralization
  • employee empowerment
  • formalization
  • mechanistic organization
  • organic organization
  • unit production
  • mass production
  • process production
  • simple structure
  • functional structure
  • divisional structure
  • team structure
  • matrix structure
  • project structure
  • boundaryless organization
  • virtual organization
  • network organization
  • learning organization
• Team structure


  An organizational structure in which the entire organization is made up of work teams
• Matrix structure


  An organizational structure that assigns specialists from different functional departments to work on one or more projects
• Project structure


  An organizational structure in which employees continuously work on projects
• Boundaryless organization


  An organization whose design is not defined by, or limited to, the horizontal, vertical, or external boundaries imposed by a predefined structure. Employees are empowered to make decisions.
• Virtual organization


  An organization that consists of a small core of full-time employees and outside specialists temporarily hired as needed to work on projects. The organization may not even have a permanent office.