Organization_Structure_and_Design

ORGANIZATION STRUCTURE AND DESIGN 1. INTRODUCTION. The right organizational structure can play an important role in an organization's evolution. This chapter introduces the elements of organizational structure. 2. DEFINING ORGANIZATION STRUCTURE AND DESIGN. There are several definitions that must be understood as a precursor to understanding organizational structure and design. A. Organizing is the process of creating an organization's structure. B. Organization structure is an organization's framework as expressed by its degree of complexity, formalization, and centralization. C. Complexity is defined as the amount of differentiation in an organization. D. Formalization is the degree to which an organization relies on rules and procedures to direct the behavior of employees. E. Centralization is defined as the concentration of decision-making authority in upper management. Decentralization is the handing down of decision-making authority to lower levels in an organization. F. Organization design is the development or changing of an organization's structure. 3. BUILDING THE VERTICAL DIMENSION OF ORGANIZATIONS. In the first chapter, we discussed the fact that organizations consist of both operatives and managers. How are these organizational categories determined and how is the interaction among these levels defined' These are just a few of the issues that are discussed in this section. A. Unity of command is defined as the principle that a subordinate should have one and only one superior to whom he or she is directly responsible. 1. In the classical view, unity of command was strictly adhered to. In the rare instance when the principle had to be violated, it was clearly designated that there be an explicit separation of activities and a supervisor responsible for each. 2. In the contemporary view, the unity of command principle is viewed as logical when organizations are simple. However, if situations warrant, the advantages of flexibility in structure that comes from violating the unity of command principle far outweigh the disadvantages. B. Authority and responsibility. Authority is defined as the rights inherent in a managerial position to give orders and expect them to be obeyed. Responsibility is defined as an obligation to perform assigned activities. 1. In the classical view, authority was a major doctrine. It was viewed as the glue that held organizations together. Authority related to one's position within the organization. When authority was delegated, commensurate responsibility had to be allocated. a. Authority and responsiblity needed to be equal. b. Responsibility cannot be delegated. c. The contradiction here was answered by recognizing two forms of responsibility: operating responsibility and ultimate responsibility. d. There were also two forms of authority relationships: line authority is the authority that entitles a manager to direct the work of a subordinate--it follows the chain of command which is the flow of authority from the top to the bottom of an organization; and staff authority which is authority that supports, assists, and advises holders of the authority. 2. In the contemporary view, we look at the perspective that authority is only valid if subordinates are willing to accept it and also at authority as only one element in the larger concept of power. a. Chester Barnard presented the acceptance theory of authority which proposes that authority comes form the willingness of subordinates to accept it. 1. What determines if subordinates accept orders' 2. According to Barnard, the following conditions must be met. a. They understand the order. b. They feel the order is consistent with the purpose of the organization. c. The order doesn't conflict with their personal beliefs. d. They are able to perform the task as directed. b. Power is defined as the capacity to influence decisions. C. Span of control is defined as the number of subordinates a manager can direct efficiently and effectively. 1. The classical view favored small spans, typically no more than six, in order to maintain close control. 2. The contemporary view establishes that more and more organizations are increasing their spans of control. The span of control is increasingly being determined by looking at various contingency factors. 4. BUILDING THE HORIZONTAL DIMENSION OF ORGANIZATIONS. An organization's structure also has a horizontal dimension that looks at how work activities are organized at each specific level of the organization. A. Division of labor describes splitting a job into a number of steps with each step being completed by a separate individual. 1. In the classical view of division of labor, the diversity of skills that workers held were efficiently used. Also, division of labor was viewed as an unending source of increased productivity. 2. In the contemporary view, researchers began to recognize that there was a point at which the human diseconomies from division of labor exceeded the economic advantages. These human diseconomies took the form of boredom, fatigue, stress, low productivity, poor quality, increased absenteeism, and high turnover. B. Departmentalization is another area in which classical and contemporary views differ. 1. In the classical view, activities in the organization had to be specialized and grouped into departments. The approach to grouping selected activities should be the one that best contributes to the attainment of the organization's objectives and goals. There were five approaches to departmentalizing. a. Functional departmentalization grouped activities by functions performed. b. Product departmentalization grouped activities by product line. c. Customer departmentalizaton grouped activities on the basis of common customers. d. Geographic departmentalization grouped activities on the basis of territory. e. Process departmentalization grouped activities on the basis of product or customer flow. 2. In the contemporary view, most large organizations continue to use most or all of the classical departmental groupings. However, two trends can be noted. a. Customer departmentalization is becoming increasingly emphasized. b. Rigid departmentalization is being complemented by the use of teams that cross over departmental lines cross-functional teams. c. The concept of cross-functional teams evolved from matrix organizations which is an organizing approach that assigns specialists from different functional departments to work on one or more projects that are led by a project manager.