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Chapter 5Chapter 5

Designing OrganizationalDesigning Organizational

Structure:Structure:

Authority and ControlAuthority and ControlWhats on the agenda?Whats on the agenda?

How and Why Vertical Differentiation OccursHow and Why Vertical Differentiation OccursFactors Affecting the Shape of the HierarchyFactors Affecting the Shape of the HierarchyThe Principles of Bureaucratic StructureThe Principles of Bureaucratic StructureRestructuring the OrganizationRestructuring the Organization


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A basic design challenge involves deciding

how much authority to centralize at the top

of an organizations and how much to

decentralize to middle and lower levels.

An organizations hierarchy begins to emerge

when the organization experiences

problemsin coordinating and motivating employees.

These problems lead to organizations:

- Increasing the number of managers

- Increasing the number of levels in the

management hierarchy


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An organization with many management levels relative to its size is

a tall organization.

An organization with few levels relative to its size is a flat

organization.

It is key to understand that this characteristic is relative to

organizational size.

Problems with Tall Hierarchies

Communication Problemsboth timing and distortion

Motivation Problemsan increase in levels of management leads

to a decrease in responsibility and motivation

Bureaucratic Costsmanagers cost money

Types of OrganizationsTypes of Organizations


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Principle of Minimum Chain ofCommand

An organization should choose the minimum number of

management levels consistent with its goals and the environment

in which it exists.

In other words, keep the organization as flat as possible while

maintaining control over activities.

How can an organization avoid becoming too tall

One way is by increasing managers span of controlthe number

of subordinates a manager directly manages.

In general, a managers span of control is limited by two factors:

the complexity and interrelatedness of tasks.


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Factors affecting the shape of the hierarchy:

Horizontal Differentiationan organization

that is divided into subunits has many different

hierarchies, not just one.

Centralizationwith decentralization, lessdirect managerial supervision is needed

Standardizationreduces the need for

levels of management because rules

substitute for direct supervision


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33 -- 66

Copyright 2001 Prentice Hall

FIGURE 3.9

Horizontal Differentiation into Functional Hierarchies

Sales Engineering Manufacturing Purchasing Research and

Development

6

5

4

3

2

1

7

1 1

2 2

3 3

3-11


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The Principles of Bureaucratic Structure:

Bureaucracya form of organizational structure in which people can

be held accountable for their actions while conforming to well-

specified rules and standard operating procedures

Weber outlined six principles that underlie effective structure.

Bureaucratic Principal One:

A bureaucracy is founded on the concept ofrational-legal authority.

Rational-legal authority is due to the position in an organization, notbecause of personal qualities such as charisma, wealth, or status.


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Bureaucratic Principal TwoBureaucratic Principal Two::

Organizationalroles are held on theOrganizationalroles are held on the

basis ofbasis of

technical competence, not because oftechnical competence, not because of

social status, kinship, orheredity.social status, kinship, orheredity.


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Bureaucratic Principal ThreeBureaucratic Principal Three::

Aroles taskresponsibility and decisionAroles taskresponsibility and decision--makingmaking

authority and its relationship to otherrolesauthority and its relationship to otherroles

in the organization should be clearlyin the organization should be clearly

specified.specified.

A clear pattern of vertical and horizontalA clear pattern of vertical and horizontal differentiation cuts down on role conflictdifferentiation cuts down on role conflict

and role ambiguity.and role ambiguity.


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Bureaucratic Principal FourBureaucratic Principal Four::

The organization ofroles in a bureaucracyThe organization ofroles in a bureaucracy

is such that each loweroffice in theis such that each loweroffice in thehierarchyhierarchy

is under the control and supervision of ais under the control and supervision of a

higheroffice.higheroffice.

People can recognize the chain of command.People can recognize the chain of command.


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Bureaucratic Principal FiveBureaucratic Principal Five::

Rules, standard operating procedures,Rules, standard operating procedures,andand

norms should be used to controlnorms should be used to control

behavior

behavior

and the relationship between rolesand the relationship between roles

in an organization.in an organization.


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Bureaucratic Principal SixBureaucratic Principal Six::

Administrative acts, decisions, andrulesAdministrative acts, decisions, andrules

should be formulated and put inshould be formulated and put in

writing.writing.

This provides history and continuity.This provides history and continuity.


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It is important to know thatIt is important to know that bureaucracybureaucracy

isnt isnt alwaysalwaysa negative term.a negative term.

Typically this is our first reaction becauseTypically this is our first reaction because

we usually only think of bureaucracieswe usually only think of bureaucracies

when they break down or becomewhen they break down or become

dysfunctional.dysfunctional.


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Chapter 5Chapter 5

Restructuring an OrganizationRestructuring an Organization

RestructuringRestructuring refers to the process by whichrefers to the process by which managers change task and authoritymanagers change task and authority

relationships to improve organizationalrelationships to improve organizational

effectiveness.effectiveness.

One type of restructuring that has becomeOne type of restructuring that has become

common in recent years iscommon in recent years is downsizingdownsizing..


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DownsizingDownsizing is the process by which managersis the process by which managers

streamline the organizational hierarchystreamline the organizational hierarchy

and lay off managers and workers toand lay off managers and workers toreduce bureaucratic costs.reduce bureaucratic costs.

Other important trends that go hand in handOther important trends that go hand in hand

with restructuring and downsizing are thewith restructuring and downsizing are the use ofuse of empowered workers, selfempowered workers, self--managedmanaged

teams, and contingent workersteams, and contingent workers..


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EmpowermentEmpowerment is the process of givingis the process of giving

employees throughout the organization theemployees throughout the organization the

authority to make important decisions.authority to make important decisions.

SelfSelf--managed teamsmanaged teams are work groups thatare work groups that

consist of people who are jointlyconsist of people who are jointly

responsibleresponsible for ensuring that the team accomplishesfor ensuring that the team accomplishes

its goals and who lead themselves.its goals and who lead themselves.


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Contingent workersContingent workers are employed forare employed for

temporary periods by an organizationtemporary periods by an organization

and who receive no indirect benefits suchand who receive no indirect benefits such

asas health insurance or pensions.health insurance or pensions.

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