Chapter 9Designing Adaptive Organizations

Management Principles

Craig W. Fontaine, Ph.D.

What Is Organizational Structure?

Key Elements:• Work specialization• Departmentalization• Chain of command• Span of control• Centralization and

decentralization• Formalization

Organizational StructureHow major organizational work activities are formally divided, grouped, and coordinated.

Key Design Questions and Answers for Designing the Proper Organization Structure

The Key Question The Answer Is Provided By 1. To what degree are tasks Work specialization

subdivided into separate jobs? 2. On what basis will jobs be grouped Departmentalization

together? 3. To whom do individuals and groups Chain of command

report? 4. How many individuals can a manager Span of control

efficiently and effectively direct? 5. Where does decision-making Centralization

authority lie? and decentralization

6. To what degree will there be rules Formalizationand regulations to direct employeesand managers?

What Is Organizational Structure?

Division of labor:• Makes efficient use of employee skills• Increases employee skills through repetition• Specialized training is more efficient.• Allows use of specialized equipment.

Work SpecializationThe degree to which tasks in the organization are subdivided into separate jobs.

What Is Organizational Structure?

Grouping Activities By:• Function• Product• Geography• Process• Customer

DepartmentalizationThe basis by which jobs are grouped together.

Key Concepts in Organizational Structure

Chain of CommandThe unbroken line of authority that extends from the top of the organization to the lowest echelon and clarifies who reports to whom.

AuthorityThe rights inherent in a managerial position to give orders and to expect the orders to be obeyed.

Unity of CommandA subordinate should have only one superior to whom he or she is directly responsible. (Matrix organizations violate this rule)Span of ControlThe number of subordinates a manager can efficiently and effectively direct.

Contrasting Spans of Control

Key Concepts in Organizational Structure

CentralizationThe degree to which decision making is concentrated at a single point in the organization.

FormalizationThe degree to which jobs within the organization are standardized.

DecentralizationThe degree to which decision making is spread throughout the organization.

Dimensions of Organizational Structures• Organizational structures have two dimensions: vertical and horizontal

• The vertical dimension refers to the number of hierarchical levels in the company: “tall structures” have many more levels then “flat structures”

• Tall structures typically have a “narrow” (less people) span of control and flat structures have “wider” span of control (more people).

• Tall structure are characterized by centralized decision making at the top, flat structures normally have more local decentralized decision making.

• The horizontal dimension is the organization structure element which divides work into specific jobs/tasks and assigns jobs into units such as departments. (These are described in detail later in the presentation)

VerticaL Dimension (Tall or Flat)

Tall or Flat – Advantages and Disadvantages

Advantages of Tall Structures Advantages of Flat StructuresClose supervisory control Flexible and better able to adapt to changes

Clearly defined roles and responsibilities More direct and effective communicationObvious chain of command Faster decision making

Decision making centralized at the top Greater autonomy and decision making for staffClear progression and promotion ladder Less hording of information at the top

More mentoring More democratic

Disadvantages of Tall Structures Disadvantages of Flat StructuresHigh management costs Less clear specific job functions

Slow decision making Less opportunity for promotionIneffective and slow communication High managerial work load

Employees are less motivated, innovation suffers More difficult to coordinate between subordinatesLess rewards are given to staff, de-motivational Less close relationship between superior & staff

Subordinates have less freedom and responsibility Produces more generalists than specialists

Horizontal Dimension• The horizontal dimension defines how work/jobs are grouped or

Departmentalization.

• Popular approaches to departmentalization are:• By function – Functional Departmental Structure• By product, service or customer type – Divisional Departmental

Structure

• When customers or jobs are scattered over a large geographic area and have similar needs based on their location, a Geographic organizational structure (a type of Divisional Structure) might be appropriate.

• Less common is the Matrix organizational structure, which combines two structures. In a matrix structure; product, project or client/regional managers, borrow talent from the specialized functional areas in achieve tasks.

Functional

Advantages DisadvantagesHigh degree of efficiency Cross functional communication poor

Develops specialized employees Diminished responsiveness to customers’ needsAllows economies of scale to be achieved Slow response to external environmental

changesFosters a professional identity within

functions Fosters restricted view of the organization

Accountability and roles are clear Creates allegiance to functions, not the organization

Clear career path Develops specialists not generalists

Divisional

Advantages DisadvantagesFast response to environment Duplication of resources

Fast response to customer needs Reduced specializationFosters high coordination across functions Competition among divisions

Develops general managers and executive skills Makes standardization across divisions difficultClear responsibility for all activities in the division Poor coordination across divisions

Divisional Structures can also be by customer type:• Consumer Products• Commercial Products• Military Products

Geographic (Type of Divisional)

Advantages DisadvantagesLocal hiring improves knowledge of local culture Duplication of personnel (home and regions)

Provides greater customer knowledge Competition between different areasCustomer feels more comfortable Difficult to maintain core company beliefs

Faster more nuanced decisions Potential feeling of division within the companyFosters customized solutions Different metrics and policies for each region

Teams can help

Characteristics:• Breaks down departmental barriers/silos.• Decentralizes decision making at the team level.• Requires employees to be generalists as well as

specialists.• Creates a “flexible bureaucracy.”

Team StructureThe use of teams as the central device to coordinate work activities.

Matrix

Advantages DisadvantagesEfficient utilization of scare expensive specialists Dual chain of command repercussions

Allows for rapid start of new projects/products Requires good interpersonal skillsDevelops cross-functional skills by employees Conflict of between managers over priorities

Increased employee involvement in decision making Too much time spend coordinatingAchieves coordination to meet customer needs Places stress on individuals

Differing Models of Structure Mechanistic ModelA structure characterized by extensive departmentalization, high formalization, a limited information network, and centralization.

Organic ModelA structure that is flat, uses cross-hierarchical and cross-functional teams, has low formalization, possesses a comprehensive information network, and relies on participative decision making.

Why Do Structures Differ? – StrategyInnovation StrategyA strategy that emphasizes the introduction of major new products and services.

Imitation StrategyA strategy that seeks to move into new products or new markets only after their viability has already been proven.

Cost-minimization StrategyA strategy that emphasizes tight cost controls, avoidance of unnecessary innovation or marketing expenses, and price cutting.

The Strategy-Structure RelationshipStrategy Structural Option

Innovation Organic: A loose structure; low

specialization, low formalization, decentralized

Cost minimization Mechanistic: Tight control; extensive work specialization, high formalization, high centralization

Imitation Mechanistic and organic: Mix of loose with tight properties; tight controls over current activities and looser controls for new undertakings

Organization Structure: Its Determinants and Outcomes

Implicit Models of Organizational StructurePerceptions that people hold regarding structural variables formed by observing things around them in an unscientific fashion.

Boundaryless OrganizationAn organization in which chains of command are eliminated, spans of control are unlimited, and rigid departments give way to empowered teams.Modular Organization: An organization that surrounds itself by a network of other organizations to which it regularly outsources noncore functions.Virtual Organization: A highly flexible, temporary organization formed by a group of companies that join forces to exploit a specific opportunity.

Modular Organization

Pros and Cons of Modular Structures

Virtual Organization

Pros and Cons of Virtual Structures

Job Design

Job Design• The design of work involves determining the

appropriate task content, sequences, interrelationship and context of jobs

• Redesigning work can increase worker performance and satisfaction

• Approaches include:• Work simplification• Job Rotation• Job enlargement• Job enrichment

• Work Simplification refers to the process of reducing a job to its component parts than reassembling those parts into the most efficient work process, it includes:

• Mechanical pacing• Repetitive work• Fractionalization• Enhanced tools and techniques

• Can cause significant dysfunction!

Work Simplification

Job Design: Creating Meaningful Jobs• Job Rotation

– The periodic shifting of a worker from one task to another.– Reduces boredom and increases motivation through diversifying

the employee’s activities.• Job Enlargement

– The horizontal expansion of jobs.– Attacks the lack of diversity in overspecialized jobs; does little to

instill challenge or meaningfulness to a worker’s activities.• Job Enrichment

– The vertical expansion of jobs.• Employee does a complete activity

– Expands the employee’s freedom and independence, increases responsibility, and provides feedback.

What people want from their jobs & design principles

• Reasonably demanding work with some variety

• Opportunity to learn• Some decision making• Social support and recognition• Significance & meaning• Some desirable future

Job design principlesAt the level of the individual Respect Contribution to product Quantity & quality - feedback results

quickly Meaningful whole task A whole job - plan, do, evaluate Variety Optimum cycle times

The Job Characteristics Model

Source: Adapted from J. R. Hackman and G. R. Oldham, Work Redesign (Reading, MA: Addison-Wesley, 1980).

Job Characteristics Model

Job Characteristic

Skill variety Employee uses a wide range of skills.

Task identity Worker is involved in all tasks of the job from beginning to end of the production process

Task significance Worker feels the task is meaningful to organization.

Autonomy Employee has freedom to schedule tasks and carry them out.

Feedback Worker gets direct information about how well the job is done.

Types of Flexible Scheduling• Compressed workweek/year• Flextime• Job Sharing• Telecommuting

Employee Responses to Flexible Work Arrangements

• 94 percent are very satisfied with their work arrangements• 70 percent reported less stress• 81 percent said they were more effective at balancing work and their

outside lives• 48 percent use flex work to deal with family responsibilities and child

and/or elder care• 36 percent said they would leave the company if flex work were not

available• 78 percent said their opportunities for advancement were the same

or better than when they worked a traditional schedule